Making Sense of the Federal Reserve

Introduction to the Federal Reserve Banks

Federal Reserve Banks conduct research on the economy, supervise banks in their regions, and provide financial services to banks and the U.S. government.

Visit a Federal Reserve Bank, and you'll see that its operations resemble the activities in private businesses.

The structure of the Federal Reserve is complex, yet effective. Reserve Banks operate somewhat independently but under the general oversight of the Board of Governors. These Reserve Banks, and their branches, are strategically located in large cities across the country. The economists and other employees in each of the 12 Federal Reserve Districts work together to provide a regional perspective and expert knowledge about their local economies. Reserve Bank activities serve primarily three audiences—bankers, the U.S. Treasury, and the public:

• Federal Reserve Banks are often called the "bankers' banks" because they provide services to commercial banks similar to the services that commercial banks provide for their customers. Federal Reserve Banks distribute currency and coin to banks, lend money to banks, and process electronic payments. At one point, workers' paychecks and the checks written to pay mortgages and most other bills were sent to one of the 12 Reserve Banks, where the checks were processed to settle the debt. However, now the Federal Reserve Bank of Atlanta handles all of the Federal Reserve's check processing. Why do you think only one Reserve Bank currently processes checks? It's because there was a significant decline in the use of paper checks and an increase in electronic imaging and online bill paying.

• Reserve Banks also serve as fiscal agents for the U.S. government. They maintain accounts for the U.S. Treasury, process government checks, and conduct government securities auctions.

• Finally, Reserve Banks conduct research on the regional, national, and international economies; prepare Reserve Bank presidents for their participation on the FOMC; and distribute information about the economy through publications, speeches, educational workshops, and websites.

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