Summaries of Sources for Research Paper

This source, from the Federal Reserve’s website, talks about the history and main functions of the Federal Reserve. The Federal Reserve System, the central bank of the United States, was created with the Federal Reserve Act in 1913 and was intended to make the nation’s monetary system more safe and flexible, but its role has increased over time. The Federal Reserve has four main responsibilities: the monetary policy, the supervising of banks, the stabilization of the financial system, and the provision of financial services to both the public and private sectors. The Federal Reserve is centralized in Washington D.C. and has 12 regional banks throughout the U.S. The Board of Governors, the president of the Federal Reserve of New York, and the presidents of other banks who rotate positions make up the Federal Open Market Committee (FOMC). The FOMC is the main tool used by the Federal Reserve to influence market conditions. Although the Federal Reserve receives its authority from Congress, it is still considered independent because its decisions are not ratified by anyone and it does not receive Congressional funding. Therefore, politics are kept out of the Federal Reserve System and it is more difficult for corruption or ideological takeovers to occur. The Federal Reserve is funded mostly by interest gained by government activities and any additional money is returned to the Treasury. The Federal Reserve is required to report to the Speaker of the House at least once a year, and to the Congressional banking committees twice a year. Congress can also request members of the Fed to testify before them. Independent auditors audit the Fed’s financial records.

This source also comes straight from the website of the Federal Reserve. It is a question and answer page about how actions taken by the Federal Reserve affect the monetary policy, and therefore the economy, of the United States.  The monetary policy of a nation is determined by a central bank, for example, the Federal Reserve Bank in the United States, and is used to influence the amount and cost of money available in the market. The Federal Reserve uses the tools of open market operations, discount window lending, and reserve requirements in order to set monetary policy and influence the amount of money the U.S. has in reserves and the federal funds rate. These actions can eventually influence things like employment, interest rates, the amount of money and credit in an economy, and even the prices of goods and services. The Federal Open Market Committee, made up of the important people who work for the Federal Reserve, is in charge of setting the federal funds rate, which is the rate that one institution charges another for a sale of overnight funds available from the Federal Reserve. By altering this rate, the Fed can control things like economic growth and inflation rates. The Federal Reserve is also responsible for the money stock, which is the combination of money held by the public, banks, mutual funds, and other financial institutions. It can influence the money stock by changing the interest rates. The Fed is also responsible for setting the national discount rate every 14 days, which is the rate at which banks charge interest to each other for borrowing money.