The Federal Reserve System

Topics: Federal Reserve System, Monetary policy, Central bank Pages: 4 (1267 words) Published: May 21, 2013
Federal Reserve Bank

“The only limit to a commercial bank's ability to discount is the limit to good commercial paper. . . . Such paper springs from seli-clearing transactions. ... It is the duty of the banker to discount freely for his customer in a crisis or panic. . . . The only limit... is the limit to good commercial paper. ... The whole purpose of the Federal Reserve Act is to enforce this practice. -Rep. Charles Korbly (1913)” (Timberlake, Richard, 134-5)

For the past decade, the Federal Reserve Bank has been the point of attack of a lot of people criticizing the US economy. Some people think that because of the Federal Reserve Bank this county is bad economically. And other people say the contrary defending the Federal Reserve Bank. Economists and politicians also debate on this topic whether the Federal Reserve Bank has a positive impact in the US economy or not. Despite all of the economic problems that this country is going through, the Federal Reserve Bank is a good thing to have. Why is it good? Because it is vital to the financial system, it helps regulate payments and settlements between banks and it regulates commercial banks, and creates monetary policies. These are a few reasons to why it is good to have a Federal Reserve Bank.

The Federal Reserve Bank, also known as the Fed, has been a vital part of the financial system for almost 100 years. The Fed is broken down into 12 districts or Reserve Banks. These 12 Reserve Banks have branches in specific states in which they serve. Each district funds its own operations primarily on interest on its loans and the securities it holds. Also, the Fed controls the U.S. money supply by selling and buying treasury bonds in the open market. It keeps inflation in check and employment high and keeps track of other dangers in the market that could affect the economy (White, Lawrence). But, the main purpose of the Fed’s creation is to carry out the policies of the Federal Reserve System.

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