Editor's Note: This is the first of a multi-part series of articles on the "2012 Economic Outlook: Where is the Economy Heading," a symposium hosted by Western New Mexico University Business School, with representatives from the Federal Reserve Bank.
After WNMU President Joseph Shepard welcomed representatives from the Federal Reserve Bank of Dallas and from the El Paso branch, he explained to the nearly 100 people attending the symposium on Tuesday, April 10, that the agency protects the nation's assets of the banking industry.
Lupe Mares-Edens gave an overview of the Federal Reserve Bank. The bank is known by several nicknames, including The Bankers' Bank and The Central Bank of the U.S., but probably the most used name is simply the Fed.
It was enacted in 1913, after the Panic of 1907. It began by insuring depositors' money up to $100,000, but it has since been raised to $250,000 to reassure people their deposits are safe.
A Board of Governors, located in Washington, D.C., contributes to monetary policy, oversees the Reserve Banks, and regulates financial institutions. The board consists of seven members, with currently two vacancies. The members serve 14-year terms, with a chairman and vice-chairman each serving four-year terms. The current Chairman Ben Bernanke is generally the face of the Fed.
There are 12 districts, Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. The Federal Reserve Bank of Dallas oversees all of Texas, the southern two-thirds of New Mexico and about half of Louisiana through its three branches, in El Paso, Houston and San Antonio.
The Federal Open Market Committee, on which the President of the United States serves, meets eight times a year to review economic and financial conditions, to assess the risks of price stability and economic growth, and sets interest rates.
"What goes in in our region is taken to the FOMC by Richard Fisher, the president of the Federal Reserve Bank of Dallas," Mares-Edens said.
The monetary policy tools, used to influence maximum employment and to monitor jobs, to stabilize prices and the availability and cost of money and credit, include reserve requirements, discount lending and open market operations.
When participants checked in to the symposium, they received a vial of shredded money.
"Money is shredded when a bill, which is made of 75 percent cotton and 25 percent linen, becomes mutilated," Mares-Edens said.
Financial services of the Fed include check processing, the electronic transfer of funds, and the distribution and receipt of cash and coins. The Fed sells, transfers and redeems government securities, such as Savings Bonds and Treasury bills.
The Fed, which is the fiscal agent of the federal government, provides banking supervision to ensure the safety and soundness of the financial system, and fair and equitable treatment to citizens
She answered several questions.
Q: Why does the bank put holds on checks?
A: If it's a large dollar amount, the bank wants to make sure it is good before releasing the funds to the check holder.
Q: Any plans to get rid of bills or coins?
A: Robert W. Gilmer, vice president in charge of the El Paso Branch, said there are no plans to strip out of the system about $10 billion in cash a year.
Q: In Canada, there are $1 and $2 coins. Do we have any plans for them?
A: Mares-Edens said the U.S. has a $1 coin and a $2 bill, but neither is popular.
Q: How do I buy a Savings Bond?
A: Savings Bonds can be purchased online through the U.S. Treasury.
Q: Does every bank belong to the Fed?
A: All national banks must belong to the Fed, but community banks and credit unions do not have to belong.
Q: Can the Fed print money?
A: Gilmer said the Fed can print a limited amount and put it in circulation, but "we like to see the money supply grow along with gross domestic product. We work for Congress, which has control over us."
Q: If GDP grows at 2 percent that is not enough to create full employment.
The question was answered indirectly during the next presentation by Anthony Murphy of the Federal Reserve Bank of Dallas, discussing Financial Markets and the U.S. Economic Recovery.