Many people are wondering, what exactly is the Federal Reserve System (Fed)? The Fed was first started in 1913 with the passage of the Federal Reserve Act. As defined on Wikipedia, it is a quas- public/ quasi-private government entity. It is comprised of:: 1.a presidentially appointed Board of Governors, of the Federal Reserve System in Washington, DC.,2. the Federal Open Market Committee, 3. 12 regional Federal Reserve Banks in designated regions in the US operating as agents for the US Treasury (each with a 9 member board), 4. numerous member banks which subscribe to required amounts of non transferable stock in the Federal Reserve banks and 5. various advisory councils. Ben Bernake is the present Chairman of the Fed.

Do you know where another $30 billion of your tax dollars are going? You guessed it. The Federal Reserve and the Federal Deposit Insurance Corporation announced that they will spend $30 billion dollars to buy toxic assets.

To do this they have chosen nine firms out of 100 that applied for the program. The guts of the program are that the government will partner with private companies to buy toxic assets.The Treasury supposedly did background checks to be sure that none of the firms chosen had any "conflicts of interest."

The Federal Reserve Open Market Committee (FOMC) issued its unanimous decision. The language on interest rates and quantitative easing remained unchanged. It indicated that inflation is not a problem despite a recent rise in oil prices and sees economic stabilization although continued weakness.

This decision was designed to avoid potential landmines which could disrupt the financial markets. In other words, the FOMC wanted this statement to be a non-event and seems to have largely succeeded.

Here is today's quiz. If you were given $1,000,000 to spend each day, how many days would it take you to spend $12.2 trillion dollars? You are probably wondering where the number $12.2 trillion came from? Well, this is the amount of money the government has committed for economic recovery.

Some of the monies can be accounted for but its still a big mystery where the rest went. So far we know this:

What are the new changes in financial regulation? First and foremost, President Obama wants to expand the powers of the Federal Reserve to assume primary responsibility for averting an new financial crisis.

Secondly, he wants to create a "council of financial regulators" who would improve coordination among agencies. The council would discuss systemic risks, but the Fed could at alone without its approval.

The administration has decided not to consolidate regulatory agencies due to the political fallout involved.

The numbers cited here for bank rescue costs are staggering -- way beyond our imagination. Keep in mind that we are talking trillions, not billions. You might want to etch these numbers in your memory to say that you have lived through perhaps the greatest financial crisis of our time.

• The U.S. government and the Federal Reserve have spent, lent, or committed $12.8 trillion to bank rescue, which amounts to about the value of everything produced in this country as of March 31.
• EU governments have approved $5.3 trillion of aid, more than the annual GDP of Germany.
• The UK pledged $1.1 trillion to restore confidence in its lenders, the most of any EU member.
• The top three EU states providing capital injections were the UK with $781.2 billion, Denmark with $593.9 billion and Germany with $554.2 billion.

Good news everyone! The Fed believes that the worst of the recession has passed. At least that is what its snapshot of economic conditions from yesterday showed. The data indicated that the "downward trend is showing signs of moderating" in five of the Fed's 12 regions.

Furthermore, "several" regions indicate that their expectations of future business activity have improved, but there will not be a "substantial increase" through the end of the year. In the last survey, "several regions" indicated signs of some stability at low levels. Taken in whole, the assessments of businesses on the "front lines" of the economy appear slightly better than in the last report, which was issued in mid-April.

Bank of America (NYSE: BA) CEO Ken Lewis threatened to use a "material adverse change" (MAC) clause to kill the agreement to buy Merrill Lynch because he wanted to get a lower price, according to the Financial Times. New e-mails reveal how he was then pressured to proceed with the deal.

A House committee on oversight and government reform is investigating whether or not undue pressure was put on Lewis in order to complete the deal to purchase Merrill Lynch. Reportedly, the Federal Reserve would not comply with the committee's request for documentation and e-mails regarding the accusations, but the committee issued a subpoena to the central bank on Tuesday. Lewis is set to testify about the matter today at a congressional hearing.

More dark clouds for your silver lining. The Beige Book numbers came in today showing continuing mild deflation. The report, published eight times per year, is a compendium of anecdotal insights from the various Federal Reserve Banks.

A report out of Harvard University shows that income inequality in the U.S. that has ballooned since the 1970s is the result of an gap in educational attainment by U.S. children and workers. Prior to that period, children were almost always better educated than their parents. No longer. And fixing this one is going to be tough as the general cultural perception still holds that professional degrees are more important than pure scientific degrees. Lastly, as oil continues to rise, concerns are surfacing that high oil prices could halt the recovery or at least slow down the rebound.

Alex Salkever is the Director of Research at Piqqem.com, a stock prediction community powered by the Wisdom of Crowds

Remember when the United States government took a bunch of your money and bought crap securities from Bear Stearns and American International Group (NYSE: AIG) -- and promised we wouldn't lose money? The securities were temporarily undervalued because of an "illiquid marketplace" and we'd earn handsome returns.

Ah, yeah. About that. The Associated Press reports that "The Federal Reserve lost $5.25 billion in the first quarter on the securities it acquired with last year's bailouts of Bear Stearns and insurer American International Group, according to a report Wednesday. The loss on the holdings, which include mortgage-backed securities, reflected a decline in their value as the recession carried over into the first three months of this year. The cumulative loss on the Bear and AIG holdings comes to $16.46 billion since they were taken over last year."

It seems that the Federal Reserve is doing some back peddling these days. The evidence is there to show that interest rates are rising both for U.S. treasuries and mortgage rates. The Fed was going to buy loads of U.S. treasuries -- a move that would have sparked a rally in the bond market. This did not happen.

Now we have yet another program that is put on hold -- the Fed's program to prop up the market for distressed securities backed by mortgages. The Financial Times reports that William Dudley, who oversees the implementation of the $1 trillion term asset backed securities loan facility (TALF) program, said: "We have not made a final decision on whether it is doable and, if is doable, whether it is worth the cost."

With the Federal Reserve printing presses running on high, many investors are fearing the prospect of inflation -- especially as real estate values start to show signs of stabilization and some commodities show rising values.

But Wall Street Journal (subscription required)economic editor David Wessel wonders whether inflation fears are overblown, and suggests that it can be avoided: "The question now is whether central bankers and the rest of us will remember the lessons of the late '70s and do whatever it takes to avoid inflation."

Have you looked at a chart of the 30-year bond lately? What you see may be a bit disconcerting. In the past few weeks the June contract has fallen from a high of about 143 to a low of 115 or $28,000 (each 100 point equals $1000.00.) Remember when the Federal Reserve announced that it would buy US treasuries and it was anticipated that the bonds would rally? Well as you can see, this did not happen.

US treasuries have been selling off because investors see a mountain of debt that needs financing, and the effect of this process is putting downward pressure on treasuries, with yields rising. (Prices and yields move in inverse directions. As the price goes down, the yield goes up.)

Stocks felt choppy all day, although the late day move and afternoon stability allowed stocks to have another solid day. Housing starts added some strength, and the buyers are still deciding they need to be in rather than out of the market.

Here are today's unofficial closing bell levels:

Dow 8,746.51 +25.07 (0.29%)
S&P 500 945.36 +2.49 (0.26%)
Nasdaq 1,836.89 +8.21 (0.45%)

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The Dow is set to end another week with a close above 8,000. In fact, the U.S. stock market is at a crossroad of sorts.

Right now, Dow 8,000 is not an issue: 5 consecutive weekly closes and roughly 400 points above 8,000 suggest that battle has been won by bulls.

Still, the bears will argue that the Dow is not that far above the psychologically-important 8,000 level and that this market is more than capable of wiping out that cushion in two sessions. Further, the bears also argue that while the Dow has closed above 8,000 for about a month, it hasn't been able to both make and sustain new highs above 8,600, then 8,800 and 9,000 etc.