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Pages:
3 pages/≈825 words
Sources:
1 Source
Level:
MLA
Subject:
Business & Marketing
Type:
Essay
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 12.96
Topic:

The Federal Reserve and the Financial Crisis (Essay Sample)

Instructions:
the task was about discussing the federal reserve's response to the 2008 financial crisis based on the book "the federal reserve and the financial crisis" by Ben S. Bernanke. The task reviewed the book and its importance. it also discussed the history and role of the federal reserve in the us economy. source..
Content:
Student Name Professor Name Course Date The Fed and Financial Crisis Introduction Brief Overview of the Book and Its Importance The book “The Federal Reserve and the Financial Crisis” by Ben S. Bernanke is a short book comprising a series of lectures given to undergraduate students at George Washington University in March 2012. At the time of the lectures, Bernanke was serving as the 14th chairperson of the Federal Reserve, whose term lasted between 2006 and 2014. The lectures revolve around the role of the Federal Reserve in the American economy. Specifically, Bernanke seeks to illustrate how critical the Fed has been in mitigating financial crises and economic recessions. The book traces the origins of the Fed to 1914 but clarifies that central banks have existed for centuries. For instance, the Swedes established a central bank in 1668, the Bank of England was set up in 1694, and a French central bank was founded in 1800 (Bernanke 5). The book illustrates that the Fed has continuously learned lessons from the various crises, including the 1929-1933 Great Depression and the 2007-2008 financial crisis. Each time, the Fed has delivered on its mandate to preserve the country’s financial stability. The importance of this book manifests through its articulated assessment of the role of the Fed as a lender of last resort. Even though several financial crises have occurred, the Fed has been central to their mitigation. The book makes a case for the Fed and, most importantly, raises several policy questions that must guide the role of the Fed in the future. Additionally, the book gives a first-hand account of how the challenges in the financial system are addressed. Purpose of the Paper This paper aims to discuss the 2008 financial crisis and the Federal Reserve’s response. Based on Bernanke’s lectures in the book, the paper presents a background to the Federal Reserve. Specifically, the paper outlines the history of the Fed since it was established, targeting various historical milestones. Another aspect of the paper is the structure of the Fed. Lastly, the Fed’s role in the US economy is detailed. Background on the Federal Reserve History of the Federal Reserve The Federal Reserve is considered one of the attempts by the American Congress to create a central bank. Congress passed the Federal Reserve Act in 1913, which created the Fed (Bernanke 14). After Congress passed the Act, the Fed was created in 1914. With its help, the country experienced a significant period of prosperity in the 1920s. However, the Great Depression of 1929 presented the Fed with its biggest challenge after the stock market crashed. The Fed is deemed to have failed in monetary policy and financial stability. Most importantly, it failed to effectively render its role as a lender of last resort. Several changes to the Fed followed after the crisis; for example, deposit insurance was created in 1934. Another step taken was to ditch the gold standard, which released the monetary policy and expanded the money supply. After World War II, the Treasury allowed the Fed to independently set interest rates to control inflation and balance inflation with employment levels. Even though the Fed is supposed to act independently, there are worries that it is sometimes swayed by political pressure. Structure of the Federal Reserve The Fed adopts a structure that differs significantly from most central banks worldwide. Congress set up the structure of the Fed to insulate monetary policy from political pressure since different parts of the country have a voice regarding various aspects of the economy. The Fed comprises a central author based in Washington, called the Board of Governors, and a decentralized network of twelve Federal Reserve Banks across the major cities in the United States (Bernanke 15). A chairperson leads the Board of...
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