Ad-Express and Daily Iowegian, Centerville, IA

Columns

January 21, 2014

What does the Federal Reserve do?

Q:What does the Federal Reserve do?

A: The Fed was created to stem fault lines in the financial system that many argued bred depositor runs, interest rate spikes and market speculation in the late 19th and early 20th centuries. The case was made in Congress that the ebb and flow of a growing U.S. economy needed more certainty and that a system was needed to manage money and the flow of credit. The law that created the Fed — the Federal Reserve Act of 1913 — established staggered terms for presidential appointees to serve on the Board of Governors who also required a congressional green light of approval via the advice and consent of the U.S. Senate. Today appointees serve 14-year terms intended to help insulate monetary policymaking from politics. Unlike the centralized banking systems of its international counterparts, the Federal Reserve System established a dozen regional banks known as the Federal Reserve District Banks to serve and reflect the diversity of each respective region. The Board of Governors and the Reserve Bank presidents meet eight times per year. The Fed will launch its centennial year under new leadership with the Senate’s approval in January of Janet Yellen to serve as the 15th executive at the helm of the seven-member Board of Governors of the Federal Reserve System. For the last 100 years, the Fed’s primary responsibilities have included setting monetary policy, supervising the soundness of financial institutions and providing payment services to banks.

Q: How does the Federal Reserve impact Americans?

A: The Fed sets monetary policy that influences the supply and cost of credit. As people go about their daily lives, from paying bills, buying goods and services, cashing or depositing checks or taking out a car or home loan, the policies set by the Federal Reserve affect these basic transactions and influence consumer behavior and decisions on whether to save, spend or invest. The Fed provides financial services such as providing banks with currency and coin; moving money electronically between banks; and maintaining the U.S. Treasury’s account, including processing electronic payments, such as Social Security checks. In 2012 the Fed processed $4.2 trillion in payments per day. By managing the money supply and influencing interest rates, the Fed plays a policymaking role to curb inflation, boost consumer confidence and trigger commercial activity.

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The Iowegian wants readers to think about rental permit fees. The Centerville City Council has conducted two working sessions and a third one is planned in order to get a feel for the public's appetite about raising rental permit fees from charging a landlord $25 every two years to charging a certain amount per rental unit per year. So, the question of the week is, "Are you in favor of Centerville increasing rental permit fees?"

A. I'm in favor.
B. I'm not in favor.
C. I'm not sure.
     View Results
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