THE FEDERAL OPEN MARKET COMMITTEE
The Federal Open Market Committee is made up of the seven member the of the twelve regional bank presidents. All twelve regional presidents attend each FOMC meeting, but only five get to vote. The five with voting rights rotate among the twelve regional presidents over time. The president of the New York Fed always gets a vote, however, because New York is the traditional finance center of the US. economy and because all Fed purchases and sales of government bonds are conducted at the New York Fed’s trading desk. Through the decisions of the FOMC, the Fed has the power to increase or- cleanse the of dollars in the economy. In simple metaphorical terms, you can imagine the Fed printing dollar bills and dropping them around the country by helicopter. Similarly, you can imagine the Fed using a giant vacuum cleaner to suck dollar bills out of people’s wallets. Although in practice the Fed’s methods for changing the money supply are more complex and subtle than this, the helicopter-vacuum metaphor is a good first step to understanding the meaning of monetary policy.