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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: Mark Nelson who wrote (7949)	11/14/1997 10:29:00 PM
From: Rational	Read Replies (3) \| Respond to of 18056

Mark: I worked at the Board of Governors of the Federal Reserve System (Fed) which is an independent government body created by the US Congres under the Federal Reserve Act 1933 in the wake of the great depression. US Taxpayers have endowed the Fed with massive amount of Treasury bonds. The income from these bonds fund the Fed. In fact, the Fed returns a billion+ dollar of income that it cannot spend (within the budget) back to the Treasury every year. The reason for this funding is to keep it completely independent like the US Supreme Court. The Fed is not answerable to the President or his Administration. Fed is answerable to the citizens of US through the Congress. [The periodic Congressional testimonies by the Fed are mandatory.] Like the Supreme Court judges are nominated by the President, 7 of the 11 Fed Governors (including the Chairman) are nominated by the President and confirmed by the US Congress. The remaining 4 governors are chosen from the 14 Federal Reserve Bank Presidents (which are private funded by fees from banks) on rotation with the NY Fed President always being chosen. Fed sets the short-term rates (Fed Fund Rate and the Discount Rate) by a vote among the 11 governors. Thus, the Chairman can seek the votes, but is not necessarily going to get his way. Greenspan has been very effective because he changes his opinion based on facts, convincing economic arguments and analyses and others' arguments. Fed sets the monetary policy, but the Treasury Department prints the fiat money (dollar) and administers the mint factories. Sankar