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Fed Services to Banks 14.2

Fed Services to Banks 14.2. Clearing Checks —Is a method of crediting and debiting banks reserve accounts. Americans write 40 billion checks/year Dallas Federal Reserve Bank processes 4.5 million checks/day.(Read by scanner). See Fed check clearing slide. The Federal Reserve at Work 14.2.

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Fed Services to Banks 14.2

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  1. Fed Services to Banks 14.2 • Clearing Checks—Is a method of crediting and debiting banks reserve accounts. • Americans write 40 billion checks/year • Dallas Federal Reserve Bank processes 4.5 million checks/day.(Read by scanner). • See Fed check clearing slide

  2. The Federal Reserve at Work 14.2 • What does Fed do for you as an individual? Nada! • Fed provides services to commercial banks and to the government. • Fed oversees flow of $ between member banks and its district banks.

  3. Fed Services to Banks 14.2 • Loans to Banks— • Local banks may need short-term loans to replenish their reserves. • Contact the Federal Reserve for short term loans. Usually done in cases of large withdrawals. • Financial emergencies, natural disasters, seasonal factors. Ex. Spring farming when farmers withdraw cash for planting crops.

  4. Fed Services to Government 14.2 • Each year, government raises and spends $1.5 trillion. • The Fed provides the following services: • Serves as the governments bank • Supervises the Fed’s member banks • Regulates the national money supply

  5. Services to Government 14.2 • 1. Serves as the Government’s bank— • Serves as depository for federal revenues • Allows government to write checks for income tax refunds, social security, etc. • Records deposits and withdrawals of federal funds .

  6. Services to Government 14.2 • 2. Supervises Member Banks—Has staff or auditors and bank examiners that monitor banks loans, bank records, and bank investments. • Fed monitors banks reserves • Regulates bank mergers

  7. Services to Government 14.2 • 3. Regulates the Money Supply— • Money supply—the amount of money circulating in the U.S. economy. • New currency put into circulation when: • Replace old worn out bills • Increase amount of money in circulation

  8. Money Supply 14.2 • M1—Is all the currency in circulation, value of all travelers checks, all checking account deposits, in banks. • M2—In addition to M1, M2 includes money market accounts, mutual fund shares, CD’s, plus all money in savings accounts. • M3 and L—Includes M2 plus all CD’s over $100,000. Also includes, savings bonds.

  9. Federal Reserve Map • Pick up copy of Federal Reserve map from front table. • Follow directions: Paper is due today. • Put in period folder for credit

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