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The Federal Reserve Bank
The Federal Reserve Bank
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Introduction
The Federal Reserve Bank is a financial institution that acts as the central bank of the US. It is based on a government agency called Federal Reserve System. Also known as Fed, the bank’s general role is to foster economic stability and sound banking system. The bank has branches in twelve districts established under the Federal Reserve Act. All branches of the bank work together to implement monetary policies formulated by the Federal Open Market Committee (FOMC) (Bordo & Roberds, 2013). This paper presents an overview of the Federal Reserve Bank. In particular, the paper examines the history, purpose and structure of the bank. In addition, the paper examines the tools that the bank uses to carry out its functions and how it uses these tools to implement monetary policy.
History
The Federal Reserve Bank has a long history that can be traced back in the 18th century. In 1970, Alexander Hamilton, the then Secretary of Treasury created a bill that proposed for the establishment of a central bank that would enhance economic stability and growth in the US after independence (Thomas, 2005). The efforts led to the establishment of the first central bank called the First Bank of the United States in 1971. The bank’s headquarter was in Philadelphia but it had branches in other major cities in the US. President George Washington signed a charter for the bank that would last for twenty years. After the expiry of the charter twenty years later, the US stayed for several years without a central bank. As a result, the US was hit by unusual inflation during the period. In response, James Madison signed another charter in 1816 and hence, the bank came back into existence (Thomas, 2005).
Even before the expiry of the charter, government funds were removed from the bank by President Jackson in 1833, during the Bank War era. Consequently, the US stayed without a central bank until 1913 when a Federal Reserve System was established. The efforts that led to the establishment of the Federal Reserve System were triggered by widespread calls for the government to establish a system that would act as the “lender of last resort” to troubled banks in times of crises, just as a certain private conglomerate was doing during the Panic of 1907 (Meltzer, 2010). The final draft of the Federal Reserve Act that led to the establishment of the Federal Reserve System was approved by the congress in December 1913, and it allowed for the creation of regional Federal Reserve Banks that would be operating under one supervisory board. To facilitate this, the Act allowed for the establishment of a committee that would divide the US into districts, each with eight to twelve cities. The Act stipulated that each district would contain one regional Federal Reserve Bank (Meltzer, 2010).
After successful establishment, the Federal Reserve System started operating in 1914. The Federal Reserve Act made it mandatory for all national banks to join the system. All other banks were free to join. The role of Fed has expanded since then from simply supporting banks during periods of crises to being a supervisor and regulator of the US banking system and a rescuer of banks that need additional credit any time in order to maintain stability (Bordo & Roberds, 2013).
Purpose
As mentioned earlier, the principle purpose of the Fed is to enhance economic stability and healthy banking system. The Fed has four key specific roles. Firstly, it provides financial services and support to banks in the US. For instance, it provides credit to banks that are at risk of facing financial instability. As well, it acts as the custodian of part of the financial assets of the bank. It also facilitates the transfer of funds from one bank to another. In doing so, the Fed ensures efficiency and safety of the payment system of the US. Secondly, the Fed acts as a bank for the US government. For instance, the US bank handles all revenues derived from taxes and payments made by the government. It provides financial services to the government through selling and redeeming of securities, including bonds, notes and treasury bills. It also issues and regulates the flow of paper and coin currency (Bordo & Roberds, 2013).
Another major role of the Fed is supervising and regulating activities of all banks operating in the US, including members of the system, foreign-owned banks and international banks. As well, Fed regulates the activities of US banks in foreign countries (Meltzer, 2010). The Fed ensures that banks operating in the US respect the credit rights of the consumers and adhere to the established credit regulations. In addition, the Fed regulates the purchase of securities through setting a limit on borrowings meant for that purpose. Lastly and most important, the role of Fed is to formulate and implement monetary policies (Bordo & Roberds, 2013). The Fed does this through taking actions that influence the amount of credit and money circulating in the economy of the US. In turn, changes in the amount of credit and money influence the interest rates and ultimately, the performance of the economy.
Structure
At the top of leadership of the Fed is Board of Governors, a government agency that is based in Washington. The board of governors is made up of seven members, a chairman and a vice chairman. All of them are appointed by the president and are approved after confirmation by the senate (Bordo & Roberds, 2013). Currently, there are twelve regional Federal Reserve Banks in different cities around the US and they operate under the Board of Governors (Bordo & Roberds, 2013). These banks carry out almost all work of the Fed. Each reserve bank generates its own income to support daily operations. The FOMC is the branch of Fed that makes policies. The FOMC is led by the chairman of the Fed’s Board. The voting members of the FOMC are the seven members of the board and a group of five rotating heads of the regional reserve banks. All heads of the Reserve Banks may engage in the discussions, whether they are voting or not. Lastly, the Federal Reserve banks regulate and supervise national banks and other banks that are members (Bordo & Roberds, 2013).
Tools
The Fed uses three main tools to implement monetary policy. The first tool is Open-Market Operations. Fed frequently sells and purchases government securities such as bonds and notes in the financial markets. In doing so, it regulates the amount of money reserves held in the US banking system. As well, these actions affect credit volume level, as well as interest rates paid by the consumers (Brezina, 2011). This is the tool that is most frequently used by the Fed to implement monetary policy. When the volume of level of money reserves in the banking system is too low to the extent that it leads to an increase in interest rates for credit, the Fed responds by purchasing government securities in an open market in order to increase money reserves (Brezina, 2011). The opposite applies when the level of money reserves held in the banking system is too high. The second tool used by Fed is Discount Rate. The Discount Rate is the interest charged by the Reserve Banks on short-term loans taken by banks. When the Reserve Banks lower the Discount Rate, the banks are encouraged to borrow more and to lower the interest rate paid by consumers on credit. This leads to an increase in the level of monetary reserves and credit. The opposite happens when the Federal Reserves raise the Discount rate (Brezina, 2011).
The third tool that is used by the Fed is Setting Reserve Requirements. Reserve requirement refers to the level of the physical funds that banks are required by the Fed to hold in bank accounts against the amount they hold in reserves. In other words, it refers to the amount physical funds that banks are required to hold, rather than lent out. The Reserve Requirement in the US is usually around 10 percent. When the Fed notices that the amount of money in circulation is too high to the extent that it leads to an increase in inflation rate, the Fed may respond by raising Reserve Requirement in order to reduce the amount of money lent out to the consumers (Board of Governors of the Reserve Federal System, 2014).
Conclusion
In conclusion, the Fed is the key financial institution that plays the role of regulating and supervising the baking system and economic stability in the US. The origin of the institution can be traced back in the 18th century. It is based on the structure of the federal system, an independent agency that is headed by Board of Governors. The Fed uses three main tools to implement monetary policy, namely, Open-Market Operations, Reserve Requirements and Discount Rate.
References
Board of Governors of the Reserve Federal System (2014). Monetary Policy, Retrieved from
HYPERLINK “http://www.federalreserve.gov/monetarypolicy/default.htm” http://www.federalreserve.gov/monetarypolicy/default.htm
Bordo, M. D. & Roberds, W. (2013). The Origins, History, and Future of the Federal Reserve: A
Return to Jekyll Island. Cambridge University Press
Brezina, C. (2011). Understanding the Federal Reserve and Monetary Policy. New York, NY:
The Rosen Publishing Group
Meltzer, A. H. (2010). A History of the Federal Reserve, Volume 1: 1913-1951, Volume 1.
Chicago: University of Chicago Press
Thomas, L. (2005). Money, Banking and Financial Markets. New York, NY: Cengage Learning
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Power in American Politics
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Power in American Politics
Introduction
Since historical times, the society has always grappled with social, economic and cultural disparities. Notably, these have had diverse implications on its functioning with the most profound being the inequalities that they present. In most cases, a segment of the population that assumes a lower position is always disadvantaged and hence faces more challenges than the former. From the dawn of the twentieth century to date, gender and race issues have raised various controversies that have prompted governments and other leaders in the society to address them accordingly through mainstreaming vital changes in the policies employed in governance. In particular, racial prejudice triggered various concerns related to human rights as well as religious values and practices. Likewise gender disparities culminated in the rise and development of the feminist movement that has been fundamental in spearheading change with regard to how women are treated within the society.
The revolution that occurred in the past century can be attributed to the rise of these two ideologies. Several personalities have been associated with these and their efforts in perpetuating relative ideals are indeed commendable. Not only did they enlighten the respective population and the about the inherent social complexities, but their work also influenced policy changes that were geared towards addressing the same. It is in this consideration that this paper reviews the extent to which the analysis of gender in ‘The Feminine Mystique” is analogous to the evaluation of the concept of race in “The Souls of Black Folk”. This is in a bit to underscore the underlying similarities as well as implications on respective populations and social change.
Before the advent of the social movements that spearheaded critical changes in the social fabric, it is worth acknowledging that the society was patriarchal in nature and men were given an upper hand in almost everything. Women were confined to subordinate and reproductive roles that were largely domestic in nature. Likewise, racial prejudice was prevalent and the White population was considered to be superior to the Black population and other mixed races. As such, just like the men in the society, the white assumed an elevated niche and was accorded preferential treatment by the entire society. These beliefs were perpetuated by the male segment and White populations and had various implications on the wellbeing of women and other individual of mixed races in the society.
Just like Du Bois’ “The Souls of Black Folk”, Friedman’s “The Feminine Mystique” triggered various changes in the treatment of respective populations. In particular, Selle indicates that Friedman contributed significantly to the transformation of the perceptions that women were accorded in the society (51). Her information is posited to have led to the rise of the modern women’s movement that advocates for the rights and holistic wellbeing of women in the society. Women in this regard were portrayed as victims of the male dominated society whose ideas restricted them to domestic roles. This was regardless of the fact that they had the power to explore various economic and social domains for their benefit. Notably this led to policy changes that accorded the women and equal right as their male counterparts.
Likewise Gates and Oliver indicate that Du Bois’ prepositions have had various implications on the sensitive yet demeaning issue of racial prejudice (55). Historical studies assert that this ideology stems from the concept of slavery that led to the suffering of the Black and Negro communities. In his review, Du Bois argues that these segments of the populations were classed in a similar category as ox. Just like the women, the author contends that they were considered to be inferior to the rest of the population. However, the introduction of “The Souls of Back Folk” triggered various changes that have significantly reduced racial prejudice in the society. These changes were mainstreamed in relevant policies and institutions and seemingly, the Black and Negro population have been granted their freedom and accessibility to various national resources at their disposal.
Despite these developments, both authors contend that there are intrinsic attitudinal perceptions that undermine the effective implementation of the respective policy changes. Just like the women, persons of mixed races continue to face various challenges that are perpetuated by the conventional attitudes that the population accords them. While Wolfe argues that this can be attributed to the expansive and deep rooted nature of the two ideologies in the society, Stanley and Benjamin lament that this simply implies the non responsiveness of the society to social change (102, 44).
In addition, both authors argue that the efforts of their respective populations to obtain a similar social position as the rest of the populations were frustrated because of the presence of more powerful forces that dictated any form of social change. Specifically, Du Bois argues that the slaves were denied a chance to pursue any form of education and thus their intelligence remained low. Since they had limited choices, they resorted to perseverance and continued to suffer under slavery. The efforts of the women to liberate themselves from the yolks of domestic slavery were on the other hand limited by the traditions and norms of the society that ascribed them to domestic roles. As such, they lacked the chance to pursue education and assume top positions in the society like their male counterparts.
In both instances, it is certain that the society played a critical role in perpetuating the social disparities. The belief that women and the persons of mixed races were inferior was ingrained in the societal traditions and values that had diverse implications on the value system and thought process of the society. It was considered a normal ideology that was important in maintaining social order. The respective populations also appreciated the social discrepancies whose implications seemingly undermined their holistic wellbeing. The slaves contended that they were doomed to being inferior while the women performed their domestic jobs diligently without questioning. These assumptions were crippling and compromised the ability of the population to rise above the problems that they struggled with.
Gibson points out that the assumption of these positions by the respective populations was contributed to by the populations in higher social positions (92). In this regard, it is argued that up to date, the Black population attributes their social inferiority to their inability to pursue their freedom effectively. This presumption stems from the perception that they were accorded by the White population. Similarly, women still consider themselves to be subordinate to men and responsible for domestic duties. This is despite the liberation and enlightenment that they were exposed to by the feminist movement. Horowitz posits that this trend is influenced by the conception that the males are superior to the females (61). It is perpetuated by the system of education as well as religious and social virtues that prescribe the behavior that needs to be upheld by the different segments of the society.
In both populations, the double identity that the society accords them has also played an instrumental role in undermining their efforts to liberate themselves fully from their current positions. With regard to slavery, Du Bois argues that the Blacks and other personalities of mixed races were expected to struggle with maintaining both the black and American identities. As Blacks, they were expected to stick to their low social status as well as uphold the important values and principles that defined their races.
As Americans, they were expected to portray the American social and cultural ideals through language and means of economic production and social wellbeing. On the other hand, Friedman indicates that women were expected to conform to the belief system and social identity that solely defined them in terms of the successes of their children as well as husbands and at the same time maintain their primary role of domestic production. Notably, both populations had an extra task of maintaining both identities without compromising the position of each. This could possibly have had far reaching implications on their ability to function executively in the society.
In both scenarios, authors ascertain that characteristic dehumanization has been passed on through generations. Notably, the perceptions that both populations are currently accorded dates back to historic times. In his historical analysis, Gibson ascertains that slavery for instance was initiated in the sixteenth century but its practice has been passed on to current populations and despite the efforts made by various institutions to counter the scenario, they still present various challenges to individuals of mixed races in America (54). The women have also been affected by the social ideas and irrespective of the efforts of the feminist movement to alter the situation; they are still considered inferior to men.
A typical example in this regard pertains to the experiences that they have had in politics. In this respect, studies affirm that women politicians in the 2008 elections could not realize their ambitions of assuming top leadership positions because of the societal viewpoints regarding their gender. Thus undue attention was accorded to their being ‘women’ as opposed to their ability to function effectively in top positions. Notably, the society accorded these personalities a differential treatment and approved the success of their male counterparts. This is an indication that the traditional conceptions about the position of women in the society are still influential in decision making.
In his research, Wolfe ascertains that both populations contributed significantly to the development of the identity of the personalities that were considered to be in top social positions (102). With respect to the slaves, it can not be disputed that their contribution to building the identity of the American society was significant. Specifically, they provided vital labor that was used in economic production and contributed significantly to the economic welfare of America. Thus their contribution to designing a strong economic base for this country can not be understated. In addition they provided labor in industries as well as in domestic spheres. This gave the Americans an opportunity to explore and assume lifestyles that currently define the social ideals of the population.
Similarly, the women still play a significant role in molding the social identity of their husbands. As indicated earlier, they perform vital domestic roles that influence the functioning of their children as well as their husbands in the social and economic spheres respectively. Most importantly, they offer vital moral and emotional support that encourages their children and husbands to pursue various aspects of their lives. In his review, Selle cites that women assume mothering roles and their support contributes immensely to the holistic wellbeing of their husbands (52). Sadly, in most instances, this is not reciprocated and they have to bear the burden of their mental problems and emotional challenges individually.
Conclusion
Social disparities have been a common societal feature since historical times. It has diverse and in some instances adverse effects on the welfare of certain segments of the society. From the analysis, it can be ascertained that slavery stifled the chances of the Black populations to pursue certain ideals that could improve their social wellbeing. In addition, the conventional patriarchal perceptions had crippling implications on the welfare of women in the society.
Besides giving them the burden of dealing with double identities these ideologies frustrated their efforts of liberating themselves. Even after numerous social and legal efforts have been undertaken to enlighten the women and the Black communities, the ideologies are still practiced within the society and these affect their wellbeing in different ways. It is in this regard that his paper concludes by ascertaining that the analysis of various themes y both authors is similar and just like Du Bois, Friedman explicitly explores the nature of gender in her “The Feminine Mystique”.
Works Cited
Alan, Wolfe. Betty Friedman’s Mystique. The Atlantic Monthly, 1(1999): 99-104.
Daniel, Horowitz. Betty Friedman and Modern Feminism. Massachusetts: University Press, 1998.
Donald, Gibson. Evaluating Du Bois’ Literature. USA: Penguin Books, 1996.
Henry, Gates & Oliver, Terri. Du Bois Works: Impacts, Criticisms and Contexts. USA: Norton, 1999.
Robert, Selle. Feminism’s Matriarch. World and 1. (1998): 51-3.
Stanley, Crouch & Benjamin Playthell. Du Bois’ Themes, Styles and Contexts. USA: Running Press, 2003.