Federal Reserve System

Look through the list of English words and their Russian equivalents before reading the text:

1. community (n)	общество, община, группа населения
2. to charter (v)	даровать привилегию
3. governor (n)	член правления
4. rate (n)	ставка
5. discount rate (n)	ставка рефинансирования
6. requirement (n)	нужда, потребность
7. tool (n)	инструмент, орудие
8. vault (n)	хранилище
9. to promote (v)	продвигать, содействовать
10.to set aside (v)	выделять, откладывать
11.tight money (n)	ограниченный кредит

The Federal Reserve System is the central bank for the U.S. It is an independent U.S. government agency. Its most important function is to manage the country’s supply of money and credit.

The Federal Reserve System includes 12 regional Federal Reserve Banks and 25 Federal Reserve Bank branches. All nationally charted commercial banks are required by law to be members of the Federal Reserve System; membership is optional for state-chartered banks. In general, a bank that is a member of the Federal Reserve System uses the Reserve Bank in its region in the same way that a person uses a bank in his or her community.

The Federal Reserve System is administered by the Federal Reserve Board of Governors, a group of seven individuals who are appointed by the president of the United States and serve 14-year terms. Although the Federal Reserve System is directly responsible to Congress, the governors are, by law, independent of political pressure from either Congress or the president.

The Federal Reserve has three main tools for maintaining control over the total supply of money and credit in the economy. The first is the discount rate, or the interest rate that commercial banks pay to borrow funds from Reserve Banks. By raising or lowering the discount rate, the Fed can promote or discourage borrowing and, thus, alter the amount of revenue available to banks for making loans.

The second is the reserve requirement. These are percentages of deposits, set by the Federal Reserve, that commercial banks must set aside either as currency in their vaults or as deposits at their regional Reserve Banks. These percentages cannot be used for loans.

The third tool is known as open market operations. It is the buying and selling of government securities. When the Federal Reserve buys government securities from banks, other businesses or individuals, it pays for them with a check (a new source of money that it prints) drawn on itself.

These tools allow the Federal Reserve to expand the amount of money and credit in the U.S. economy. When there is more money to lend, credit is “loose” and interest rates tend to drop. In general, business and consumer spending tend to rise when interest rates fall. When there is less money to lend, credit is “tight” and interest rates tend to rise. Tight money is considered a particularly powerful tool for fighting inflation.

Ex.1.Match the English words with the appropriate Russian equivalents:

1. reserve	a) необязательный
2. administer	b) ценная бумага
3. drop	c) резерв
4. optional	d) управлять, вести дела
5. security	e) назначать
6. appoint	f) процентная ставка
7. interest rate	g) падать

Ex.2.Give English equivalents from the text:

Филиал, требование резерва, деньги, правительственные ценные бумаги, борьба с инфляцией, мощный инструмент, способствовать, иметь тенденцию, увеличивать количество денег, потребитель, ограниченный кредит, ставка рефинансирования, подчиняться, давать взаймы, изменять количество дохода, ценные бумаги, брать взаймы.

Ex.3. Say whether these statements are right or false:

1. The Federal Reserve System is a dependent U.S. government agency.

2. The Federal Reserve System is administered by the Federal Reserve Board of Governors.

3. The Federal Reserve System includes 15 regional Federal Reserve Banks and 20 Federal Reserve Bank branches.

4. Membership is not optional for state-chartered banks.

5. The first tool for maintaining control over the total supply of money and credit in the economy is the discount rate.

6. The percentages of deposits, set by the Federal Reserve, can be used for loans.

7. When the Federal Reserve buys government securities from banks, other businesses or individuals, it pays for them with a check.

Ex 4. Answer the questions:

1. What is the Federal Reserve System?

2. What is the main, principal function of the system?

3. Who appoints the Federal Reserve Board of Governors?

4. What are the main tools for maintaining control over the total supply of money and credit in the economy?

6. What is the reserve requirement?

7. Why is tight money considered a particularly powerful tool for fighting inflation?

Ex.5. Complete the sentences:

1. The Federal Reserve System is …

2. Its most important function is …

3. The Federal Reserve System is administered by…

4. The Federal Reserve System has three main tools for…

5. The third tool for maintaining control over the total supply of money and credit is known…

6. When there is more money to lend, credit is …

7. When there is less money to lend, credit is …

8. Tight money is considered…

Ex.6.Make up a plan of the text and retell it.