Copyright © Philip M. Parker, INSEAD. Terms of Use.
Definition: Federal Reserve |
Federal ReserveNoun1. The central bank of the United States; incorporates 12 Federal Reserve branch banks and all national banks and stated charted commercial banks and some trust companies; "the Fed seeks to control the United States economy by raising and lowering short-term interest rates and the money supply". Source: WordNet 1.7.1 Copyright © 2001 by Princeton University. All rights reserved. |
Synonyms: Federal ReserveSynonyms: Fed (n), Federal Reserve System (n). (additional references) |
(From Wikipedia, the free Encyclopedia)
 Federal Reserve Regions |
The Federal Reserve System (also known as the Federal Reserve or simply "The Fed") is the central bank of the United States. It was created by the United States Congress with the passage of the Federal Reserve Act in 1913. The Federal Reserve System is composed of a central, governmental agency -- the Board of Governors -- in Washington, D.C, and twelve regional Federal Reserve Banks located in major cities throughout the nation.
The Federal Reserve System is not "owned" by anyone and is not a private, profit-making institution. Instead, it is an independent entity within the government, having both public purposes and private aspects. It is considered an independent central bank because its decisions do not have to be ratified by the President of the United States or anyone else in the executive or legislative branch of government, it does not receive funding appropriated by Congress, and the terms of the members of the Board of Governors span multiple presidential and congressional terms. However, the Federal Reserve is subject to oversight by Congress, which periodically reviews its activities and can alter its responsibilities by statute, and is also subject to laws regarding federal agencies such as the Freedom of Information Act and the Privacy Act.
In addition, the Federal Reserve must work within the framework of the overall objectives of economic and financial policy established by the government. Therefore, the Federal Reserve can be more accurately described as "independent within the government."
The twelve regional Federal Reserve Banks, which were established by the Congress as the operating arms of the nation's central banking system, are organized much like private corporations--possibly leading to some confusion about "ownership." Indeed, many people incorrectly refer to the Federal Reserve as the "Federal Reserve Corporation." The Reserve Banks issue shares of stock to member banks. However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock is, by law, a condition of membership in the System. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, 6 percent per year.
The earnings of the Federal Reserve System come primarily from interest received on the Reserve Banks' holdings of U.S. government securities (which are used in the conduct of monetary policy) and from fees they charge depository institutions for providing services (such as processing and clearing checks). The expenses of the System are paid from these earnings. Any net earnings are paid yearly to the United States Treasury. For 2001, the payment was $27.14 billion.
The organization committee was chartered with selecting the locations of between eight and twelve decentralized Federal Reserve Banks. They decided upon twelve cities, and a centralized "Board of Governors" in Washington, DC:
The Fed is in charge of setting the federal funds interest rate. This is the rate that banks are forced to charge each other for overnight loans to each other. This in turn influences the Wall Street Journal prime rate which is usually 3 percent higher then the federal funds rate. This prime rate is the relative rate that most banks price their loans at.
The Fed usually lowers or raises its rates by 0.25% or 0.50%. The Economist, Merrill Lynch, Lehman Brothers, HSBC used to make predictions about how the rates will change.
Since 2001, The Fed has lowered its interest rates several times to fight recession : lower rates make credit cheaper and so enable more investment, whereas saving brings less money (see monetary policy for more explanation).
In November 2002, rates were cut to 1.75. Rates are below inflation level.
It is said that the Fed doesn't have much ammunition left, since rates are already below inflation and that 1.25 means that there no much room left for further cuts (in theory five times 0.25)
In March 2003, interest rates were at their lowest in 40 years.
On the 23rd of July 2003 a Federal Reserve committee cut the federal funds rate by one-quarter of a percentage point - to 1 percent.
The federal funds rate is also called the overnight rate because it is what banks charge one another for overnight loans. The last time it was lower was in July 1958, when the overnight rate averaged 0.68 percent. The Fed has cut the overnight rate 13 times since the beginning of 2001, when the rate was 6.5 percent.
The Fed, in contrast with the European Central Bank (ECB or BCE), has two goals—keeping growth and fighting inflation—while the BCE has only to fight inflation.
History
The Federal Reserve System began operations in 1914 with the appointment of the Organization Committee by Woodrow Wilson. This committee was composed of Secretary of the Treasury William McAdoo, Secretary of Agriculture David Franklin Houston and Comptroller of the Currency John Skelton Williams.
Each of these cities came to be important financial districts due, in large part, to this selection.Roles and Responsibilities
The main tasks of the Fed are:
Organization of the Federal Reserve
The Federal Reserve is comprised of a board of governors. The 7 members of the board are appointed by the President and confirmed by the Senate. The members are elected for a term of 14 years (with no re-appointment possible). The Federal Open Market Committee (FOMC) comprises the 7 members of the board of governors and 5 representatives from the Federal Reserve Banks.Chairman
Interest rates
The Fed and BCE
External links
Source: adapted by the editor from Wikipedia, the free encyclopedia under a copyleft GNU Free Documentation License (GFDL) from the article "Federal Reserve."
| Context | Synonyms within Context (source: adapted from Roget's Thesaurus). |
Money | Federal Reserve Bank, central bank; Federal Reserve Board, board of governors of the Federal Reserve; Treasury Department; Secret Service. |
Double eagle, eagle; Federal currency, fractional currency, postal currency; Federal Reserve Note, United States Note, silver certificate, gold certificate; long bit, short bit; moss, nickel, pile, pin money, quarter, red cent, roanoke, rock; seawan, seawant; thousand dollars, grand. | |
| Source: adapted from Roget's Thesaurus. | |
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Source: compiled by the editor from various references; see credits. | |||
| Thumbnail | Description & Credit | Thumbnail | Description & Credit |
 | Federal Reserve Warehouse.Credit: Library of Congress. |  | Federal Reserve Building, Constitution Ave. Federal Reserve with azaleas and marble bench in foreground I.Credit: Library of Congress. |
 | Emblems and seals. U.S. seal in Federal Reserve boardroom I.Credit: Library of Congress. | ||
Source: compiled by the editor from various references; see credits. | |||
| Subject | Topic | Quote |
Business | The Federal Reserve Bank has managed this trust fund on behalf of the Thai government, primarily by investing in U.S. treasury securities. (references) | |
Under this program, the Thai government utilizes a military trust fund account opened at the Federal Reserve Bank of New York to buy weapons from the United States. (references) | ||
However, in 2000, the RTAF was able to conclude a successful deal in acquiring sixteen used F-16 air defense fighter jets from the United States for US$136 million, utilizing the unused funds deposited at the Federal Reserve Bank toward the purchase of F-18 fighter jets, a purchase that was cancelled because of the economic crisis. (references) | ||
Economic History | Taiwan | Taiwan is expected to achieve another BOP surplus in 2001, although political factors and U.S. Federal Reserve interest rate cuts could affect the interest income earned from forex reserves. (references) |
China | China continued to hold the exchange rate for the domestic currency (renminbi - RMB) during 2000 and through the first half of 2001. The gap between relatively lower Chinese interest rates and generally higher overseas rates, narrowed somewhat as the U.S. Federal Reserve reduced rates to maintain economic growth, leading to similar declines in China's foreign currency deposit rates. (references) | |
Political Economy | India | Indian Finance Minister Yashwant Sinha traveled to Washington and held meetings with Treasury Secretary Rubin and Federal Reserve Bank Chairman Greenspan in April 1998. (references) |
Trade | Colombia | According to the information provided by the Federal Reserve Bank of the United States. (references) |
Costa Rica | The government began the process of rebuilding the institution with new staff in 2000 and has asked the Inter-American Development Bank and U.S. Federal Reserve for training and technical assistance. (references) | |
Australia | Until recently, the Reserve Bank of Australia (RBA) carried out the prudential regulation of Australia's banks, not unlike the Federal Reserve in the U.S. Changes brought about by the 1997 Wallis Inquiry into the Australian financial system establish the RBA's key roles as monetary policy, systemic stability and payments system regulator. (references) | |
Source: compiled by the editor from ICON Group International, Inc.; see credits. | ||
| Speaker | Phrase(s) |
Robert Novak | But a majority of the president's party in Congress is opposing him on this issue and the House Democratic leader spoke out against the agreement on the same day that the Federal Reserve chairman was supporting it. |
Source: compiled by the editor from various references; see credits. | |
| Speaker | Term | Phrase(s) |
Lyndon B. Johnson | 1963-1969 | Given the cooperation of the Federal Reserve System, which I so earnestly seek, I am confident that this movement can continue. |
Gerald Ford | 1974-1977 | Only a reduction in spending can make it possible for the Federal Reserve System to avoid an inflationary growth in the money supply and thus restore balance to our economy. |
Ronald Reagan | 1981-1989 | We will continue to cooperate with the Federal Reserve Board, seeking a steady policy that ensures price stability without keeping interest rates artificially high or needlessly holding down growth. |
George Bush | 1989-1993 | So tonight I am asking the Congressional leaders and the Federal Reserve to cooperate with us in a study, led by Chairman Alan Greenspan, to sort out our technical differences so that we can avoid a return to unproductive partisan bickering. |
Source: compiled by the editor from various references. | ||
Expressions using "Federal Reserve": board of governors of the Federal Reserve ♦ federal Reserve Bank ♦ Federal Reserve Banks ♦ Federal Reserve Board ♦ Federal Reserve Float ♦ federal reserve note ♦ federal reserve system. Additional references. | |
| Source: compiled by the editor from various references; see credits. |
| The following statistics estimate the number of searches per day across the major English-language search engines as identified by various trade publications. Hyperlinks lead to commercial use of the expression at Amazon.com. |
| Language | Translations for "Federal Reserve"; alternative meanings/domain in parentheses. | ||||||||||||||||||||||
Danish | FED (adipic, adipose, fat, fatty, greasy, lea, skein, sut, wind), USA's centralbank. (various references) | ||||||||||||||||||||||
Dutch | federale reservebank (Federal Reserve Bank), Federal Reserve System (Federal Reserve System). (various references) | ||||||||||||||||||||||
French | FED, Réserve fédérale. (various references) | ||||||||||||||||||||||
German | Federal Reserve System (Federal Reserve System), föderale Reservenbank (Federal Reserve Bank). (various references) | ||||||||||||||||||||||
Greek | Tράπεζες-μέλη του Oμοσπονδιακού Aποθεματικού Συστήματος των H A (Federal Reserve Banks), Oμοσπονδιακό Aποθεματικό Σύστημα (Federal Reserve System), επιταγές υπό είσπραξη κατατεθειμένες στις Tράπεζες-μέλη του Oμοσπονδιακού Aποθεματικού Συστήματος των H A (Federal Reserve Float). (various references) | ||||||||||||||||||||||
Hungarian | usa központi bankja (federal reserve system). (various references) | ||||||||||||||||||||||
Italian | Fed (Federal Reserve System), Sistema della riserva federale (Federal Reserve System), Riserva federale (Federal Reserve System), banca di riserva federale (Federal Reserve Bank). (various references) | ||||||||||||||||||||||
Japanese Kanji | 連邦準備制度 (Federal Reserve System). (various references) | ||||||||||||||||||||||
Japanese Katakana | れ"ぽうじゅ"びせいど (Federal Reserve System). (various references) | ||||||||||||||||||||||
Pig Latin | ederalfay eserveray banco de reserva federal (Federal Reserve Bank). (various references) национальный банк (federal reserve bank). (various references) cheques pendientes de cobro depositados en bancos de la Reserva Federal (Federal Reserve Float), Bancos de la Reserva Federal (Federal Reserve Banks), banco de reserva federal (Federal Reserve Bank). (various references) | ||||||||||||||||||||||
Scrabble® Enable2K-Verified Anagrams | |
| Words within the letters "a-d-e-e-e-e-e-f-l-r-r-r-s-v" | |
-4 letters: federalese, rereleased. | |
-5 letters: deferrals, deferrers, referrals, rerelease, revealers, verderers. | |
| Source: compiled by the editor from various references; see credits. SCRABBLE® is a registered trademark. All intellectual property rights in and to the game are owned in the U.S.A and Canada by Hasbro Inc., and throughout the rest of the world by J.W. Spear & Sons Limited of Maidenhead, Berkshire, England, a subsidiary of Mattel Inc. Mattel and Spear are not affiliated with Hasbro. | |
Hexadecimal (or equivalents, 770AD-1900s) (references)46 65 64 65 72 61 6C 52 65 73 65 72 76 65 |
| Leonardo da Vinci (1452-1519; backwards) (references)
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Binary Code (1918-1938, probably earlier) (references)01000110 01100101 01100100 01100101 01110010 01100001 01101100 00100000 01010010 01100101 01110011 01100101 01110010 01110110 01100101 |
HTML Code (1990) (references)F e d e r a l   R e s e r v e |
ISO 10646 (1991-1993) (references)0046 0065 0064 0065 0072 0061 006C 0052 0065 0073 0065 0072 0076 0065 |
Encryption (beginner's substitution cypher): (references)40717071846778252718571848871 |
| 1. Definition 2. Synonyms 3. Crosswords 4. Usage: Commercial | 5. Images: Slideshow 6. Images: Photo Album 7. Quotations: Non-fiction 8. Quotations: Spoken | 9. Quotations: Speeches 10. Expressions 11. Expressions: Internet 12. Translations: Modern | 13. Anagrams 14. Orthography 15. Bibliography |
Copyright © Philip M. Parker, INSEAD. Terms of Use.
