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Presentation:
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A request of the Supervision of resources, has been elaborated the present titled work the "the Regulation" and Supervision of Financial Institutions in the United States of America "the same one that has been prepared by Lic. Raul Garron.
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It is a contribution to the International Seminary where subjects relative to the institutionalization of the regulating system will
be discus , reason by which the Experience of the United States, constitute a basic knowledge in benefit of the participants on the Old system but of the western world, that to resisted with success, attacks of magnitude during the crises of the 20, the one of the 32, and but recently in 1998, when the system was to the margin of the total collapse, with the failure of hedge fund, illegal LTCM by and abusive speculation of derived instruments.
The present document, allows to reader one vision of the traditional and historic as activities of supervision of the Federal Reserve and its complementary institutions, that we are safe will be one contribution for the participants of our seminary.
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Lic. Flavio Machicado Saravia
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Introduction:
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Frequently it is argued that the United States of America north has an independent central bank. This is evident in sense that decisions of reserves federal to it do not need the ratification the President or anyone of designated in the Executive authority of the government. Consequently, the Federal Reserve has the responsibility to report the Congress, and the citizenship about the development of its politics.
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However, although the FR is the pivot of the system of monetary politics and supervision of the United States is important to point out that its system of financial supervision is similar made up of two additional institutions, the office of the controller of the currency, that is an agency of the executive authority, dependent of the department of the Treasure, responsible to supervise the operations of all the National Banks, and that according to the law of Banks of 1863 directly report the Congress and the Federal Corporation of Insurances of deposits, that is a corporation publishes created by the government in 1933 to assure banking deposits and to protect the depositors.
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The system of the Federal Reserve, or (Federal reserves System) was created by the Law of the Congress in 1913 with object to provide a monetary system and banking but flexible in Vista that by periodic a previous one of one hundred years before the creation of the FR, the economic system was victim of financial periodic panics that culminated in the bankruptcy of a great one a number of banks. In consequence, based in the recommendations of effected studies by the National Monetary Commission that was established by Congress a year later after the severe panic of 1907, many offers where effectuated recommending the creation of a designated institution to balance out this type of financial dysfunctions. After considerable debates, The Federal Reserve was established. Their purpose in the beginning was to give the country a elastic money , providing the facilities for the discount of commercial credits and to improved the supervision system of the bank system.
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Although, Is obvious that the functions of the FR are changing drastically since the arduous experiences that begin with the disaster of stock-market of 1998 follow by the financial failure in Russia, The Asiatic Crisis of 1998 with Japan, Korea, Asia, Brazil Mexico, till the extenuative abuse with the “derivates instruments” in 1998 by Long Term Capital Management – LTCM of Greenwich Connecticut. According to Martin Mayer, the tools of the FR in this Millennium would be oriented with psychology and the financial markets that have been separated by the technology and the tactic of the reality of employment and the product. These rules have changed, and we do not have maps showing the paper or script of the banks its regulators and the central banks. We lived in a world dominated by the markets.
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Since the birth of the Federal System reserves, it was clear that these original propositions constitute element and aspects more ample, but greater national’s financiers and economics objectives. According to Kenneth Spong, throughout years, the stability and economic growth high levels of employments , the stability in the spending power of dollar but a reasonable balance in the transactions with others countries, had deserve the market recognition like primary objectives of the politics economic . Consequently to include/understand the History of the Banking Regulation of the United States it is necessary to understand how important the roll of the Federal Reserve and its objectives contributions, and evolutions since the beginning of 1913. Such objectives have been synchronized and articulated by the Congress in the Employment Act, of 1946, and recently by the Employment Act and the balanced growth,, Full Employment and Balanced Growth Act of 1978. Also the Law of the, Federal Reserves Act, has been object of several amendments throughout its history, with object to allow that the System of the Federal Reserve works with greater effectiveness in support to the profit of national economics the objectives, by means of described key amendments in the Banking Law, Banking Act "of 1935, also the Banking amendments of year 1970 to the Law of Companies Holding, bank Holding Company Act., the law the International of the Bank, the International Banking Act. Of 1978, as like the law of Deregulation and Monetary Control of Depositaries Institutions, Depository Institutions Deregulation and Monetary 1980 Act control. The Federal Reserve also contributes to the profit of the economics’ and financial goals of the nation by means of its ability of influence in the money and the credit in the economy. As a Central bank of the Nation, It tries to assure in the long term that, the monetary growth and the credit is sufficient to stimulate the growth of economy, its potential and with a reasonable stability of prices. In a short term the FR looks forward to adapt its politics to fight inflationary pressures. Also, as moneylender the last option, it has the responsibility to use the instruments of politics available in a effort to resist the possible national crises of liquidity and financial panic.
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A solid financial structure is an essential require of any monetary politics and in order to achieve the successful growth of an economy The FR has been trusted with a series of regulated supervisors functions. In the other hand, the FR is responsible of the available credit for the purchases or ejections of tittles or documents of Negotiable States. Also the RF regulates the foreign activities of all the American in the USA, also it regulates the Holding Companies of the Bank , supervise by Bank Members with licenses, State Chartered Banks , and it established rules to assure that the consumers will be inform and treated with justice and respect , in certain credit transactions
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THE REGULATION AND SUPERVITION OF
FINANCIAL INSTITUTIONS IS THE UNITED STATES OF AMERICA
Raul Garron Claure
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Monetary Politics by the Reduction of the Interest Rates
Federal Funds 2001 (%)
