The Federal Reserve is essentially the central back of the
United States of America. Its purpose is often misunderstood, but at its core,
the functions and responsibilities of the Federal Reserve are fairly simple to
understand. It has five main functions and responsibilities. Here is a run down
of each of them.
Conducting the nation’s monetary policy
This is the Federal Reserve’s primary purpose. This system
is responsible for putting in place policies and laws in relation to the
monetary system of America. This includes, but is not limited to, the promotion of accessible and stable costs on products, ensuring moderate and reasonable interest rates on a long-term basis, and helping to achieve the highest employment rates possible for the country.
Helping maintain the stability of the financial system
This responsibility is crucial to the financial security and
healthy living standard of all communities and homes in the United States, as
well as for the economic health of businesses. In order to ensure financial
stability, the Federal Reserve monitors a wide variety of potential risks,
keeping an eye on the relationships between businesses, investors, lenders,
borrowers, and those saving money, both on a national and international level
for American citizens.
But when can a financial system be said to be stable? In
this case, this would refer to the ability for the country as a whole to enjoy
the benefits and results of a growing and healthy economy. Products, services, and resources remain accessible to those who need them by the means of industries and institutions. Market resilience and strength like this will prevent difficulty in more troubled times.
Supervising and regulating financial institutions
This function ties into the aforementioned ones, as it, in
essence, involves the monitoring of financial institutions and their effects on
the entire financial system. Essentially, this involves ensuring that banks,
lenders, and other varieties of financial institutions are helping and not hurting
the security and health of the entire financial system.
This responsibility also carries forward to ensuring that
banks and other similar corporations are safe and secure to use, interact with,
and carry out transactions with. All in all, this function serves the purpose
of maintaining the confidence of those living in America towards the banking
and financial systems.
Fostering payment and settlement system safety and efficiency
The United States Treasury department is responsible for the
production of American dollars and cents. Meanwhile, the Federal Reserve acts as the Treasury’s personal fiscal agent, serving as a banker to all of the
country. To put it simply, the Treasury uses the Federal Reserve’s banks as a
form of checking account, whereby the Federal Reserve processes transactions, additions, and deductions to that account.
This responsibility extends to more than just the Treasury,
reaching savings institutions of all kinds nationwide. Federal Reserve also
ensures that all American cash and currency goes into public circulation
properly and reaches its citizens. They may also facilitate the destroying of
any currency that is no longer meant to be circulated. This is to ensure a safe
and efficient manner to carry out American transactions.
Promoting consumer protection and community development
The Federal Reserve ensures proper supervision of financial
services as a whole, keeping them in line with laws, rules, and regulations
that have been put in place for the safety of their users and clients. Some of
these policies that are enacted carefully govern the credit of users, making
sure that financial corporations are promoting services correctly in a manner
that serves the best interests of those who use them.
A wide majority of American households take part in the
financial industry by using cards, taking out loans, or even simply having bank
accounts. The Federal Reserve’s role with this function is to ensure that they
are receiving the financial services they are entitled to, and understanding
the way this will affect larger communities.
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