Most people deal with a bank in some fashion, whether it is with savings accounts, checking, or loans. Nevertheless, if you use a bank, you are dealing with the Federal Reserve System, otherwise known as the Federal Reserve, or simply, the Fed. The Federal Reserve is an agency you should familiarize yourself with. The Fed is the central banking system in the United States. It has been that way since Congress passed the Federal Reserve Act of 1913. The Fed was designed to make the financial and monetary system in the U.S more stable and safe.
The Federal Reserve did begin as a completely independent agency. The executive branch or legislative branch of the government did not control it in any way. The Federal Reserve System reported once a year to Congress, but it was merely a formality at that point. More recently, the government has gained more control over the Fed. It still doesn’t receive funding from Congressional orders, but the Fed reports to Congress regularly and formally as Congress is responsible for overseeing the Fed to make sure it is handling things appropriately and on time. The Fed gets most of its funding from securities and interest on loans. As for reporting, The Federal Reserve has to report once a year to the Speaker of the House and semi-annually to Congress.
The Federal Reserve System was set up with 12 separate regional banks. This prevented one bank from having too much centralized authority in banking. Each regional bank was set up as the central bank for a given part of the country. They now act as one central bank, collectively.
The function of the Federal Reserve System is to be the banker’s bank and the bank for the government. The Fed acts as the banker’s bank because local banks use the Federal Reserve Banks much like we use our local banks. Each Federal Reserve Bank issues currency to meet the demand. Another function of the Federal Reserve System is called the check-clearing process. This is a way for checks to flow from one part of the country to another.
In reality, the Fed deals with all the money that one has if you deal with the banking system in any way. When you give someone a check, the Fed knows about it. When you do any bank transaction, the Fed knows about it. Not that they are spying necessarily, but when your money is put into a checking or savings account, they know because of the bank involved. That is part of their job. Therefore, if you use a bank, you are dealing with the Federal Reserve System. Just like you know about your own personal bank, the Fed is something that you should also know about.