Where do banks go when they need a loan? To the Federal Reserve System, which sets the discount interest rate, the base rate at which its member banks may borrow. Known as the Fed, the system oversees a network of 12 Federal Reserve Banks located in major US cities; these in turn regulate banks in their districts and ensure they maintain adequate reserves. The Fed also clears money transfers, issues currency, and buys or sells government securities to regulate the money supply. Through its powerful New York bank, the Fed conducts foreign currency transactions, trades on the world market to support the US dollar's value, and stores gold for foreign governments and international agencies.