The FMC promulgates rules and regulations to interpret, enforce, and ensure compliance with shipping and related statutes by common carriers and other persons subject to those statutes. The staff of the FMC administers programs to ensure compliance with the provisions of the shipping statutes. These programs include the submission of information, and field investiga- tions and audits of activities and practices of common carriers, terminal operators, and others subject to the shipping statutes. The FMC also conducts rate analyses, studies, and economic reviews of current and future trade conditions, including the extent and nature of competition in various trade areas. The FMC conducts investigations of prac- tices by foreign governments and foreign carriers that adversely affect the U.S. shipping trade. The commission works with the DEPART- MENT OF STATE to eliminate discriminatory practices on the part of foreign governments against U.S flag shipping and to promote fairness between the United States and its trading par tners. The FMC has sought to become more efficient by implementing an electronic filing system. By 2002 it was able to issue service on companies electronically, which proved crucial during the fall of 2001, when the anthrax crisis prevented the delivery of mail by the U.S. POSTAL SERVICE in some areas. In addition, it now posts filings of important public proceedings on its web site. FURTHER READINGS Federal Maritime Commission. 2003. Annual Program Performance Report. Available online at http://www. fmc.gov (accessed July 23, 2009). “Federal Maritime Commission News.” 2004–2009. U.S. Politics Today. Available online at http://uspolitics. einnews.com/news/fmc; website home page: http:// uspolitics.einnews.com (accessed September 2, 2009). U.S. Government Manual Website. Available online at http:// www.gpoaccess.gov/gmanual/index (accessed July 21, 2009). FEDERAL MEDIATION AND CONCILIATION SERVICE The Federal Mediation and Conciliation Service (FMCS) is an independent agency of the U.S. government that seeks to prevent or settle disputes between labor unions and management that affect interstate commerce. The FMCS was established by the 1947 LABOR-MANAGEMENT RELATIONS ACT (61 Stat. 153 [29 U.S.C.A. § 172]), better known as the TAFT-HARTLEY ACT. Mediators for the FMCS have no law enforce- ment authority and must rely on their own persuasive techniques. The FMCS has its headquarters in Washington, D.C., and sup- ports 68 field offices. The Labor-Management Relations Act requires that parties to a labor contract must file a notice with the Federal MEDIATION and Conciliation Service (FMCS) if agreement is not reached within 30 days before a contract termination or reopening date. The FMCS is required by the act to avoid mediation of disputes that would have only a minor effect on interstate commerce. However, in seeking to promote labor peace through the encourage- ment and development of long-term, stable relationships between labor and management, the FMCS has taken a broad view of its statutory mandate and has involved itself in disputes that have little effect on interstate commerce. The FMCS provides both mediation and conciliation services. Most of its interventions involve mediation, which is a voluntary, non- binding form of dispute resolution. A mediator attempts to facilitate an agreement by conduct- ing meetings and coordinating discussions. A mediator may make substantive suggestions as an active participant to help the parties reach a voluntary agreement. FMCS mediators must be neutral and must have a minimum of seven years’ experience in bargaining methods and tactics. Mediators must maintain strict confidentiality regarding the positions of both sides and may be removed for bias or a failure to maintain confidences. The FMCS employs more than 200 mediators, who typically handle about 30,000 cases every year. Conciliation is a different form of dispute resolution. A conciliator acts as a neutral THIRD PARTY , serving as a resource person for both sides. Generally, a conciliator will not partici- pate in any joint meetings between the parties. Instead, a conciliator will present each party’s position to the other in separate sessions. The conciliator may also suggest solutions, especially when negotiations have reached a stalemate. The FMCS will also provide ARBITRATION support. Arbitration is an informal method of adjudication, in which both parties present their side of the case, and an arbitrator decides who will prevail. Upon the joint request of a union FEDERAL MEDIATION AND CONCILIATION SERVICE 379 GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL MEDIATION AND CONCILIATION SERVICE 379 and an employer, the FMCS will help to select arbitrators from a roster of private citizens. The agency also employs preventive media- tion techniqu es once an agreement is reached. These techniques include the organization of or participation in labor-management committees, which serve as outlets for discussing problems and the training of labor and management in ALTERNATIVE DISPUTE RESOLUTION techniques. This training is often presented through conferences and seminars. The FMCS developed web technology that provides the public with comprehensive infor- mation. More importantly, FMCS has shifted much of the work done by mediators from paper to electronic documents, which are accessible through its web site. By 2009 FMCS had in place conference centers linked to the INTERNET, along with other technology, that provide online mediation. FURTHER READINGS Federal Mediation and Conciliation Service. Available online at www.fmcs.gov (accessed September 23, 2009). Newman, William A. 1990. “Use of Non-Adjudicative Third-Party Dispute Resolution Methods by Dispute Resolution Agencies of the United States Government.” Ohio Northern University Law Review 17. U.S. Government Manual Website. Available online at www. gpoaccess.gov/gmanual (accessed November 10, 1993). FEDERAL NATIONAL MORTGAGE ASSOCIATION The Federal National Mortgage Association (known colloquially as “Fannie Mae”)isthe largest U.S. corporation. The federally chartered Fannie Mae holds a unique place in the national mortgage market. Established by federal law in 1934, it was originally a NEW DEAL program. Since the 1970s it has been a privately owned, for-profit corporation that is regulated and overseen by the federal government. Its chief purpose is to buy federally guaranteed home mortgages on the secondary market, thus freeing lending institutions to make more funds available for new mortgages for low- to middle- income home buyers. Tighter federal regulation began in the early 1990s, even as critics in Washington, D.C., argued that Fannie Mae should be completely privatized. A broad federal response to the Great Depression gave rise to Fannie Mae. In the 1930s the national housing market was devas- tated when a tight supply of money, coupled with a failure of banks, made mortgage financ- ing extremely difficult to secure. Congress responded first in 1934 by creating the Federal Housing Administration (FHA), a body charged with stabilizing the mortgage market by insur- ing home loans (National Housing Act of 1934, subch. II [12 U.S.C.A. §§ 1707–1715z-11 (1980)]). This measure was not enough to salvage the mortgage market, however. In 1935 lawmakers created the Reconstruction Finance Corporation (15 U.S.C.A. § 601 [1983], repealed by Reorganization Plan of 1957 No. 1 [5 U.S.C. A. § 903 note (1977)]), and in 1938, they added a subsidiary, Fannie Mae (Federal National Mortgage Association Charter Act [12 U.S.C.A. §§ 1716–1723h (1980)]). Fannie Mae’s federal charter required it to buy FHA-insured loans from mortgage lenders, thus increasing the supply of mortgage funds available for lending. Fannie Mae played a major role in the post– World War II boom years in housing. Its portfolio grew after it was authorized to purchase Veterans Administration (VA) loans in addition to FHA loans, a measure that fueled an enormous expansion of housing in the late 1940s and 1950s. In 1954 the federal govern- ment began issuing stock in Fannie Mae as part of a plan to share responsibility for the corporation’s financial health with lending institutions. It issued PREFERRED STOCK to the TREASURY DEPARTMENT and nonvoting COMMON STOCK to mortgage lenders. For the latter, purchase of stock became a prerequisite for selling mortgages to Fannie Mae. A shift to private ownership began in 1968. First, Congress split Fannie Mae into two entities: One retained the name Fannie Mae, and the other was called the GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA), under authority of title III of the National Housing Act (12 U.S.C.A. §§ 1716–1716b [1983]). Whereas GNMA, also known as “Ginnie Mae,” was chartered to provide funding for federally assisted housing programs, the new Fannie Mae retained its original mission but with a new source of funding: Lawmakers wanted it to become self-sustaining through fees and securi- ties. In 1970 the federal government sold its share of stock to Fannie Mae for $216 million, severing its last financial tie to the corporation. Two years later, Fannie Mae expanded the scope of its investments by purchasing non-federally guaranteed loans as well. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 380 FEDERAL NATIONAL MORTGAGE ASSOCIATION Despite its financial independence, the corporation remains closely linked by its charter to the federal government. Federal oversight remained, as did Fannie Mae’s mission to provide services to low-, moderate-, and middle-income homebuyers. During the 1970s and 1980s, the corporation grew enorm ously, particularly through the securities market, where it sold so-called mortgage-backed securi- ties, which are pools of mortgage loans acquired from lenders for which the acquiring corpora- tion earns guarantee fees. Its stock was actively sought, primarily because of profitability and a sense on Wall Street that the federal govern- ment would always back up the corporation in bad times. In fact, the enormous flo w of money through Fannie Mae rivaled that of the nation’s major lending institutions. Fannie Mae volun- tarily registered its common stock with the SECURITIES AND EXCHANGE COMMISSION (SEC) in 2003, thus requiring it to file periodic financial disclosures with the SEC under the Securities Exchange Act of 1934. Calls for reform of Fannie Mae began in the 1980s. The anti-regulatory administration of President RONALD REAGAN suggested privatizing it completely. But action only followed a scandal of the savings and loan industry, in which greed and mismanagement plunged many of the nation’s thrifts into insolvency—at a cost to taxpayers of hundreds of billions of dollars. Motivated to protect the federal government from suffering such losses again, Congress in 1992 passed the Federal Housing Financial Enterprises Safety and Soundness Act (Pub. L. No. 102-550, § 1301, 12 U.S.C.A. § 4501). The law tightened regulations governing Fannie Mae and related federally chartered financial institu- tions. Specifically, it requires these institutions to pass periodic review to ensure that they maintain adequate capital according to risk criteria determined by Congress. This oversight is conducted by the Office of Federal Housing Enterprise, a part of the DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT . Under law, such a corporation must submit a plan to restore its capital levels if it fails review. Significant undercapitalization can lead to the appointment of a conservator to run the cor poration. Congress also prohibited excessive executive and staff salaries. At the same time, it gave Fannie Mae additional responsibility for helping low-income home buyers. Major trouble hit the corporation in the mid-2000s, when significant accounting pro- blems put both Fannie Mae and Freddie Mac in the spotlight and at risk. In July 2008, President GEORGE W. BUSH announced his plan to rescue Fannie Mae and Freddie Mac, in an attempt to stop or stay the sliding sub-prime mortgage crisis and its effect on the nation’s overall economy. The plan called for Congress to authorize up to 18 months’s funds (billions of dollars) to help the companies through a critical period. This would be done by government investments, e.g., government-purchased com- pany stocks and loans. Opposition from both parties in Congress was initially substantial. But the reality of the companies’s role in the national economy was indisputable. Together, Fannie Mae and Freddie Mac either held or guaranteed mortgages valued at more than $5 trillion dollars, and both companies were rapidly sinking into debt from defaulted mortgage loans. As of July 2008, Fannie Mae carried debt of $800 million, while Freddie Mac had about $740 million in debt. According to the Mortgage Bankers Association, nearlyfour percentof prime mortgages were past due or in FORECLOSURE as of September 2007, the highest rate since the group started tracking prime and sub-prime mortgages separately in 1998. The default rate for sub-prime loans was almost one in four, or 24 percent. The combined rate of delinquency and foreclosure was 7.3 percent, higher than at any time since the group started tracking data in 1979. Accord- ing to the IMF in its April 2008 Global Financial Stability Report, global losses could reach $945 billion once other related losses, such as in commercial real estate, were included. In September 2008 the Treasury Secretary announced the government takeover (conserva- torship) of Fannie Mae and Freddie Mac, in the form of government-owned (taxpayer-funded) and controlled stock, representing an extraordi- nary move by the government of the world’smost eminent free enterprise nation. The news of government intervention in private enterprise made front-page headlines around the world. In the next few days, a modest surge in the STOCK MARKET signaled hope, but the nation’smortgage foreclosures had not yet peaked in the midst of the now-global financial meltdown. By August 2009 Fannie Mae needed an additional $10.7 billion, as the value of non- performing loans continued to burden it. At GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL NATIONAL MORTGAGE ASSOCIATION 381 that time, it had used up approximately $45 billion of the $200 billion reserve slated to keep it afloat. However, financial indicators pointed toward a leveling-off of losses as there appeared to be a slowdown in the increase of estimated loan defaults, and the nation’s economy appeared heading toward slow recovery. FURTHER READINGS Bajaj, Vikas and Louise Story. “Mortgage Crisis Spreads Past Subprime Loans.” The New York Times, 12 February 2008. CNN News. 2009.“Fannie Mae Needs Another $10.7B in Federal Aid.” August 6, 2009. Available online at http:// money.cnn.com/2009/08/06/news/companies/Fannie_- Mae_earnings/“>; website home page: http://www.cnn. com/ (accessed September 20, 2009) Dodd, Randall and Paul Miller. “Outbreak: U.S> Subprime Contagion.” Finance & Development, Vol. 45, No.2, June 2008. Fannie Mae Website Homepage and various links. 2009. Available online at http://www.fanniemae.com; website home page: http://www.fanniemae.com/ (accessed Sep- tember 20, 2009) “Federal National Mortgage Association (Fannie Mae)” The New York Times, September 24, 2008. Froomkin, A. Michael. 1995. “Reinventing the Government Corporation.” University of Illinois Law Review. Labaton, Stephen. “Bush Offers Plan to Save Fannie Mae, Freddie Mac.” The New York Times, 14 July 2008. Malloy, Robin Paul. 1986. “The Secondary Mortgage Market: A Catalyst for Change in Real Estate.” Southern Methodist University Law Review (February). CROSS REFERENCE Housing and Urban Development Department. FEDERAL PROCEDURE See CIVIL PROCEDURE. FEDERAL QUESTION An issue directly involving the U.S. Constitution, federal statutes, or treaties between the United States and a foreign country. Application of these kinds of law to particular cases or interpretation of the mean- ings of these laws is a power within the authority of the federal courts. The authority to hear lawsuits that turn on a point of federal law is called federal question jurisdiction. Under 28 U.S.C.A. § 1331 (1993), U.S. district courts “shall have ORIGINAL JURISDICTION of all civil actions arising under the Constitution, laws, or treaties of the United States.” Unlike federal jurisdiction based upon DIVERSITY OF CITIZENSHIP under 28 U.S.C.A. § 1332 (Supp. 2003), federal question jurisdiction is not dependent on the parties meeting a prescribed AMOUNT IN CONTRO- VERSY . CROSS REFERENCES Jurisdiction; Treaty. FEDERAL REGISTER A daily publication that makes available to the public the rules, regulations, and other legal notices issued by federal administrative agencies. Executive Orders and agency regulations were promulgated at a furious pace in the early days of the NEW DEAL under President FRANKLIN D . ROOSEVELT, but there was no requirement that these regulations be centrally filed or regularly published. It became increasingly difficult to know which rules were in effect at any one time. Two important cases were pursued all the way to the U.S. Supreme Court before it was discovered that the administrative regulations that the defendants were accused of violating were no longer in effect. Newspapers all over the country castigated the government for prosecuting people under nonexistent laws. The furor led to enactment in 1935 of the Federal Register Act, now part of 44 U.S.C.A. § 1501 et seq., a law that established the Federal Register as a daily gazette for the government. Orders from federal agencies or the EXECUTIVE BRANCH do not become effective until they have been published in the Federal Register. In 1937 the act was amended to create the CODE OF FEDERAL REGULATIONS , a set of paperback books that arrange effe ctive regulations from the Federal Register by subject. The Federal Register includes (1) presidential proclamations and executive orders; (2) other documents that the president from time to time determines to have general applicability and legal effect; (3) documents that are required by an act of Congress to be published; and (4) other documents selected for publication by the director of the Federal Register. Documents are placed on filefor public inspection at the Office of the Federal Register in Washington, D.C., on the day before they are published, unless an earlier filing is requested by the agency issuing them. The Federal Register has been published continuouslysinceMarch14, 1936,anditprovides the only complete history of the regulations of the federal government with the text of all changes. Regulations are published in the order in which they are filed, but specific documents can be GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 382 FEDERAL PROCEDURE located by consulting a table of contents in each daily issueor in the monthly index. Separate guides are prepared, to note which regulations have been changed in an issue (“List of C.F.R. Parts Affected in This Issue”) and the regulations changed at any time since the beginning of the month (“Cumula- tive List of C.F.R. Parts Affected During April,” for example). A separate pamphlet is published along with the monthly index that lists references to all the changes in regulations since the last time the affected title of the Code of Federal Regulations was revised. All references are made to the Code of Federal Regulations because it is the topically organized version of the regulations that are published daily in the Federal Register. The text of any document in the Federal Register can be shown as good and sufficient evidence that the document was properly filed and that it is, therefore, good law. If a regulation has not been published in the Federal Register, a governmental agency would have to show that an individual actually knew about it before it could prosecute the person for violating it. This encourages the agencies to be sure that their regulations are published in the one place where everyone can expect to find them. As of July 31, 2003, the database for Federal Register for each year subsequent to 1995, (and subsequent to Volumes 60), was available and searchable online at http://www.gpoaccess.gov/ fr/index.html. Documents may be retrieved in ASCII format (full text, graphics omitted), Adobe Portable Document Format, “PDF” (full text with graphics), and “SUMMARY” format (abbreviated text). The 1994 Federal Register (Volume 59) database was also available but did not have the same search capabilities, as it contains no fields or section identifiers. It is also possible to browse the current issue of the Federal Register at the same site. Also accessible is an online History of Line Item Veto Notices (as published in the Federal Register) prior to U.S. Supreme COURT OPINION No. 97-1374 (argued April 27, 1998—decided June 25, 1998. FEDERAL REGULATION See ADMINISTRATIVE AGENCY; REGULATION. FEDERAL REPORTER ® A legal reference source primarily covering published decisions of federal appellate courts. The decisions are published in paperback Federal Reporter pamphlets (advance sheets) shortly after they are handed down and then are issued in a hardbound volume when enough cases have accumulated to fill a book. The hardbound volumes are consecutively num- bered as they are published. After 300 volumes had been issued, a second series was started in 1924. Following the release of 999 volumes in the second series, the third series started in 1993. A case may be found in the Federal Reporter in the volume whose number is that given first in the citation for the case. If the case was decided after 1924, the citation will refer to the second series of the Federal Reporter. For example, the case of O’Connor v. Lee-Hy Paving Co., decided by the U.S. Court of Appeals for the Second Circuit in 1978, is cited as 579 F.2d 194. It can be located on page 194 of volume 579 in the Federal Reporter, second series. The Federal Reporter covers decisions by (1) the CIRCUIT COURT of appeals, the district courts, the former U.S. Court of Customs and Patent Appeals, the former U.S. COURT OF CLAIMS, and the Court of Appeals of the District of Columbia for the years from 1880 to 1932; (2) the U.S. COURTS OF APPEALS and the former U.S. Court of Customs and Patent Appeals for the years beginning with 1932; (3) the U.S. Emergency Court of Appeals from 1942 to 1961 and the U.S. TEMPORARY EMERGENCY COURT OF APPEALS from 1972 to the present; and (4) the former U.S. Court of Claims from 1960 to the fall of 1982; thereafter it became the U.S. Claims Court. CD-ROM format is available. Other federal court opinions are published in a series called the FEDERAL SUPPLEMENT. CROSS REFERENCE Reporter. FEDERAL RESERVE BOARD The Federal Reserve System, established by the Federal Reserve Act (12 U.S.C.A. § 221), is the central BANK OF THE UNITED STATES. The Federal Reserve is charged with making and adminis- tering policy for the nation’s credit and monetary affairs and helps to maintain the banking industry in sound condition. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL RESERVE BOARD 383 The Federal Reserve Board of Governors, or Federal Reserve Board, has broad supervisory powers over the functions of the Federal Reserve System. It determines general monetary, credit, and operating policies for the Federal Reserve System and formulates the rules and regulations that are necessary to carry out the purposes of the Federal Reserve Act. A primary function of the board is to influence credit conditions, such as interest rates, in the nation’s marketplace. The board regulates the amount of credit that may be initially extended and subsequently maintained on any securities, in order to prevent an excessive use of credit for their purchase or carrying. The Federal Reserve Board office is located in Washington, D.C. The board is composed of seven me mbers, appointed by the president of the United States with the ADVICE AND CONSENT of the Sena te. The chair of the board must be chosen from among the seven governors and serves a four-year renewable term. Other board members serve one nonrenewable 14-year term, with one governor’s term expiring every other January. By EXECUTIVE ORDER, the chair of the board is also a member of the National Advisory Council on International Monetary and Finan- cial Policies. Following the passage of the Federal Reserve Act, Congress attempted to claim exclusive control over the management of monetary policy. It asserted that this was the proper function of Congress, as the constitutionally The Fed and the 2008 Recession A recession is a period of economic decline that is marked by wide- spread unemployment, a fall in econom- ic output, and the decline in value of stocks and other financial instruments. The Federal Reserve (often referred to as the Fed)is charged with maintaining the stability of the U.S. economy and has several tools it can employ to improve the business climate. These tools were put to the test when the U.S. economy went into recession in 2008. Though the collapse of September 2008 was dramat- ic, with Wall Street suffering dramatic losses, economists believe the recession started as early as April 2008. Federal Reserve chairman Ben Bernanke moved swiftly in the fall of 2008 to stabilize the economy and then began working to grow it. Despite these efforts, Bernanke drew criticism for bailing out banks while average Americans lost their homes and jobs. The Federal Reserve has three means of dealing with a financial crisis by managing the U.S. money supply. First, it can lower the discount rate or interest rate it charges to major banks that borrow money from it on a short term basis. Second, it can lower the reserve requirements of banks; banks must have on hand a certain percentage of the deposits from customers. Third, it can raise the amount of money in the economy through its open market opera- tions. This is done by the Fed repurchas- ing government securities such as Trea- sury bills from investors. The U.S. housing market, which had fueled much of the economic expansion of the 2000s, began to lose momentum in 2007. The Fed began cutting interest rates in the fall of 2007, in hopes of loosening a tighten- ing credit market and as a way to stimulate economic growth. The rate eventually dropped to zero, yet this was not enough to prevent a recession. In November 2008 the Fed began to use other ways of injecting money into the system. It used methods called “quanti- tative easing.” Bernanke had initially opposed these methods but gave way once the discount rate was at rock bottom. These methods included buying large amounts of longer-term Treasury bonds and mortgage-backed securities issued by government-sponsored com- panies such as Fannie Mae and Freddie Mac. It also purchased commercial debt issued by private companies and con- sumer lenders. The recession was deepened by the collapse of the investment banking firm Lehman Brothers, Washington Mutual Bank, and the near collapse of the insurer American International Group (AIG). In early October 2008, Congress passed the Emergency Economic Stabilization Act of 2008. Known as the bank bailout law, the act authorized the TREASURY DEPART- MENT to buy up to $700 billion of toxic assets from banks. Most of these assets were mortgage-backed securities, which had lost much of their value with the collapse of the housing bubble and the rise of home foreclosures. Congress sought to stabilize the financial markets and unfreeze credit. Banks had ceased to loan money even to reliable customers. The Federal Reserve leadership in Washington and at the Federal Reserve Bank of New York played key roles in dealing with toxic assets as well. By GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 384 FEDERAL RESERVE BOARD appointed keeper of the nation’s purse. The Banking Act of 1935 curbed Congress’s claims by increasing the power of the executive branch’s appointees to the board. In the 1970s, the Humphrey Hawkins Act (Pub. L. No. 95-253, 15 U.S.C.A. § 3101 et seq.) reformed the Federal Reserve to require bian- nual congressional oversight hearings on mon- etary policy and the decisions of the board. Reports on these hearings are presented to Congress by the chair of the board of governors. In 1999, Congress passed the Financial Services Modernization Act (PL 106-102, November 12, 1999, 113 Stat. 1338). This legislation rewrote banking laws that had prevented commercial banks, securities firms, and insurance companies from merging their businesses. In addition, the law directed the Federal Reserve Board to accept existing reports that a bank has filed with other federal and state regulators, thus reducing time and expense for the bank. Moreover, the Federal Reserve Board may examine the insurance and brokerage subsidiaries of a bank only if reasonable cause exists to believe that the subsidiary is engaged in activities that pose a material risk to bank depositors. The act contained many more such provisions that restr ict the ability of the Federal Reserve Board to regulate the new type of bank that the law contemplated. The board of governors interacts with the other parts of the Federal Reserve System, including the twelve Federal Reserve banks, their 25 branches situated throughout the December 2008 the Fed had spent $1.2 trillion making emergency loans and buying financial assets. This amount was separate from the $700 billion appropri- ated by Congress in October. The Fed loaned money to banks, credit card companies, and some large businesses. In addition, the Fed began paying higher interest rates in October to banks for deposits it held for reserve require- ments. Banks wastednotime in depositing large sums. The amount on deposit with the Fed went from $10 billion in August to $880 billion by January 2009. Though banks benefited from higher returns from a stable government source, this discour- aged them from expanding credit. Though Bernanke and other Fed officers stated that rates would decline, forcing banks to lend money, by December 2009, the reserve balances were over $1 trillion. The amount of money spent by the Federal Reserve since September 2008 is staggering. Its balance sheet jumped from about $900 billion to more than $2 trillion, due to the printing of new money that has been lent out to fight the recession. Once it purchases all the mortgage-backed debt and consumer debt it has sought, the Fed’s balance sheet will total about $3 trillion. Never before has the Federal Reserve played such a prominent role during an eco- nomic crisis. By the end of 2009, economists were cautiously optimistic that the U.S. economy would come out of recession sometime in 2010. Such high visibility has also invited criticism and calls for reform of the Federal Reserve. Republicans have complained that theFed’s regulatory powers are too vast and heavy-handed, while Democrats and Republicans alike have complained about the bank bailouts. Democrats have also contended that the Fed failed to properly protect consumers from toxic financial instruments. By late 2009 legislation was moving through the House and Senate that would greatly curtail the Fed’sregulatory powers. In a November 27, 2009, Washing- ton Post op-ed, Bernanke spoke out against removing the Fed’s oversight of banks. He also questionedthe repealofa1978 lawthat was meant to protect monetary policy “from short term political influence.” He acknowledged, “The proposed measures are at least in part the product of public anger over the financial crisis and the government’s response, particularly the rescues of some individual financialfirms.” However, the Fed had to act to “prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society.” Though the Fed, like other government agencies, failed to prevent excessive financial risk-taking, Bernanke declared that the Fed had toughened its rules and oversight. He rebutted critics who thought the Federal Reserve needed to be more transparent, noting that it published “detailed minutes of policy meetings” and its balance sheet weekly. Whether his arguments succeed will likely be known in 2010, when Congress is expected to pass a financial reform law. How soon the U.S. economy comes out of recession and what the long-term consequences are of heavy government borrowing will likely be ways of measur- ing the effectiveness of the actions taken by the Federal Reserve. FURTHER READINGS Gasparino, Charles. 2009. The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System. New York: HarperBusiness. Goodman, Peter. 2008. “Taking Hard New Look at a Greenspan Legacy.” New York Times. October 8. Morris, Charles. 2009. The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash. New York: Public Affairs. Phillips, Kevin. 2008. Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism. New York: Viking. Sorkin, Andrew Ross. 2009. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System and Themselves. New York: Viking. Varchaver, Nicholas, and Kate Benner. 2008. “The $55 Trillion Question.” Fortune. September 30. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL RESERVE BOARD 385 United States, other member commercial banks, the powerful Federal Open Market Committee (FOMC), the Federal Advisory Council, and the Consumer Advisory Council. Through these arms of the Federal Reserve System, board members help to maintain a commercial banking system that responds to the needs of the nation. Federal Reserve Banks and Their Branch Members The 12 Federal Reserve banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. The powers of these central banks include transferring funds, handling govern- ment deposits and debt issues, supervising and regulating banks, and acting as lenders of last resort. The 25 branches of these banks are located throughout the country. Along with supervising these member banks, the board has jurisdiction over the administration of other state banks and trust companies. The board may also grant authority to member banks to establish branches in foreign countries or dependencies or insular possessions of the United States. The board of governors elects direc tors and officers of the Reserve banks. These representatives are divided into three classes. Class A directors and officers represent the Federal Reserve’s stockholding member banks. Class B directors and officers are elected from various industries or banks within their districts to represent the interests of their districts’ economies. The six Class A and six Class B directors are elected by the stockholding member banks. Class C directors hold no office or position in any bank. They are elected by the board of governors to terms in office that are arranged to expire, in conjunction with the terms of office in the A and B c lasses, in alternatin g years. Class C directors work in consultation with the other directors and fill vacancies as necessary. The Federal Open Market Committee As part of the FOMC, the board works with other bank representatives to develop key policies for the Federal Reserve. The open market operations of the FOMC determine the control of the nation’s money supply and the prevailing economic conditions of the country. Twelve voting members form this committee. Seven members are the governors from the board, and five members are pre- sidents of district banks. The board, therefore, has the majority of the votes within the committee. The chair of the board of governors also presides as the chair of the FOMC. When the FOMC meets, approximately eight times a year, the board makes suggestions and policy surrounding the purchase and sale of securities in the open market. Such transactions supply bank reserves to support the credit and money that is needed for long-term economic growth, to offset cyclical economic swings, and to accommodate seasonal demands of businesses and consumers for money and credit. The Federal Advisory Council The board of governors confers with the Federal Advisory Council on general business conditions throughout the nation. The Federal Advisory Council advises the board on matters within the board’s jurisdiction. The council is composed of 12 members, one from each Federal Reserve district. It meets in Washington, D.C., at least four times per year, and more often if the board of governors calls it to do so. Ben Bernanke became chair of the Federal Reserve Board in 2006. The board determines monetary and credit policies and influences national interest rates. AP IMAGES GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 386 FEDERAL RESERVE BOARD The Consumer Advisory Council The board of governors confers with the Consumer Advisory Council on the responsi- bilities of the board in the field of CONSUMER CREDIT protection. Congress established the council in 1976 when it restructured the Advisory Committee on Truth in Lending, initially established under the TRUTH IN LENDING ACT (15 U.S.C.A. § 1601 et seq. [1968]). The council is composed of approximately 30 members from across the country. It represents consumer and creditor interests and advises the board on its responsibilitie s under laws such as Truth in Lending, Equal Credit Opportunity (88 Stat. 1521, 15 U.S.C.A. 1691 et seq.), and Home Mortgage Disclosure (89 Stat. 1125, 12 U.S.C.A. 2801 et seq.). Web site: www.federalreserve.gov. FURTHER READINGS Colander, David C., and Dewy Daane, eds. 1994. The Art of Monetary Policy. New York: Sharpe. Federal Reserve Board Web site. Available online at http:// www.federalreserve.gov (accessed July 23, 2009). Federal Reserve Subcommittee on Economic Growth and Credit Formation of the Committee on Banking, Finance, and Urban Affairs. 1994. Conduct of Monetary Policy: Report of the Federal Reserve Pursuant to the Full Employment and Balanced Growth Act of 1978, P.L. 95–523, and the State of the Economy: Hearing before the Subcommittee on Economic Growth and Credit Formation of the Committee on Banking, Finance, and Urban Affairs (February 22). Available online at http:// www.archive.org/stream/conductofmonet ar1994unit/ conductofmonetar1994unit_djvu.txt; website home page: http://www.archive.org (accessed September 13, 2009). Harvrilesky, Thomas. 2007. The Pressures on American Monetary Policy. New York: Springer-Verlag. Mankiw, Gregory N. 1997. Monetary Policy. Chicago: Univ. of Chicago Press. U.S. Senate. 1993. The Federal Reserve President’s Views on Monetary Policy and Economic Conditions: Hearing before the Committee on Banking, Housing, and Urban Affairs. S. Hr’g No. 103-98 (March 10). U.S. Senate. 1994. Federal Reserve: Recent Monetary Policy Actions: Hearing before the Committee on Banking, Housing, and Urban Affairs. S. Hr’g No. 103-901 (May 27). Washington, D.C.: U.S. Government Print- ing Office. U.S. Senate. 1995. Federal Reserve’s First Monetary Policy Report for 1995: Hearing before the Committee on Banking, Housing, and Urban Affairs. S. Hr’g No.104- 62 (February 22). Washington, D.C.: U.S. Government Printing Office. CROSS REFERENCES Bank of the United States; Banks and Banking; Glass- Steagall Act. FEDERAL RULES DECISION ® A reporter that reprints decisions ren dered by federal district courts that interpret or apply the Federal Rules of Civil, Criminal, and Appellate Procedure and also the Federal Rules of Evidence. The full-text decisions that appear in the Federal Rules Decisions, commonly abbreviated F.R.D., are not published in the FEDERAL SUPPLEMENT . FEDERAL RULES OF EVIDENCE The Federal Rules of Evidence generally govern civil and criminal proceedings in the courts of the United States and proceedings before U.S. bank- ruptcy judges and U.S. magistrates, to the extent and with the exceptions stated in the rules. Promulgated by the U.S. Supreme Court and amended by Congress from time to time, the Federal Rules of Evidence are considered legislative enactments that have the force of statute, and courts interpret them as they would any other statute, employing traditional tools of statutory construction in applying their provisions. The rules are de signed to secure fairness in JUDICIAL ADMINISTRATION, to eliminat e unjustifi- able expense and delay, and to promote the growth and development of the law of evidence so that truth may be ascertained and pro- ceedings justly resolved. Huff v. White Motor Corporation, 609 F.2d 286 (7th Cir. Ind. 1979). But the rules are not intended to result in an exhaustive search for a total and complete understanding of every civil and criminal case that comes before a federal court. Rather, the rules are meant to assist lawyer-adversaries and common sense triers-of-fact in resolving particularized legal disputes. Accordingly, the rules give courts authority to adapt the laws of evidence to circumstances as they arise. The Federal Rules of Evidence were adopted by order of the Supreme Court on November 20, 1972, transmitted to Congress by Chief Justice WARREN E. BURGER on February 5, 1973, and became effective on July 1, 1973. In enact- ing these rules, the Supreme Court and Con- gress did not intend to wipe out years of COMMON LAW development in the field of evidence. To the contrary, the Federal Rules of Evidence largely incorporate the judge-made, common law evidentiary rules in existence at the time of their ADOPTION, and where the federal rules contain gaps or omissions, courts GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL RULES OF EVIDENCE 387 may answer unresolved questions by relying on common law precedent. Like their common law predecessors, the federal rules govern the overall admissibility of evidence, the limitations of relevant evidence, the definition of prejudicial and CUMULATIVE EVIDENCE, the admissibility of hearsay, lay and EXPERT TESTIMONY, the nature of evidentiary presumptions, the grounds for authentication and identification of DOCUME- NTARY EVIDENCE , and the scope of evidentiary privileges, like the work product, attorney- client, and doctor-patient privileges. The Federal Rules of Evidence apply to (1) the U.S. district courts, including the federal district court in Washington, D.C.; (2) the fede- ral district courts located in Puerto Rico, Guam, the Virgin Islands, and the Northern Mariana Islands; (3) the U.S. COURTS OF APPEALS; (4) the U.S. Claims Court; (5) U.S. BANKRUPTCY courts and U.S. magistrates. Although the rules do not specify whether they apply to the U.S Supreme Court, that Court has applied the rules as if they do. Pursuant to EXECUTIVE ORDER, military courts- martial are required to apply rules of evidence that substantially conform to the Federal Rules of Evidence. Executive Order No. 12473. However, the Federal Rules of Evidence do not generally apply to administrative agencies. The Federal Rules of Evidence apply to most civil actions, including admiralty and maritime cases, to most criminal proceedings, and to contempt proceedings, except contempt pro- ceedings in which the court may act summarily. But the rules do not apply to criminal pro- ceedings to issue an ARREST WARRANT,aSEARCH WARRANT ,oraSUMMONS, to preliminary exam- inations in criminal cases, such as hearings on motions to SUPPRESS evidence, to proceedings for EXTRADITION or rendition, to SENTENCING hear- ings, to probation hearings, or to hearings to set bail. FRE Rule 1101. Nor do the Federal Rules of Evidence generally apply in GRAND JURY proceedings. A grand jury may compel the production of evidence or the testimony of WITNESSES as the grand jury considers appropriate, and its operation generally is unrestrained by technical, procedural, and evidentiary rules governing the conduct of criminal trials. However, the rules governing privileges generally do apply at grand jury proceedings, and thus grand-jury witnesses may refuse to disclose information on the grounds that it is protected by ATTORNEY-CLIENT PRIVILEGE , for example. In some instances the Federal Rules of Evidence apply only to the extent that they have not been superseded by statute or other Supreme Court rules governing certain proceedings in particular areas of law. For example, the Federal Rules of Evidence do not fully apply to the trial of misdemeanors and other petty offenses before U. S. magistrates, to the review of orders by the Secretary of Agriculture under the Perishable Agricultural Commodities Act of 1930 (7 U.S.C.A. 499f, 499g), to NATURALIZATION proceedings under the IMMIGRATION and Nationality Act (8 U.S.C.A. 1421-1429), to prize proceedings in admiralty under 10 U.S.C.A. sections 7651-7681, or to proceedings reviewing the orders of the Secretary of the Interior under 15 U.S.C.A 522. In 1974 the National Conference of Com- missioners on Uniform State Laws adopted the Uniform Rules of Evidence, which were designed to be identical to the Federal Rules of Evidence. Cases interpreting the Federal Rules of Evidence are helpful in the analysis of state rules that are based on the Federal Rules of Evidence. In fact, some jurisdictions have held that a rule of evidence patterned after a Federal Rule of Evidence should be construed in accordance with federal court decisions interpreting the federal rule. Thus, state courts in these jurisdic- tions will look at the federal rule’s history and purposes in interpreting the provisions of an identical state rule of evidence. However, at least one state court has held that because rules of evidence, to the extent that they do not impinge upon U.S. constitutional guarantees, are a matter of state law, federal decisions interpreting the federal rules are not of controlling precedential significance. State v. Outlaw, 108 Wis.2d 112, 321 N.W.2d 145 (Wis., Jul 02, 1982) FURTHER READINGS Bocchino, Anthony J., and David A. Sonenshein. 2003. Federal Rules of Evidence with Objections. South Bend, IN: National Institute for Trial Advocacy. Johnson, Lori A. 2003. “Creating Rules of Procedure for Federal Courts: Administrative Prerogative or Legisla- tive Policymaking.” The Justice System Journal 24 (winter). Kraut, Jayson, et al, eds. 1983. American Jurisprudence. Rochester, NY: Lawyers Cooperative. CROSS REFERENCES Burger, Warren Earl; Grand Jury. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 388 FEDERAL RULES OF EVIDENCE . Federal Reserve Bank of New York played key roles in dealing with toxic assets as well. By GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION 3 84 FEDERAL RESERVE BOARD appointed keeper of the nation’s. omissions, courts GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD E DITION FEDERAL RULES OF EVIDENCE 387 may answer unresolved questions by relying on common law precedent. Like their common law predecessors,. 24 (winter). Kraut, Jayson, et al, eds. 1983. American Jurisprudence. Rochester, NY: Lawyers Cooperative. CROSS REFERENCES Burger, Warren Earl; Grand Jury. GALE ENCYCLOPEDIA OF AMERICAN LAW, 3RD