Monday, May 18, 2015

Nine questions about the Federal Reserve you were too embarrassed to ask - The Washington Post

The entire article below is both informative and entertaining on the subject of the Federal Reserve. Since we are studying monetary policy, it would be a good idea to understand a little more about the most powerful central bank in the world and how it operates.

Nine questions about the Federal Reserve you were too embarrassed to ask - The Washington Post
What is the Federal Reserve? 
The Fed, as it is often called, is the nation's central bank. It controls the supply of money in the U.S. economy. The $20 bill in your wallet can be used to buy things because the Fed says so (Look! It even says "Federal Reserve Note" at the top). 


The Fed also regulates thousands of private banks around the country and is ready to make emergency loans to them if they temporarily run short of cash. And it manages the technical plumbing that ensures that banks have plenty of money on hand to fill up their cash machines and makes sure that when your employer tries to electronically transfer your paycheck every other Friday, the money shows up in your checking account. 
The Federal Reserve System includes the Board of Governors, based on Constitution Avenue in Washington, and a dozen reserve banks based around the country, plus 20 smaller branch locations. It’s pretty huge: The Federal Reserve System has around 20,000 employees and $2.3 billion worth of real estate. It had $3.7 trillion on its books at last count.

How powerful is the Fed chair, really? No, seriously, I want a ranking.
Oh, you want power rankings? I’d put the Fed chair at the second most powerful person in the United States. The president comes first. But consider the alternatives for the No. 2 slot: The vice president’s only formal power is to break ties in the Senate; the president can choose to ignore and marginalize him. High Cabinet officials like the secretaries of state and defense take their orders from, and serve at the pleasure of, the president. Similarly, you could make a case for White House chief of staff, but that position is basically a vessel for carrying out the president's wishes. The chief justice of the Supreme Court is both powerful and independent, but is much more likely to be outvoted by peers than is the Fed chair.

No comments:

Post a Comment