WRITING. While reading the text focus on the information describing the procedures of the Fed and other financial institutions of the USA

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While reading the text focus on the information describing the procedures of the Fed and other financial institutions of the USA, put down a plan choosing key words to each point of the plan.

Banking in the USA

At the centre of the U.S. banking system is the Federal Reserve System (FRS or “the Fed”, as it is usually called) which was established in 1913. It consists of 12 regional banks and has its task in controlling the national banking system.

The Federal Reserve serves as a “banker’s bank” and the typical bank customer never enters the door of a Federal Reserve district bank or one of its branch banks.

The organization's main task is to set and implement monetary policy, which is a set of rules for handling the economy and the money supply. Following are brief descriptions of some of the principal functions of the Federal Reserve.

The Fed (1) regulates the money supply by four basic tools. It can set the discount rate and change the reserve requirements, that is the sum of money (called reserves) equal to a certain percentage of deposits that a bank must keep on hand.

Another tool the Fed uses is its power to buy and sell government bonds on the open market. These are known as open-market operations.

The last tool employed by the Fed involves selective credit controls, or the setting of credit terms on various kinds of loans.

Another function performed by the Fed includes (2) clearing checks. Banks can use the Federal Reserve's check-clearing service to clear checks drawn on banks outside their Federal Reserve districts.

One more important task of the Fed is (3) maintaining and circulating currency. Note that the FRS does not print currency – it maintains and circulates money. The Federal Reserve must be ready to ship extra money from its large vaults by armoured trucks.

The Fed also (4) supervises the activities of member banks abroad and regulates certain aspects of international finance.

Apart from that, the Fed (5) protects consumers by receiving and trying to resolve consumer complaints against banks. There are certain regulations, for example, that prohibit discrimination based on race, colour, sex, religion, or national origin in the extension of credit.

In addition, the (6) Fed maintains the federal government checking accounts and gold. The U.S. Treasury has the Fed handle its checking account. From this account, the federal government pays for such expenses as federal employees’ salaries, social security, tax funds, veterans’ benefits, defence, and highways. Gold, stored in the Fed belongs mainly to foreign governments and is one of the largest accumulations of this precious metal in the world.

Commercial banks accept deposits and use these funds to make loans. There are two types of commercial banks: national banks and state banks. National banks are chartered by the federal government, and state banks are chartered by state government. These banks are prime sources of capital for business and also provide loans as well as checking and saving accounts for consumers. Both savings banks and savings and loan associations perform many of the same functions as commercial banks (e.g., checking and savings accounts, loans) but use the majority of their assets for financing home mortgages.

Credit unions are member-owned corporations that offer checking and savings accounts, credit cards, and consumer loans. Most of the 16.326 credit unions in this country serve employee groups.

Other financial institutions include finance companies (which provide short-term loans), large brokerage houses, insurance companies, pension funds, and investment banks (which help corporations raise capital). Most financial institutions operate on the principle of attracting deposits and then lending some of this money to other customers.

Ex. 1. Find in the text answers to the following questions:

1. What is the head of the U.S. banking system and when was it established?

2. What is the Fed’s most powerful body and how many members does it consist of?

3. What is the main task of the FRS?

4. What four basic tools does the Fed use to regulate the money supply and expand economy? Which of them is the most powerful for controlling the money supply?

5. What are other functions performed by the Fed?

6. What different forms of financial institutions are there in the U.S.? How are they characterized?

While reading the text point out differences and similarities of banking system of the Republic of Belarus with those of the USA and Great Britain. Write a short summary of the text. Add some more information concerned with the current changes in the banking system.

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