Federal Reserve

The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States.

Fractional-Reserve Banking

In its role of setting reserve requirements for the country's banking system, the Fed regulates what is known as fractional-reserve banking. This is the common practice by banks of retaining only a fraction of their deposits to satisfy demands for withdrawals, lending the remainder at interest to obtain income that can be used to pay interest to depositors and provide profits for the banks' owners. Some people also use the term to refer to fiat money, which is money that is not backed by a tangible asset such as gold. See fractional-reserve banking for more information and criticism.

Related Topics:
Fractional-reserve banking - Fiat money - Gold

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