Question

What role does the Federal Reserve play? Check all that apply.

Regulate the banking industry
Loan money to banks
Give individual loans
Give corporate loans
Transfers any profits to the Treasury

Answer 1

- Regulate the banking industry — Yes. The Fed supervises and regulates many banks and bank holding companies and sets rules (capital, reserve requirements, etc.).
- Loan money to banks — Yes. The Fed lends to depository institutions (discount window and other liquidity facilities) as lender of last resort.
- Give individual loans — No. It does not make loans to individual consumers.
- Give corporate loans — Generally no. The Fed does not normally lend directly to corporations (only very limited, exceptional emergency facilities have been used under strict conditions).
- Transfers any profits to the Treasury — Yes. After expenses and required dividends, the Fed remits most of its net earnings to the U.S. Treasury.