Amelia Vayda, Chapter 10, Question 6

In chapter 10 of Naked Economics Wheelan brings up the branch within the Federal Reserve called the Federal Open Market Committee (FOMC). This branch specifically works with interest rates. There are two distinct ways to stimulate the economy by lowering the cost of borrowing. The first tool is the discount rate and an example Wheelan gives is when Citibank's discount rate falls they can borrow from the Feds at a low cost, which then lets them lend at a cheaper price to their customers. Another tool that banks use is borrowing from other banks, for example when Wells Fargo lends money to Citibank. Learning about these two distinct ways to help customers borrow money from banks has showed me that it takes a lot more work to get a loan. It also showed me that there are more people involved than I initially thought. I had always thought when I was younger that you could just walk into a bank and receive money but after reading this passage I have developed a better understanding of what it really takes to receive a loan and that it takes a committee and the bank to develop the loan. It just doesn't come from a bank teller.