FED Structure
Basically, all markets continued sideways; but stocks continued their power move up with a slight move up today.
In the news today….
Happy April 15th – the tax man cometh
Foreclosures – rose 16% in March and has set a new record for the number of foreclosures. One in every 138 homes received their foreclosure notice.
US Stock Company Profits – rose in 2009 to the second highest amount ever. Now that’s amazing considering what our economy is doing. What’s even more amazing is that this profit jump occurred with a DROP of 7.8% in revenues. Imagine that!!! Higher profits with falling sales. How was this possible. Restructuring – a polite word for laying off workers. On the bright side, our government could learn a lesson from industry’s industriousness.
Greece Debt – needs to be understood by Americans. We are going down a similar road, and the following graph shows where Greece’s problems are coming from. It’s those pesky unfunded mandates that must be paid in the future. Those promises that politicians made, but don’t have to keep themselves – future generations have to pay. Same here in America.
Tonight’s Dinner Conversation…..
The Federal Reserve Organization. Have you ever wondered how the FED is organized? I have. There is so much discussion about this “independent” body that is not owned by the US Government, but is owned by the big banks. That leads to lots of conspiracy theories.
So, I want to show you the organization that leads the free world around by setting monetary policy for the US.
There are seven Federal Reserve governors, including a chairman and vice-chairman. There are twelve bank districts with independent boards that choose their district president. The Federal Open Market Committee (FOMC) oversees monetary policy and is composed of the seven governors and five of the district presidents. The president of the New York district is always one of the five, and the other four are rotated among the remaining eleven.
Note that the seven governors are appointed by the President and must be approved by the Senate. Further, the board of governors appoints three members to each of the nine-member boards of directors of the local districts.
When a local board narrows its choices for district president to a few candidates, it submits those choices to the national board of governors for comments, which are of course taken seriously. (There has been at least one occasion when a board submitted only one name and the governors asked for alternatives, and the local board reasserted that this was their only choice. The governors backed down.)
A FED governor is supposed to serve for 14 years, and the terms are staggered. That way, no President gets to appoint more than a few governors and cannot stack the board in favor of certain policies. That has changed with Obama. Dodd held up two nominations by Bush for several years, and with the resignation of Vice-Chairman Kohn, President Obama now gets to appoint four governors, and he has almost three years left in his term.
My conclusion from all this is that the FED is fairly independent of the government, but is, at the same time, tied to the government by having significant political appointments of governors. If the FED were 100% political, we would have had hyperinflation a long, long time ago. If the FED ever goes political, we will get hyperinflation much sooner than we will get it anyway.
Here are the last numbers for today:
Dow Jones 30 Industrial – 11,144 (up 21)
10 Year Treasury Bond – 3.85% (down 0.01%)
Euro – $1.3575
Gold – $1160 (up $4)
Oil – $85.47 (down $0.47)
Gasoline – $2.33 (no change)
