The Fed's mission is to protect the integrity of the nation's money by providing a healthy banking and financial system that is consistent with price stability and sustainable economic growth. This basic mission has not changed for the more than 80 years that the Fed has been in existence. Although the purposes and functions of the Fed have not changed over its history, the economic, financial and social environment in which the Fed operates has changed. The Fed, as a result, has transformed itself and the way it does business in response to this dynamic environment.

Today, the Fed is a market-driven and customer-driven entity. It has elements of both the public and privat

The actions of the Fed, particularly with regard to interest rates, have a significant impact on the company. Recent changes in the federal funds rate are illustrated on page - 6 -. During 1994, the Fed increased interest rates more than at any time in the past, with the intention of slowing down the economy (see page - 7-.) By raising interest rates, the Fed hoped to increase the cost of funds to the point that businesses would slow down expansion plans and the economy would veer away from inflation.

The effect of the Fed's efforts can be seen in the changes in the prime rate which have mirrored the changes in the federal funds rate. The prime rate is the rate that banks charge their best customers, and as illustrated on page - 8 -, the prime rate has increased during the same periods that the federal funds rate has increased. This is one of the effects that the Fed hopes to achieve when it raises interest rates. A second effect of interest rate increases is an increase in the short-term (six-month) T-bill; this effect can be seen on page - 9 -.

Americans have a low level of savings when compared to other nations, and that puts them at a disadvantage when issues such as the economy come under consideration. If Americans saved more, there would more capital available to stimulate the economy. However, with interest rates low, there is little incentive for consumers to put their savings in a bank, and cultural influences suggest that consumers are better off spending their money or otherwise indulging in activities which do not necessarily result in savings. An increa

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