The Federal Reserve Act of 1913 is what set up the Federal Reserve System in the U.S. This law came about after a lot of economic ups and downs in the country. Congress wanted to bring some stability to the economy, so they created a central bank to manage monetary policy. Signed into law by President Woodrow Wilson, it also laid out the Fed’s main goals: to promote employment and keep prices stable.
Learn more about 1913 Federal Reserve Act
Before 1913, financial panics were pretty common because investors were worried about how safe their bank deposits really were. Big private financiers like J.P. Morgan, who helped the government out in 1895, often stepped in to provide credit and bring some stability to the financial scene.
To address these issues, Congress passed the Federal Reserve Act in 1913, which laid out the goals, structure, and functions of the Federal Reserve System. This law gives the U.S. government the power to make changes to the Federal Reserve Act, and they’ve done that a few times over the years.
When President Woodrow Wilson signed the Federal Reserve Act into law in 1913, it allowed the Fed to print money and use various policy tools to maintain economic stability. The Federal Reserve System also established a dual mandate to boost employment and keep prices in check.
The History
The Federal Reserve came into being after some pretty rough economic times. In the past, the federal government had set up centralized national banks, which didn’t sit well with many folks living in rural areas. These banks were usually run by big banking interests from the East, making them seem untrustworthy to people living elsewhere. So, state-chartered or free banks stepped in, creating their own currency backed by gold.
Then, the National Banking Act of 1863 came along, allowing for nationally chartered banks again. This helped create a more standardized currency that was backed by American securities. However, financial instability hit hard in 1893 and 1907, leading to market crashes and depressions, which were only somewhat eased by private investments from J.P. Morgan.
With the public worried about the safety of their money, banking reform became a big deal. In 1912, President Woodrow Wilson turned to the House Committee on Banking and Finance for a solution. They decided on a decentralized bank, which led to the creation of the Federal Reserve in 1913.
Conclusion
The Federal Reserve serves as the central bank for the United States. It came into existence after the 1913 Federal Reserve Act was passed, which was a response to several financial crises that the country faced. The main aim of the Fed is to promote stability in the financial system through various monetary and fiscal policies.