The Federal Reserve banking system was created in 1913, the same year that income taxes were added to the US Constitution.
12 regional Fed banks were established, each of which plays a role in monitoring and implementing interventions to the flow of money in the economy. The Federal Reserve Bank is a 12-bank system in the United States that plays the role of the country’s central bank.
Central banks in other countries are typically part of the government and print the actual currency, but in this case the Fed is independent of the actual US government, and the Treasury Department technically prints the money.
The Fed’s leadership is partially composed of government appointees, so that it straddles the line between public and private interests.
The Fed influences monetary policy, and the economy, by being a cornerstone of the inter-bank financial markets and being the source of funds for member banks when they have no other way to meet capital requirements for whatever reason.
This is one of the ways in which the Fed stabilizes the financial sector. It also has a direct influence on the interest rate environment, which can determine how much risk people are willing to take in the market, or how much money is circulating.
What is the Federal Discount Rate?
How Many Dollars do We Have in Circulation?
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