Difference between revisions of "Federal Reserve System"
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[[Image:Federal Reserve.jpg|right|thumb|300px|The Federal Reserve headquarters in Washington, DC.]] | [[Image:Federal Reserve.jpg|right|thumb|300px|The Federal Reserve headquarters in Washington, DC.]] | ||
| − | The '''Federal Reserve''' (also known as '''The Fed''') is a central banking system that controls the monetary system of the [[United States]]. | + | The '''Federal Reserve''' (also known as '''The Fed''') is a central banking system that controls the monetary system of the [[United States]], with virtually no accountability to the public. The Senate refuses to confirm for a position at the Fed anyone who is a critic or a genuine outsider. In practice, the Fed is a safety net for those connected with its club, as it arranged for the bailout of Long Term Capital Management in 1998<ref>http://www.pseagles.com/Fed_Bailout_Requires_Full_Investigation</ref> and then again for [[Wall Street]] banks a decade later.<ref>https://www.bloomberg.com/opinion/articles/2014-09-23/biggest-losses-start-with-brilliance</ref> |
| − | + | ||
| − | One of the main jobs of the Federal Reserve is to control [[inflation]] by adjusting the supply of money in the economy, while at the same time maintain the stability of the financial system and promote economic growth. This is done by buying and selling government bonds in order to influence banks' cash supply (called "open market operations") | + | It was established by the Federal Reserve Act, which was passed by Congress and signed into law by [[President]] [[Woodrow Wilson]] in 1913. As it describes itself, "the Board is a federal government agency consisting of seven members appointed by the President of the United States and confirmed by the U.S. Senate."<ref>[http://www.ny.frb.org/aboutthefed/fedpoint/fed46.html Board of Governors of the Federal Reserve System] - Fedpoints - Federal Reserve Bank of New York</ref> The Federal Reserve is a system of private banks, twelve of which are designated as Federal Reserve Banks and have some features of public federal agencies. The Federal Reserve is headed by a Board of Governors and a Chairman. The current Chairman is Jerome Powell, as appointed by President [[Donald Trump]]. Prior chairmen have included [[Alan Greenspan]], appointed by President [[Ronald Reagan]]. |
| + | |||
| + | One of the main jobs of the Federal Reserve is to control [[inflation]] by adjusting the supply of money in the economy, while at the same time maintain the stability of the financial system and promote economic growth. This is done primarily by setting the interest rates (the "discount rate") for money it lends to banks,<ref>The Fed's lending facility is called the "discount window"</ref> and also by buying and selling government bonds in order to influence banks' cash supply (called "open market operations") and setting the amount of money that banks must keep in reserve.<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 also has the responsibility of supervising and regulating banking institutions.<ref>http://www.federalreserve.gov/generalinfo/mission/default.htm</ref> | ||
In 2008 the Fed became a major player in many new ways, taking over several major banks (ostensibly to prevent total economic collapse) and making trillions of dollars in guarantees. See [[Financial Crisis of 2008]]. | In 2008 the Fed became a major player in many new ways, taking over several major banks (ostensibly to prevent total economic collapse) and making trillions of dollars in guarantees. See [[Financial Crisis of 2008]]. | ||
| Line 10: | Line 11: | ||
==Criticism== | ==Criticism== | ||
| − | [[Libertarian]]s, such as [[Ron Paul]], and many conservatives want to abolish the Federal Reserve. For 30 years Ron Paul has called for the secretive Federal Reserve bank to be audited.<ref>[http://www.ronpaul.com/congress/legislation/111th-congress-200910/audit-the-federal-reserve-hr-1207/ Audit the Federal Reserve]</ref> Ron Paul's website declares "Since the Fed’s creation in 1913 the dollar has lost more than 96% of its value, and by recklessly inflating the money supply the Fed continues to distort interest rates and intentionally erodes the value of the dollar."<ref>[http://www.ronpaul.com/congress/legislation/111th-congress-200910/audit-the-federal-reserve-hr-1207/ Audit the Federal Reserve]</ref> | + | [[Libertarian]]s, such as [[Ron Paul]], and many conservatives want to abolish the Federal Reserve. For 30 years Ron Paul has called for the secretive Federal Reserve bank to be audited.<ref>[http://www.ronpaul.com/congress/legislation/111th-congress-200910/audit-the-federal-reserve-hr-1207/ Audit the Federal Reserve]</ref> Ron Paul's website declares "Since the Fed’s creation in 1913 the dollar has lost more than 96% of its value, and by recklessly inflating the money supply the Fed continues to distort interest rates and intentionally erodes the value of the dollar."<ref>[http://www.ronpaul.com/congress/legislation/111th-congress-200910/audit-the-federal-reserve-hr-1207/ Audit the Federal Reserve]</ref> [[Mark Dice]] has also criticized it and gave a detailed explanation of its origins.<ref>[https://youtu.be/srzhu29kn_o]</ref> |
However, conservatives are not united in their criticism: the prominent conservative commentator [[Vox Day]], a member of [[Mensa]], describes himself as a "loyal Federal Reserve supporter".<ref>[http://voxday.blogspot.com Vox Day's blog]</ref> | However, conservatives are not united in their criticism: the prominent conservative commentator [[Vox Day]], a member of [[Mensa]], describes himself as a "loyal Federal Reserve supporter".<ref>[http://voxday.blogspot.com Vox Day's blog]</ref> | ||
| Line 17: | Line 18: | ||
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! | ||
| − | Friedman and Schwartz argued that all this was due to the | + | Friedman and Schwartz argued that all this was due to the Fed's failure to carry out its assigned role as the lender of last resort. Rather than providing liquidity through loans, the Fed just watched as banks dropped like flies, seemingly oblivious to the effect this would have on the money supply.<ref>[http://www.thefreemanonline.org/featured/the-great-depression-according-to-milton-friedman/ The Great Depression According to Milton Friedman]</ref> |
==Recent Literature== | ==Recent Literature== | ||
| − | * Epstein, Lita & Martin, Preston (2003). ''The Complete Idiot's Guide to the Federal Reserve''. ISBN 0-02-864323-2. [ | + | * Epstein, Lita & Martin, Preston (2003). ''The Complete Idiot's Guide to the Federal Reserve''. ISBN 0-02-864323-2. [https://www.amazon.com/Complete-Idiots-Guide-Federal-Reserve/dp/0028643232/ref=sr_1_2?ie=UTF8&s=books&qid=1212812900&sr=1-2 excerpt and text search] |
| − | * Greenspan, Alan. '' The Age of Turbulence: Adventures in a New World'' (2007), memoirs covering his chairmanship 1987-2006 [ | + | * Greenspan, Alan. '' The Age of Turbulence: Adventures in a New World'' (2007), memoirs covering his chairmanship 1987-2006 [https://www.amazon.com/Age-Turbulence-Adventures-New-World/dp/1594201315/ref=sr_1_1?ie=UTF8&s=books&qid=1212812097&sr=1-1 excerpt and text search] |
* Greider, William, ''Secrets of the Temple''. (1987). ISBN 0-671-67556-7; nontechnical book explaining the structures, functions, and history of the Federal Reserve, focusing specifically on the tenure of [[Paul Volcker]] | * Greider, William, ''Secrets of the Temple''. (1987). ISBN 0-671-67556-7; nontechnical book explaining the structures, functions, and history of the Federal Reserve, focusing specifically on the tenure of [[Paul Volcker]] | ||
* Hafer, R. W. ''The Federal Reserve System: An Encyclopedia''. (2005). 451 pp, 280 entries; ISBN 4-313-32839-0. | * Hafer, R. W. ''The Federal Reserve System: An Encyclopedia''. (2005). 451 pp, 280 entries; ISBN 4-313-32839-0. | ||
| Line 34: | Line 35: | ||
* Carosso, Vincent P. "The Wall Street Trust from Pujo through Medina", ''Business History Review'' (1973) 47:421-37 | * Carosso, Vincent P. "The Wall Street Trust from Pujo through Medina", ''Business History Review'' (1973) 47:421-37 | ||
* Chandler, Lester V. ''American Monetary Policy, 1928-41.'' (1971). | * Chandler, Lester V. ''American Monetary Policy, 1928-41.'' (1971). | ||
| − | * Epstein, Gerald and Thomas Ferguson. "Monetary Policy, Loan Liquidation and Industrial Conflict: Federal Reserve System Open Market Operations in 1932." ''Journal of Economic History'' 44 (December 1984): | + | * Epstein, Gerald and Thomas Ferguson. "Monetary Policy, Loan Liquidation and Industrial Conflict: Federal Reserve System Open Market Operations in 1932." ''Journal of Economic History'' 44 (December 1984): 957–84. in JSTOR |
* Friedman, Milton, and Anna Jacobson Schwartz. ''A Monetary History of the United States, 1867-1960'' (1963) | * Friedman, Milton, and Anna Jacobson Schwartz. ''A Monetary History of the United States, 1867-1960'' (1963) | ||
| − | * Hetzel, Robert L. ''The Monetary Policy of the Federal Reserve: A History'' (2008) from 1913 to 2007; [ | + | * Hetzel, Robert L. ''The Monetary Policy of the Federal Reserve: A History'' (2008) from 1913 to 2007; [https://www.amazon.com/Monetary-Policy-Federal-Reserve-Macroeconomic/dp/0521881323/ref=sr_1_2?ie=UTF8&s=books&qid=1212812672&sr=1-2 excerpt and text search] |
* Kubik, Paul J. , "Federal Reserve Policy during the Great Depression: The Impact of Interwar Attitudes regarding Consumption and Consumer Credit." ''Journal of Economic Issues'' . 30#3. 1996. pp 829+. | * Kubik, Paul J. , "Federal Reserve Policy during the Great Depression: The Impact of Interwar Attitudes regarding Consumption and Consumer Credit." ''Journal of Economic Issues'' . 30#3. 1996. pp 829+. | ||
| − | * Link, Arthur. ''Wilson: The New Freedom'' (1956) pp | + | * Link, Arthur. ''Wilson: The New Freedom'' (1956) pp 199–240. |
* Livingston, James. ''Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890-1913'' (1986), Marxist approach to 1913 policy | * Livingston, James. ''Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890-1913'' (1986), Marxist approach to 1913 policy | ||
| − | * Mayhew, Anne. "Ideology and the Great Depression: Monetary History Rewritten." ''Journal of Economic Issues'' 17 (June 1983): | + | * Mayhew, Anne. "Ideology and the Great Depression: Monetary History Rewritten." ''Journal of Economic Issues'' 17 (June 1983): 353–60. |
| − | * Meltzer, Allan H. ''A History of the Federal Reserve, Volume 1: 1913-1951'' (2004) the standard scholarly history [ | + | * Meltzer, Allan H. ''A History of the Federal Reserve, Volume 1: 1913-1951'' (2004) the standard scholarly history [https://www.amazon.com/History-Federal-Reserve-1913-1951/dp/0226520005/ref=sr_1_1?ie=UTF8&s=books&qid=1212812672&sr=1-1 excerpt and text search] |
* Roberts, Priscilla. "'Quis Custodiet Ipsos Custodes?' The Federal Reserve System's Founding Fathers and Allied Finances in the First World War", ''Business History Review'' (1998) 72: 585-603 | * Roberts, Priscilla. "'Quis Custodiet Ipsos Custodes?' The Federal Reserve System's Founding Fathers and Allied Finances in the First World War", ''Business History Review'' (1998) 72: 585-603 | ||
| − | * Romer, Christina D. and David H. Romer. ''Choosing the Federal Reserve Chair: Lessons from History''. ''The Journal of Economic Perspectives,'' Vol. 18, No. 1. (2004), pp. | + | * Romer, Christina D. and David H. Romer. ''Choosing the Federal Reserve Chair: Lessons from History''. ''The Journal of Economic Perspectives,'' Vol. 18, No. 1. (2004), pp. 129–162. ([http://links.jstor.org/sici?sici=0895-3309%282004%2918%3A1%3C129%3ACTFRCL%3E2.0.CO%3B2-I jstor]) |
* Schull, Bernard. "The Fourth Branch: The Federal Reserve's Unlikely Rise to Power and Influence" (2005) ISBN 1-56720-624-7 [http://www.questia.com/read/113203394?title=The%20Fourth%20Branch%3a%20%20The%20Federal%20Reserve's%20Unlikely%20Rise%20to%20Power%20and%20Influence online edition] | * Schull, Bernard. "The Fourth Branch: The Federal Reserve's Unlikely Rise to Power and Influence" (2005) ISBN 1-56720-624-7 [http://www.questia.com/read/113203394?title=The%20Fourth%20Branch%3a%20%20The%20Federal%20Reserve's%20Unlikely%20Rise%20to%20Power%20and%20Influence online edition] | ||
* Steindl, Frank G. ''Monetary Interpretations of the Great Depression.'' (1995). | * Steindl, Frank G. ''Monetary Interpretations of the Great Depression.'' (1995). | ||
* West, Robert Craig. ''Banking Reform and the Federal Reserve, 1863-1923'' (1977) | * West, Robert Craig. ''Banking Reform and the Federal Reserve, 1863-1923'' (1977) | ||
| − | * Wicker, Elmus R. "A Reconsideration of Federal Reserve Policy during the 1920-1921 Depression", ''Journal of Economic History'' (1966) 26: | + | * Wicker, Elmus R. "A Reconsideration of Federal Reserve Policy during the 1920-1921 Depression", ''Journal of Economic History'' (1966) 26: 223–238, in JSTOR |
* Wicker, Elmus. ''Federal Reserve Monetary Policy, 1917-33.'' (1966). | * Wicker, Elmus. ''Federal Reserve Monetary Policy, 1917-33.'' (1966). | ||
* Wells, Donald R. ''The Federal Reserve System: A History'' (2004) | * Wells, Donald R. ''The Federal Reserve System: A History'' (2004) | ||
| Line 54: | Line 55: | ||
* Wueschner; Silvano A. ''Charting Twentieth-Century Monetary Policy: Herbert Hoover and Benjamin Strong, 1917-1927'' (1999) | * Wueschner; Silvano A. ''Charting Twentieth-Century Monetary Policy: Herbert Hoover and Benjamin Strong, 1917-1927'' (1999) | ||
| − | ==References== | + | ==References== |
<references/> | <references/> | ||
| − | ==External | + | ==External links== |
*[http://www.federalreserve.gov/ Board of Governors of the Federal Reserve System] | *[http://www.federalreserve.gov/ Board of Governors of the Federal Reserve System] | ||
| − | [[ | + | [[Category:Finance]] |
| − | [[ | + | [[Category:Progressive Era]] |
| − | [[ | + | [[Category:United States History]] |
| − | [[ | + | [[Category:Economic History]] |
Revision as of 15:23, August 19, 2020
The Federal Reserve (also known as The Fed) is a central banking system that controls the monetary system of the United States, with virtually no accountability to the public. The Senate refuses to confirm for a position at the Fed anyone who is a critic or a genuine outsider. In practice, the Fed is a safety net for those connected with its club, as it arranged for the bailout of Long Term Capital Management in 1998[1] and then again for Wall Street banks a decade later.[2]
It was established by the Federal Reserve Act, which was passed by Congress and signed into law by President Woodrow Wilson in 1913. As it describes itself, "the Board is a federal government agency consisting of seven members appointed by the President of the United States and confirmed by the U.S. Senate."[3] The Federal Reserve is a system of private banks, twelve of which are designated as Federal Reserve Banks and have some features of public federal agencies. The Federal Reserve is headed by a Board of Governors and a Chairman. The current Chairman is Jerome Powell, as appointed by President Donald Trump. Prior chairmen have included Alan Greenspan, appointed by President Ronald Reagan.
One of the main jobs of the Federal Reserve is to control inflation by adjusting the supply of money in the economy, while at the same time maintain the stability of the financial system and promote economic growth. This is done primarily by setting the interest rates (the "discount rate") for money it lends to banks,[4] and also by buying and selling government bonds in order to influence banks' cash supply (called "open market operations") and setting the amount of money that banks must keep in reserve.[5] 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 also has the responsibility of supervising and regulating banking institutions.[6]
In 2008 the Fed became a major player in many new ways, taking over several major banks (ostensibly to prevent total economic collapse) and making trillions of dollars in guarantees. See Financial Crisis of 2008.
Federal Reserve banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, Kansas City, St. Louis, Minneapolis, Dallas, and San Francisco.
Contents
Criticism
Libertarians, such as Ron Paul, and many conservatives want to abolish the Federal Reserve. For 30 years Ron Paul has called for the secretive Federal Reserve bank to be audited.[7] Ron Paul's website declares "Since the Fed’s creation in 1913 the dollar has lost more than 96% of its value, and by recklessly inflating the money supply the Fed continues to distort interest rates and intentionally erodes the value of the dollar."[8] Mark Dice has also criticized it and gave a detailed explanation of its origins.[9]
However, conservatives are not united in their criticism: the prominent conservative commentator Vox Day, a member of Mensa, describes himself as a "loyal Federal Reserve supporter".[10]
Effects of the Fed's Monetary Policy
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!
Friedman and Schwartz argued that all this was due to the Fed's failure to carry out its assigned role as the lender of last resort. Rather than providing liquidity through loans, the Fed just watched as banks dropped like flies, seemingly oblivious to the effect this would have on the money supply.[11]
Recent Literature
- Epstein, Lita & Martin, Preston (2003). The Complete Idiot's Guide to the Federal Reserve. ISBN 0-02-864323-2. excerpt and text search
- Greenspan, Alan. The Age of Turbulence: Adventures in a New World (2007), memoirs covering his chairmanship 1987-2006 excerpt and text search
- Greider, William, Secrets of the Temple. (1987). ISBN 0-671-67556-7; nontechnical book explaining the structures, functions, and history of the Federal Reserve, focusing specifically on the tenure of Paul Volcker
- Hafer, R. W. The Federal Reserve System: An Encyclopedia. (2005). 451 pp, 280 entries; ISBN 4-313-32839-0.
- Meyer, Lawrence H. A Term at the Fed: An Insider's View. (2004) ISBN 0-06-054270-5; focuses on the period from 1996 to 2002, emphasizing Alan Greenspan's chairmanship during the Asian financial crisis, the stock market boom and the 9-11 Attacks
- Treaster, Joseph B. Paul Volcker: The Making of a Financial Legend (2004), chairman 1979-87 online edition
- Tuccille, Jerome. Alan Shrugged: The Life and Times of Alan Greenspan, the World's Most Powerful Banker (2002) online edition
- Wells, Donald R. The Federal Reserve System: A History (2004)
- Woodward, Bob. Maestro: Greenspan's Fed and the American Boom (2000) study of Greenspan in 1990s.
Historical Literature
- Broz, J. Lawrence. The International Origins of the Federal Reserve System (1997). online edition
- Carosso, Vincent P. "The Wall Street Trust from Pujo through Medina", Business History Review (1973) 47:421-37
- Chandler, Lester V. American Monetary Policy, 1928-41. (1971).
- Epstein, Gerald and Thomas Ferguson. "Monetary Policy, Loan Liquidation and Industrial Conflict: Federal Reserve System Open Market Operations in 1932." Journal of Economic History 44 (December 1984): 957–84. in JSTOR
- Friedman, Milton, and Anna Jacobson Schwartz. A Monetary History of the United States, 1867-1960 (1963)
- Hetzel, Robert L. The Monetary Policy of the Federal Reserve: A History (2008) from 1913 to 2007; excerpt and text search
- Kubik, Paul J. , "Federal Reserve Policy during the Great Depression: The Impact of Interwar Attitudes regarding Consumption and Consumer Credit." Journal of Economic Issues . 30#3. 1996. pp 829+.
- Link, Arthur. Wilson: The New Freedom (1956) pp 199–240.
- Livingston, James. Origins of the Federal Reserve System: Money, Class, and Corporate Capitalism, 1890-1913 (1986), Marxist approach to 1913 policy
- Mayhew, Anne. "Ideology and the Great Depression: Monetary History Rewritten." Journal of Economic Issues 17 (June 1983): 353–60.
- Meltzer, Allan H. A History of the Federal Reserve, Volume 1: 1913-1951 (2004) the standard scholarly history excerpt and text search
- Roberts, Priscilla. "'Quis Custodiet Ipsos Custodes?' The Federal Reserve System's Founding Fathers and Allied Finances in the First World War", Business History Review (1998) 72: 585-603
- Romer, Christina D. and David H. Romer. Choosing the Federal Reserve Chair: Lessons from History. The Journal of Economic Perspectives, Vol. 18, No. 1. (2004), pp. 129–162. (jstor)
- Schull, Bernard. "The Fourth Branch: The Federal Reserve's Unlikely Rise to Power and Influence" (2005) ISBN 1-56720-624-7 online edition
- Steindl, Frank G. Monetary Interpretations of the Great Depression. (1995).
- West, Robert Craig. Banking Reform and the Federal Reserve, 1863-1923 (1977)
- Wicker, Elmus R. "A Reconsideration of Federal Reserve Policy during the 1920-1921 Depression", Journal of Economic History (1966) 26: 223–238, in JSTOR
- Wicker, Elmus. Federal Reserve Monetary Policy, 1917-33. (1966).
- Wells, Donald R. The Federal Reserve System: A History (2004)
- Wicker, Elmus. The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed (2005).
- Wood, John H. A History of Central Banking in Great Britain and the United States (2005)
- Wueschner; Silvano A. Charting Twentieth-Century Monetary Policy: Herbert Hoover and Benjamin Strong, 1917-1927 (1999)
References
- ↑ http://www.pseagles.com/Fed_Bailout_Requires_Full_Investigation
- ↑ https://www.bloomberg.com/opinion/articles/2014-09-23/biggest-losses-start-with-brilliance
- ↑ Board of Governors of the Federal Reserve System - Fedpoints - Federal Reserve Bank of New York
- ↑ The Fed's lending facility is called the "discount window"
- ↑ http://www.federalreserve.gov/pf/pdf/pf_3.pdf
- ↑ http://www.federalreserve.gov/generalinfo/mission/default.htm
- ↑ Audit the Federal Reserve
- ↑ Audit the Federal Reserve
- ↑ [1]
- ↑ Vox Day's blog
- ↑ The Great Depression According to Milton Friedman
