The Fed works to accomplish these tasks through its continuing role as a lender of last resort, open market operations and through its regulation of a large part of the banking system. While the Fed's role as lender of last resort is perhaps its most important function, it is called upon only infrequently. Its efforts to maintain full employment and price stability through open market operations are much more common and closely followed. Changing interest rates in turn have significant impacts on the economy's growth and ultimately inflation. The Fed's responsibilities in regulating much of the nation's banking system can also have significant economic impacts.
Banks ultimately determine who gets credit and under what terms.
In this case, the Fed can pressure banks to tighten their lending standards or face their heightened scrutiny. It is fitting that the 20th century is ending with the Fed seemingly at the top of its influence and success. The U.S. economy is, for all intents and purposes, at full employment, growing at close to its potential and with stable prices. Living standards have never been higher and they are growing quickly. This has occurred despite significant global hurdles, and while the result of many factors, none is more important than the establishment of the U.S. Federal Reserve Board.