TOP DRAWER ARTICLE

What the Fed does for US
by
HL Carpenter

You might think the US Federal Reserve System has enough work keeping track of financial situations and current economic conditions. But that’s only a part of what the Fed does.

Here’s an overview of a few other Fed functions:

Electronic Funds Transfers. Electronic transfers, such as ATM and debit card transactions, preauthorized withdrawals from your bank account and telephone transfers, let you pay bills or access your money without writing a check.

Computer networks at the Fed’s twelve regional banks act as central clearing facilities for electronic funds transfers.

Cash Services. Federal Reserve Banks play a role in distributing money through the economy by keeping supplies on hand for use by financial institutions. When your bank needs new or replacement coins or bills, it sends an order to the Reserve Bank serving its area. Whether you use your computer, ATM, or walk into the lobby, the cash is waiting for you.

Banking Regulations. Did you know the Fed supervises and assists in writing regulations for America’s commercial banks, as well as regulating the foreign activities of US banks? In addition, based on the Fed’s recommendations, the Board of Governors approves or disapproves US bank mergers and acquisitions.

Credit Card Surveys. Every six months, the Federal Reserve Board releases information on terms offered by the largest issuers of bank credit cards in the nation. You can use the survey report to research rates and fees, and compare credit card offers.

Recently, after two and a half years of study and consumer input, the Fed issued a proposal that could put more teeth into the Truth in Lending Act regulations. The Act is designed to help you understand different methods companies use to compute interest, as well as help prevent fraud, deception and unfair business practices. The new proposal is expected to curb some of the practices credit card companies employ to market and price their service.

In addition to these activities, the Federal Reserve System acts as banker for banks and the US government, and sells and redeems Treasury securities. There’s always plenty of work to do when your job involves overseeing an economy measured in trillions of dollars.

Originally published July 2008.

Last update: January 8, 2011