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Federal Reserve Responsibilities


Title: Federal Reserve Responsibilities Author: Ryan Wagner Last modified by: Ryan Wagner Created Date: 12/6/2012 2:46:00 AM Document presentation format – PowerPoint PPT presentation

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Title: Federal Reserve Responsibilities

Federal Reserve Responsibilities
Bank of the U.S. Government
  • Money paid to the US government (taxes) are held
    by the Federal Reserve
  • Payments made by the US government come from the
    Federal Reserve
  • The Fed buys and sells government bonds (Treasury
    and savings)

Money Storage
  • New currency and coins are stored by the Federal
    Reserve district banks
  • To be given to member banks when they need it

Monitoring Reserves
  • Reserves
  • Money owned by banks that is stored in bank
    vaults or at the Federal Reserve banks
  • Banks are required to keep reserves (more on this
    later in the chapter)
  • Fed makes sure banks have enough reserves (more
    on this later in the chapter)

Clearing Checks
  • Processes checks for both member and non-member
  • Not all checks have to go through the Federal
  • The Fed serves as the intermediary between banks
    in the process (middle-man)
  • How does this work?
  • I need 5 volunteers

Check Clearing
  • Check is given from person A to person B
  • Person B deposits check at his bank (Bank X)
  • Bank X adds the check value to Person Bs account
  • Bank X sends check to Federal Reserve Bank
  • Fed adds the checks value to Bank Xs reserve
  • Fed subtracts the checks value from Bank Ys
    reserve amount (Person As bank)
  • Fed sends check to Bank Y
  • Bank Y receives the check
  • Reduces the checks value from Person As account

Quick Review
  1. How does the Fed act as the bank of the US
  2. What are reserves?
  3. What responsibility does the Fed have in regards
    to bank reserves?
  4. What role does the Fed play in the process of
    clearing checks?

Holds money, pays out money, buys/sells bonds
Bank money stored in vaults or at the Fed
Makes sure banks have enough reserves
Intermediary (middle man)
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