Federal Reserve Act

The Federal Reserve Act

Submitted by Fredrik Henriksen

Passed the legislature August 24th, 2019, 14 Ayes, 4 Abstains, 2 Nays

Signed into law by: Anthony Magallanez

Article I: Establishment of the Federal Reserve

=Article I.      Establishment of the Federal Reserve=

(a)    Serve as the Central Bank for Amasenen
====              (i)    In its role as the central bank of Amasenen, the Fed serves as a banker's bank and as the government's bank. As the banker's bank, it helps to assure the safety and efficiency of the payments system. As the government's bank or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars. The Amasenen Treasury keeps a checking account with the Federal Reserve, through which incoming federal tax deposits and outgoing government payments are handled. As part of this service relationship, the Fed sells and redeems Amasenen government securities such as savings bonds and Treasury bills, notes and bonds. It also issues the nation's coin and paper currency. The Amasenen Treasury, through its Amasenen Mint and Bureau of Engraving and Printing, actually produces the nation's cash supply and, in effect, sells the paper currency to the Federal Reserve Banks at manufacturing cost, and the coins at face value. The Federal Reserve Banks then distribute it to other financial institutions in various ways.====

(b)    Address the Problem of Banking Panics
====              (i)    Banking institutions in the Republic of Amasenen are required to hold reserves to only 10%  of the amount of the bank's deposit liabilities owed to customers. This practice is called fractional-reserve banking. As a result, banks usually invest the majority of the funds received from depositors. On rare occasions, too many of the bank's customers will withdraw their savings and the bank will need help from another institution to continue operating; this is called a bank run. Bank runs can lead to a multitude of social and economic problems. The Federal Reserve System was designed as an attempt to prevent or minimize the occurrence of bank runs, and possibly act as a lender of last resort when a bank run does occur.====

(c)     Government Regulation & Supervision
====              (i)    The Federal Reserve banks may be audited by the Government Accountability Office (GAO). The GAO has authority to audit check-processing, currency storage and shipments, and some regulatory and bank examination functions, however, there are restrictions to what the GAO may audit.====

a)       audits of the Federal Reserve Board and Federal Reserve banks do not include:
i)        transactions for or with a foreign central bank or government or non-private international financing organization;

ii)        deliberations, decisions, or actions on monetary policy matters;

iii)        transactions made under the direction of the Federal Open Market Committee; or

iv)        a part of a discussion or communication among or between members of the board of governors and officers and employees of the Federal Reserve System related to items (i), (ii), or (iii).

(f)      Supervising and Regulating Banks
====              (i)    The board of directors of each Federal Reserve Bank District also has regulatory and supervisory responsibilities. If the board of directors of a district bank has judged that a member bank is performing or behaving poorly, it will report this to the board of governors.====