Federal Reserves Act
In 1913 Congress passed the Federal Reserve Act, which created the Federal Reserve System. The Federal Reserve Act was passed to help make a more sound banking system and healthy economy. The components of this system are: the Board of Directors, 12 Federal Reserve banks and the Federal Open Market Committee. The Fed has a variety of functions, but I will only talk of a few. It acts as a bank to the banks, it functions as the bank for the government, and it acts as the banking supervisor.The 12 Federal Reserve Banks serve specific districts nationwide. These banks act as banks for other banks. They provide similar services to banks as regular banks do for businesses and individuals. The Fed processes millions of dollars in payments. Payments made by checks and electronic transfers are a part of this process. Another service it provides to banks or financial institution is clearing checks. Clearing checks can take up to two days to process. This is so because of the travel that th
When the payee receives the check it gets deposited into their bank, the bank in turn sends it to the Fed or local clearinghouse to receive payment. This is to make sure that banks are operating in a proper manner and follow state and /or federal rules. When a financial institution needs or has too much money they order or return it to the Fed. Acting as the government?s bank (fiscal agent) is an important role of the Fed also. The Federal Reserve System: A History of the First 75 Years. They may even decide this institution be acquired by another institution. Upon review, if the Fed feels that the institution is not in satisfactory condition, request for corrective measurement must be made. Eventually when money is too old to circulate it is destroyed. Electronic transfers are usually completed the same day. The system was set up with a variety of functions and a number of checks and balances to decentralize it somewhat and it has worked. The payment is then debited and credited to the respected accounts.
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