The U.Sv federal Reserve bank and the European bank.

The U.S Federal Reserve Bank and[pic 1]

the European Center Bank

1. The Federal Reserve’s System, The Fed

Federal: States’ rights -> California has the power; means the power is for all states

• Gay marriage is federal law (in 50 states)
• Same situation in Europe with the decision of E.U

Financial Service Industry

• Government institution (FADE)
• Supranational Institutions

The Federal Reserve System, the Fed

• was established by Congress: The Federal Reserve Act of 1913
• Resulted from a series of bank runs (ruée sur la banque) & financial (the Panics of 1907)
• Its role has evolved & expanded over the dedicates: supervising, servicing depositary institution
• Unique in the world as a public/ private, centralized/decentralized central bank that does not issue currency (the U.S Treasury department “creates” currency and the U.S Mint “makes” it) -> (frappe la monnaie)

Fractional recences : law allows them to have only a part of (un avoir)

Economics Keynes “Keynians”

• Main ideas he has: deficit spending when the government see the economy in troubles

The Chairman is a presidential appointee; so are the 7 members of the Board of Governors (staggered 14-year terms, one term beginning every2 years)

There are 12 District Reserve Banks (regional Federal Reserve Banks)

The FOMC (Federal Open Market Committee): meet once a month oversees the principal tools of national monetary policy interest rate s and money supply); 12 members of which the head of FRB NY is a permanent member, the other voting members rotate.

Critics of the Fed enables of the housing bubble? Unbridled credit expansion through too-low interest rates?

3 Keys macroeconomic indicators:

• Gross Domestic Product (GDP) (PIB in French) -> growth
• Consumer Price Indice (CPI) (Indice de prix à la consommation) -> Inflation rate : INSEE / Eurostat
• Employment -> Unemployment rate

Questionable leadership of Alan Greenspan? Appointed by Ronald Reagan, served under four presidents

Greenspan: “Irrational exuberance” (1996)

Bernanke “Quantitative Easing” (QE, QE2), since August 2010

Former Vice President Chairperson of the FRB since 2010 (Janet Yeller)

Former President and CEO of the FRB of San Francisco (2004-2010) and voting member of FOMC

Ideologically a “dove” and not a “hawk”

Ph.D in Economic from Yale (1971)

1. The European Central Bank

Mandate of the ECB laid out in article 105 of the Treaty o the E.U

• “… to maintain price stability…”
• “… without prejudice to the objective of price stability, THE Euro System Shall support the general economic policies of the community such as sustainability and non-inflationary growth and a high level of employment

For the 11 initial member countries deemed eligible to join the common currency on Jan 1, 1999, the ECB assured the responsibility for monetary policy.

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