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In addition to managing the value of the U.S. dollar through interest rate policy, the Fed also engages in foreign currency operations. This involves the buying and selling of U.S. dollars on global currency markets. Doing so can expand or contract demand for the dollar, thereby increasing or lowering its value. The Fed does this in order to create demand for U.S. products, or to help fight inflation.
In the Fed's role as one of the supervisors and regulators of the banking system, it has been gifted with certain enforcement mechanisms. The Fed can use both formal and informal actions to control the behavior of banks. The first step in enforcement is that the Fed will present to the managers of the bank in question all of its findings and demand that the issues be addressed. If the bank does not comply, the Fed will then request...
It is hoped that this action will compel the bank's board into action.
If that fails, the Fed begins its formal process. The Fed has the power to levy fines, to remove officers and directors, to issue cease-and-desist orders and to bar individuals from the banking industry. Along with this comes public humiliation, as the Fed posts these punishments publicly. This escalating series of enforcement measures gives the Fed broad powers to control and ultimately curtail the activities of non-compliant banking institutions. The Fed's authority with regard to unwinding banks is limited, as that role falls to the FDIC.
Works Cited:
Federal Reserve website, various pages. (2009). Retrieved November 16, 2009 from http://www.federalreserve.gov/
Works Cited:
Federal Reserve website, various pages. (2009). Retrieved November 16, 2009 from http://www.federalreserve.gov/
Federal Reserve in stabilizing the economy using monetary policy tools. The paper is divided into six major sections. The first section introduces the Federal Reserve by highlighting its objectives, roles, and composition. The second section explains its role and effectiveness in stabilizing the current U.S. economy. The next section discusses some important economic indicators which the Federal Reserve can analyze for better economic stabilization. The fourth section is dedicated
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
The new government banks put heavy taxes on state banks, and they were forced to go under. After this, the government had a monopoly on banking and money again, and they used it to the fullest extent possible. One of the main problems with the banking system, though, was that there were still a lot of cash flow problems and other weaknesses that led to panics for individuals who
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
It is also worth noting that the Fed must understand how the relationship between its actions and the outcomes changes under different circumstances. For example, open market transactions put more money into the economy; they do not imply that spending will increase. Thus, more money in the economy will not necessarily lead to more growth, lower unemployment or higher inflation, even though the typical relationship is that they will. The
United States Federal Reserve System: The Federal Reserve System or the Fed was established by President Wilson in December 1913 to promote the development of a stable, flexible, and safer financial system in the country. President Wilson enacted the Federal Reserve Act, which was a conclusion of the findings of a commission that was mandated with the task of examining the 1907 severe bank panic. Since its inception, the Federal Reserve