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A Comparison of Two Federal Reserve Banks   Term Paper ID:27359 Click to get this paper

Essay Subject: Examines the role of the Federal Reserve System. Compares & contrasts the roles of the New York Federal Reserve Bank with the St. Louis Federal Reserve Bank.... More...

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Paper Abstract: Examines the role of the Federal Reserve System. Compares & contrasts the roles of the New York Federal Reserve Bank with the St. Louis Federal Reserve Bank. Paper Introduction: A Comparison of Two Federal Reserve Banks Introduction: Federal Reserve Functions The Federal Reserve System is the central bank of the United States. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system. Over the years, its role in banking and the economy has expanded. Today, the federal Reserve's duties fall into fall into four general areas: 1. Conducting the nation's monetary policy by influencing the money and credit conditions in the economy in pursuit of full employment and stable prices; 2. Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. FRED files are grouped into twelve categories: Daily/Weekly U.S. In this sense, the differencesbetween the Reserves enhance and make the reserve system stronger. Supervising and regulating banking institutions to ensure thesafety and soundness of the nation's banking and financial system and toprotect the credit rights of consumers; 3. These components share responsibility forsupervising and regulating certain financial institutions and activities;for providing banking services to depository institutions and to thefederal government; and for ensuring that consumers receive adequateinformation and fair treatment in their business with the banking system(Overview, 1997). The Beige Book, as it has come to be called, is published eight timesa year. government securities in the secondarymarket in order to adjust the level of reserves in the banking system.Open market operations enable the Federal Reserve to manage money supplygrowth and reach other monetary policy targets (Open market operations,1997). Available:http://www.ny.frb.org/pihome/fedpoint/fed44.htm. (1997). The St. The Beige Book summarizes this information by Districtand sector (FRED, 1997). Over the years,its role in banking and the economy has expanded. [On-line]. Through open market operations, theFederal Reserve buys and sells U.S. Available: http://www.stls.frb.org. Public information. Louis. Louis Federal Reserve Bank takes a lead in gathering andpresenting this information (Purposes and functions, 1997).Functions of the New York City Federal Reserve The manager of the System Open Market Account at the New York Fed, whoexecutes open market operations on behalf of the entire Federal ReserveSystem, uses the directive as a guide in making decisions about the day-to-day sale or purchase of securities (Open market operations, 1997). Today, the federalReserve's duties fall into fall into four general areas: 1. The Federal Reserve Bank of St.Louis. The sale or purchase ofU.S. The open market staff also receives information from the Treasuryabout its balances at Federal Reserve Banks through a telephone call eachmorning at about 1 :3 a.m. FRED. On many occasions the New York Fed acts as agent on behalf of othercentral banks and international organizations wishing to participate in theFX market in the United States, with funds kept for those organizations inFederal Reserve custody accounts and with no money of U.S. Louis Federal Reserve The St. It oversees the value ofmoney, within and without the U.S. monetaryauthorities involved (Intervening in open market operations, 1997). Available: http://www.stls.frb.org/pubinfo. Purposes and functions. A Comparison of Two Federal Reserve BanksIntroduction: Federal Reserve Functions The Federal Reserve System is the central bank of the United States.It was founded by Congress in 1913 to provide the nation with a safer, moreflexible, and more stable monetary and financial system. The Federal Reserve Bank of New YorkCity. Providing certain financial services to the U.S. economicand financial data, including daily U.S. Overview. economy and makes decisions that helpmaintain the stability of those economies. When the RPs mature, the added reserves are automatically drained.However, when there is a temporary need to drain reserves, matched sale-purchase transactions with dealers are executed. [On-line]. interest rates, monetary andbusiness indicators, exchange rates, and regional economic data forArkansas, Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee. In some sense, the New YorkFederal Reserve acts as broker on national and international levels,concerning the value and availability of money. These transactionsinvolve a contract for immediate sale of Treasury bills to, and a linkedmatching contract for subsequent purchase from, each participating dealer(Open market operations, 1997). The St.Louis Federal Reserve acts as a focus for valuable financial informationfrom all the other Federal Reserves. In addition to the monetary services indexes, the database containsdual user cost indexes, measures of potential aggregation error in themonetary services indexes, measures of the stock of monetary wealth andrelated indexes. The Federal Reserve Bank of St. FRED (Federal Reserve Economic Data) provides historical U.S. When intervening on behalf of U.S. monetary authorities, the New YorkFed uses varied intervention techniques, depending on the circumstances andgoals of the operation. This information is used by theFederal Open Market Committee (FOMC) and the Board of Governors in reachingmajor decisions about monetary policy. [On-line]. This directive indicates the approach to monetary policythat the FOMC considers appropriate for the time period between itsmeetings, which are held approximately every six to eight weeks (Openmarket operations, 1997). Louis. Louis, the Beige Book,Summaries of Current Economic Conditions by Federal Reserve District, andFRED (Federal Reserve Economic Data) which is an historical database ofeconomic and financial data (Statistical information, 1997). Federal Reserve Board. The Monetary Services Index (MSI) for theUnited States measures the flow of monetary services received each periodby households from their holdings of monetary assets. Maintaining the stability of the financial system and containingsystemic risk that may arise in financial markets; and 4. Each Federal Reserve Bank gathers anecdotal information on currenteconomic conditions in its District through reports from Bank and Branchdirectors and interviews with key businessmen, economists, market experts,and other sources. In addition, traders at the New York Fed observe market trends anddevelopments to provide information to policy makers. (1997). (1997). Boards of directors of the Reserve Banks and Branches provide theFederal Reserve System with a wealth of information on economic conditionsin virtually every corner of the nation. Open market operations. Open market operations are the Federal Reserve's most flexible meansof carrying out monetary policy. Available:http://www.ny.frb.org/pihome/fedpoint/fed32.htm. Reserve forecasters in the New York Fed's research department and atthe Board of Governors in Washington compile data on bank reserves from theprevious day and on factors that could change their projections for futuredays. Federal Reserve Board. It acts as a kind of gathering and exchange point foreconomic information, factual and anecdotal. It is a federal system, composed basically of acentral, governmental agency, the Board of Governors in Washington, D.C.,and twelve regional Federal Reserve Banks, located in major citiesthroughout the nation. Louis Federal Reserve includes (butis not limited to) annual reports, news releases, speeches by Thomas C.Melzer President, Federal Reserve Bank of St. Levels of theindexes are often referred to as Divisia monetary aggregates (Statisticalinformation, 1997). Being closer to historicseats of power and European markets, the New York branch of the FederalReserve has assumed a kind of natural role. [On-line]. If a decision is made to support the dollar's price against acurrency, the foreign trading desk of the New York Fed will buy dollars andsell foreign currency; to reduce the value of the dollar, it will selldollars and buy foreign currency, usually the German mark or the Japaneseyen. Asset data, user costs, and the benchmark rate areprovided along with asset and rate data prior to adjustments, and programsand procedures used to construct the indexes (Statistical information,1997). At the New York Fed's trading desk, where open market operations areexecuted, the staff starts each workday by gathering information about themarket's activities from a number of sources. Open market operations are one of three basic tools used by theFederal Reserve to reach its monetary policy objectives. The Federal Reserve Bank of St. government securities in the "open market," also known as thesecondary market, is the Federal Reserve's most flexible means of carryingout its objectives. The Fed's traders discusswith the primary dealers how the day might unfold in the securities marketand how the dealers' task of financing their securities positions isprogressing. Available:http://www.bog.frb.fed.us/fomc/bb/current. Following the discussion with the Treasury,the manager of the System Open Market Account, after reviewing all of theinformation gathered from the various sources, develops a plan of actionfor the day (Intervening in open market operations, 1997). Louis Branch of the Federal Reserve has a different, moredomestic role. Information from directors and other sources gathered by the ReserveBanks is also shared with the public in a special report informally calledthe Beige Book which is issued about two weeks before each meeting of theFOMC. government, tothe public, to financial institutions, and to foreign officialinstitutions, including playing a major role in operating the nation'spayments system (Overview, 1997).Structure of the System The Federal Reserve System has a structure designed by Congress togive it a broad perspective on the economy and on economic activity in allparts of the nation. Depending upon the level of reserves in the banking system, the NewYork Fed's System Open Market Account manager may take one of threeapproaches regarding the type of transaction executed. (1997). The New York Federal Reserveneeds such information to enhance their decision making process. References The Beige Book. Thelatter technique is useful if the Fed wishes to act discreetly (Interveningin open market operations, 1997).Functions of the St. (1997). [On-line].Available: http://www.bog.frb.fed.us/pf/pf.htm Statistical information. The Federal Reserve Bank of St. Federal Reserve Board. The trading desk staff also talks with the large money centerbanks about their reserve needs and the banks' plans for meeting them (Openmarket operations, 1997). [On-line]. (1997). Conducting the nation's monetary policy by influencing the moneyand credit conditions in the economy in pursuit of full employment andstable prices; 2. Louis provides a database containingmonetary services indexes. (1997). With RPs, the System buys securities from thedealers, who agree to repurchase them by a specified date at a specifiedprice. By adjusting the level of reserves in the bankingsystem through open market operations, the Fed can offset or supportseasonal or international shifts of funds and thereby influence short-terminterest rates and the growth of the money supply (Open market operations,1997). The other toolsinvolve changing the terms and conditions for borrowing at the discountwindow and adjusting reserve requirement ratios. The New York City Federal ReserveBank takes the lead in this area (Purposes and functions, 1997). Most often, thetransactions the trading desk engages in are short-term repurchaseagreements (RPs), which are used in situations that call for temporaryadditions to bank reserves. (1997). The St. Intervening in foreign exchange markets. The trading desk may either deal directly withcommercial banks or ask a commercial bank to deal on its behalf. The Federal ReserveBank of New York City. Information available from the St. Available:http://www.bog.frb.fed.us. While the Fed'strading staff may operate in the Foreign Exchange (FX) market at any timeand in any market in the world, the focus of activity usually is the U.S.market (Intervening in open market operations, 1997). FinancialData, Monthly Monetary Data, Monthly Interest Rates, Monthly Reserves,Monthly Commercial Banking Data, Business/Fiscal Data, Gross DomesticProduct and Components, Monthly Consumer Price Indexes, Monthly ProducerPrice Indexes, Monthly Employment and Population Data, Exchange Rate andBalance of Payments Data, and Monthly Regional Data (FRED, 1997).Conclusion: The Importance of Differences One of the central tenets of the Federal Reserve system is to gatherand disseminate accurate and useful information. [On-line]. Decisions about the sale or purchase of securities in the open marketare based on a directive, or set of instructions, developed by the FederalOpen Market Committee (FOMC), the Federal Reserve's top monetary policy-making group. Louis federal Reserve carries out duties which on the surfacemay seem more mundane, but are equally as important as the functionscarried out by the New York federal Reserve, the organization andpresentation of factual information for the Fed and for public consumption. [On-line].Available: http://www.stls.frb.org/fred. Some of this information is regional in nature, but a great deal of itpertains the national economy (Public information, 1997). If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.