There’s just something about Ben I like. Ben Bernanke, Chairman of the Federal Reserve that is. The Federal Reserve was created on December 23, 1913 by an Act of Congress to serve as the U.S. central bank. There is a seven member board of governors and districts located around the U.S. that serve regional matters. The board of governors are appointed by the President and confirmed by the U.S. Senate for terms of 14 years.
As some may recall from History 101, Alexander Hamilton liked the idea of a central bank and centralized governments. The Federal Reserve while operating in a central bank frame of reference also incorporated Thomas Jefferson’s concept of states and regions into the mix. So, while the Federal Reserve Board of Governors operated in a centralized location, Washington, D.C., the 12 districts and 25 branches are in every state and provide input and monitor the individual regions on a daily basis.
To say, the Federal Reserve monitors and establishes monetary policy would be an understatement of what the Federal Reserve does in the United States. Sure, the Federal Reserve sets interests rates, but it does so much more. Our central bank, the Federal Reserve talks to other central banks around the world to find out what is going on in the global financial world. The Federal Reserve monitors banking practices in the United States.
The Federal Reserve monitors fiscal responsibility of the national budget. The Federal Reserve looks at long term projections of spending, credit and debt. While appointed by the Executive Branch of government and confirmed by Congress, the Federal Reserve tries to maintain a cool, detached head in advising and regulating the all important, “Money & Financial Security,” of the United States. It is not easy, as the complexities of the world economy and monetary policies of the marketplace are evolving and not stagnate.
As stated, The Federal Reserve is not one function and it is as complex as the subject it governs. While, independent and centralized in Washington D.C. it has 12 districts and branch banks. Each of the districts and branches have a Board of Directors. The board members are from leading banking, business and other professionals in the geographic area. There are 25 branches. Their chief role is to handle the day to day work of the Federal Reserve at the region level. They process checks and currency. They supervise banks and most importantly provide input to the Board of Governor’s about monetary policy.
The Board of Directors is comprised of A, B, and C classifications. As an example: District 9 is Minneapolis, Minnesota. The District Chairmen, Class A are Mr. Morrison, Citibank South Dakota; Mr. Hoven, First Western Bank & Trust, North Dakota; Mr. Haddeland, First National Bank, Minnesota. The Class B members are: Mr. Heinemen, Williams Insurance Agency; Mr. Johnson, Reuben Johnson & Sons and Mr. Peterson, Director of Lake Superior State University in Michigan. The Class C members are executives from Cargill Inc., and Marvin Window & Doors in Minnesota.
The Helena, Montana Branch is headed by a former director for The Museum of the Rockies, Regional President of Wells Fargo Bank and President of 1st Bank of Sydney, Montana. The Board of Governors appointed the CEO of Wheat Montana and the President of the Washington Corporation of Montana as additional members of the Helena Branch.
So, why do I like Ben? Today, January 18, 2007 I listened and watched on-line his testimony before a Congressional Committee. Ben, refrained from taking a “how to” partisan and political approach to the looming debt and anticipated health care and entitlement drain on the U.S. economy, he simply acknowledged the problems and left it to Congress to figure out a route among various options to remedy the situation. It was like talking to your hometown local banker. “Yep, you have too much going out and not enough coming in.” “You need to fix something.”
As far as health care, while not specifically providing a formula, Ben provided alternatives in the area of catastrophic health problems among the population. A Senator remarked that the U.S. has the highest percentage of the gross national product going to serve health care costs. The figure he quoted is 16 percent of the gross national product. Ben, didn’t skip a beat he neither agreed nor disagreed with the figure and the pay-go method of paying for governmental services. He simply said, “There needs to be an integrated approach.” If the government is involved, somebody has to coordinate services and increase communication among the various health care providers.
As far as tax cheats who do not pay the estimated 350 billion dollars in uncollected taxes owed, Ben offered the U.K. example of a paperless W-2 form where the taxing agency keeps track of all earned wages, thus minimizing the chance of “gone missing,” income. In an attempt not to turn the discussion into a political battleground, Ben said the tax code is burdensome. Some sources indicate many Americans spend nearly 27 hours each year just trying to comply with the taxing requirements of the U.S. To the extent you make it easier to comply and encourage compliance the better.
So, the on-line tip is pay attention to Health Care Stocks for 2007. Look for buying opportunities in oil related stocks including drilling and supplies because international sources may get political and current dips in prices may be temporary. Lastly, diversify. As the old adage goes, “Don’t put all of your eggs in one basket.” Right Ben?