Pascal: My understanding of the disagreement was as follows:
1. What was Fed Funds Rate on 6-30-94?
2. Is Fed Funds Rate ALWAYS above discount rate?
My source of information was the Chief Deputy Treasurer of the State of California. I believe him to be well-informed and reliable. He is meticulous, accurate, and possesses great personal integrity.
The answers were:
1. 10% for reasons as stated by Kevin. (I believe the day prior it was 4%).
2. No. On some days, discount may end up Lower than Fed Funds rate for a variety of market-related reasons.
I will now quote from "Barron's Finance & Investment Handbook," 3rd Edition, (A Dow Jones Publication):
"FEDERAL FUNDS RATE: interest rate charged by banks with excess reserves at a Federal Reserve district bank to banks needing overnight loans to meet reserve requirements. The federal funds rate is the most sensitive indicator of the direction of interest rates, since it is set daily BY THE MARKET, unlike the PRIME RATE and the DISCOUNT RATE, which are periodically changed by banks and by the Federal Reserve Board, respectively" (p.271)
As for other points: the only rate set in concrete at any given time by the Federal Reserve Board committee itself is the DISCOUNT RATE. As pointed out on p.632 of the same volume, the legal responsibilities of the Board of Governors includes setting the DISCOUNT rate, supervising printing of currency, setting reserve requirements for member banks, regulate money supply by buying & selling govt. securities on the open market, and examining member banks to ensure that they meet Federal Reserve regulations.
Point 4, I think, is moot.
As far as I am concerned, this disagreement has been most regrettable and inexplicably personal and strident in nature. I urge all to take a deep breath, practice patience and resume civility in communication.
Let us not continue "beating a dead horse." This issue is decidedly past that point. Regards. |
