Before we get started…, what exactly is The Federal Reserve or “The Fed?”
“In a nutshell, The Federal Reserve, or “The Fed,” is the central banking system of the United States. Its job is to help keep our financial systems safe and our economy stable,” according to Erica Gellerman of Credit Karma.
You’ve probably heard of the Federal Reserve…, but how does it affect our daily lives?
As the central bank of the United States, “the Fed” sets policy that can affect things like mortgage interest rates, stock prices and even our personal finances.
The Fed consists of three key entities:
One, the Federal Reserve Board of Governors. These seven board members oversee the Federal Reserve System. These “Governors” are appointed by the President of the United States and confirmed by the Senate for 14 year terms.
Two, a network of 12 Federal Reserve banks around the country that do a lot of administrative work.
Three, the Federal Open Market Committee, or FOMC. This committee, whose job is to set monetary policy, is made up of the seven Board of Governors members and five Reserve Bank presidents.
Regarding “the Fed,” we hear the term “setting monetary policy” a lot. I believe this basically means they decide what they need to do in order to get the outcomes they desire both politically and monetarily, which may or may not be in the best interests of the American people.
The Fed promotes “a healthy” U.S. economy through its monetary policy. The FOMC holds eight meetings per year to review economic trends and vote on new monetary policy measures.
Officially, the Fed is supposed to strive for high employment and low inflation.
The Fed also supervises and regulates many banks and other financial institutions to promote stability in the financial markets.
Lastly, the Fed Acts as the government’s banker, while maintaining the Treasury Department’s checking account and processing other transactions like Social Security payments and government payroll checks.
Erica Gellerman of Credit Karma adds, “Before the creation of the Federal Reserve, the U.S. was plagued by financial panics and bank failures. Banks usually didn’t keep a lot of cash on hand. If customers lost confidence in their bank — usually after hearing about a failure of another bank — they would rush to their bank to withdraw money. If the banks didn’t have enough cash around, they would end up going out of business. This panic could trigger multiple bank failures, which is what happened during a particularly severe panic in 1907.”
They of course could not have all of these rich bank owners and investors losing money and being dependent on their everyday customers.
“After this panic, President Woodrow Wilson signed the Federal Reserve Act, and Congress established the Federal Reserve System in 1913. The goal of creating the Federal Reserve was to end the instability of the banking system.”
“End the instability,” again, meant to take the risk out of being in the banking business for our wealthy friends and passing that honor along to us.
“And after the financial crisis that began in 2007, the Wall Street Reform and Consumer Protection Act — aka the Dodd-Frank Act — was passed. Among other things, this law transferred most consumer protection duties that the Fed performed to the new Consumer Financial Protection Bureau (CFPB).”
I have NOTHING good to say about the CFPB. I’ll just say the CFPB was a child of Elizabeth “Pocahontas” Warren, then this child was adopted by Barack Obama and took up residence in “the swamp.” Please refer to my blogs of 11/29/17 and 7/2/18 regarding the CFPB and its constitutionality.
Today, Wednesday, 7/31/2019, the Fed cut interest rates for the first time in over a decade, by .25%.
“The cut will likely placate President Trump, who frequently belittles the Fed, and its chairman, Jerome Powell, for raising interest rates too high, too quickly — but also raised questions about whether the U.S. central bank is truly independent, given the stronger-than-expected economic data out of the U.S. in the past few months,” reports Megan Henney of FoxBusiness.
The last time the Federal Reserve cut interest rates was in December of 2008, soon after Barack Obama’s election.
Hmmm. What a coincidence.
If we look at the rate chart here, we can see the effective interest rate was at ZERO for Barack Obama’s entire eight years in office.
Isn’t that interesting?
If the economy was so good under President Obama, as we are told by numerous democrats and their media cohorts…, why would the interest rates have to be adjusted down to zero the whole time?
Rates were up over 5% during George W. Bush’s presidency, at 0% during Barack Obama’s entire presidency, and then back up to nearly 3% for Donald Trump’s presidency.
Do we see a pattern here?
What would you anticipate the rate would be if a democrat got elected in 2020?
Here ends the lesson.
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