NAME
KEY
What is the medium of exchange today?
CURRENCY
Currency- All Media of Exchange such as: Coins, Paper Money, Bonds, Checks, Loan Papers.
An item with a stamped value
List and define the 3 types of currency:
OFFICIALLY STAMPED VALUE RECOGNIZED BY BUSINESSES, BANKS, and
GOVERNMENT.
1.
METALLIC CURRENCY-(COINS)
2.
GOVERNMENT CURRENCY- Paper money or government printed bonds, notes
3.
BANK CURRENCY – Checks (deposit currency), bank loan notes
US Government Paper Currency Today (list the president on each currency)
One dollar____GW_____________________________
Two dollar___TJ______________________________
Five dollar_____AL____________________________
Ten dollar_____AH____________________________
Twenty dollar___AJ___________________________
Fifty dollar_____UG___________________________
One hundred______BF_________________________
**WHICH ONE IS NOT A PRESIDENT
The First Bank of the United States CHARTERED IN 1791
Who created it? ALEXANDER HAMILTON
Why did they create it?
TO ESTABLISH THE FEDERAL GOV’T AS CONTROLLER OF
MONEY
Why did it fail? AS THE NATION GREW WESTWARD, MORE PEOPLE RESENTED THE
CONTROL OF POWERFUL EASTERN BANKERS. IT LOST POLITICAL SUPPORT.
The Second Bank of the United States 1816
Why was is created? TO CREATE A CENTRAL BANK WITHIN THE US ECONOMY
Why did it fail? PEOPLE WERE AFRAID OF THE BANKS POWER TO CONTROL THE
ECONOMY
Describe the National Banking Act of 1864: (What is the Act and what is it used for)
THE ACT ESTABLISHED CHARTER BANKS AT THE STATE LEVEL & WAS USED TO
STABILIZE THE US BANKING SYSTEM

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Federal Reserve Act- Established in 1913, a government regulated system of central banks which member banks could borrow money. The Federal Reserve board (FEDS) has the power to control and regulate these member banks.
The Great Depression- began in 1929 and lasted about 10 years. The 1920’s was a decade of extreme prosperity. Many people borrowed money from the banks to buy stocks. Banks were lending to everyone plus they were invested in the market. When the stock market crashed so did many of the banks. MARKET CRASHED & BANKS FAILED
Margin- borrowing money to buy stocks (only paying a fraction of the actual cost then selling it later for a profit without ever paying the full purchasing price)- many brokerage firms still practice this but with strict regulations.
Federal Deposit Insurance Corporation (FDIC)-
The FEDS guarantee the money if a member bank fails (up to a certain limit- usually 100K)
Inflation- a collective rise in the supply of money, incomes, and prices. The historical average inflation is around 3% a year in a healthy economy. Any extremes either way can be negative.
Stagflation- High inflation rates but low performing economy-stagnant
Deregulation- Regulations start to ease up to give banks more freedom, government releases partial control.
The loosening of the GLASS STEAGALL ACT of 1933 which placed heavy regulations and restrictions on banks after the GREAT DEPRESSION.
BANKING MATH
Inflation is still with us, although the rates are far lower than they were 30 years ago. Anticipating inflation is part of financial planning. If this year’s inflation rate is 2.7%, and you placed $2000 in a savings account at the beginning of the year earning 2% interest, how much must you deposit in the account at the end of the year to hold the same purchasing value?
FORMULA P x R x T (Principle x Rate x Time)
INFLATION RATE $2000 x .027 x 1 =
SAVINGS RATE $2000 x .02 x 1 =

Structure of the Fed (define each) CHAIRMAN
1.
Member banks- Any bank that is part of the Federal Reserve System BOARD
2.
District Reserve Banks- The 12 regional FED banks of the US
DISTRICT
3.
Board of Governors- The 7 FED Board members-selected by the President MEMBER a
4.
The Chairman- The top FED Board member- currently BEN BERNANKE
What are the 4 functions of the Federal Reserve:
THE GOVERNMENTS BANK- Loan money (or store money) for US Government
THE BANKS’ BANK- Loan money to member banks
BANK SUPERVISION- Supervise member banks
1.
MONETARY POLICY- Set interest rates and deposit requirements
List the 3 functions of Bank Supervision-
Conduct bank examinations (CAMELS)
Supervise International Banks
Protect Consumers
CAMELS- Bank examination criteria – 6 functions of safety and soundness
C CAPITAL ADEQUACY
A ASSET ADEQUACY
M MANAGEMENT
E EARNINGS
L LIQUIDITY
S SENSITIVIY to RISK
MONETARY POLICY:
Open market- The FED buys and sells government securities
(EXAMPLE: Sell EE savings bonds to the public)
Federal funds rate- the rate at which banks borrow from each other
Discount rate- the rate of interest that the FED charges member banks for loans
(short term- usually overnight)
Federal Open Market Committee (FOMC)- Sets discount rates in response to economic conditions

Counterfeiting is an ongoing problem associated with paper currency since the government first began printing it. Visit the U.S. Bureau of Engraving and Printing’s web site at
CLICK ON THE TAB “ANIT-COUNTERFEITING” > SECURITY MEASURES
LIST 3 NEW MEASURES OF SECURITY LISTED IN 1996
1.
2.
3.
FROM THIS WEBSITE WHAT ARE 2 CITIES WHERE YOU CAN TAKE A TOUR OF A CURRENCY
FACILITY?
FROM THIS WEBSITE WHAT IS THE US SECRET SERVICE? WHY WAS IT CREATED AND
WHEN WAS IT CREATED?
Visit the Federal Reserve Board of Governors’ web site at
From the ABOUT THE FED tab select district banks and list the 12 banks locations.
Find and visit the local bank in our area and list several resources they provide to educate the public about financing. List 3 resources:
Google Federal Reserve Pyramid (use amosweb.com site)
DRAW THE FEDERAL RESERVE PYRAMID