The Federal Reserve System: An Encyclopedia

THE FEDERAL RESERVE SYSTEM THE FEDERAL RESERVE SYSTEM AN ENCYCLOPEDIA R. W. Hafer Greenwood Press Westport, Connecticut • London Library of Congress Cataloging-in-Publication Data Hafer, R. W. (Rik W.) The Federal Reserve System : an encyclopedia / R. W. Hafer. p. cm. Includes bibliographical references and index. ISBN 0-313-32839-0 (alk. paper) 1. Board of Governors of the Federal Reserve System (U.S.)—Encyclopedias. 2. Banks and banking, Central—United States—Encyclopedias. 3. Banks and banking—United States— Encyclopedias. 4. Federal Reserve banks—Encyclopedias. I. Title. HG2563.H235 2005 332.1T '097303—dc22 2005006189 British Library Cataloguing in Publication Data is available. Copyright © 2005 by R. W. Hater All rights reserved. No portion of this book may be reproduced, by any process or technique, without the express written consent of the publisher. Library of Congress Catalog Card Number: 2005006189 ISBN: 0-313-32839-0 First published in 2005 Greenwood Press, 88 Post Road West, Westport, CT 06881 An imprint of Greenwood Publishing Group, Inc. www.greenwood.com Printed in the United States of America The paper used in this book complies with the Permanent Paper Standard issued by the National Information Standards Organization (Z39.48-1984). 10 9 8 7 6 5 4 3 2 1 To my parents and to Gail and Cait CONTENTS Preface and Acknowledgments ix Introduction xi List of Entries xxv Topical List of Entries xxix The Encyclopedia 1 Appendix A: The Federal Reserve Act 407 Appendix B: Membership of the Board of Governors: 1913-2004 433 Appendix C: Federal Reserve Regulations 439 Index 443 This page intentionally left blank PREFACE AND ACKNOWLEDGMENTS The entries in this encyclopedia deal with the Federal Reserve System, the central bank of the United States. This book does not, however, deal solely with how the Federal Reserve operates or its current institutional structure. Even though focusing on these issues could fill a book, such an approach misses the rich history and development of the Federal Reserve, the dramatic changes that have occurred in the banking industry and the evolution of monetary policy over the past century. The entries that comprise this book, therefore, represent an attempt to cover a broader spectrum than merely what the Federal Reserve is and how it developed. With this in mind, the entries chosen range across Federal Reserve operations and how monetary policy functions in the United States. The entries also cover points that may at first seem unrelated to the Federal Reserve. For example, how could a discussion of something as arcane as "real business cycle theory" fit in a book about the Federal Reserve? The answer is because this theory has important implications for how monetary policy is conducted. In this discussion, and in others like it, what might seem as unrelated issues are tied to monetary policy, to the Federal Reserve's regulatory oversight duties, or how the System operates. In each and every case there is an explicit connection between the entry and the Federal Reserve. Some of the entries deal with complex issues or concepts. At times, economic jargon will creep into the discussion. On both points, every effort has been made to present the material in a fashion that makes it accessible to the general reader. The purpose of the book is to provide an introduction to the Federal Reserve and related topics, not to frighten you away from the subject matter. If successful, this will be the first, not the last, book that you'll read on the subject of the Federal Reserve. A number of people provided suggestions and comments at various stages of this project. I