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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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Friday, June 27, 2008
Going the Distance for Kids With Cancer
Comtex
NEW YORK, June 27, 2008 /PRNewswire-USNewswire via COMTEX/ ----Richie La Placa doesn't know what it's like to be a kid with a brain tumor or even the parent of that kid. But on June 26, he headed up the Hudson, waterskiing over 60 miles without a single fall to raise awareness and money for the Children's Brain Tumor Foundation to help kids with brain and spinal cord tumors.
Richie, a self-employed mason and carpenter, met Ashley Gankiewicz's father, Adam, through their mutual interest in karate. As he says, "Holding on for the two hours it will take to make the trip is like a walk in the park compared to what kids with brain tumors and their families have to deal with every hour of every day. Most of us face hardships at one time or another in our lives, but for these kids, the hardships are there every day. Their hope is that a cure or new medicine will come along to make their tomorrows easier."
Joe Fay, Executive Director, Children's Brain Tumor Foundation, explains, "We call brain and spinal cord tumors the toughest children's cancer. While the survival rates of other pediatric cancers have, thankfully, have improved in the last decade, our kids still face the lowest five-year survival rate. Moreover, survival comes with challenges; cognitive impairments, physical limitations and social isolation. Finally, because there are many kinds of brain tumors research is daunting. Parents tell me the initial diagnosis is like a kick in the gut. Unfortunately, that's only the beginning of a long, challenging journey for these families and kids and sometimes ending in the untimely death of a child."
At 3 months Ashley Elizabeth had a disorder known as Neurofibromatosis. At the age of 2 she was diagnosed with a brain tumor. She underwent surgeries and over a year of chemotherapy to stabilize her tumor. Although Ashley's tumor is stable today she battles various medical issues. She has scoliosis, balance and coordination issues, depth perception issues, visual loss, early onset of puberty due to her tumor and cardiac issues. Her disease has caused small tumors to grow on her legs, arms and back. These tumors can be painful and irritating to Ashley. Ashley visits eight different doctors every 3 to 4 months.
Mom Stacy says, "Despite everything she has gone through, Ashley continues to brighten the world and especially mine. When you look at Ashley you see that none of her challenges have broken her little spirit to love life no matter what comes her way."
Stacy continues, "The Children's Brain Tumor Foundation does so many wonderful things; they fund research, provide emotional support, and even helped advocate to obtain support services for Ashley at school. They have been an amazing support for us."
The Children's Brain Tumor Foundation (CBTF) was founded in 1988 by a group of parents, physicians and friends to improve the treatment, quality of life, and the long term outlook for children with brain and spinal cord tumors through research support, education, and advocacy to families and survivors. Its goal is to ensure parents and children know they are not alone in their struggle.
Richie La Placa started his trip at the Statute of Liberty at noon Thursday and finally docked at Piermont after water-skiing 60 miles. United States Coast Guard Sector New York escorted him to the George Washington Bridge.
You can still make a pledge to Richie. Please visit Children's Brain Tumor Foundation website at http://www.cbtf.org.
SOURCE Children's Brain Tumor Foundation
http://www.cbtf.org
Copyright (C) 2008 PR Newswire. All rights reserved
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