Financial Services of the FED

Shriya Shah :)

How do they provide financial services?

  • collect checks
  • Electronically transfer funds
  • distribute and receive cash and coin
  • They provide these services to banks, credit unions, and saving and loans
  • (It is like a bank for banks)

Automated Clearinghouse (ACH)

  • What is the ACH?

A type of electronic payment network which is used by depository institutions to send each other electronic credit and debit transfers

  • Examples:

· payroll deposits

· corporate payments to vendors

· Social Security payments

· insurance premium payments and utility payments

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  • large-dollar electronic payment system
  • transfers funds between financial institutions
  • used by people to repay large loans or to settle real estate transactions.
  • most of the Fedwire transactions are initiated on-line
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Check collection

  • a depository institution may send the checks for collection to a Federal Reserve Bank when it receives deposits of checks drawn on other institutions
  • How is it done electronically?
    Banks can now make an image of a check, send the image electronically to another location and then print a substitute check from the image to present for payment locally.
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keeping money in circulation

  • The FED accepts deposits and distributes cash
  • notes that are suspected of being counterfeit are destroyed using a shredding machine and its face value is deducted from the total amount of Federal Reserve notes
  • 12 federal reserve banks are authorized to issue money

How does it help the U.S government?

  • sells and redeems government securities (Savings Bonds and Treasury bills)
  • Maintains accounts for U.S. Treasury
  • Processes government checks, postal money orders and U.S. savings bonds
  • Collects federal tax deposits
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Saving bonds

  • This is a a contract evidencing a loan made to the United States
  • millions of U.S. savings bonds each year are issued by the Fed on behalf of the Treasury

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