Comparing The Fed And The Treasury

The Fed and the Treasury

Government branches like the Federal Reserve Bank and the United States Treasury were set up with protecting the United States economy. These two systems work together to provide financial stability to the marketplace, although they each have different mechanisms for achieving this stability. The Federal Reserve Bank

In 1913, the Federal Reserve System was initially set up. Before that time, the United States did not have a central bank or a real way to manage the economy. Financial crises during the 1890s had been solved by major business tycoons like J.P. Morgan, but it was clear that this technique would not work forever.

The goal of the new Federal Reserve Bank was to keep the dollar valuable and ensure the health of the financial system. It was able to do this through its influence on monetary policy in the United States. Basically, the Fed was set up to make sure that

One way is by fighting recessions together. If the economy starts to decline, the Fed and the Treasury work together to create an economic policy that will stimulate the economy. The Department of the Treasury can take funds out of the Federal Reserve to give consumers tax rebates. These rebates are then spent to fuel the economy. They can also lower interest rates and make sure that more funds are available for consumers and banks.

Treasury Bills, Bonds and Securities

The Federal Reserve and the Department of the Treasury are connected through another mechanism. The Federal Reserve is officially considered a nonprofit company. After paying its expenses, it hands over any profits to the Department of the Treasury. Then, this money is used to fund government spending. In 2006, the Federal Reserve gave the Treasury $29 billion. In addition to putting policies into action, the Federal Reserve also helps to generate revenue for the government.

Taking Care of Government