HOW DOES THE FEDERAL RESERVE FIT INTO
THE U.S. BANKING SYSTEM?
Although the Federal Reserve is often in the news, not everyone understands what it is and what it does. Perhaps the best way to clear things up is to have a Federal Reserve “Q & A” to cover some of the most common questions that people ask.
What is the Federal Reserve?
It is the central banking system of the United States.
What does it do?
The short answer is that the Federal Reserve is:
• a bank for other banks,
• a bank for the U.S. government, and
• responsible for U.S. monetary policy, which influences how much money and credit will be available to the U.S. economy.
It also helps to:
• supervise and regulate banking institutions to ensure the safety and soundness of the nation’s banking and financial system
• protect the credit rights of consumers, and
• maintain the stability of the financial system by helping to contain risks that may arise in financial markets.