116 Unit 2 Money and Regulation negotiating skills buys and sells the dollar and currency issued by other countries to keep the value of the dollar stable. The Fed charges fees for the services provided to its member banks. It uses these funds to pay its own expenses. If any funds remain after expenses are paid, the Fed gives the money to the US Treasury, where it is applied to the US national debt. Stability of the Financial System From the beginning, the Fed has helped to establish the stability of the US fi nancial system. The frequency of bank runs and bank failures showed that the early banking system was fl awed and unstable. It relied on individuals rather than an organization. By issuing regulations and supervising its member banks, the Fed works hard to ensure that your money is safe. In fact, the Fed supervises every aspect of your bank’s activities. Today, the Fed uses its entire toolset to maintain the stability of the fi nancial system. It monitors the economy, supervises and regulates member banks, and serves as the nation’s bank. In every way possible, the Fed works to maintain the nation’s economic stability and provide an environment that promotes the growth and success of American individuals and businesses. Checkpoint 5.3 1. How does the Fed conduct monetary policy? 2. When is the discount rate set? 3. What are some customer services offered by Federal Reserve Banks? 4. What does the Fed do with the money it earns? 5. How does the Fed use its entire toolset to maintain the stability of the fi nancial system? Build Your Vocabulary As you progress through this course, develop a personal glossary of banking terms and add it to your portfolio. This will help you build your banking vocabulary. Write out a defi nition for each of the following terms, and add it to your personal glossary. monetary policy discount rate prime rate reserve requirement Fr the U show on in Fed su its m a Source: Shutterstock (Michael G. Smith) Afte r th e Fed pa ys its expe nses, it g ives th e extra m o n e y to th e US Treas u ry , wh e re it is a p p l i ed to th e n ati o n a l d e bt.
Previous Page Next Page