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| Introduction to the New York Fed |
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In addition, it has important roles in operating the nation's
payments systems, protecting consumers' rights in their dealings
with banks and promoting community development and reinvestment.
Federal Reserve Banks
Seeing the Federal Reserve Bank of New York, visitors' first impressions are of the building's formidable architecture. Inside the vault of this imposing structure is stored billions of dollars of gold. But what is most significant about the Bank is its broad policy responsibilities and the effects of its operations on the nation's economy. The New York Fed has supervisory jurisdiction over the Second Federal Reserve District, which encompasses New York state, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico and the U.S. Virgin Islands. Though it serves a geographically small area compared with those of other Federal Reserve Banks, the New York Fed is the largest Reserve Bank in terms of assets and volume of activity. The New York Fed has one regional office located in East Rutherford, New Jersey.
In the past, EROC handled check processing for New Jersey and the New York Metropolitan area. However, as part of the Federal Reserve’s check restructuring process, East Rutherford check processing operations were moved to the Federal Reserve Bank of Philadelphia starting in August 2006.These changes were made in response to the changing market; including the decline of check volumes industrywide as consumers and businesses continue to move from using paper checks toward electronic payments. The New York Fed employs over 2,700 officers and staff at the head office and the East Rutherford Operations Center, New Jersey. Currently, the New York Fed employs more than 400 field examiners. More than half of these examiners were hired after 1991, when the Federal Reserve was given additional supervisory powers over foreign depository institutions. They were hired primarily to examine branches and agencies of foreign banks headquartered in the New York area. In addition to the responsibilities the New York Fed shares
in common with the other Reserve Banks, the New York Fed has
several unique responsibilities, including conducting open
market operations, intervening in foreign exchange markets,
and storing monetary gold for foreign central banks, governments
and international agencies. Foremost is the implementation
of monetary policy, one of the three missions of the New York
Fed. The other two are international operations, and supervision
and regulation.
The Federal Open Market Committee (FOMC), the 12-member group, that formulates monetary policy for the Federal Reserve System, meets in Washington, D.C., usually eight times a year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth. The Federal Reserve influences the economy through the market for balances that depository institutions maintain in their accounts at Federal Reserve banks. Banks keep reserves at Federal Reserve banks to meet their reserve requirements and to clear financial transactions. Transactions in the federal funds market enable depository institutions with reserve balances in excess of reserve requirements to sell reserves to institutions with reserve deficiencies at an interest rate known as the federal funds rate. Today the FOMC sets the target for the federal funds rate at a level it believes will foster financial and monetary conditions consistent with achieving its monetary policy objectives, and it adjusts that target in line with evolving economic developments. The Federal Reserve implements U.S. monetary policy by affecting conditions in the market for balances that depository institutions hold at the Federal Reserve banks. The seven governors of the Federal Reserve Board and the president of the New York Fed are permanent voting members of the FOMC. Uniquely, the first vice president of the New York Fed may vote at FOMC meetings in the president's absence. The other Reserve Bank presidents take turns serving for one year as the four remaining voting members of the committee. Non-voting Reserve Bank presidents attend and participate in discussions at all FOMC meetings. The chairman of the Board of Governors of the Federal Reserve System serves as the committee's chairman. The New York Fed president serves as the committee's vice chairman. At the end of each FOMC meeting, a directive is issued to guide the open market operations of the New York Fed until the next meeting. Federal Open Market Committee ››  The Fed uses three tools to implement Monetary Policy, the most important being open market operations.
These “domestic operations” are conducted for the System only by the Federal Reserve Bank of New York under the direction of the Federal Open Market Committee (FOMC). Through open market operations, the Fed buys or sells U.S. Treasury securities in the secondary market in order to produce a desired level of bank reserves. These securities are held in the System’s portfolio, which is known as the SOMA. The “primary dealers,” designated by the New York Fed, serve as its counter parties in open market operations and other securities transactions. The Fed adds extra credit to the banking system when it buys Treasury securities from the dealers, and drains credit when it sells to the dealers. As the laws of supply and demand take over in the reserves market, the cost of funds for the remaining reserves finds its level at the federal funds rate. Current List of Primary Dealers ›› Fedpoint: Primary Dealers ›› Fedpoint: Federal Funds ››
Reserve requirements establish the proportions of demand deposit (checking) accounts and time deposits that must be held as non-interest bearing reserves at Federal Reserve Banks or as vault cash. Reserve ratios are rarely changed, and any major adjustment would be viewed as a very significant monetary policy action. An increase in reserve requirements would be regarded as an attempt to restrict bank credit and restrain economic activity. A reduction in the reserve ratio would be viewed as a stimulative monetary policy move.
Open market operations of the Federal Reserve, borrowing at the discount window and from other sources, and reserve requirements together determine the total volume of reserves available to depository institutions. These reserves affect the ability of the banking system to "create" new money by establishing an upper limit on the quantity of deposits that banks can support. This effectively sets a maximum to the amount of money that banks can lend and invest. By influencing the supply of money and, in turn, the cost and availability of credit, the Fed's actions affect economic activity and prices. Fedpoint: Open Market Operations ››
Further, the Federal Reserve Bank of New York serves as fiscal agent in the United States for foreign central banks and official international financial organizations. It acts as the primary contact with other foreign central banks. The services provided for these institutions include the receipt and payment of funds in U.S. dollars; purchase and sale of foreign exchange and Treasury securities; and the storage of over $200 billion in monetary gold. Fedpoint: New York Fed Services for Central Banks and International Institutions ›› The Key to the Gold Vault 
24 pages / 774 kb
Regulations ›› Fedpoint: Foreign Banks and the Federal Reserve ››
The Fed is responsible for enforcing laws and establishing rules to protect customers of depository institutions. It also ensures that banks try to meet the credit needs of their communities by observing community reinvestment laws and laws assuring consumers fair and unbiased access to credit. Community Reinvestment Act ››
The New York Fed and the other Reserve Banks provide several important services to the Federal government and to depository institutions. Depository institutions are charged a fee for these services. As the banker for the Federal government, the Fed clears checks drawn on the Treasury's account. Acting as fiscal agents for the government, the Reserve Banks sell, service and redeem Treasury securities. Further, currency and coin are placed into or are withdrawn from circulation in response to seasonal and cyclical shifts in the public's need for cash. Almost all U.S. currency now consists of Federal Reserve notes, which were first issued in 1914.
The majority of U.S. Fedwire transactions originate from Second District financial institutions. In 2007, Fedwire transferred a total of $4.4 trillion a day, of which there were about $2.7 trillion a day in funds and $1.7 trillion a day in securities. Together, the twelve Federal Reserve Banks processed approximately $1,107 trillion worth of funds and securities transfers in 2007. The other EFT system, which makes relatively small payments, consists of national and local automated clearing house (ACH) networks operated by or with the support of Reserve Banks. The ACH system was designed to reduce the use of paper checks for routine payments. Typical payments include salaries, recurring bill payments and Social Security benefits. In 2007, the twelve Federal Reserve Banks originated about 10.6 billion transactions worth about $18.3 trillion. Second District institutions originated about 1.6 billion of the transactions worth about $2.7 trillion. A large number of payments are cleared privately through clearing houses,
such as the Clearing House Interbank System (CHIPS). CHIPS settles roughly $2.1 trillion per day through the New York Fed and is one of the primary methods used for international funds transfers.
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