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 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.

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.

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

Services to Government 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.

Services to Government 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

Services to Government 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

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.

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