Fomc Essay

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THIS PAPER IS SUBMITTED TO PROFESSOR MILENA SIMIC AS A PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR CLASS MONEY AND BANKING (EC 355) MISSOURI VALLEY COLLEGE FALL 2011 Choose an item. # 10 FOMC Tristan Hill DATE DUE: 12/4/2011 Open market activities, which entails the Reserve Banks buying, and selling securities, primarily to earn interest began about a decade before the Banking Act of 1933. In the early twenties the Reserve banks sought new ways to cover expensive operating costs, hence came the idea to trade securities on the open market. The FOMC is a committee that was created by the Banking Act of 1933. It was then the legal structure and name of the committee was settled upon. Seven Board of Governors and the twelve Presidents of the central banks make up the FOMC meetings. Only five of the twelve Presidents vote at a time with the seven Governors during times of decision-making. The president of the United States appoints the Governors and the Senate confirms the appointments. The board of directors appoints the presidents of regional central banks, and then the Board of Governors makes final approval. This system of checks and balances keeps both the private and public sectors as happy as possible. There is also a nice balance of regional and national representation. The FOMC has meetings often in the nation’s capital every six to eight weeks, but often times they happen more regularly. The goal of the meeting is to set the FOMC target rate somewhere that will encourage stable prices and growth in the economy. The meeting begins with a report from the manager of SOMA on how close the committee is to reaching the target rate as well as new information on the progress in foreign exchange and financial markets. Following him or her is the “director of the Division of Research and statistics as well as the director of the Division of

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