Banks both create and issue money. While commercial banks no longer issue their own banknotes, they are effectively the distribution system for the notes printed, and the coins minted, by the U.S. Treasury . The Federal Reserve buys coins and paper money from the Treasury and distributes them through the banking system, as needed. Banks effectively buy currency from the Fed, or sell it back when they have excess amounts on hand. (To lean more, see How The Federal Reserve Was Formed .) Settle Payments Every day there are millions of financial transactions in the United States, some conducted with paper currency, but many more done with checks, wire transfers and various types of electronic payments. Banks play an invaluable role in the settling of these payments, making sure that the proper accounts are credited or debited, in the proper amounts and with relatively little delay. Credit Intermediation Banks play a major role as financial inte...