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We like to think that when we deposit a dollar at the bank, it goes into a big vault and we can pull out that same dollar at any time. But that¿s not how the U.S. banking system works. Banks take that money and invest it to make money themselves, so cash gets spread around. This, naturally, leads to a big risk: What happens if those investments go sour? Well, you¿d be out of luck. You can¿t get your dollar back.
The Federal Reserve doesn¿t like that scenario, so it prohibits banks from putting all the cash it has on deposit on the line. In fact, the Fed forces banks to keep a portion of their assets at the Federal Reserve itself, to make sure that some of your assets won¿t get squandered if the bank¿s bets go south. These are called ¿reserves,¿ (hence, Federal Reserve. Got it? Good), and usually amount to 10% of the total cash kept in checking accounts.
These reserves are never exactly 10%, and banks like to keep a little extra in reserve ¿ not, as you might think, to make you more comfortable that they¿re in good financial shape, but rather so they can take that excess and lend it to other banks and make money off it. (They¿re banks, they can¿t help themselves.) The rate at which they make these loans is called the Federal Funds rate, which is set by the Federal Reserve¿s Federal Open Market Committee.
When you hear people chattering about how the Fed cut or hiked interest rates, this is what they¿re talking about: the interest rate banks can charge for lending money from their reserves. This begs the question: If these are essentially loans between banks, why is the Fed Funds rate so important for the rest of the economy?
Well, simply put, because loans make the financial world go round. Bank A lends Bank B $10,000 at a Fed Funds rate of 5%. Bank B then lends out $10,000 to a small business at 7%. The small business then takes that money and expands the business and hires new workers. Now someone is employed, Bank B has made interest off the loan, and Bank A is the richer for making it all happen. It¿s perhaps overly simplistic, but you get the idea. When you want the economy to thrive, you make lending cheaper.
Of course, sometimes you don¿t want the economy to thrive. In fact, you might want it to cool down, mostly to avoid money flooding the system and causing inflation. In that case, the Fed raises interest rates, making it difficult to lend or borrow.
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Sunday, August 17, 2008
American Red Cross Prepares for Tropical Storm Fay in Florida
Comtex
WASHINGTON, Aug 17, 2008 /PRNewswire via COMTEX/ ----Florida residents listening to Tropical Storm Fay advisories on local and national news are also being informed of American Red Cross activities in their areas. The Red Cross is urging people to register themselves and their loved ones on the Safe and Well website, to let family and friends around the country know of their status. The website can be updated following evacuation or following the storm.
Red Cross workers are also moving both people and supplies into positions throughout Florida, including thousands of ready-to-eat meals and cots and dozens of Emergency Response Vehicles (ERVs). Prior to Tropical Storm Fay making landfall, the Red Cross is preparing its own shelters and supporting other shelters that will be available for people needing to evacuate. Strategically placed warehouses and chapters allow the Red Cross to set up quickly in order to provide for the needs of those affected by storms and hurricanes.
The Safe and Well website is easy to use: -- Visit Redcross.org, and click on the Safe and Well link
-- Click on "List Myself as Safe and Well," enter your pre-disaster address and phone number, and select any of the standard message options.
-- If you are concerned about a loved one, click "Search" and enter the person's name and pre-disaster phone number OR address. If they have registered, you will be able to view the messages that they posted.
-- If you don't have internet access, you can call 1-800-RED-CROSS (1-800-733-2767) to register yourself and your family. Follow the prompts for disaster information.
Please note that the Safe and Well site safeguards the privacy of the disaster victim. Although these messages will be viewable by friends or family members who conduct a successful search, the site does not reveal a specific location or contact information.
Information being provided by the Red Cross to Florida residents includes the following tips on preparing for hurricanes and evacuations.
Know What to Do When a Hurricane WATCH Is Issued:
-- Listen to NOAA Weather Radio or local radio or TV stations for up-to-date storm information.
-- Prepare to bring inside any lawn furniture, outdoor decorations or ornaments, trash cans, hanging plants and anything else that can be picked up by the wind.
-- Prepare to cover all windows of your home. If shutters have not been installed, use precut plywood as described above. Note: Tape does not prevent windows from breaking, so taping windows is not recommended.
-- Fill your car's gas tank. -- Recheck manufactured home tie-downs.
-- Check batteries and stock up on canned food, first aid supplies, drinking water and medications.
Prepare a Personal Evacuation Plan: -- Identify ahead of time where you could go if you are told to evacuate. Choose several places -- a friend's home in another town, a motel or a shelter. -- Keep the telephone numbers handy of these places as well as a road map of your locality. You may need to take alternative or unfamiliar routes if major roads are closed or clogged. -- Listen to NOAA Weather Radio or local radio or TV stations for evacuation instructions. If advised to evacuate, do so immediately. -- Take these items with you when evacuating: -- Prescription medications and medical supplies -- Bedding and clothing, including sleeping bags and pillows -- Bottled water, battery-operated radio and extra batteries, first aid kit, flashlight -- Car keys and maps -- Documents; including driver's license, Social Security card, proof of residence, insurance policies, wills, deeds, birth and marriage certificates, tax records, etc.
All American Red Cross disaster assistance is free, made possible by voluntary donations of time and money from the American people. You can help the victims of thousands of disasters across the country each year, disasters like Tropical Storm Fay, by making a financial gift to the American Red Cross Disaster Relief Fund, which enables the Red Cross to provide shelter, food, counseling and other assistance to victims of disaster. The American Red Cross honors donor intent. If you wish to designate your donation to a specific disaster please do so at the time of your donation. Call 1-800-REDCROSS or 1-800-257-7575 (Spanish). Contributions to the Disaster Relief Fund may be sent to your local American Red Cross chapter or to the American Red Cross, P. O. Box 37243, Washington, DC20013. Internet users can make a secure online contribution by visiting www.redcross.org
SOURCE American Red Cross
http://www.redcross.org
Copyright (C) 2008 PR Newswire. All rights reserved
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