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The structure of the federal reserve. Federal Open Market Committee (FOMO). Advisory Councils. The Federal reserve system. Created in 1913 Board of Governors Appointed by the President for one 14-yr term Must be approved by the Senate One members term expires every 2 years
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Federal Open Market Committee (FOMO) Advisory Councils
The Federal reserve system • Created in 1913 Board of Governors • Appointed by the President for one 14-yr term • Must be approved by the Senate • One members term expires every 2 years • Chairman Ben Bernanke
The Role of banks • Banks are a business with the same profit making goals of any other business. • They make a profit by providing services
Role of banks • They provide safety and interest income for depositors • A source of loans for people in business • How does a bank make a profit? a. By charging higher rates of interest to borrowers then they pay to depositors b. Credit cards
Bank assets and liabilities • An asset is something you own a. Loans b. Bonds c. Real estate d. Cash reserves
Liabilities are something you owe. • Checking and saving account deposits • Loans from the Federal Reserve • Money owed to stockholders
Federal Deposit Insurance Corp. • Stop runs on banks • $250,000
Competition for banks • Tax shelters, 401K plans, Roth IRA’s • The Stock Market • Credit Unions
Fractional reserve banking www.classzone.com
Common loans banks make Mortgage • Real estate • Lender & borrower • Monthly • Lender
Credit cards • Issued by banks to users • Pays; lends • Repaying
Banking deregulation Bank Mergers • Larger banks acquired smaller ones • Smaller ones joined forces to enter different geographic markets
BENEFITS • Increased competition which keeps interest rates low • Increase in the number of bank branches
CONS • Fewer banks to choose from • Big banks show less interest in smaller customers
Banking Services Financial Services Act of 1999 • Allowed banks to sell stocks, bonds, and insurance
Technology & Banking • ATM’s – allow customers to bank without seeing a bank officer • Debit Cards – Can be used to withdraw cash to make a purchase • Stored – value cards – Represent money that the holder has a deposit with the issuer (gift cards)