The Federal Reserve System

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Editor's Note: We've had several questions about the Federal Reserve System - how it works - how do the regional banks operate. Here is the first article in a series designed to address these questions.

To many people, the operations of the U.S. Federal Reserve System are more than confusing, they can be downright mysterious. Sure, our politicians and newscasters can often be heard referring to "the Fed," but how many of us really understand this complex part of the American government and economy?

The Federal Reserve System was founded by Congress in 1913 and today remains the central bank of the United States. The Fed provides the nation with a safer, more flexible, and more stable monetary and financial system; over the past 80 years, its role in banking and the economy has changed and expanded.

Today, the Federal Reserve's duties fall into four general areas:

* Conducting the nation's monetary policy by influencing the money and credit conditions in the economy in pursuit of full employment and stable prices;

* Supervising and regulating banking institutions to ensure the safety and soundness of the nation's banking and financial system and to protect the credit rights of consumers;

* Maintaining the stability of the financial system and containing systemic risk that may arise in financial markets;

* Providing certain financial services to the U.S. government, to the public, to financial institutions, and to foreign official institutions, including playing a major role in operating the nation's payments system.

The Fed is not unique in the global marketplace; …