【正文】 sumer amp。 services Economic goals: ?Full employment ?A stable price level ?Sustainable economic growth ?A stable balanceofpayments position Cost amp。 growth of the money supply Market value of the public’s security holdings Currency exchange rates Public expectations regarding security prices, interest rates, currency prices, money supply 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 the key policy decisions during the Fed’s early years. ? Then slowly, economic, financial, and political forces bined to amend the original Federal Reserve Act and remake the character and methods of the central bank. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 17 Goals and Policy Tools of the Fed ? The Great Depression brought about a concentration of power within the Fed. ? The sevenmember Board of Governors in Washington, ., became the central administrative and policymaking group. ? In addition, the Federal Open Market Committee was created to oversee the conduct of open market operations, which rapidly became the Fed’s main policy tool. ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 18 How the Fed is Organized Board of Governors (7 members appointed by the president) 3,200 member banks of the system Supervise Manager of the System Open Market Account Supervise 12 Federal Reserve banks amp。 Rate of Return ? Maturities of . mercial paper range from three days (“weekend paper”) to nine months. ? Most mercial paper is issued at a discount from par, and yields to the investor are calculated by the bank discount method, just like Treasury bills. DR = Par value – Purchase price ? 360 . Par value Days to maturity ? 2020 by The McGrawHill Companies, Inc. All rights reserved. McGraw Hill / Irwin 12 42 Growth of Commercial Paper ? The volume of mercial paper has grown rapidly due to its relatively low cost and high quality, as well as the expanding use of credit enhancements. 1960 $ billion 1970 1980 1990 2020 1, 2020 1, Year Outstanding Volume of Paper in the . Effect of weaker economy 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