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[00:00] So there's a ton of drama going down with the Federal Reserve right now. The beef is that President Trump wants to be able to fire a few of the Fed's board chairs, and the Supreme Court is currently trying to decide if he should be allowed to do that or not. This is major news, especially because it's not just a partisan fight anymore. Republicans and Democrats alike are really against the idea of firing board members Lisa Cook and Jerome Powell, the current chair of the entire Fed. But why is everyone seemingly so alarmed by this? Why is everyone across the political spectrum fighting to keep Jerome in? How is this going to impact our national economy? And how exactly is this drama going to change your mortgage, your retirement savings and your loans? What's up, everyone? I'm your host, Vivian Tu, AKA Your Rich BFF and your favorite Wall Street girlie. Today on Networth and Chill, we're gonna be doing a bit of an economics crash course on the Federal Reserve. Yes, the little name you see at the top of every single US dollar. But before we talk about what it is, why it matters and what control it has over your finances, if you're interested in even more money knowledge to level up your finances beyond the basics, check out my new app, Ask Dolly. Think of Ask Dolly as your best financial friend in your pocket, ready to answer any financial questions you might have to get closer to your goals. In addition to that, we can connect to you with certified financial planners that can help your specific one-on-one situation. We create extra content that helps you break down the headline so you know what it means for your wallet, and we'll even do a general financial wellness assessment to let you know what tasks you're doing a great job at, and what things can be improved in your financial life so that you can hit all of your ambitions and get the life you want. We'll leave the link for Ask Dolly in the description, or you can visit askdolly.com to learn more. Okay, so what is the Federal Reserve? Support for Networth and Chill comes from Adobe. Planning your finances means taking a realistic picture of your life as it is now and where you want to be. But you also got to plan for the unexpected, because life happens and you need to be able to edit, adapt, and collaborate with others to reach your goals. Adobe gets that, which is why they made a tool that's just as flexible, PDF spaces in Acrobat. Your PDF files are no longer static. Instead, they're living documents that flex with you and your project's needs. Learn more at adobe.com/do that with Acrobat. When we're actually talking about the Federal Reserve, we're talking about a whole system of central banks. So it's multiple banks. All you have to do is think of the economy like a birthday party. And birthday parties need a little bit of surveillance. Everyone wants to make money, spend money, and throw it up in the air, generally have a good time, right? And we all want to earn a lot of money and use our money to buy cool stuff. But without the appropriate supervision, we've all seen a wild party get, well, you know, just a little too wild. I don't want a house party that's Project X, but I don't want something that is so lame and reminds you of Squidward's birthday party. That's where the Federal Reserve, otherwise known by its nickname, the Fed, steps in. They're in charge of making sure that the vibe of the party doesn't get dull, but also that no one ends up in the hospital with a broken bone after jumping off of the roof. They're basically our babysitter, making sure that we're not downing a family size bag of gummy worms and then throwing it up one hour later. Former Fed Reserve Chair William McChesney Martin literally described it as, The Federal Reserve is in the position of the chaperone, who has just ordered the punch bowl removed just when the party was really warming up. Because before the Fed was founded, America was basically running on sugar crashes. People would put money into a bank, but if the bank would start to flop or maybe find itself tied on cash for whatever reason, it would lead to huge panics where people would basically run to their banks to withdraw all of their money. That's why you see these movie scenes of people rattling the cages of the bank tellers desks in their old timey hats and in black and white. It would usually start a domino effect too, where that flop would cause people to yank all of their money out of their banks, even if those banks themselves weren't actually failing. All this anxiety would spark economic recessions, which of course would push ripple effects outward onto basically everything. That is bad news. So Congress needed a source of emergency reserve money to give to the banks in order to prevent panics, like a little string cheese or a granola bar in your purse to prevent you from getting hangry. That way, no one would crash out or faint the moment things changed, and there could be a restored trust between the people and their banks. Thus, the Federal Reserve Act was signed in 1913, creating the Federal Reserve System, which is made up of three parts. First up, it's seven appointees on the Federal Reserve Board, the 12 Federal Reserve Banks across the country, and the Federal Open Market Committee, otherwise known as the FOMC, which is made up of the seven appointees on the Federal Reserve Board, plus the president of the Federal Reserve Bank of New York and four rotating regional reserve bank presidents. And while yes, it was initially created just to give banks those emergency purse snacks, it's now pretty much responsible for the health and diet of the entire American economy. The Fed is responsible for pumping money into the economy, operating electronic payment systems, and monitoring systemic risk in our financial system. They're the people who clear your checks and set the interest rates that ultimately inform your mortgage, student loans, and credit card interest rates. I don't think I'm reaching when I say it's the single most powerful economic institution in the country. And yes, that is a lot of power for 12 people to hold over all of our lives. So now let's get into how interest rates actually impact you. Say the Fed announces that they're going to be raising interest rates. Why would they do that? You might ask. It's kind of like turning the lights on at the party. They're seeing things getting a little bit too freaky deaky, and they know turning the lights on will kill the vibe. Raising rates slows economic activity. They know by making it more expensive to borrow money, businesses will hire fewer people, you'll be less incentivized to go shopping if your savings account is offering you a higher interest rate, and thus fewer dollars will be chasing the same amount of stuff. Before you go and call the Fed killjoys, turning on the lights can prevent a big scary word that we all know and all hate, inflation. But last year, the Fed was doing the opposite. They were pretty steadily cutting, aka lowering, interest rates. They were looking out at the economy and seeing that the job market kind of sucked. People weren't getting hired, long-term unemployment was on the rise, so cutting interest rates was aimed at stimulating the job market by creating lower borrowing costs for businesses, who would in turn start hiring people again. So who benefits when interest rates are cut? Lower rates means, well, lower rates on everything. That includes debt, credit card interest rates go down, federal student loan rates go down, car loans go down, and although they usually have longer terms, 15 or 30 years, even mortgage rates will come down. Anyone applying for new debt benefits from this, because you'll get friendlier terms on your payback schedule. Lower rates also supercharge the stock market by reducing borrowing costs for companies and consumers, which boosts corporate profits and increases economic activity. They also make bonds way less attractive, driving investors towards investing in stocks for higher returns. But who doesn't stand to win as much? People who like to stash their money at the bank, specifically people who are putting money in high-yield savings accounts, or low interest-bearing investment products like certificates of deposit, because the rates for those also go back down. That's why the Fed can be so controversial. They're not often going to make decisions that benefit everyone at one time, and sometimes their decisions aren't always on the mark. The system has two main goals. To maintain stable prices so that we don't feel squeezed out by the cost of living, and second, to make sure everyone has a job, or at least can get a job if they want one. So I'll let you take a wild guess as to why people have been upset with them. That's right, not only are we having a hard time getting those jobs, but everything around us still feels pretty stinking expensive. But now let's talk about why changing Fed chairs matters. As you can see, there's a lot that's impacted when the Fed makes a decision, which is why they've historically been considered a non-partisan independent body trying to remain objective against the Democrat versus Republican vibe that we see in the rest of our government. One board of governors holds the position for 14 years, so new appointments are staggered in two-year increments in order to have as much overlap as possible between presidential terms. Big world events, et cetera. That way, we don't have a fresh new cast of characters every 14 years, which would give one president too much power in stacking the deck with their friends and fans. It's this independence that's at the center of the fight between the Fed and the White House right now. Basically, President Trump really wants Fed Reserve Chair Jerome Powell to just slash interest rates as low as possible, like a going out of business sale. But Powell has historically been a pretty cautious guy, dropping them slowly and steadily, then seeing how it ripples out across the economy. The problem is that President Trump really, really, really wants people to like him a lot, and slashing interest rates would make him look really good this year. Ahem, midterms are coming. Ahem. But he has no control over the rates. So what does he do? He tries to append the whole system by firing the newly appointed board governor, Lisa Cook. Also, conveniently, the first black woman to be appointed to the board by saying that she committed fraud on her mortgage. I will tell you, though, the evidence of this is like pretty much nothing right now. Powell's term is also up on May 15th, but he has one more optional year as a board governor, and shockingly, he might do it. That's not going to fly with this administration, though. So they've been serving him subpoenas over the cost of renovating the Fed's headquarters and saying they're running a criminal investigation in what appears to be a move to intimidate him out of doing his super senior year. It's a pretty shocking twist given that, one, Jerome Powell was actually originally appointed by Trump, and two, compared to how the Fed has historically been treated, which has been, all right, fine, they're doing their thing over there, we'll just trust that they'll handle it. Trump's move is basically trying to openly say that he wants the Fed to play ball along party lines more. It's such a surprising strategy that the fight is getting pretty personal. Republican senators are drawing the line here, defending Powell like he's family, saying that Trump simply cannot get rid of him. Apparently, even North Carolina Republican Senator Tom Tillis' dog Gus loves Powell. And yes, this is all interesting, but there are actual impacts on your wallet. If the president actually succeeds in firing Lisa Cook, he would definitely replace her with someone who will do what he wants, now giving him a majority on the Fed's board and greater influence over the central bank's decisions on interest rates and bank regulation. In the short term, it means there could be a greater chance of rates plummeting, which would be good news for borrowers, but we would also see more upheaval, volatility, a higher likelihood for runaway inflation, and most concerningly, more politics in our money. Is anybody sick of that yet? It sets the precedent that if the president, get it, doesn't like something that's happening outside their control, they can just say, okay, let me just accuse them of doing something, and go ahead and exert influence that way. At least for now, it seems like Trump is trying to go for a safer pick that would still listen to him if push came to shove. That's a man by the name of Kevin Warsh, a former bank executive and a former member of the Fed's Board of Governors. So yes, Warsh is very much qualified. He's actually been in that job before. However, historically, Kevin Warsh has been known on Wall Street as an inflation hawk. This guy really cares about inflation. He said before that it's even more important than anything else in the economy, including the job market. So usually, he's advocated for higher interest rates just to try and put a lid on inflation, which seems like it would be antithetical to Trump's crusade to have the lowest interest rates in human history, right? Well, Warsh has advocated for lower rates during the AI boom, which could fall in line with Trump's wishes. But JP Morgan has not penciled in any upcoming rate cuts for the rest of the year, which might be a sign. Is this good or is this bad? Well, it depends what's most important for you right now. Suddenly dropping interest rates would have an immediate impact on the consumer lending rates you're getting and could stimulate companies to expand headcount. But that's not a guarantee, and they also run the risk of pushing prices up for our daily costs. Support for Networth and Chill comes from Adobe. Things change, life happens, timeline shift, and your financial strategy, it has to be able to keep up and fit the current moment. So if you need to be flexible and adaptable, then the documents you use to keep track of it all should be too. That's where PDF Spaces from Adobe Acrobat comes in. With Acrobat, you can do so much more with a PDF file than you ever thought possible. PDF Spaces takes those documents and turns them into a living project you can edit, engage with, and collaborate with others on. You can even put all your files into one workspace and have a whole conversation with your AI assistant about it. Then you can ask questions to get deep insights about your project all without leaving the PDF space. You can also invite people to your PDF space and let them add files, comments, notes, and more. You can brainstorm through sketches or even synthesize all the info in podcast form. That's right, Acrobat lets you generate an audio overview of your project in just one click. The world isn't static and thanks to Acrobat, neither are your PDFs. Learn more at adobe.com/do that with Acrobat. Hi friends, quick pause in our show to take a question from Besties in Phone a Friend presented by Adobe Acrobat. Rahul asks, how do I negotiate for a raise when my workload has doubled but my title hasn't changed and does being more productive actually hurt me in salary conversations? This is such a common and frustrating situation. You're doing the work of two or more people but still getting paid like one. Here's a strategic approach that will help you out. One, document everything first. Start building that brag book right now. Track every additional responsibility, project, or task you've taken on since your workload expanded. Get specific with the metrics you're recording. Managed 40 percent more client accounts, reduced processing time by three hours daily, or took over X department's responsibilities. You need concrete evidence of your expanded role. Two, frame it as a role evolution, not just more work. Don't just bring up this casually, present your case as your role naturally evolving beyond its original scope. Say something like, over the past XYZ timeframe, my responsibilities have expanded significantly beyond the original job description. I'd like to discuss how my compensation can reflect the value I'm bringing to the team. Step three, you got to research your work strategically. Look up salary ranges for roles that match your current responsibilities, not your original title. If you're doing manager level work, research manager salaries. Four, address the productivity concern head on. Being more productive absolutely should not hurt you, but you need to position it right. Show that your productivity creates more value, not just the same work done faster, and it doesn't necessarily mean you need more grunt work to do. Five, have a backup plan. If they say the title change has to come first, ask for a timeframe and interim compensation adjustment. If the budget is tight, negotiate for other valuable perks while you wait for official promotion. Good luck. You've got this. Now back to our show. Okie dokie. Now after that quick rundown, let's actually go over some questions that BFFs have submitted about the Federal Reserve, about what's going on so I can help you understand this a little bit better. If I don't end up getting to your question, friendly reminder that you can head to askdolly.com and download my new app Ask Dolly to ask all of your financial knowledge questions. We break it down in layman's terms, just like the content I create that you are watching already. I make sure that you can understand it using analogies that are simple and easy. I just want to make sure that if you have any questions, they are getting answered, so check it out. askdolly.com. Get curious. The very first submitted question is, how does the Fed funds rate impact my high-yield savings account rate? That is a great question. Simple answer is, when the Fed funds rate moves up or down, your high-yield savings account will also move in that direction. But I'll explain to you the logistics of why. When you actually have a bank account, it's not that your money is just sitting there with the bank. You give the bank $10,000, they're lending your money out. That money is somebody's mortgage, that money is somebody's car loan, that money might be a private student loan, that money might be a personal loan, whatever. You get paid interest for the pleasure of being able to do that. And at a traditional brick and mortar, you might make something very, very low, something like a 0.32% every single year. At a high yield savings account, you probably are getting something closer to three or 4% annually right now. And the reason why you are able to earn that money is because when that bank is loaning your money out, they are charging more for it, right? We know what mortgage rates are at, they are 6-7%, a car loan might be 10%, 11%, 12%, personal loans 7-15%. Like they are earning more money and they are giving you a portion of it so that you will bank with them. But when the Fed funds rate comes down generally, these banks can't charge as much for their mortgage loans or car loans or personal loans, what have you, and because they have to charge less, you also are getting less from the luxury of parking your money with them and having that money be loaned out. That is why your high-yield savings account rate goes down when the Fed funds rate goes down. But in the same vein, your high-yield savings account rate might rise if the Fed funds rate goes up. Also, one more thing to mention is there is not a single high-yield savings account or bank or any sort of financial institution that is going to be impervious to a Fed funds rate cut or hike. Every single high-yield savings account will have to drop rates or raise rates depending on how things change. This is something that is applicable across the board. It will happen everywhere. It doesn't matter where your high-yield savings account is. This is something that you will see. And frankly, you'll see it at traditional brick and mortars. But frankly, you're making so little interest from your savings there anyway that I don't really recommend it and it won't make a huge difference. But with a high-yield savings account, you'll definitely notice the change. Next question, does the Fed have anything to do with tariffs? So the answer is no, but maybe. While the Fed does not directly have anything to do with tariffs as those are typically set by the executive branch or Congress, what we will find is that the Federal Reserve will be closely monitoring the consequences and impacts of tariffs. If tariffs, meaning we are charging small businesses more to import things from abroad, make it hard for businesses to then have surplus money to hire, that will be indicated in the job market and the Fed is going to have to adjust for that. If we find that there are other issues that, you know, there are supply chain disruptions, if there's anything that has to do with those tariffs that impact our economy, the Fed may have to adjust their monetary policy to make sure that we are actually making smart decisions just as a country, but they don't actually have anything to do with the tariffs themselves. Next question, what does the Fed do in the event of an economic crisis? Can it prevent one? So to answer the second question, yes, the Fed's job is very literally to prevent economic crises, crises, crisis, crises. And the reason it is changing interest rates is generally to try and heat up or cool down the economy so that we maintain a healthy level. That said, if an economic crisis does hit, the Fed's got a couple options. First, it'll likely slash interest rates to near zero. They want to stimulate the economy. They want people to continue to be able to buy stuff, to do stuff in their business, to keep moving. They don't want people to just hold their dollars in fear. Two, they inject liquidity into financial markets. Fancy way of saying that they are going to buy long-term securities, things like government bonds or mortgage-backed securities, to basically put cash into the banking system. This is called quantitative easing. You might have heard this on financial channels. And then last but not least, they serve as a backup lender to prevent bank failures. Like we mentioned, the rattling of the cages of the tellers. They don't want banks to go under. That's a really bad look and does not instill confidence in the average American consumer. So the Fed does have a couple options to help make economic periods of crisis a little bit easier, but it's really their job to try and prevent them in the first place. And last but not least, the question, how long can people serve as board members of the Fed? Board members can serve for 14 years, but there's a little bit of nuance here. The chair and vice chair are appointed from the existing board and serve four year terms, and they can be reappointed. That said, the actual board members of the reserve serve for 14 years, like I mentioned, and after you're 14, you can't do it again, unless your first term was to fill a vacancy. So if you wrote out someone else's 14 year term, then you do have the potential to be appointed again and do your own 14 year term. A little complicated, but there are some safeguards in place, like I mentioned, to make sure that not every year the entire board is turning over. They try to stagger it that way. Not any one president has too much power to be able to appoint the entire board. So in conclusion, there is no doubt that having checks and balances in a financial system is so important. But not everyone is going to like the chaperone at the party. I mean, more often than not, when's the last time you liked the chaperone? Some people will believe that we don't need one entirely, because they think everyone should just take care of themselves. Some people believe that the chaperone's playlist sucks and that we need someone else who plays more hype music. And some people will think that the chaperone is just trying to do their best and if everyone just stopped trying to poke a hole in the bounty castle, maybe we wouldn't have so many problems. Whatever your thoughts are, I hope this episode has taught you a little bit more about the Federal Reserve. You're a little bit more economically knowledgeable about the American economy, and you will tune in next week. I'll see you then. Bye besties. Thanks for tuning into this week's episode of Networth and Chill, part of the Vox Media Podcast Network. If you like the episode, make sure to leave a rating and review, and subscribe so you never miss an episode. Got a burning financial question that you want covered in a future episode? Write to us via podcast at yourrichbff.com. Follow Networth and Chill pod on Instagram to stay up-to-date on all podcast-related news, and you can follow me at Your Rich BFF for even more financial know-how. See you next week. Bye. Support for Networth and Chill comes from Adobe. 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