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Banking System
The United States banking system has been around for quite a while. Indeed, the Bank of New York was founded in 1784, a scant eight years after the United States was created. The banking system has two major functions. First, they operate an overall payments system. Second, they facilitate and allow for financial intermediation. There was no formal financial system in the colonial states prior to the formation of the United States. The modern form of the banking system has only really been around since the early 1900's. The nascent form of the banks as they exist today was created by Alexander Hamilton. As of the inauguration of George Washington in 1789, only three banks existed in all of the colonies. Generally speaking, banks are typically financial institutions that are chartered and regulated mostly by the state in which the bank or banks operate. The banking system of the United States experienced some major growing pains in the mid-1800's as the Industrial Revolution entered full swing. The Civil War and Abraham Lincoln brought about the federal chartering of banks rather than relegating the process and framework to the banks. This greatly helped stabilize the banking system and currency valuations...
Created in the 1910's, there was the creation of a single central bank. Prior to the creation of the bank, there was no centralization to speak of other than the aforementioned federal chartering that occurred during the time of Lincoln. The revised system was to help prevent against financial crises from happening. Over the last one hundred years, the Fed has been mostly successful. However, there have been times of major strife. The two most specific examples are the Great Depression in the 1930's and the much more recent financial crisis that ran from 2007 to 2009. Even so, the nationalization of the banking system was necessary because the system of notes and other documents that existed before the Fed was quite a mess and the lack of a singular and unified currency led to a rampant amount of counterfeiting and other problems. The Fed technically being a private institution is a problem for many people. At the same time, allowing politics and power-hungry politicians to control the…
References
Sylla, R. (2016). The U.S. Banking System: Origin, Development, and Regulation -- The Gilder
Lehrman Institute of American History. Gilderlehrman.org. Retrieved 19 April 2016,
from https://www.gilderlehrman.org/history-by-era/economics/essays/us-banking-system-origin-development-and-regulation
Utt, R. (2008). The Subprime Mortgage Market Collapse: A Primer on the Causes and Possible
Solutions. The Heritage Foundation. Retrieved 19 April 2016, from http://www.heritage.org/research/reports/2008/04/the-subprime-mortgage-market-collapse-a-primer-on-the-causes-and-possible-solutions
The Federal reserve realized the big negative impact of MBS and announced a 600 billion program in November 2008 to purchase these securities and this helped to bring back some liquidity into the market. In March 2009, it added another $750 billion to bring the total to $1.25 trillion. The Fed has the power to create or print more money to increase money supply in the market and this is exactly
Rather than propping up "bad blood" and allowing the "illusion" of wealth to continue to be fostered, the Federal Reserve should allow the market to flush out the "bad blood" and operate the way it is intended. Conclusion In conclusion, the good that the Federal Reserve does is to monitor economic policy, encourage maximum employment and long-term stability. The way it does so, however, especially in times of crisis such as
Federal Reserve Policies 2000- The first decade of the 21st century saw the U.S. economy on a peripatetic through tumultuous events, euphoric highs, and abysmal lows. The ten-year window highlighted three periods: 2000-2004, 2004-2007, and 2007-2010 in which the Federal Reserve actively utilized their policy levers to achieve their dual policy mandate of full employment and low inflation. The Fed's policy bag includes: the Fed funds rate, open market operations, discount
Many laws have been successful in restricting such practices in order to avoid a similar situation in the future. Today, "when a mortgage borrower wins a rescission case in court, the bank loses the right to foreclose, and has to give up all profits from interest and fees on the loan" (Carter, 2012). However, just a few years after predatory lending caused so much damage, there are already movements
S. growth will proceed at a crawl in 2008, which will provide little comfort for the dollar" and most certainly call for intervention again by the Fed. "In some fashion the dollar will continue to decline," according to Adnan Akant, a specialist in currency at Fischer Francis Trees & Watts, money managers in New York City. For investors, Slater continues, having a weaker dollar offers choices; to wit, if you
" (Structure of the Federal Reserve System) The 12 Federal Reserve Banks extend banking service to the depository institutions and also to the federal government. To the financial institutions it takes the responsibility of maintaining reserve and clearing out accounts and entails various payment services incorporating checks, electronically transferring funds and circulating and receiving coins and currency notes. As the banker of the Federal Government they function as fiscal agents. They