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Financial Services

Test your knowledge about the financial services function of the Federal Reserve through

thisquizorword search. Additionalquizzesandword searchesare also available.

ACH

The Automated Clearinghouse (ACH) is an electronic payment network through which

depository institutions send each other electronic credit and debit transfers. Some examples are

payroll deposits, corporate payments to vendors, Social Security payments, insurance premiumpayments and utility payments.

Fedwire

The Fedwire funds transfer system is a large-dollar electronic payment system owned and

operated by the Federal Reserve Banks that transfers funds between financial institutions.

Participants typically transfer large dollar, time-critical payments, such as to disburse or repay

large loans or to settle real estate transactions. The majority of Fedwire transactions are initiatedon-line and all transactions are completed in seconds.

Savings Bonds:

The Federal Reserve Banks issue, service, and redeem tens of millions of U.S. savings bondseach year on behalf of the Treasury. Savings bonds are a contract evidencing a loan made to the

United States. For more information about savings bonds, visit the United States Department ofthe Treasury Web site.

Cash

It's up to the Fed to make sure there is enough money in circulation. Reserve Bank offices

maintain cash and coin processing operations to accept deposits and distribute cash and coin tofinancial institutions. When cash and coin are deposited with the Reserve Banks, notes that are

suspected of being counterfeit are separated from the rest and forwarded to the Secret Service.

Notes that are too worn for recirculation are destroyed using a shredding machine and their facevalue is deducted from the total amount of Federal Reserve notes outstanding.

Each of the twelve Federal Reserve Banks is authorized by the Federal Reserve Act to issue

currency. Currency must be secured by legally authorized collateral, most of which is in the formof U.S. Treasury and federal agency securities held by the Reserve Banks. The notes are

designed and printed by the Bureau of Engraving and Printing of the Department of the Treasury

and are delivered to the Reserve Banks for circulation.

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Check Collection The Federal Reserve System operates a nationwide check clearing system that processes

checks, drafts and similar items. When a depository institution receives deposits of

checks drawn on other institutions, it may send the checks for collection to a Federal

Reserve Bank. For checks collected through the Federal Reserve Banks, the accounts of

the collecting institutions are credited for the value of the checks deposited for collectionand the accounts of the paying banks are debited for the value of checks presented for

payment. Most checks are collected and settled within one business day.A 2004 federal law, the Check Clearing for the 21st Century Act, also known as Check

21, facilitates the electronic exchange of checks. Check 21 permits banks to replace

original checks with substitute checks, special paper copies of the front and back of theoriginal check that are the legal equivalent of the original check. Banks can now make an

image of a check, send the image electronically to another location and then print a

substitute check from the image to present for payment locally.

A Bank for the Government

Additionally, the Federal Reserve acts as a fiscal agent or bank to the federal government by

providing financial services to the United States Department of Treasury and by selling and

redeeming government securities such as Savings Bonds and Treasury bills.

One of the core responsibilities of the Federal Reserve Banks is to serve as fiscal agent anddepository for the United States government. In this role, the Reserve Banks act as the federalgovernment's bank and perform several services for the Treasury. These services include:

Maintaining accounts for U.S. Treasury Processing government checks, postal money orders and U.S. savings bonds Collecting federal tax deposits