The Federal Reserve System is the name of the central banking system of the United States. It came into existence under President Woodrow Wilson after runs on banks in the early 1900s caused public demand for a central bank. The purpose was the make the nation’s financial system more stable.
Here are 7 basic duties of the Federal Reserve, according
www.federalreserve.gov and associated websites,
federalreserveeducation.org and
FederalReserveHistory.org.
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1. Conducting monetary policy: The Federal Reserve is mandated by law to control the money supply. This is important, because if there is too much money, inflation can run rampant, making the dollar worthless.
2. Keep the economy stable: The Federal Reserve helps stabilize the economy by reducing interest rates and purchasing treasury securities.
3. Support employment: Part of the Federal Reserve's responsibility is to promote a high level of employment. The unemployment rate is a factor in the decision making of the Federal Open Market Committee, which is the group of people who set monetary policy for the bank.
4. Regulating Banks: There are about 8,000 banks regulated by the Federal Reserve. The purpose of this regulation is to make sure that bank customers throughout the country are getting a fair shake from their financial institutions. The Fed regulates the actions of state-member banks, bank holding companies and other banking institutions.
5. Interpreting new laws: The Fed is responsible for implementing any new laws concerning financial regulation and also interpreting those laws.
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6. Providing payment service to financial institutions: The Federal Reserve makes and destroys cash. It provides a check clearinghouse system and processes all government payments.
7. Emergency cash to keep the economy flowing: There are times that the Federal Reserve provides cash to keep banks afloat if it is deemed to be in the best interest of the country. This is part of what is considered the Fed’s role in promoting a healthy financial system.
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