Legislation About the Federal Reserve

On May 19, 2016 the Congressional Research Service released a report entitled Federal Reserve: Legislation in the 114th Congress by Marc Labonte, Specialist in Macroeconomic Policy. Labonte breaks the bills about the Federal Reserve (Fed) into four categories:

1. Changes to Fed governance -  "change the Fed's institutional structure."
2. Changes to oversight and disclosure - increase "congressional oversight or require the Fed to disclose more information to Congress and the public."
3. Changes involving the Taylor Rule - "require the Fed to compare its monetary policy decisions to those prescribed by a Taylor Rule and report those findings to Congress." According to the Federal Reserve, "Taylor rules are simple monetary policy rules that prescribe how a central bank should adjust its interest rate policy instrument in a systematic manner in response to developments in inflation and macroeconomic activity.
4. Changes to the Fed's emergency lending powers - "reduce the Fed's discretion to make emergency loans under Section 13(3) of the Federal Reserve Act."

The report covers bills that have seen committee or floor action. Labonte analyses the above provisions and the policy debate about them.

For more information see http://www.fas.org/sgp/crs/misc/R44273.pdf

* Understanding the Risks Inherent in Shadow Banking

Staff at the Dallas Federal Reserve Bank have published a paper exploring how shadow banking relates to systemic risk and the recent financial crisis. The paper, Understanding the Risks Inherent in Shadow Banking: A Primer and Practical Lessons Learned by David Luttrell, Harvey Rosenblum and Jackson Thies, is divided into two parts. "The first serves as a primer on shadow banking; the second provides a narrative of how the system froze during the financial crisis and pertinent lessons learned for the current reform effort." The paper explains shadow banking came about because technological advances opened up new avenues of credit. "The various other avenues of credit flow have been called the shadow banking system— so named because they intermediate credit with less transparency and regulation than in traditional banking. Shadow banks are at the center of our global market-based financial intermediation system, conducting maturity, liquidity, and credit transformation without explicit public sector credit guarantees or liquidity access."

Federal Reserve Board Finance and Economic Discussions Series

The Federal Reserve Board Finance and Economic Discussions Series includes staff working papers on a variety of economic and financial topics of interest to the American public.  For example, Raven Molloy and Hui Shan 's "The Post-Foreclosure Experience of U.S. Households"  looks at  1999 to 2010 data from the credit reports of a large group of individuals.  They concluded, "Although foreclosure considerably raises the probability of moving, the majority of post-foreclosure migrants do not end up in substantially less desirable neighborhoods or more crowded living conditions."

See the links for that report and the complete lists of reports at http://www.federalreserve.gov/Pubs/FEDS/2011/ .

Banks' Stress Test

According to a Board of Governors' press release dated May 7, 2009, the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corporation made public the results of a comprehensive assessment of the financial conditions of the nation's 19 largest bank holding companies (BHCs). Called the Supervisory Capital Assessment Program (SCAP), the assessment identified "potential losses, resources available to absorb losses, and resulting capital buffer needed for the 19 participating BHCs."

The SCAP complements the Treasury's Capital Assistance Program (CAP) whose function is to make capital available to financial institutions "as a bridge to private capital in the future."

Both the Overview of Results (333 KB PDF)and a statement by Federal Reserve Board Chairman Ben S. Bernanke are available.

Credit Crisis Timeline

The Federal Reserve has posted a timeline of events and actions for the credit crisis. The Timeline of the Financial Crisis lists market events and actions by the Fed and other government agencies. Included are links to official source documents, relevant economic data, and government agency websites. Additional content will be added to the site in the coming months.

New Federal Reserve Newsletter

Librarians from the St. Louis Federal Reserve (8th District) have created a new non-technical newsletter aimed at government information and university librarians, students, and the general public. Published nine times a year (Jan.-May, Aug.-Nov.), the newsletter "is a selection of useful economic information, articles, data, and websites." The current issue of Liber8 features information about problems in the subprime mortgage industry.

Happy Birthday Federal Reserve

On December 23, 1913 President Woodrow Wilson signed into law the Federal Reserve Act to establish more effective supervision of banking in the United States. The New York Branch of the Federal Reserve has written a brief history of the chaotic events that led to the founding. For a more detailed history see Allan H. Meltzer's A History of the Federal Reserve Volume 1:1913-1951. Source materials cited by Meltzer are available on FRASER (Federal Reserve Archival System for Economic Research). FRASER also links to other documents pertaining to the history of the Federal Reserve through 2005.

Federal Reserve Board - Chairman Bernanke's Speech in Germany

Federal Reserve Board Chairman Ben Bernanke spoke Friday at the Fourth ECB Central Banking Conference in Frankfurt, Germany on "Monetary Aggregates and Monetary Policy at the Federal Reserve: A Historical Perspective." See this article in the Houston Chronicle for a discussion of his speech.

Not sure about the meaning of some of the monetary terms used in the article? Interested in learning more about money supply and the operation of the Federal Reserve? Check out FED101 on the Federal Reserve education site. For definitions of the monetary terms used in the speech, Wikipedia's article on money supply is also very helpful.