What Does the Federal Reserve Bank Do?

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>> Unknown Speaker: The U.S. Federal Reserve was created by Congress under the Federal Reserve Act of 1913 to provide the country with a secure and stable economic and financial structure. How do you get on the Fed? Well, the president appoints a Federal Reserve Board of seven members to terms of fourteen years at staggered intervals. Their job is to supervise the conduct of the banks in the Federal Reserve System and to manage and influence the amount of money and credit in the economy. The Fed's main goals are: the promotion of sustainable economic growth, full employment, and stability of prices. The three tools they use are: one, open-market operations, or the buying and selling of U.S. government bonds. Two, setting the level of Reserve requirements, which are the portions of deposits banks must maintain either in their vaults or on deposit at a Fed bank. And three, establishing the discount rate, which is the interest rate charged by Fed banks to depository institutions on short-term loans. That's the rate you hear about after the big meeting. All of these instruments help the Fed navigate economic growth that is too fast, which causes inflation, or too slow, which could lead to a recession.

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