Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
¶ … Federal Reserve system adequate in strengthening the payments system?
After the credit crisis of 2008, the Federal Reserve vowed to assume a permanent role in issuing routine short-term loans to banks. When Lehman Brothers was not 'bailed out' there was a 'run' on most of the major banks, which caused many banks to default on what were once entirely routine, secure short-term loans. The Fed, in a December 2008 press release, declared that it would take a more proactive official position in providing short-term loans to otherwise solvent banks to avoid sudden bank runs and subsequent liquidity crises. The Fed will now offer intraday balances through collateralized daylight overdrafts.
The Fed will pledge collateralized 'daylight' overdrafts at no fee and increase fees for uncollateralized daylight overdrafts to the annual rate. By adjusting net debit caps, eliminating the current deductible for daylight overdraft fees, and increasing the penalty daylight overdraft fee, the Fed hopes to restore confidence in the American banking system. Collateralized loans will have demonstrably greater security than uncollateralized loans.
While these measures seem sound and will hopefully ensure that no institution will be penalized for making the types of loans that are necessary for the international economy to remain functional, much still needs to be done in exercising oversight over the practices that lead to the failure of Lehman Brothers in the first place. A lack of transparency in financial dealings remains a concern, and there are still a variety of financial instruments that are poorly regulated -- moreover, the precipitous drop in interest rates orchestrated by the Fed to stimulate the economy could give rise to yet another crisis of over-borrowing and widespread consumer debt. Greater regulation and oversight is necessary as well as greater insurance of debt.
Reference
Press release. (2008, December 18). The Federal Reserve. Retrieved November 18, 2009
http://www.federalreserve.gov/newsevents/press/other/20081219a.htm
This is the interest rate that banks lend their balances on at the Federal Reserve to other banks. It exercises this control by influencing the demand for and supply of these balances through the following means: Open market operations -- the purchase or sale of securities, primarily U.S. Treasury securities, in the open market to influence the level of balances that depository institutions hold at the Federal Reserve Banks (The
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
Federal Reserve Bank Financial services as an industry has progressed to become one of the widely transforming sectors of the global economy, having significant changes in information transference and processing, innovation in terms of commodities and processes, and rapid competition among the financial institutions -- among themselves and also among their several customers. The industry and its part in the transformations in the economy show that the supervising and regulatory structure
Validity and reliability have not been addressed in this paper at all. There is no empirical test being proposed for the paper. The a priori conclusion of the paper, in the absence of research, begs serious questions about the validity of this research. If you think you already know the answer, why ask the question? 6. In terms of style, the proposal sounds disjointed, and the giant paragraphs do not help. Ideas
Federal Reserve Ratio What federal reserve ratio? Why important? The Federal Reserve ratio refers to the funds banking or depository institutions are mandated by law to hold against their deposit liabilities. This fund is a proportion of the amounts of money banking or depository institutions hold in form of net transactions accounts and deposits that make up the institution's liability to its customers. This proportion is a predetermined ratio arrived at through
The Office exacts a new level of accountability, which encourages a broader range of competitions and new organizations to enter these competitions. Congress authorizes the Office to develop the franchise funds pilots and to expand the competitive environment. It also invites the private sector to participate in new markets and at new levels of commercial workload. At the same time, it encourages the public to compete for the same