Home Depot Essay

REVIEW – ECO 315
1. Remember the date 1913
a. In 1913, Congress created the Federal Reserve Act of 1913. The Federal Reserve Act of 1913 created the Federal Reserve System with the 12 regional Federal Reserve banks.
i. The Federal Reserve System includes the Federal Reserve Banks (FRB), the Board of Governors of the Federal Reserve System, The Federal Open Market Committee (FOMC), the Federal Advisory Council, and around 2,900 member commercial banks.
1. Federal Reserve Banks – There are 12 of them. Each with 9 directors who appoint the president and other officers of FRB.
2. Boards of Governors – There are 7 members, including the chairman. They are all appointed by the President and confirmed by the Senate. They appoint 3 out of the 9 directors of each FRB.
3. Federal Open Market Committee – It includes 7 members of Board or Governors, plus presidents of FRB of New York and four other FRB’s
4. Federal Advisory Council – There are 12 members (bankers), one from each district.
5. Member Banks – around 2,900 member commercial banks, which select 6 out of 9 directors to each FRB.
2. Remember the date 1933
a. The Banking Act of 1933 created the FDIC and the Glass-Steagall Act.
i. It established Federal Deposit Insurance Corporation (FDIC).
1. Temporary deposit insurance limited to $2,500.
2. Changed from temporary to permanent in 1934 for $10,000.
3. Required all FDIC insured banks to become members of Federal Reserve System. ii. Glass-Steagall Act
1. Separated commercial banking from investment banking.
2. Was repealed in 1999.
3. What is Dual Banking System?
a. System of banking where state and national banks are chartered and supervised at different levels. National banks are chartered and regulated under federal law and standards, and supervised by a federal agency. State banks are chartered and regulated under state laws and standards, and supervised by a state supervisor.
4. FDIC (Advantage and Disadvantage)
i. Advantages:
1. Deposit insurance guaranteeing up to $250,000.
2. Examines and supervises certain institutions for safety and soundness.
3. Performs certain financial consumer-protection functions.
4. Manages failed banks. ii. Disadvantage:
1. Premiums and fees that banks have to pay to be part of the FDIC.
2. Taking a high risk
5. What is Bank Holding Company?
a. Companies that own one or more banks.
6. What is Gap Analysis?
a. Measurement of the sensitivity of bank profits to change in interest rates, calculated by subtracting the amount of rate-sensitive liabilities from the amount of rate-sensitive assets.
7. Structure of the Federal Reserve Bank.
a. 7 Board of Governors at the head of the Federal Reserve System.
i. Each appointed by the President and confirmed by the Senate. ii. The Governor can serve one nonrewewable 14 year term plus part of another term, with one governor’s term expiring every other January. iii. The chair of the board is picked by the 7 governors and serves a 4 year, renewable term. iv. Once a new chairman is appointed, the old chairman must resign.
8. How many controllers of the money supply?
a. FED
i. FED’s liabilities are the bank’s assets. ii. Assets are what you use and liabilities are the source of the money.
b. Bank
i. Total Reserve ii. Required Reserve iii. Excess Reserve
c. Us (currency holding)
9. Dynamic and Defensive Open Market
a. Dynamic – intended to change the level of reserve and the monetary base.
b. Defensive – intended to offset movements in other factors that affect reserves and the monetary base such as changes in treasury deposits.
10. Chapter 14
a. Monetary Base – Currency in circulation and total reserves (C+TR)
b. Factors that determine the money supply.
i. Change in monetary base
1. Increase in MB from an open market purchase, increase MS.
2. Decrease in MB from an open market sale, decrease MS. ii. Change in borrowed reserve from the FED
1. Increase in discount loans from the FED by

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