Maybe you only think about the Federal Reserve when interest rate decisions make headlines. However, the Fed does much more than that. The Federal Reserve acts as a bank to banks. It holds bank deposits, lends money to financial institutions, and facilitates the process for banks to borrow funds from each other. The Federal Reserve also ensures the smooth operation of the banking system and guides the nation's economy by managing U.S. currency and by steering interest rates. Learn more: How Fed rate mo ...