Trading Justice

Description

What is a central bank? Originally, they were created to provide the nation with a safer, more flexible, and more stable monetary and financial system. Do it still do that, though? According to the FOMC’s website, its duties now include:

• conducting the nation’s monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates
• supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system and to protect the credit rights of consumers
• maintaining the stability of the financial system and containing systemic risk that may arise in financial markets
• providing financial services to depository institutions, the U.S. government, and foreign official institutions, including playing a major role in operating the nation’s payments system

The bank still does determine interest rate and monetary policy for the US (and other countries for their respective central banks), but the US banks also have an extra wrinkle as compared to other countries.

While a majority of the Fed is staffed by presidential appointees (seven seats, in fact), there are indeed five seats that belong to private banks as part of the agreement with these banks to purchase shares in the Federal Reserve system. These shares can’t be sold, but they do pay out interest to their holders to the tune of about 2 Billion a year (with the other roughly 88 Billion going directly into the US Treasury).

How does that work, exactly? Why was the FOMC created this way? Join us for the latest Trading Justice podcast wherein Matt and guest Jeff Crystal talk central bank history and policy.

Notes

• For your free 15 day Tackle Trading Pro trial membership, follow this link and fill out the form with the coupon code: theta
  
• Click Here to join us at Tackle Trading