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Youve read how the Federal Reserve attempts to use the money supply to stabilize the economy. One criticism is that much of

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If the FED lent directly to households and small businesses then the advantage would be that there will be no intermediate banks . FED can directly control the target money supply and carry on the lending process without private banks intervening . Even if the FED lowers repo rate or interest rate , it is upto the private banks the amount they wish to lent out and amount they wish to maintain as reserves to some extent .

The disadvantages are that FED cannot maintain records of such large number of financial transactions alone , financial inclusion is hampered since FED alone cannot reach all parts of country .

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