Changes

The current Chairman is [[Ben Bernanke]], a Republican appointed by President [[George W. Bush]]; his predecessor was [[Alan Greenspan]], a Republican appointed by President [[Ronald Reagan]].

The current Chairman is [[Ben Bernanke]], a Republican appointed by President [[George W. Bush]]; his predecessor was [[Alan Greenspan]], a Republican appointed by President [[Ronald Reagan]].

One job of the Federal Reserve is to control [[inflation]] by regulating the [[free market]].<ref>http://web.archive.org/web/20070818201731/http://www.peterjaworski.com/Friedman</ref> One of its main functions is to set the amount of money that banks must keep in reserve and to set the interest rates for money it lends to banks.

One job of the Federal Reserve is to control [[inflation]] by adjusting the supply of money in the economy. This is done by buying and selling government bonds in order to influence banks' cash supply (called "open market operations", setting the amount of money that banks must keep in reserve, and setting the interest rates for money it lends to banks (the Fed's lending facility is called the "discount window")<ref>http://www.federalreserve.gov/pf/pdf/pf_3.pdf</ref>. These three major operations are the basis of [[monetary policy]], and are performed by the Fed to target a specific [[Federal Funds Rate]] that it believes will be low enough to ensure available credit and stimulate the economy, but high enough to prevent inflation.

The Fed made the [[Great Depression]] much, much worse by utterly failing in its primary responsibility. It simply did nothing, as hundreds and thousands of banks failed (see [[bank run]]). What it was supposed to do was lend them enough money to keep going!

The Fed made the [[Great Depression]] much, much worse by utterly failing in its primary responsibility. It simply did nothing, as hundreds and thousands of banks failed (see [[bank run]]). What it was supposed to do was lend them enough money to keep going!