HomeRegulatorsFederal Reserve System (FED)

Federal Reserve System (FED)

On this page, we will share what you need to know about the FED (Federal Reserve System). We will cover aspects of the regulator, including its responsibilities, their importance, and the industries they are involved with. Their work to stabilize the economy should give you confidence when sending money to the United States.

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What Is the FED?

The Federal Reserve System is the United States central bank responsible for ensuring that the economy remains stable during turbulent times. Experts believe that the organization is the most influential financial institution in the world, which means their actions will have a profound effect on consumers of money transfer companies.

The FED has a board that is made up of 7 members. Also, there are 12 federal reserve banks, each with its own district. Their primary duties involve providing banking services, ensuring the US economy is stable, and regulating monetary policy. Keep reading to learn more about the details of their responsibilities.

The organization was founded in 1913, which makes them one of the oldest financial institutions in the US. Their current bank rate is 2.5%, and the interest rate target is 2.25-2.5%. Their jurisdiction is the United States, and the child agency is the Federal Open Market Committee.

What Is the FED Responsible for?

This section is an overview of the responsibilities of the FED. This explains why they are a big deal for regulating the US economy. Understanding the important work of the FED will give you peace of mind when sending money to the United States.

Here are the top responsibilities of the FED:

  • Manage the US’s money supply: through monetary policy, the FED managed the nation’s money supply. Their goals include preventing inflation and deflation spikes, promoting stable prices, increasing employment, and maintaining moderate long-term interest rates. However, their goals can sometimes be in direct conflict, which is one of the reasons why they have a tough job.

  • Strike a balance: the FED has to strike the right balance in acting as a centralized arm of the government and working in the interests of private banks. They do this by supervising and regulating banking institutions to protect the rights of consumers.

  • Maintains stability: the FED has to ensure that the US economy is not too volatile or has a systemic risk that results in cascading adverse effects. However, international factors can make this task difficult.

  • Financial services for depositor institutions: they maintain the nation’s payment system, facilitate the exchange of money between regions and respond to local liquidity needs.

  • World economy: this organization is responsible for improving the standing of the US in the world economy. This involves ensuring that the USD has the best currency conversion rates with other currencies and remains the world's dominant currency.

What Is the Importance of the FED

Now let us take a closer look at the top reasons why the FED is a critical organization. These macro-level reasons show how they help the US economy and provide peace of mind for money transfer consumers.

The importance of the FED:

  • Improves trust: investors and consumers of financial services in the US economy need to have faith that their money will not be lost. The work completed by the FED ensures that everyone can remain invested in the economy and continue keeping it healthy.

  • Reduces the chance of bankruptcies: by ensuring that inflation does not get out of control, the FED tries to keep prices stable so businesses can afford to continue turning a profit.

  • Reduces the chances of fraud: the regulatory activity that the FED does to oversee banks ensures that consumers are not scammed or tricked. In addition, regulations aim to ensure that fair financial practices are offered by banks and money transfer companies.

  • Fairness: in principle, the FED is a fair organization that creates a good framework for private banks and consumers that use their financial services. Otherwise, the US economy would be a free-for-all that would lead to problems.

An example of the Federal Reserve Board in action is when they fined Goldman Sachs Group, Inc $154 million. The fine was for failing to maintain the proper oversight, risk management, and internal controls regarding 1Malasyia Development Berhad.

FED Regulations

Now let us take a closer look at the relevant regulations, crimes, and industries relating to the FED. This provides the scope and limitations of the FED at a glance. Therefore, money transfer customers can learn how the FED contributes to the quality of their experience.

Regulations: the Federal Reserve is responsible for regulating private banks. The philosophy for how the FED does this ensures a balance between government regulations and privatization. The Federal Banking Agency Audit Act is the relevant regulation that the FED uses to oversee the financial system.

Crimes: the FED can reduce the chances of crimes by maintaining macro-level decisions. For instance, they can block routes or loopholes for bad actors that want to launder money. However, they are not involved in the day-to-day investigating and stopping of minor financial crimes.

Industries: the FED is responsible for the financial-related industries – especially banks and companies that allow consumers to deposit money. The FED will regulate any entity that meets these criteria and is within the United States.

Accountability: the FED is accountable to the public and Congress. Twice every year, the FED must submit a Monetary Policy Report to Congress, and the chair and Board of Governors must testify.

What Regions Does the FED Cover?

The FED is responsible for the US economy, so the United States is the only country in which they regulate policy and companies. This includes all 50 states, and how it regulates banks in each one might differ based on the local laws. Also, the FED might interact with international organizations to ensure they can complete their domestic duties. Cooperation and collaboration ensure that managing the US economy is more viable during turbulent times.

When Might You Encounter the FED?

You will not likely encounter the FED when interacting with the US economy. For example, money transfer company customers have no reason to get contacted by the FED. That is because they deal with large-scale decisions and communicate with private banks to ensure they function fairly.

Can the FED make new rules?

The FED has the authority to change the legislation and rules about how private banks must behave in the US economy. This includes the way their services are offered to the general public. Also, the FED changes the bank interest rate, which is one of the tools used to manage inflation.

How to Contact the FED

This section shares the contact details for the FED. You may want to contact them to find out how they help improve the economy and why that is important for consumers of money transfer companies.

  • Telephone: 202-452-3000

  • Form: you can fill out a Contact Us form on their official website to send them a message, and you will get a reply to your email address.

Other Regulators

Bottom Line

To conclude, the Federal Reserve System is arguably the most crucial financial organization in the United States. They do the vital work of stabilizing the economy, managing public money, and ensuring private banks offer the public fair financial services. Therefore, investors and consumers can have more trust in the US economy and continue using its financial system without worrying that a collapse is just around the corner.

We encourage you to continue learning about the process of sending money to the United States. You can start with the guides titled Send Money to the USA and Send Money to the USA from the United Kingdom. These guides will allow you to save money by getting lower fees and more competitive currency conversion rates.

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Martynas Pupkevicius
Martynas Pupkevicius
Martynas is a seasoned freelance writer that has written on a broad range of topics over his 10 year career. He enjoys diving into the research and sharing what he's learned with readers.