Federal Reserve Bank My key term for this week’s Discussion Board is

Federal Reserve Bank

My key term for this week’s Discussion Board is Federal Reserve Bank. The reason that I chose the Federal Reserve Bank is academic curiosity and potential career opportunities. I currently work as an accountant for a large Oil company in San Antonio, Texas. I would like to switch career paths, so once I finish up my courses for my MBA I want to look into a career in banking. I believe that banking would be a good career opportunity for me so I would like to know as much about the banking industry as possible. I have been trying to do as much research on this topic as possible, and now that I have this as a topic for school, I feel like this is an added bonus in learning.

Explanation

Satterlee’s definition of the Federal Reserve Bank is “responsible for regulating the growth of the economy, which is accomplished by the increase or decrease of money supply” (Satterlee, 2018, p.136). Other countries and economies also have similar financial institutions such as the Bank of England, the European Central Bank, and the Bank of Japan. The Federal Reserve Bank is a central banking system that was created on December 23, 1913 along with the Federal Reserve Act. The Great Depression in the 1930’s and the Great Recession in the 2000’s has increased the duties and responsibilities of the Federal Reserve System.

There are twelve Federal Reserve Banks spread across the United States and serve many districts and territories. The Federal Reserve system also has 5 major functions that helps to stimulate the United States economy. The Federal Reserve handles the nations monetary policy, fosters the stability of the financial system, ensures the safety and security of individual financial institutions, provides services to the banking industry that ensures payment and clearing house transactions occur safely, Ensures consumer protection through numerous programs (Federal Reserve, 2022).

Summary

The article I chose for my key term the Federal Reserve Bank is an article published by Kimberly Amadeo. This article was fascinating, it spoke about how the Federal Reserve works and who owns it. The Federal Reserve is the central bank for the United States and is there to regulate the economy. President Woodrow Wilson was the president at the time that the Federal Reserve Bank and the Federal Reserve Act were enacted in 1913. This article also spoke about funding and the bank members on its board. The funding does not come from Congress as one might think, funding actually comes from investments.

The Federal Reserve is also made up of twelve banks across the United States and each bank services certain states. To become a member of the Federal Reserve banks must own shares of stock in the twelve regional Federal Reserve Banks across the country.

But owning Federal Reserve bank stock is nothing like owning stock in a private company. It cannot be traded and does not give the member banks voting rights. These pay out dividends, mandated by law to be 6%. But the banks must return all profits, after paying expenses, to the U.S. Treasury (Amadeo, 2022, para. 9).

In summary, the Federal Reserve Bank was established to help regulate the economy. After the Great Depression in the 1930’s and the Great Recession of the 2000’s, the Federal Reserve has been in more demand and has had more responsibilities such as reducing inflation and trying to cut interest rates.

Discussion

The Federal Reserve plays an important role in the United States Economy. It will adjust the monetary policy as needed to help stabilize prices, interest rates, and help the unemployment rate. It does this by either stimulating demand by reducing interest rates or and constricting the policy by increasing interest rates. “How does the Fed cut interest rates? It lowers the target for the fed funds rate. Banks usually follow the Fed’s lead, cutting benchmark rates such as the prime rate” (Amadeo, 2022, para.18). With inflation starting to increase in the United States over the last few months the Federal Reserve is starting to implement higher interest rates in hopes to lower inflation. 

The article I cited is similar as all the articles talk about the monetary policy of the Federal Reserve. The Federal Reserve is responsible for setting the monetary policy for the United States. At times the policy set by the Federal Reserve and other central banks of other countries have an impact on international financial markets. With the global economy the Federal Reserve bank’s policy has more impacts on other countries and currencies. “More specifically, the monetary policy of a center country could be transmitted to the periphery economies via the exchange rate, trade, credit, and risk-taking channels” (Inoue & Okimoto, 2022, p.2). 

This can sometimes lead to the United States receiving criticism from other countries due to the fact that the dollar is a dominant currency in the global market. Due to these concerns the Federal Reserve attends meetings with other central banks during the year in order to allow other central banks the opportunity to question and respond to the Federal Reserve Bank (Bernanke, 2017). With continued globalization of the economy the monetary policy of the United States will become increasingly important to other nations.

References

Amadeo, K. 2022. Who Really Owns the Federal Reserve? The Balance. https://www.thebalance.com/who-owns-the-federal-reserve-3305974#:~:text=TheFederalReserveisthecentralbankfor,agency.Itsleaderisnotanelectedofficial.

Bernanke, B. S. (2017, April). Federal Reserve Policy in an international context. IMF Economic Review, 65(1), 5+. Retrieved from https://bi-gale-com.ezproxy.liberty.edu/global/article/GALE|A494741776?u=vic_liberty&sid=summon

Federal Reserve. (2022) Board of Governors of the Federal Reserve System. About the Fed.

https://www.federalreserve.gov/aboutthefed.htm

Inoue T & Okimoto T. (2022) International spillover effects of unconventional monetary policies of major central banks. International Review of Financial Analysis.  Volume 79 ISSN 1057-5219, 1-19. (https://www-sciencedirect-com.ezproxy.liberty.edu/science/article/pii/S1057521921002854?viaihub).

Satterlee, Brian. (2018) International Business with Biblical Worldview. McGraw Hill Publishing