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10 Cards in this Set
- Front
- Back
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Issuing Currency
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The Federal Reserve Banks issue Federal Reserve Notes, the paper currecny used in the US monetary system.
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Setting reserve requirements and hlding reserves
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The Fed sets reserve requirements, which are the fractions of checking account balances that banks must maintain as currency reserves. The Central Banks accept as deposits from the banks and thrifts any portion of their mandated reserves not held as vault cash.
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Lending to financial intitutions and serving as an emergency lender of last resort
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The Fed makes routine short-term loans to banks and thrifts and charges them an interest rate called the discount rate. It also occasionally auctions off loans to banks and thrifts through its Term Action Facility, discussed in Chapter 16 . In times of financial emergencies, the Fed serves as a lender of last resort to critical parts of the US financial industry.
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Providing for check collection
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The Fed provides the banking system with a means for collecting on checks. If Sue writes a check on her Miami bank or thrift to Joe, who deposits it in his Dallas bank or thrift, how does the Dallas bank collect the money represented by the check drawn against the Miami bank? The answer: The Fed handles it by adjusting the reserves of the two banks.
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acting as fiscal agent
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The Fed acts as the fiscal agent for the Federal government. The government collects huge sums through taxation, spendswqually lerge amounts, and sells and redeems bonds. To carry out these activities, the government uses the Fed's facilities.
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supervising banks
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The Fed supervises the operations of banks. It makes periodic examinations to assess bank profitability, to ascertain that banks perform in acocordance with the many regulations to which they are subject and to uncover questionable practices or fraud. Following the financial crisis of 2007-2008, Congress expanded the Fed's supervisory powers over banks
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controlling the money supply
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Finally, the Fed has ultimateresponsibility for regulating the supply of money, and this enables it to influence interest rates. The major task of the Fed under usual economic circumstances is to manage the money supply according to the needs of the economy.This involves making an amount of money available this is consistent with high and rising levels of output and employmentand a relatively stable price level.
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10
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10
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