Market Update: The financial markets are in full swing — and Barry Schwartz, Top 50 producer and mortgage advisor with PERL Mortgage, explains the the relationship between rates and bonds, unemployment reports, our favorite Fed Chair, Ben Bernanke, and why some mortgage rates differ between products and programs.

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Credit Advice: It’s advice time on the PERL Mortgage podcast. Barry Schwartz, mortgage advisor with PERL Mortgage, discusses credit checks in today’s economy — and offers a bevy of helpful tips for when your credit score is unexpectedly lowered or if you’re wondering about your current credit score.

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The American economy, like most world economies today, is run on a system of fiat money, or money that is assigned its value by government decree. Since this money has no intrinsic value of its own, its value and supply must be carefully managed and regulated, not just within the nation’s borders but also in accordance with the economies of all other nations. In light of this need for careful stewardship of the economy, the United States maintains a central bank, called the Federal Reserve (or, more commonly, the Fed).

The Fed as it exists today is actually the United States’ fourth attempt at founding a central bank. In the midst of the Revolutionary War, America’s Continental Congress ratified the Articles of Confederation, which, among other edicts, gave Congress the power to issue bills of credit. A private national bank, modeled after the Bank of England, was established shortly thereafter, but was denied the opportunity to become a central national bank due to unease about foreign influence and other political concerns. The official First Bank of the United States was created in 1791, and lasted 20 years before being denied a renewal of charter by President James Madison. The Second Bank of the United States opened in 1816, and it too only lasted 20 years before President Andrew Jackson shut it down. Political opposition to the very idea of a central bank had been a chief culprit of these failures, and it would be almost a century before the United States would try again.

In 1907, a profound financial panic occurred, a direct result of a failed attempt by stock traders to corner the market on shares of the United Copper Company. The failure created a series of bank runs on those institutions that had backed the bid. As is often the case with bank runs, the atmosphere of worry spread nationwide, causing other banks to suffer runs and even leading to the collapse of, at the time, the third-largest financial trust in New York City, the Knickerbocker Trust Company. With no central bank in existence to attempt stabilization of the economy with an infusion of currency, the only reason that the crisis did not fling the country into irreparable economic turmoil was the work of private business tycoons such as J.P. Morgan, who banded together and contributed much of their own capital to bolster the banks. It was this barely dodged catastrophe that led to a series of financial reforms over the next few years, culminating in 1913 when Congress and President Woodrow Wilson passed the Federal Reserve Act.

In structure, the Federal Reserve is unique among the world’s central banks. Although it is designed to function as an entity “independent” of the federal government, thereby limiting its exposure to political influence, the Fed also employs a mixture of private and public sections in its operation—most similar banks in the world operate under either entirely private or entirely public ownership. It is also the only such bank to not make its own currency (which is instead printed by the United States Treasury). The Fed is managed by a Board of Governors, all of whom are presidential appointees, and is also comprised of the Federal Open Market Committee (FOMC) and representatives from twelve other Federal Reserve Banks located throughout the country.

The Fed has been reformed a number of times since 1913, especially so after the recovery from the Great Depression. Currently, its chief mandate is to provide the means to deal with bank panics, but it also sets interest rates, operates as a lender of last resort in case the banking system is in need of capital, and generally regulates the entire money supply by balancing the factors of employment rates and inflation. The importance of these functions to the American economy cannot be overstated. Any competent financial player in any market knows that a key component of success or ruin is an ability to observe, analyze, and possibly predict the actions of The Fed…and any competent Board of Governors is aware that The Fed is being closely watched.

1. Remember: If you’re vacationing this summer, make sure to set your bills to auto-pay so that you don’t get hit with any lates!

2. Reshape: Doing some shopping? Try to spread purchases across various cards to show you’ve maintained good credit health across several lines.

3. Resist: Don’t apply for a store credit card unless it’s really *worth it*.

4. Recap: Make a list of all the credit cards you’ve opened. Should anything ever go missing or mysteriously show-up on your card, it’s helpful to have a go-to place for all your info. If you keep the file on your computer, make sure it’s locked and password protected.

5. Re-evaluate: If some of your cards carry balances, call the creditor to find lower interest rate options. If unsuccessful, consider transferring your balance to a different card with a better repayment plan.

If you search the words “Credit Repair” on Google, you’re likely to find nearly 21,000,000 results. So how do you separate the wheat from the chaff? PERL Mortgage Adviser and top 200 producer Barry Schwartz explains the concept of credit repair and offers real world solutions and steps to evaluate and improve credit ratings.

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