HISTORY OF THE FEDERAL RESERVE SYSTEM
The Federal Reserve System (also known as the Federal Reserve, and
informally as the Fed) is the central banking system of the United
States. It was created in 1913 with the enactment of the Federal Reserve
Act, and was largely a response to a series of financial panics,
particularly a severe panic in 1907. Over time, the roles and
responsibilities of the Federal Reserve System have expanded and its
structure has evolved. Events such as the Great Depression were major
factors leading to changes in the system. Its duties today, according
to official Federal Reserve documentation, are to conduct the nation's
monetary policy, supervise and regulate banking institutions, maintain
the stability of the financial system and provide financial services to
depository institutions, the U.S. government, and foreign official
institutions.
The Federal Reserve System's structure is composed of the presidentially
appointed Board of Governors (or Federal Reserve Board), the Federal
Open Market Committee (FOMC), twelve regional Federal Reserve Banks
located in major cities throughout the nation, numerous other private
U.S. member banks and various advisory councils. This division of
responsibilities of the central bank falls into several separate and
independent parts, some private and some public. The result is a
structure that is considered unique among central banks. It is also
unusual in that an entity (the U.S. Department of the Treasury) outside
of the central bank creates the currency used.
According to the board of governors of the Federal Reserve, "It is not
'owned' by anyone and is 'not a private, profit-making institution'.
Instead, it is an independent entity within the government, having both
public purposes and private aspects." The U.S. Government does not own
shares in the Federal Reserve System or any of its component banks, but
the Government does receive all of the system's annual profits after a
statutory dividend of 6% on member banks' capital investment is paid and
an account surplus is maintained. The government also exercises some
control over the Federal Reserve by appointing and setting the salaries
of the system's highest-level employees. The Federal Reserve transferred
a record amount of $45 billion to the U.S. Treasury in 2009.
Purpose
The primary
motivation for creating the Federal Reserve System was to address
banking panics. Other purposes are stated in the Federal Reserve Act,
such as "to furnish an elastic currency, to afford means of
rediscounting commercial. Read more »»»
