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Organization
of the Fed: The Many Roles of the Fed
An Overview of Fed Services
The Fed helps keep the nation's economic wheels rolling in a number of significant ways through services Reserve Banks and Branches provide
for depository institutions.
The Federal Reserve is charged with ensuring that enough currency and coin are in circulation to meet the public's demand. Federal
Reserve notes are printed by the U.S. Bureau of Engraving and Printing in Washington, D.C., and Fort Worth, Texas. Coin is produced
at U.S. Mints in Philadelphia and Denver. New currency and coin are shipped to Federal Reserve Banks and Branches across the country
where the money is stored. When people need additional cash, such as during the holidays or at times of natural disaster or crisis,
a depository institution may order more currency and coin from its local Federal Reserve Bank or Branch. Each institution pays for
these orders by drawing down its reserve account balances held with the Federal Reserve.
When depository institutions have excess cash on hand, they may return it to their local Reserve Banks for credit to their reserve
accounts. Reserve Banks sort and verify the deposits. Soiled and worn-out notes are destroyed, and counterfeit notes are sent to the
Secret Service. Bags of coin are weighed to verify amounts. Reserve Banks do not process coin to detect wear and tear. Reserve Banks
store coin and reusable paper notes in their vaults until depository institutions request money.
Currency and coin are only part of the way payments are made. Checking accounts, also called demand deposits, are used in many non-cash
transactions. Federal Reserve Banks and Branches process about one-third of the checks written each year in the United States. Banks
also may clear checks directly with each other, through clearinghouse associations, or through agreements with other banks. The Fed's
check-processing machinery sorts checks at speeds up to 100,000 checks per hour, transferring funds from the bank of origin to the
bank of deposit. The numbers printed in magnetic ink on the bottom of each check tell the Fed's computers which banks to debit and
credit through accounts banks hold with the Federal Reserve.
Improvements in computer technology have led to the development of electronic alternatives to the paper-based check system as a means
of payment. The Automated Clearinghouse (ACH) provides an electronic means to exchange debit and credit entries between depository
institutions and customer accounts for such transactions as automatic payroll deposits and bill payments.
Fedwire
For larger transactions, debits and credits are transferred electronically through Fedwire, a highly sophisticated, computerized communications
system which transfers funds almost instantly from one depository institution to another anywhere in the country.
Organization
of the Fed: The
Many Roles of the Fed
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