Question

Explain/Discuss the following concepts:

- The six main activities of the district Federal Reserve Banks.

Answer 1

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Main activities of the district Federal Reserve Banks.

Introduction

A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve Act of 1913

The Federal Reserve Banks are the most recent institutions that the United States government has created to provide functions of a central bank

The Reserve Banks are organized as self-financing corporations and empowered by Congress to distribute currency and regulate its value under policies set by the Federal Open Market Committee and the Board of Governors. Legal cases involving the Federal Reserve Banks have concluded that they are neither "private" nor "governmental" as a general rule, but may be treated as either depending on the particular law at issue

Federal Reserve Bank Function

The Federal Reserve Banks offer various services to the federal government and the private sector:

• Acting as depositories for bank reserves
• Lending to banks to cover short-term fund deficits, seasonal business cycles, or extraordinary liquidity demands (i.e. runs)
• Collecting and clearing payments between banks
• Issuing banknotes for general circulation as currency
• Administering the deposit accounts of the federal government
• Conducting auctions and buybacks of federal debt

Main Activities

1) Bankers' bank

Federal Reserve Banks provide important banking services to commercial banks. Fed Banks process checks and other electronic payments, distribute paper currency and metal coins, maintain deposits for commercial banks, and extend reserve loans to commercial banks. While private companies also provide payment processing services, the vast majority of check and electronic payments for the economy are handled by the network of 37 Fed Banks.

2) Regulatory oversight of commercial banks

Federal Reserve Banks provide regulatory oversight of commercial banks. They track the assets, liabilities, loans, deposits, and reserves of commercial banks to ensure that Federal Reserve regulations are followed. Fed Banks are responsible for inspecting the books of member banks through onsite, field examinations.

3) Fiscal Agent for U.S

Federal Reserve Banks act as the fiscal agent for the U.S. Treasury and other government agencies. They maintain checking accounts which government agencies use to pay their bills. Fed Banks also handle the sale of U.S. Treasury securities and savings bonds for the Treasury Department. Commercial banks, institutional investors, brokers, dealers, even the general public can purchase newly issued Treasury securities through their nearby Federal Reserve Bank.

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