BIS Review 62/2004  1  Today, the Federal Reserve’s duties fall into four general areas - some that would have been familiar to the central bankers in the Fed’s early years and some that would have been unfamiliar: •  maintaining the stability of the financial system and containing systemic risk that may arise in financial markets  •  supervising and regulating banking organizations to ensure the safety and soundness of the nation’s banking and financial system and to protect consumers from harm in their use of credit and banking services  •  playing a major role in operating and overseeing the nation’s payment system, including providing certain financial services to financial institutions, the U.S. government, and foreign official institutions  •  conducting monetary policy in pursuit of stable prices and maximum sustainable employment  We have an all-too-recent example of the Fed as a source of financial stability in its response to the financial aftermath of the terrorist attacks of September 11, 2001, which occurred just before I joined the Board in December 2001.
As a commercial bank executive, I was impressed with the speed at which the Fed responded when the normal settlement and information systems in check and securities markets were interrupted. The Fed worked immediately through discount window lending, open market operations, and other means to provide the financial and banking systems with sufficient liquidity.