<P> Through its discount window and credit operations, Reserve Banks provide liquidity to banks to meet short - term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals . Longer term liquidity may also be provided in exceptional circumstances . The rate the Fed charges banks for these loans is called the discount rate (officially the primary credit rate). </P> <P> By making these loans, the Fed serves as a buffer against unexpected day - to - day fluctuations in reserve demand and supply . This contributes to the effective functioning of the banking system, alleviates pressure in the reserves market and reduces the extent of unexpected movements in the interest rates . For example, on September 16, 2008, the Federal Reserve Board authorized an $85 billion loan to stave off the bankruptcy of international insurance giant American International Group (AIG). </P> <P> In its role as the central bank of the United States, the Fed serves as a banker's bank and as the government's bank . As the banker's bank, it helps to assure the safety and efficiency of the payments system . As the government's bank or fiscal agent, the Fed processes a variety of financial transactions involving trillions of dollars . Just as an individual might keep an account at a bank, the U.S. Treasury keeps a checking account with the Federal Reserve, through which incoming federal tax deposits and outgoing government payments are handled . As part of this service relationship, the Fed sells and redeems U.S. government securities such as savings bonds and Treasury bills, notes and bonds . It also issues the nation's coin and paper currency . The U.S. Treasury, through its Bureau of the Mint and Bureau of Engraving and Printing, actually produces the nation's cash supply and, in effect, sells the paper currency to the Federal Reserve Banks at manufacturing cost, and the coins at face value . The Federal Reserve Banks then distribute it to other financial institutions in various ways . During the Fiscal Year 2013, the Bureau of Engraving and Printing delivered 6.6 billion notes at an average cost of 5.0 cents per note . </P> <P> Federal funds are the reserve balances (also called Federal Reserve Deposits) that private banks keep at their local Federal Reserve Bank . These balances are the namesake reserves of the Federal Reserve System . The purpose of keeping funds at a Federal Reserve Bank is to have a mechanism for private banks to lend funds to one another . This market for funds plays an important role in the Federal Reserve System as it is what inspired the name of the system and it is what is used as the basis for monetary policy . Monetary policy is put into effect partly by influencing how much interest the private banks charge each other for the lending of these funds . </P>

Which part of the federal reserve system is known as the bankers bank
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