Word: feds
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Dates: during 1970-1979
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...relationship with the rest of Government. The President appoints and the Senate confirms the chairman and the six other governors of the board, and thereafter neither can give them orders. Burns has boasted that once, when Nixon's Treasury Secretary George Shultz called on him to plead that the Fed pump out more money, Burns angrily ordered Shultz out of his office...
However, the Federal Reserve and the Administration must try to get along. The Fed cannot press a tight-money policy so far as to prevent the Treasury from borrowing enough to cover the budget deficit (that would mean Government failure to pay its bills, which would shake the whole financial structure), but it can foil Administration policy by being tight or loose. So every chairman becomes a nonofficial adviser to the President...
...Fed, the chairman has no statutory power to command. He has only one of seven votes on the board and one of twelve on the Federal Open Market Committee (FOMC), which makes the key operating decisions on money supply and interest rates. The practice is to have discussion go around and around the table until a consensus emerges, and take a vote only after its outcome has become a foregone conclusion. A forceful chairman can guide and shape the debate, but it had been thought that Miller's lack of training in banking might cause him to defer...
...indirect method of buying or selling Government securities. When it buys, it creates money out of thin air; it pays with its own checks, which the sellers?individuals and corporations?deposit in their bank accounts. The checks become new money, available to be loaned out. When the Fed sells Government securities, it withdraws money from circulation; the buyers pay with checks that disappear into Federal Reserve vaults, never more to be seen. The less money that banks have to lend, the higher interest rates will rise. The FOMC focuses on the Fed funds rate at which banks lend to each...
...Reserve calculations. The necessity of creating at least enough money for the Treasury to borrow to cover budget deficits is one. The strength or weakness of loan demand is perhaps the most important consideration. The Federal Reserve may set an interest-rate target of, say, 7¼% to 7¾% for Fed funds? which is believed to have been its goal in June. But if loan demand is exceptionally strong, it may have to put out more money than it wants to in order to keep the rate from rising above the upper limit...