Reserve requirement
The Fed encourages banks to loan more money by:Reducing the Cash Reserve Ratio (Money that needs to be deposited with the fed by every bank) This way banks have more cash to lend and hence they loan it to customersReducing Interest Rates - By reducing interest rates, loans become cheaper thereby prompting customers to take new loans which encourages banks to lend more loans in order to gain new business
The fed attempts to make banks safe and sound because of what happened during the great depression, when the stock market crashed the banks had no way of insuring the people that there money was save to stay in the banks, and with that in mind thousands of people went and withdrew their life savings and caused the banks to have to shut down. and in doing so now they can provide people with the ability to sleep well knowing that there money is save
The Fed, Federal Reserve System, has three tools to use for its monetary policy. 1. Open Operations - buying or selling securities from the privite sector to control money supply. 2. Discount Loans - Setting discount rate that privite sector banks would need to pay the Fed to borrow money from them. 3. Reserve requirements - sets amount of money banks must have in their vaults in case customers come take money out. The Fed's current monetary policy is price stability and implicitly controling inflation.
i am fed up with our banks the greed i would sooner put my trust in the germans, i would gladly give them bash,
Reserve requirement
The main thing the Fed does is that it is the Bank that Banks deposit their money in.
Others are state commercial banks that have chosen to be members. Of the more than 9,000 commercial banks in the country, more than 3,700 are members of the Fed.
A member bank is required to purchase stock from its Reserve Bank in an amount equal to 3 percent of its combined capital and surplus.
other banks.
Usually
To a certain extent the banks do. But the Fed, which lends money to banks, can have an impact on it depending on what interest they charge the banks.
monetary policy
In Economics 101, students studying economics all knew about the usual methods the Federal Reserve System controls lending policies of its member banks. These were:* Performing open market operations;* Changing the discount rate; and* Changing reserve requirements.Less publicized is the fact that the Fed, is in constant contact with member banks either via weekly meetings, personal communications to the financial community, and via its omnipresent large crew of bank examiners which provides reports to the boards of directors of major banks. The result of its virtually daily contacts with member banks is the term "Moral Suasion". The purpose of this is to persuade banks by verbal communications to change their lending policies.
The primary responsibility of the central bank is to influence the flow of money and credit in the nation's economy. Members of these banks serve on the Federal Open Market Committee (FOMC). Second, the boards of directors of the Federal Reserve Banks initiate changes in the discount rate, the rate of interest on loans made by Reserve Banks to depository institutions.
The Federal Reserve controls the interest rate at which federal banks lend money. This, in turn, has a cascading effect, in which other banks interest rates are determined based on the rate set by the Fed.
The discount rate is the rate of interest that Federal Reserve Banks charge member banks for overnight loans. Currently the rate is.75%. There are rumors that the rate will rise a certain number of basis points near the end of February, 2014.