What is the primary role of the Federal Reserve System?

The primary role of the Federal Reserve System is to manage the nation's monetary policy and regulate banks. This responsibility centralizes around controlling the money supply and interest rates to promote maximum employment, stable prices, and moderate long-term interest rates. By adjusting the federal funds rate, conducting open market operations, and influencing banking regulations, the Federal Reserve seeks to foster a healthy economic environment.

Additionally, regulating banks is a crucial function, ensuring that financial institutions operate safely and soundly, maintaining public confidence in the banking system. This role is paramount for financial stability and includes supervisory tasks that help mitigate risks within the banking sector, protecting consumers and the economy.

The other options, while relevant to economic activity, do not accurately capture the Federal Reserve's primary roles. For example, providing loans to individuals would typically fall under the purview of commercial banks, not the Federal Reserve. Insuring bank deposits is the function of the Federal Deposit Insurance Corporation (FDIC), which protects depositors in the event of bank failures. Overseeing stock market operations is primarily the domain of the Securities and Exchange Commission (SEC), which regulates securities markets and protects investors from fraudulent practices. Thus, managing monetary policy and regulating banks distinctly embodies the core functions of the Federal Reserve.