Question

Which of the following powers does the Federal Reserve have?

1) Setting margins on non-exempt securities
2) Lending funds to member banks through the discount window
3) Auditing commercial banks for compliance with banking and MSRB regulations
4) Acting as fiscal agent for the U.S. Treasury

Answer 1

The Federal Reserve can lend funds to banks via the discount window, set margins on securities, audit commercial banks, and act as a fiscal agent for the U.S. Treasury.

Step-by-step explanation:

The Federal Reserve has several powers and roles in the U.S. financial system. One of its key abilities is lending funds to member banks through the discount window. This is a form of direct lending, usually short-term, that allows banks to borrow money to meet reserve requirements or when they are experiencing short-term liquidity issues. The Federal Reserve is also responsible for setting margins on non-exempt securities, which is part of its regulation of securities credit. Moreover, it audits commercial banks for compliance with banking regulations and Municipal Securities Rulemaking Board (MSRB) rules. Also, the Fed acts as a fiscal agent for the U.S. Treasury, assisting with the Treasury's financial transactions, such as issuing checks and processing electronic payments.