Sie sind auf Seite 1von 2

Abdullahi Adesanya

UID: 113671746
ECON 330: PROBLEM SET 4
1. What is contained in Section 2A of the Federal Reserve Act?
Section 2A of the Federal Reserve Act contains the monetary policy objectives of the
organization. It states that the Board of Governors of the Federal Reserve and the Federal Open
Market Committee are to be responsible for maintaining the long-run growth of the monetary
aggregates (the total value of money supply within the economy) and credit aggregates (the
amount of credit extended to an economy by financial institutions) in accordance with the
economy's long-run prospective increase in production, in order to bolster sufficiently the
achievement of the organization's most important goals of maximum employment, nonfluctuating prices and mild interest rates.
2.

What is contained in Section 12A of the Federal Reserve Act?

Section 12A of the Federal Reserve Act is about Federal Open Market Committee. This
section is divided into three parts; the first part describes the creation of the FOMC and the
members who make up the committee (Board of Governors of the Federal Reserve and five
representatives from the Federal Reserve Banks). The document explains the process of voting in
members of the committee and that meetings will be held by the committee four times a year in
the nation's capital.
The second part of this section deals with the participation of the Federal Reserve Banks
in Open Market Operations (Section 14 of the Federal Reserve Act); it states that the Federal
Reserve Banks are to abide by the rules and regulations legislated by the committee when
engaging in Open Market Operations.
Finally, the third part of this section illustrates that banks may only engage in Open
Market Operations (buying and selling of securities, commercial paper etc) with a view of
encouraging trade and economic activity while regarding how their activities (lending and
borrowing) may affect the country's overall indebtedness.
3.

Read proposed Section 2 and write a clear and detailed summary demonstrating
your understanding as to what is proposed in the House Bill.

Section 2 of the Fed Reserve Oversight Reform and Modernization Act focuses on how
the Federal Open Market Committee implements its Directive Policy Rules. More importantly,
Section 2 lays the groundwork for a set of requirements that need to be met when the FOMC
implements a new Directive Policy Rule. This document contains important definitions of the
terms used in addressing the different components of the section.
Moreover, this section defines the Directive Policy Rule, the requirements that must be
met while implementing it, and how Directive Policy rules are to be proposed and submitted. The
Comptroller General of the United States then revises the Directive Policy Rule to determine any

discrepancies or non-compliance of the rule with stated requirements. If any discrepancies occur
in the Directive Policy Rule, or if changes were made to it by the FOMC, the Comptroller
General notifies the appropriate congressional committees.
If an updated version of the Directive Policy Rule is still not in compliance, The
Chairman of the Federal Open Market Committee is to testify before the appropriate
congressional committees in not later than 7 days if requested to do so by either chairman of the
appropriate congressional committees. If requested to testify, the Chairman of the FOMC has to
explain why the Directive Policy Rule, an updated version of it, or the FOMC itself is not
compliant with stated requirements.
4.

Read proposed Section 4 and write a clear and detailed summary demonstrating
your understanding as to what is proposed in the House Bill.

Section 4 of this proposed house bill is an amendment to section 12A of the Federal
Reserve Act. It changes how the members of the Federal Open Market Committee will be
selected. The number of board of governors of the federal reserve remains the same, while the
positions for the remaining governors has been increased by one to make 6 positions. This
indicates that there will now be 13 members of the FOMC, and the Board of directors of the
Federal Reserve Bank of New York no longer has a permanent voting spot; instead they are to
share voting rights with the board of directors of the Federal Reserve of Boston. All other voting
positions are also paired too in a way that only 2 boards of governors can elect each new member
or representative.
Finally, the six members are to take turns in terms of eligibility for a spot of the FOMC,
depending on the year and the region where the federal reserve bank is located. In odd numbered
calendar years, one representative is to be elected from each of the following federal reserve
banks; Boston, Philadelphia, Richmond, Chicago, Minneapolis, and Dallas. While in even
numbered calendar years, one representative is to be elected from each of the following federal
reserve banks; New York, Cleveland, Atlanta, St. Louis, Kansas City, and San Francisco.