The Art of Islamic Banking and Finance: Tools and Techniques for Community-Based Banking

&Balanced federal budget

&Growth in productivity

&Improved balance of trade

&Price stability

The Act also required the Federal Reserve to report to the Congress
twice a year on its monetary policies as they related to the goals outlined in
the 1978 Full Employment and Balanced Growth Acts.

Function of the Federal Reserve
The three basic functions of the Federal Reserve are:

1.Implementation of monetary policy:This is done through the use of

three primary control devices:

a.Setting the reserve requirements of the banks

b.Setting the discount rate at which the Federal Reserve lends the

member banks

c.Setting the monetary growth or contraction through the activities of

the Federal Open Market Committee (FOMC); monetary expansion

or contraction is done through the purchase or selling, respectively,

of government securities

2.Providing payment services for the depositories:These services include

loans, check collections, currency insurance, wire transfers, and ac-

count settlements.

3.Serving as a bank for the federal government:

a.Supervising and regulating banks

b.Maintaining the U.S. federal government’s checking account

c.Selling and redeeming interest payments on U.S. government

securities

d.Establishing relations with foreign central banks and foreign

exchange trading worldwide

The Federal Reserve was created as a branch independent of the politics
of governing. Its shares are owned by participating member banks in pro-
portion to their size. U.S. monetary policy, which includes adjusting interest
rates and money supply, is designed and implemented without any political
interference from the President or Congress. In such a unique setup, the
monetary policy would be implemented for the interest of the nation, and
not to promote a certain political party, the Congress, or the President. On
the other hand, the President of the United States and the Congress decide
on the fiscal policy of the government, which includes the federal budget,
taxes, and government spending. TheFederal Reserve’s structure as an

Money and Its Creation 91