Federal Reserve pays a key role in it's involvement in financial markets. It does have limitations for how involved the Reserve can get, for being to much involved can result in a monopoly threatening smaller institutions and inflating the market, which could eventually cause a recession or a decline in the market. What many people see is the most important role of the Federal Reserve is it's backing of payment promises from smaller institutions all over the country. The Reserve backs these payments in order to "promote the integrity and efficiency of the payments mechanism and to ensure the provision of payment services to all depository institutions on an equitable basis, and to do so in an atmosphere of competitive fairness," (Federal reserve Bulletin 1990). Through it's backing of payments, the Federal Reserve has not only protected thousands of individuals and their money, but has also helped stimulate financial growth all over the nation as well.

Question 2.

There are several interesting factors regarding the structure and purpose of the United States Federal Reserve. One is that it is split between a privately held, and publicly held institution, meaning that the public has a say in the future of the bank. It might seem strange that despite its central role in government affairs, that it is still somewhat privately owned. There are also regional branches, located in 12 states. This allows the Federal Reserve to protect and stimulate regional economies all over the nation. The Federal Reserve was created in a very unique way which sets it apart from the control of Congress and the Senate. When it was established, the creators wanted to make sure that no administration could have too much control, or to use it for their own good. So the bank was established independent of the Federal Government, running itself. This keeps greedy hands in the Government from reaching too far into the nation's reserves for their own selfish purposes. Congress has recognized that it is an independent financial institution, and therefore with no interests in arty politics or election years.

References

Federal Reserve Bulletin. "The Federal Reserve in the Payments System - Policy

Statement Update." Bnet. http://findarticles.com/p/articles/mi_m4126/is_n5_v76/ai_9038455. May 1990.