Federal Reserve & Interest Rates

The United States is divided into twelve financial districts. Each of these districts has a local Federal Reserve Bank. What are these banks for? Let us take a look.

Federal Reserve Banks, also called Central Banks, are not for individual banking. The district Federal Reserve Bank is where local commercial banks do banking. Certain parts of national Treasury are also taken care of by the Federal Reserve Banks. I will get to the details of their responsibilities shortly, but I first wanted to emphasize that these banks play a major role in implementing the federal monetary decisions that are made by the Board of Governors. It would be virtually impossible to run a fair banking system, protect consumer rights, or manage government funds without them.

How is the bank run?

Each Federal Reserve Bank has a board of directors that contains nine members. Each bank has limited autonomy, under the management of the Board of Governors.

A research staff is assigned to each bank that gathers and analyzes economic data that will aid the formulation of monetary policy. They also advise the individual banks on other more local monetary decisions. The board of directors of each bank supervises and regulates all the activities of the bank, and decides how to advise monetary policy.

What does the bank do?

The primary purpose for the Reserve Banks is to influence the flow of money and credit in the nation’s economy. Within their district, they regulate and supervise the activities of state-chartered member banks and bank holding companies in their district. In a nutshell, they make sure that your bank follows the law. The Federal Reserve Banks also do the same for foreign banks located in the United States.

Central Banks offer input from the perspective of their district’s economy to the formulation of monetary policy. The statutes that govern the very financial institution that you use for your banking needs are supervised and regulated by your district Central Bank.

Check processing and wire transferring is handled and monitored by the Central Banks as well. Billions of checks are cleared every year through the Federal Reserve Banks. Thousands of depository institutions are electronically linked to these district banks.

Who’s money is in the bank?

Each Federal Reserve Bank holds government funds and collateral, as well as national Treasury funds such as income taxes withheld. Excess funds from banks within district are also stored in the local Reserve Bank.

You may not open a checking account at one of these banks, per se, but they play a major role in the form and function of the bank or banks that do hold your accounts. Your protection as a consumer is highly regarded, and the guidelines provided to banks under the Federal Reserve are very structured and well informed.

Visiting a Federal Reserve Bank

Central Banks are a great resource for consumer rights information, local economic research, and personal finance tips. All of the Reserve Banks have frequently updated websites with tons of resources.

Financial education is one of the strong suits of our nation’s Federal Reserve Banks. Central Banks offer conferences, tours, speeches, and educational workshops throughout the year. To find your local district Federal Reserve Bank visit the Federal Reserve website and click on your local area. You will be led to the home page of your financial district were you will also find consumer information and detailed economic research.