Monetary Policy. Monetary policy is concerned with the size and rate of growth or contraction of the money supply and with the financial stability of the nation as opposed to fiscal policy which attempts to regulate the economy through government spending and tax policies. According to Yeller (1996), "monetary policy is needed, and has succeeded, in smoothing the ups and downs of the business cycle" (p. 40). This job of fine-turning the money supply is entrusted to the Fed. According to monetarists such as Milton Friedman, the key to economic growth was a stable, growing money supply, but neo-Keynesians such as the late Nicholas Kalder, believe that demand-determined variables were more important causes of the level of economic activity with money largely playing a passive or neutral function (Humphrey, 1993, pp. 144-154). The Fed has leaned toward the view of the monetarists and plays an active role in controlling the money supply.

3. Reserve requirements. Congress first gave the Fed power to determine t

McNamee, M. (1992, March 2). A break for banks that won't help consumers. Business Week, p. 31.

Humphrey, T. M. (1993). Kalder versus Friedman in historical perspective. In Money, banking and inflation, ed. T. M. Humphrey, pp. 144-157. Aldershot, ENG: Edward Elgar Publishing.

4. Relevance of the Bulletin to the field of money and financial market. The Bulletin covers only a very small piece of the field and of the Fed's activities to regulate the money supply and financial markets. For example, the Fed has an extremely important role in approving or disapproving bank mergers.

6. Strengths and weakness of the Bulletin. The Bulletin does a good job within the areas it covers; however, it only tangentially touches upon the potential ineffectiveness of Fed moves to control the money supply through the manipulation of bank reserves. The Bulletin mentions that the Fed does not pay interest on funds deposited by banks as reserves (pp. 2-3). Schroeder (1997) says that under the FDIC Improvement Act of 1991, Congress directed the Board of Governors to study the possibility of paying interest on reserves, but that no action has yet been taken by the Fed to implement this (p. 3-29). There have been occasions, such as in the recession of 1990-1992, when easing of reserve requirements have not been effective in inducing jittery bankers to make more loans; instead most of them put the freed-up reserves into interest-paying accounts (McNamee, 1992, p. 31). The Bulletin would have been more complete had it reported and analyzed the success or failure of past actions of the Fed with respect to the level of reserves.

Schroeder, M. R. (1995 and 1997 Supplement). The Law and Regulation of Financial Institutions Volume I. Boston: Warren, Gorham & Lambert.