Guide Note

The Federal Reserve is the central system of banking in the United States. The Federal Reserve is responsible for setting monetary policy primarily through the raising and lowering of interest rates. The Federal Reserve is sometimes referred to as "The Fed".

Fast Facts

1. 7 member Board of Governors
2. Current chairman: Ben Bernanke
3. 12 Federal Reserve Banks
4. Headquarters: Washington, DC
5. 1913: Created by Federal Reserve Act
6. Goals: Control inflation an ensure maximum employment
7. Distributes currency and coins to banks

The Federal Reserve serves as the central bank in the United States. The Fed is both a private and government entity, known as a quasi-public bank. The Fed's job is to organize and stabilize the monetary system. It regulates financial institutions and manages the money of the U.S. The Fed has the ability to create money, and lower and raise interest rates therefor controlling inflation.

In the event of an economic crisis, the Federal Reserve is designed to address 'bank panics'. A bank panic is when a large numbers of customers withdraw all of their funds at once, leaving the private bank in a financial crisis. This can lead to a recession.