Federal Funds Market

Finance Allah Shmoop What is the nineteen thirteen Federal Reserve

Act Well for starters it created the Federal Reserve Thank

you Woody Wou okay So the Federal Reserve Act think

reserve of cash and or gold and or other securities

and assets that would serve to buffer volatile financial times

is the US grew to become a dominant global power

Will the Federal Reserve is essentially the mothership of banks

or central bank as it is called in other countries

which is kind of the water spigot in the price

and velocity at which it loans money to sub distributors

of loans A US banking system Will the act divvied

up the country into twelve regions right here twelve each

with its own board of directors And then the Federal

Reserve itself has seven board members purposely an odd number

two Both reflect the personalities of the people and the

need for tiebreaking facility Well they are the FOMC or

funk or Federal Reserve's Open Market Committee who live under

strict rules regarding meetings held discussions had And what kind

of bagels tohave on the conference room table for Friday

morning meetings Remember that the country only fifty years ago

before this act was almost split in half with the

you know their existing a Yankee currency more or less

And a Confederate currency and then other regional currencies kind

of popped up around the edges and there was gold

and there was always that nerdy whole wanted to pay

in bitcoin So the Federal Reserve act unified the country's

currencies into one common currency the US dollar And under

that massive scale tons of efficiency in managing and leveraging

that money could be had And in doing so the

US dollar became almighty It was the global standard currency

of choice And it also let banks catalyzed the American

dream at least in America by virtue of their ability

to grant mortgages right like most of the wealth in

this country is stored in homes people own So yeah

it's all powerful stuff in a world where the common

man you know for Millennia before had never dreamed of

actually owning his own castle no matter how small it

wass Well one tool that the Fed then used was

to basically say to banks We literally give you a

license to print money and it's okay Hey that you

make a profit but you have to live by our

rules But if you do you you know make bank

Yeah well that's probably where the term came from Well

it was that ability to print money that became the

central weapon the U S government then used to manage

the economy I'ii stimulate her giggity when she was cold

and cool her off when she was you know inflation

e Well the Fed created what is called a discount

window where banks line up to buy discounted money or

credit They mark it up and then resell it Tio

cash thirsty Joe six packs all around the country so

inside of each of the twelve regions of a bank

wanted to be a federal bank I live under the

rules of the Fed so that they got cheap U

S dollar backed loans from the Fed which they would

then mark up and sell Joe Consumer who wanted to

buy a home or a mule or a butter churn

or two thousand Well then they had to have skin

in the game That is the regional banks had to

go raise their own capital like you know asking grandmama

for money or raising it from a consortium of shareholders

who would then buy in or invest that capital as

part of their commitment to the long from establishment of

credible banks in the region That investment wasn't sellable or

transferable and the cash they invested well paid no interest

That quote gift unquote of no interest was kind of

a sign that well of their you know financial commitment

to the partnership would grow and do well is an

asset Our investors would lose everything and note the word

incredible Here It means believable trustworthy honest Well it doesn't

take much letter tweaking to make that word credit Credit

tha bull and yeah that's where all these turns to

write So who made all this happen Who made it

up Who implemented Well if you ever get a chance

to see Hamilton Hamilton the stage play not the TV

commercial for bulk pig meat see it You may have

to take out a bank loan You know just buying

but cheap tickets here That's what we're hoping for Yeah