The Federal Reserve System is the central bank of the United States. The Fed is exclusively a
banker's bank and does not conduct commercial banking activities. Its goal is to attain stable
economic growth in the nation, and through its actions, influence the flow of money and credit in
the economy. Specifically, the Fed’s powers and responsibilities include; formulating monetary
policy by making changes in the Cash Reserve Ratio and Statutory Liquidity Ratio, acting as
lender of last resort for the nation's banks and depository institutions; facilitating the collection
and clearance of checks; regulating and supervising banks and other financial institutions; acting
as fiscal agent for the United States Treasury; distributing coin and currency to the public
through depository institutions; and Implementing certain regulations of consumer credit
legislation. Two mandates of Fed are –Lender of the last resort; Formulating monetary policy by
making changes in the required reserve ratios.
10. ( Subprime Mortgages) What are subprime mortgages, and what role did they play in the
financial crisis of 2008?
Answer – Subprime mortgages is a type of mortgage loan granted to the high risk customers who
have higher chances of default for repayment. The bank charges higher interest rate on such
mortgages as compared to the conventional mortgages to compnesate themselves for the high
risk factor involved.
The basic reason behind the U.S recession in 2008 was tha ...
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