April 8, 2019

Some Things To Keep An Eye On Concerning the Fed

We hear about the FOMC periodically.  Everyone tunes in for their meeting.  But, little attention is paid to the committee between their meetings.  There are things afoot right now.
The Board of Governors of the Federal Reserve is required to have seven members. It presently has three. Two of the current governors were put into their position by President Trump. Two more have been nominated by the president and are awaiting confirmation by the Senate. After these two are put on the Fed’s board, the president will then nominate two more to follow them.
In essence, it is possible that six of the seven Board members will be put in place by Trump.
Why is this important?
After the housing crisis late in the first decade of the 2000’s, the Fed was given enormous power to regulate the banking industry. The Fed set up a system that would penalize banks that failed to obey its new rules.
These rules included:
Setting limits as to how big an individual bank could be.
How much money the banks have to invest in Fed Funds and Treasury instruments as a percent of their assets.
Similar to what to takes to learn how to become an investment banker
Which loans were desirable and which were not.
Where the banks could obtain their funding.
Who the President nominates and who is confirmed will be very telling for the compass of the committee moving forward.
Follow me on Twitter @MikeShorrCBOT

about the author:

Mike Shorr

Since 1994, Michael has been an on-the-floor market maker, Vice-President of Interest Rate Derivatives for Knight Financial Products and Director of Education and Options Instructor at Trading Advantage. He makes the oftentimes complex world of options and trading accessible to the novice and advanced trader alike. Michael has a Bachelor of Science degree in Statistics and Finance from the University of Illinois Champaign-Urbana. He presently is Director, Trader Education at ProsperTradingAcademy.

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