【正文】 Slide by YeeTien (Ted) FuThe Roles and Services of The Federal Reserve amp。 services Economic goals: ?Full employment ?A stable price level ?Sustainable economic growth ?A stable balanceofpayments position Cost amp。 A cce p t a n ce sBa n k Pri m e L o a n sT re a s u ry Bi l l s% ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 44 Commercial Paper Advantages ?Relatively low interest rates ?Flexible interest rates choice of dealer or direct paper ?Large amounts may be borrowed conveniently ?The ability to issue paper gives considerable leverage when negotiating with banks ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 45 Commercial Paper Disadvantages ?Risk of alienating banks whose loans may be needed when an emergency develops ?May be difficult to raise funds in the paper market at times ?Commercial paper must generally remain outstanding until maturity does not permit early retirement without penalty ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 46 Continuing Innovation in the Paper Market ? Innovations and extensions of the paper market include: ? Master note – the investing firm agrees to take some paper each day up to an agreedupon maximum amount ? Mediumterm notes – 9month to 10year notes ? Assetbacked mercial paper – loans or credit receivables are pooled and paper is then issued as a claim against that pool ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 47 Federal Agency Securities ? Certain sectors of the economy, such as agriculture, housing, small businesses, and college students, appear to have an unusually difficult time raising funds in the money and capital markets. ? Beginning in 1916, the . federal government created special agencies to make direct loans or guarantee private loans to these “disadvantaged” borrowers. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 48 Types of Federal Credit Agencies ? Governmentsponsored agencies are federally chartered but privately owned. Their borrowing and lending activities are not reflected in the federal government’s budget. ? Examples: ? Federal Farm Credit Banks (FFCB) ? Federal Home Loan Mortgage Corp (Freddie Mac) ? Student Loan Marketing Association (Sallie Mae) ? Financing Assistance Corporation (FAC) ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 49 Types of Federal Credit Agencies ? Federal agencies are legally a part of the government structure, and their borrowing and lending activities are included in the federal budget. ? Examples: ? ExportImport Bank (EXIM) ? Farmers Home Administration (FMHA) ? Government National Mortgage Association (Ginnie Mae) ? Federal Deposit Insurance Corporation (FDIC) ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 50 The Roles of Federal Credit Agencies Performing the Roles of a Financial Intermediary Federal amp。 growth of reserves in the banking system ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 11 The History of the Federal Reserve System ? The . was one of the last major nations in the Western hemisphere to permanently charter a central bank. ? . public officials were hesitant to do so for fear that a central bank with great financial power will restrict the availability of credit. ? However, a series of crises plagued the . financial system in the late 19th and early 20th centuries. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 12 Problems in the Early . Banking System ? Prior to the Civil War, the states controlled the banking system and many did a poor job. ? The high failure rate among poorly capitalized and illmanaged banks resulted in substantial losses for unlucky depositors. ? The 1863 National Banking Act created a dual banking system, but petition between federal and state bank regulatory agencies sometimes led to actions detrimental to public interest. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 13 Problems in the Early . Banking System ? The new national bank notes proved to be unresponsive to the nation’s growing need for a money or cash medium. ? The process of clearing and collecting checks was also too slow and expensive, and many banks charged a check redemption fee. ? There were recurring liquidity crises too, when the massive selloffs of bankheld securities led to panic selling by other investors. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 14 Creation of the Federal Reserve System ? The Federal Reserve Act was signed in 1913. Twelve Federal Reserve banks were chartered and they opened for business as World War I began in Europe. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 15 The Early Structure of the Fed ? The first Federal Reserve System was quite different from the Fed of today. ? The chief policy tool was the discount rate charged on loans of reserves to eligible banks, and each Reserve bank had the authority to set its own discount rate. ? The Federal Reserve banks were also given authority to issue their own paper notes to serve as a circulating currency. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 16 The Early Structure of the Fed ? Hence, although a supervisory board of seven members had been set up in Washington, ., the regional Reserve banks possessed the essential moary tools and made t