Non-Member Banks

  

Categories: Banking

You know how Rudolph was left out of all the reindeer games? Well, non-member banks are left out of all the banker games.

Eh, okay. The membership here has to do with the Federal Reserve. A bank can be chartered either on a national level or at the state level. Federally chartered banks have to become members of the Federal Reserve, the United States' central bank, the entity reponsible for overseeing the currency and conducting monetary policy. (It also fulfills major regulatory functions for the financial industry.)

State banks don't necessarily have to become members of the Fed. They can. But they don't have too. The ones that don't join up are known as non-member banks.

This group of banks are charted as state institutions, but that doesn't mean they are completely immune to federal regulation. True, the Fed isn't their main regulator. But they still fall under federal jurisdiction. Istead, they get overseen on the national level by the FDIC.

Even with the alternative regulatory structure, these banks aren't completely divorced from the Fed. They can't delete the Fed's contact information and stop sending them Christmas cards. Non-member banks still have to follow certain Fed rules. For instance, they must maintain federally-mandated reserve requirements.

Meanwhile, they aren't completely left out of the Fed-run banker games, either. For example, these non-member banks can still use the Fed's discount window.

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and finance Allah shmoop What is the Fed shmoop the

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country Each Federal Reserve Bank is responsible for a region

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of the US So the Federal Reserve banks are kind

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of like the nervous system of the federal Fed branching

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out to reach all areas of the U S They're

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located in major cities in the regions that they serve

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Reserve banks that 12 Fed Reserve banks or supervising other

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banks called member banks which include all national banks So

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you know most banks we'll reserve banks lend money to

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banks to accept deposits keeping liquidity minimum standards and then

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these banks enforce compliance of laws designed to protect consumers

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like things like the fair credit lending laws and all

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call Quays I governmental They're supposed to function publicly supervising

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the commercial banks in their area and everything but they're

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largely managed and funded privately Commercial banks in each region

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hold stock in their regions Federal Reserve Bank which means

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reserve banks are funded by the banks that they're policing

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Yeah maybe conflict of interest there Why Well because they're

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not supported by tax dollars They're supported by the interest

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they collect from commercial banks Well remember when the Fed

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was made it was designed to be separate from the

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current politics and from the rest of governments The idea

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is that no matter which way the political wind is

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blowing the Fed can remain strong and independent you know

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the Beyonce away A lack of funding from the public

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sector means that well they had to get it from

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Governors Up on High and the other six Reserve Bank

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directors are elected by the member banks in their region

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they regulate And member banks also elect 2/3 of reserve

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bank directors which means member banks have a big hand

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branch It's made up of people from the board of

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governors and the president of the Reserve Bank's Well the

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of the bomb But don't worry there is some democracy

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governors as voting members plus the president of the Federal

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the on ly reserve bank prez who always gets a

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vote There are four other voting spots in the FOMC

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voting spots are filled by the remaining 11 Reserve Bank

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hall monitor and piggy bank for the U S Treasury

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world When the Fed charges higher interest rates to member

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banks well member banks in turn charge higher mortgages car

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loans credit card rates to consumers When things are more

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low then and that usually increases consumer spending Through this

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low You know the stuff of monetary policy well Besides

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fair While it's supposed to work that way it doesn't

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