Federal Reserve TWO Flashcards
(8 cards)
The Federal Reserve System does the following:
Provides banking and fiscal services to the federal government.
Provides banking services to member and nonmember banks
Regulated the banking industry
Tracks and manages the national money supply to meet current demand and to stabilize the economy
Serving Government
U.S Government has an operating budget of 1.7 trillion.
It raises about $1 trillion in taxes each year.
It makes about $900 billion in transfer payments through programs like Medicare and Social Security
For its banking needs, the federal government turns to the Federal Reserve
Federal Government’s Banker
The Federal Reserve serves as a banker for the US government
Maintains a checking account for the Treasury Department
It processes payments such as Social Security checks, IRS refunds, and other payments.
Government Securities Auctions
They also serve as a financial agent for the Treasury Department and other government agencies
The Red sells, transfers, and redeems government bonds, bills, and notes, or securities.
It also makes interest payments on these securities.
Periodically they auction off Government Bills, Bonds, and Notes to finance the government’s activities
Issuing Currency:
Under the Federal Reserve System, only the federal government can issue currency.
The Department of the Treasury issues coins minted at the United States Mint
The district Federal Reserve Banks issues paper currency which is printed at the Bureau of which is printed at the Bureau of Engraving and Printing
When a bill becomes worn and torn, the Fed takes it out of circulation and replaces it with a fresh one
Serving Banks:
The fed also provides services to banks throughout the country
Its most visible function is in its check-clearing service
It safeguards blank reserves and lends reserves to banks that need to borrow to maintain legally required reserves
Check Clearing:
The process by which banks record whose account gives up money and whose accounts receives money when a customer writes a check
The Fed can clear millions of dollars of checks at one time using high-speed equipment
Supervising Lending Practices
To ensure stability in the banking system the Fed monitors bank reserves throughout the system.
Each of the twelve Fed. Reserve Banks send out bank examiners to check up on lending and other financial activities of member banks.
They also study proposed bank mergers and bank holding companies to competition in the banking and financial industries.
