What Is the Federal Reserve?

By Matthew Frankel, CFP – Updated Mar 18, 2025 at 2:14 PM EST

The Federal Reserve is the central bank of the United States, but many people are unclear about what it actually does. While the Federal Reserve isn’t a bank in the sense that you or I could open a checking or savings account there, it does play a very important role -- both directly and indirectly -- in the financial lives of most Americans. In this article, we’ll take a look at what the Federal Reserve is, why it exists, and what it does.

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An infographic defining and explaining the Federal Reserve. — Image source: The Motley Fool

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Academic views on the Federal Reserve

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Merchant Banking

Merchant banking provides necessary banking services to medium-sized businesses, often on their way to becoming public companies.

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About the Author

Matt Frankel, CFP, is a contributing Motley Fool stock market analyst specializing in the real estate and financial sectors. Prior to The Motley Fool, Matt taught high school and college mathematics. He holds a bachelor’s degree in physics from the University of South Carolina, a master’s degree in mathematics from Nova Southeastern University, and a graduate certificate in financial planning from Florida State University. He won a SABEW award for coverage of the 2017 Tax Cuts and Jobs Act. He is also regularly interviewed by Cheddar, Globe St, The National Desk, and other TV networks and publications for his real estate, financial, stock market, and investing expertise.

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