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Independent Investor
Why Does The Federal Reserve (Fed) Influence Markets So Much?
Courtesy of LPL Financial Services
The Fed is one of the most powerful institutions in the world because it is responsible for keeping the largest economy in the world running smoothly. Made up of 12 district banks, which are overseen by the Federal Reserve Board of Governors, the Fed is an independent government agency. It is subject to laws, like the Freedom of Information Act, but its decisions are independent of government influence.
According to the Minneapolis Federal Reserve, the primary inspiration for the Federal Reserve was the Banking Panic of 1907. It was the most severe of four national panics that occurred between 1873 and 1907. Back then, banks did not effectively cooperate with one another in times of crisis, picture Mr. Potter in the movie, "It's a Wonderful Life." As a result, public confidencein banks was not what it is today.
In 1913, the Fed was created by Woodrow Wilson. It was a passive institution intended to prevent banking panics by acting as lender of last-resort in times of crisis. Today, it has become the central bank of the United States, responsible for regulating our financial institutions, promoting monetary stability and keeping our economy healthy. When the Fed's Open Market Committee meets every six weeks to evaluate the economy and set policies that will accelerate or slow our money supply, analysts and investors pay close attention.
For investment information, please call John Meo, Jr., CFP, or Katherine Praydick- Meo, CFP, CEC at LPL Financial Services, 740 Bennetts Mills Rd. Jackson, NJ 732-833- 4575, or visit us at our Web site, www.LPL. com/Jackson Member NASD/SIPC
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