Written and Directed By: Nueng Buranasiri
A Bank For Banks
The Federal Reserve System (or FED) is the central banking organization in the United States. It is run by the Board of Governors, which is headed by a chairman. It provides financial services to depository institutions which includes banks, credit unions, savings and loans which is much like what other banks provide for their very customers. Examples of these services would include electronically transferring funds and distributing and receiving cash and coin, and collecting checks.
Now I will start of with the ACH or the automated clearing house service. It is an electrical payment for financial transactions commonly used in the United States. Basically, through it the depository institutions send each other credit and debit transfers. Good examples would be corporate payments to vendors, payroll deposits, Social Security Payments, and utility and insurance payments.
The Fedwire funds is a large-dollar electronic payment system that transfers funds between financial institutions and is owned and operated by the Federal Reserve Banks. Examples of participants transferring time-critical payments would be repaying large loans or settling real estate transactions.
FED operates a clearing system that processes checks, drafts, and similar items nationwide. A depository institution may may send checks for collection to a Federal Reserve Bank when it receive deposits of checks from other institutions.For checks that were collected through Federal Reserve Banks, the accounts were credited of collecting institutions were collected for value of the deposited checks for collection, and accounts of paying banks are debited for its value of checks for the payments. A good example would be in 2004, a federal law known as Check 21 appeared. It facilitates electronic exchange of checks. It allows bank to replace original checks with "substitute checks". Banks can get a better image of a check, send image electronically to another location and print substitute check to be presented in payment locally.
The Fed has a job to check how healthy the money circulation is. Reserve Banks offices job is to maintain coin and cash processing operations to accept deposit and to later distribute cash and coin to financial institutions. When deposited with the Reserve Banks, notes that are suspected of hoax or counterfeit are seperated and send to Secret Service. Notes too worn of recirculation is destroyed by a shredding machine.Each of 12 Federal Reserve Bank is authorized by Federal Reserve Act to issue the currency. Currency must be secured by legally authorized collateral. Notes are printed by the Bureau of Engraving and Printing Department of treasury and delivered to Reserve Banks.
A Bank for the Government
The Federal Reserve acts also as a fiscal agent to the federal government by providing financial services to the United States Department of Treasury and also by selling and redeeming securities such as Saving Bonds and Treasury Bills.Serving as fiscal agent and depository for the United States government is one of the core responsibilities of Federal Reserve Banks. It performs several services for treasury. These would include: 1) maintaining accounts for U.S. Treasury, 2) processing government checks, postal money orders and savings bonds of the US, and 3) collecting federal tax deposits.