• What Is The Federal Reserve?

    Federal Reserve is also acknowledged as Federal Reserve System and it one of the central bank of the United States. In 1913, the Federal was first created to answer all the financial crisis of the people especially in the year of 1907. As the years go by, the roles and the duty of this Reserve has been growing up. Its main obligation is to deal with the nation’s monetary policy, manage and govern banking institutions, regulate the constancy of the financial system and offer financial services to depository establishments, the US government and foreign official institutions. The Federal Reserve structure is mainly composed of the Board Members, led by a president of the board, the Federal open Market Committee (FOMC), twelve territorial Federal Reserve Banks places in major cities to the entire nation, many owned US members private banks and different consultative assembly.

    The main responsible of FOMC is adjusting monetary policy and comprises all the seven members of the Board of Governors and the twelve territorial presidents of the banks, yet only five of the presidents voted at the same time.

    The Federal Reserve System has two factors of both public and private, and they have the same mission to assist the needs of the general public and bankers in private. The government of the United States obtains the entire yearly income of the system, after the legal incentive of 6% from the member banks’ capital investment is yielded, maintained an account surplus. Last year of 2010, $82 billion was the profit created by the Federal Reserve and $79 billion was transferred to the United States Treasury.

    The Federal Reserve is giving credits to those depositories who are in need of money. All qualified depositories are allowed to make a credit in Federal Reserve at an approved rate of interest. The Federal created a various credit programs with the several requirements that the depository institutions.

    Here are some important procedures to be followed by all of the depository members who wanted to make a credit. First is, every depository members should gather all the necessary requirements and meet all the possible arrangements that the Federal Reserve is asking. Second is, the depository must provide a qualified collateral in order to be entitled to get a credit for the Federal Reserve Bank. The discount window will be the one to check the entire collateral if the depository submitted the required assets before they can make any credits. The third procedure is, specify if the institutions if it is qualified for the Primary credit for funding. This is only available from the Federal Reserve to entirely profound the depository institutions. The credit is only a short term basis and bears the lowest interest value. The fourth step is, if the institutions not allowed for the Primary credit, think in applying for Secondary credit. This kind of credit is only available to those who are not qualified for the Primary credit. The interest rate of this type of credit is much higher than compare to the Primary credit and the condition of this comes in a short term. The last one procedure is, this is intended for smaller depository institutions, a Seasonal credit program is provided by the Federal Reserve.

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