Reference no: EM13926918
Discussion must be apa format. paragraph or two.
The Federal Reserve System was created in 1913 by an act of Congress and is made up of a Board of Governors and 12 Federal Reserve Banks. The Federal Reserve (The Fed) is the central bank for the United States.
Note: The Fed is not part of the government, but the two are closely related.
The Fed controls the money supply or monetary policy. They control this money supply through controlling open market operations, reserves and the discount rate or the rate of interest the Fed charges on loans to banks.
Their main tool for controlling reserves involves open market operations. Each business day, the Open Market Desk in the New York Fed buys or sells millions of dollars' worth of securities. When the Fed buys or sells U.S. Treasury securities on the open market, the level of reserves goes up or down. (When the Fed sells, the level of reserves decreases; when the Fed buys, the level of reserves increases.)
Economists disagree over how big a role the federal government should play in the macroeconomy and how much regulation should exist.
Review the explanations of Securitization Banking and the Shadow Banking system, pages 532-534 . Then respond to at least one of the following questions.
- Should banks be allowed to get so big that their failure could affect the entire economy (too big to fail)? Why or why not? What should the Fed have done about the crisis in Securitization Banking and the Shadow Banking System (should they have responded differently than they did? How does "leveraging" work in financial markets, and how did it affect the financial crisis. How could this have been prevented? If so, how? Could this have been prevented?
- What role did investor confidence play in the financial crisis; could this have been prevented. Why or why not?
- Should commercial banks been allowed to enter investment