Federal Reserve Ratio
What federal reserve ratio? Why important?
The Federal Reserve ratio refers to the funds banking or depository institutions are mandated by law to hold against their deposit liabilities. This fund is a proportion of the amounts of money banking or depository institutions hold in form of net transactions accounts and deposits that make up the institution's liability to its customers. This proportion is a predetermined ratio arrived at through policy reforms targeting to safe guard the interests of its citizenry and controls the volume of money supply in an economy (Rose & Sylvia, 2010).
The sets to enforce a legal safe guard measure to serve the interests of economy's depositors with the banking industry (Rose & Sylvia, 2010). In this perspective, if a federal reserve is set as 11% of the banks liability, the banks are expected to deposit with the central bank/reserve bank an amount equal to the proportion. If for example a bank's...
Federal Reserve Bank Financial services as an industry has progressed to become one of the widely transforming sectors of the global economy, having significant changes in information transference and processing, innovation in terms of commodities and processes, and rapid competition among the financial institutions -- among themselves and also among their several customers. The industry and its part in the transformations in the economy show that the supervising and regulatory structure
The new government banks put heavy taxes on state banks, and they were forced to go under. After this, the government had a monopoly on banking and money again, and they used it to the fullest extent possible. One of the main problems with the banking system, though, was that there were still a lot of cash flow problems and other weaknesses that led to panics for individuals who
During most of the last 20 years (from August 1987 to January 2006), the Fed was headed by Alan Greenspan whose personal economic philosophy to a large extent guided the Fed's actions. One of the features of the Federal Reserve's "accommodative" policies was encouraging low interest rates, which was partly responsible for the longest period of economic expansion in U.S. history in the 1990s. Assessment of the Efficacy of the
NPV This becomes more complicated when trying to determine the changes that would occur to the net present value of today's dollars, especially given the uncertainties involved with changes in the interest rate. On the one hand, the value of future dollars (i.e. today's dollars saved) is eroded by inflation, so a lower interest rate is detrimental to NPV; on the other hand, higher interest rates mean more lucrative lending and
Federal Funds Rate The federal fund rate was part of the solution, comprised in the Federal Reserve Act of 1913, to centralize the banking system and gain public control of the money supply, inflation, and economic growth. The banking crisis of 1907 was a result of decentralized, unregulated banking that caused confusion with private bank notes being used as currency. There were occasional episodes of monetary mismanagement where the money supply
The ratios are symptoms rather than problems. Thus, we see the emergence of ratios as a diagnosis tool rather (Johnson, 2008). These tools must then be used in concert with more in-depth analysis techniques and the collect and interpretation of other information. Ratio analysis alone will yield little and the prevailing thought today supports finding better ways to integrate ratio analysis within the context of overall understanding of a
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