The Federal Reserve Act, The U.s. Financial System

Prior to the institution of the Federal Reserve Act, the U.S. financial system’s basic structure was determined by the National Banking Acts of 1863, 1864, and 1865 (Broz, 1999). The purpose of the legislation was to provide a uniform national currency and to raise revenue for the federal government during wartime (Broz, 1999). While effective in its main purposes, it was flawed in the fact that the increase of available currency had little to no effect on consumer demand which led to large seasonal swings in interest rates and banking panics (Friedman Schwartz, 168-169). In an attempt to rectify the shortcomings of the National Banking System, government turned to the New York Clearinghouse Association, purportedly known as the first central bank. Originally responsible for the settlement of payments between financial institutions, it was chosen because it was the only source at the time that had the ability to provide funds during high demand periods through a discount wind ow or an open market operation (Broz, 1999). In the end, it failed to maintain an adequate amount of liquid reserves to counteract the monetary crisis‘s that ensued during the agricultural harvest cycles, when currency demands accelerated. In response to the most detrimental Panics of 1873, 1893, and 1907, a faction of wealthy bankers created the concept of The Federal Reserve, an entity that would serve as the central banking system. After prior failed attempts to enact the FRB in to law, wealthyShow MoreRelatedThe Federal Reserve System Essay1075 Words   |  5 PagesThe Federal Reserve System The Federal Reserve System was founded by Congress in 1913 to be the central bank of the United States. The Federal Reserve System was founded to be a safer, more flexible, and more stable monetary financial system. Over the years, the role of the Federal Reserve Board and its influence on banking and the economy has increased. Today, the Federal Reserve Systems duties fall into four general categories. Firstly, the FED conducts the nations monetary policy. The FEDRead MoreThe Federal Reserve ( Investopedia ) Essay1574 Words   |  7 Pagesworld’s most powerful monetary system, called the Federal Reserve (Investopedia). It involves one central agency and twelve regional Federal Reserve Banks that are accountable for their designated areas in the United States (Investopedia). Its primary purpose was to establish a secure, malleable, and a solid financial system which was to prevent financial devastation during times of crisis (Investopedia). More specifically, prior to the creation of the Federal Reserve Bank, the United States hadRead MoreThe Federal Reserve System Is The United States Central Bank1339 Words   |  6 PagesHayden Hill Macroeconomics Professor Gislason 27 April 2017 The Federal Reserve System The Federal Reserve System, also called â€Å"the FED†, is the United States central bank, a national institution which governs the production and distribution of money. It was created to provide the United States with a more secure and more stable financial structure. The Federal Reserve System has many responsibilities today. First, the FED controls U.S. monetary policy by altering the supply and demand of the economyRead MoreThe Federal Reserve : The Central Bank Of The United States1526 Words   |  7 Pages The Federal Reserve Introduction The Federal Reserve, also known as the Fed is the central bank of the United States. The system was created on December 1913 during the reign of President Woodrow Wilson. It was during this time that President Woodrow signed the Federal Reserve Act, incorporating it into the law. The Congress was behind the creation of the Federal Reserve with the ultimate goal of making it safer and more reliable to keep the money. The Congress was also compelled to establishingRead MoreThe Federal Reserve1484 Words   |  6 PagesThere are many thoughts about the Federal Reserve, some people think it is the biggest thief ever and some other people think that the Illuminati is running the show. Also some people know that the Federal Reserve has saved the economy of the United States a couple of times from depressions. Moreover, economists think that the Federal Reserve saved the U.S. from the most recent depression in 2008. Many people in the U.S. may not know who Alexander Hamilton is; however, an y economist or anybody whoRead MoreShuhao Liu. Money And Banking. Dr. Sue Lynn Sasser. February1231 Words   |  5 PagesLynn Sasser February 10,2017 Summary of Legislations the National Banking Act of 1863ï ¼Å¡In 1863, the United States passed the National Bank Act, trying to provide a national constitution that would cover all banks. This Act stipulates that 25% is the statutory reserve ratio of bank deposits. In 1863, Lincoln needed more green money to win the war. So he made an important compromise, signed the 1863 national banking act. The act authorizes the government to approve the issuance of uniform bank notes byRead MoreThe Federal Reserve Essay695 Words   |  3 Pagessocial welfare, promoting moral improvement, fostering efficiency, and creating economic reform. President Woodrow Wilson, elected in 1912, made the most important change of the early 1900s; he passed the Federal Reserve Act. American citizens have been wary of a government-controlled banking system since the formation of the country. The people did not trust centralized government action, and they were largely agrarian people, knowing little about the banking industry. Still, Alexander Hamilton, theRead MoreCentral Banking System Of The Federal Reserve System1235 Words   |  5 PagesA Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve Federal Reserve Systems, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve Act of 1913. The banks are jointly responsible for implementing the monetary policy set forth by the Federal Open Market Committee. The twelve Federal Reserve Systems are Federal Reserve Bank of Atlanta, Federal Reserve Bank of Boston, FederalRead MoreThe Federal Reserve System : Purposes Functions1308 Words   |  6 Pages The Federal Reserve System: Purposes Functions (2015), the Fed has the responsibility for supervising and regulating the following segments of the banking industry to ensure safe and sound banking practices and compliance with banking laws: †¢ Bank holding companies, including diversified financial holding companies formed under the Gramm-Leach-Bliley Act of 1999 and foreign banks with U.S. operations †¢ State-chartered banks that are members of the Federal Reserve System (state member banks)Read MoreThe Workings And Structure Of The Federal Reserve Banks Of Usa1507 Words   |  7 PagesThe United States of America’s financial system comprises of the banking system, financial markets and nonbank financial institutions. (Lee, 2001) Banking system furthermore consists of the Federal Reserve System, foreign banks, commercial banks, offshore banks, credit unions and saving institutions. Financial markets consist of debt and money markets, equities markets and futures and options markets. Lastly, nonbank financial institutions consist of asset-based finance companies, commercial lending