1. Federal Reserve Responsibilities

2. Bank of the U.S. Government
Money paid to the US government (taxes) are held by the Federal Reserve
Payments made by the US government come from the Federal Reserve
The Fed buys and sells government bonds (Treasury and savings)

3. Money Storage
New currency and coins are stored by the Federal Reserve district banks
To be given to member banks when they need it

4. Monitoring Reserves Reserves
Money owned by banks that is stored in bank vaults or at the Federal Reserve banks
Banks are required to keep reserves (more on this later in the chapter)
Fed makes sure banks have enough reserves (more on this later in the chapter)

5. Clearing Checks Processes checks for both member and non-member banks
Not all checks have to go through the Federal Reserve
The Fed serves as the intermediary between banks in the process (middle-man)
How does this work?
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6. Check Clearing Check is given from person A to person B
Person B deposits check at his bank (Bank X)
Bank X adds the check value to Person B’s account
Bank X sends check to Federal Reserve Bank
Fed adds the check’s value to Bank X’s reserve amount
Fed subtracts the check’s value from Bank Y’s reserve amount (Person A’s bank)
Fed sends check to Bank Y
Bank Y receives the check
Reduces the check’s value from Person A’s account

7. Quick Review How does the Fed act as the bank of the US government?
What are reserves?
What responsibility does the Fed have in regards to bank reserves?
What role does the Fed play in the process of clearing checks?
Holds money, pays out money, buys/sells bonds
Bank money stored in vaults or at the Fed
Makes sure banks have enough reserves
Intermediary (middle man)