Chapter 15 – The Federal Reserve

System

Section 1

Structure of the Federal Reserve

Private Ownership:

Privately owned by its member

banks- commercial banks that own shares

of Federal Reserve stocks

Board of Governors• 7 members appointed by the

President• 14 year term ~ terms are staggered

so there is always a vacancy every 2 years

District Banks

• Began as 12 independent and equally powerful banks

• Each region has its own president and board of

governors ~ but are supervised by the Federal Reserve Board

in D.C.

Open Market Committee• Makes decisions about growth of the

money supply & interest rates

Advisory Committees• 3 advisory committees that advise the

Board of Directors• One representative from each district

• Advise on overall economic health, credit laws, and savings banks

Responsibilities

1.Monitors reserves in state member banks

2.Monitors bank holding companies: companies that have stock but do not

take deposits

3. International supervision

4. Mergers

Section 2

Monetary Policy:

• The expansion and contraction of the money supply in order to influence costs

Legal Reserves

• Consists of coins and currency that banks hold in their vaults

• A required percentage must be set aside for legal reserves

How Banks Operate• Banks have Liabilities = debts

and obligations to others

• A Balance sheet helps report the liabilities and assets to show their net worth = the excess of assets over liabilities (measure of value of a business)

Federal Spending

After the budget activity and the video, which federal program would you alter if you had the opportunity? In your opinion, does this program

deserve more or less federal funding? Why?