The Federal Reserve Act of 1913 established the US central banking system, the Federal Reserve, to regulate and monitor the country’s credit and financial system. It was the first major legislation to create a central bank, following the dissolution of the First and Second Banks of the United States. The act was designed to tame the unpredictable financial roller coaster that culminated in the Financial Panic of 1907. The Glass-Willis Proposal was created in response to an earlier central bank proposal by Senator Nelson W. Aldrich, which proved unpopular with the American public. The Federal Reserve Act was passed after a difficult passage through the House and Senate, establishing 12 regional Federal Reserve Banks.
The Federal Reserve Act of 1913, passed by the US Congress, established the nation’s central banking system, the Federal Reserve. The Federal Reserve wasn’t the first central bank in the nation’s history, but it was the most powerful and expansive. As such, the Federal Reserve Act could be seen as a summation of all previous efforts to provide the United States with a central bank. The bank was intended to provide an elastic monetary system, circulate a federal reserve note, and serve to regulate and monitor the country’s credit and financial system in the best interests of the American people.
At the time the act was signed into law by President Woodrow Wilson on the eve of December 23, 1913, the Federal Reserve Act was the first major piece of legislation that aimed to create a central bank to control and monitor the monetary system in the United States. within the US. Prior to this, the nation had established two central banks: the First (1791) and Second (1816) Banks of the United States, both dissolved in the course of debates over the equivalence of a central bank to a money monopoly. In the minds of many, the concept of central banking was a threat to democracy, a financial specter that would concentrate the nation’s wealth in the hands of a powerful few.
Since the dissolution of the Second Bank of the United States, the economy has been through nearly a century of turmoil, marked by pockets of calm and turmoil that have occurred with embarrassing frequency. At times, the financial crisis crippled banks in some areas of the country, while others continued to thrive. It was this unpredictable and shocking financial roller coaster, culminating in the Financial Panic of 1907, that the Federal Reserve Act was designed to tame. The initial version of the act was drafted by Representative Carter Glass (D-VA), the chairman of the House Banking and Currency Committee and financial advisor H. Parker Willis. House Resolution 7837, or the Glass-Willis Proposal, was created in response to an earlier central bank proposal by Senator Nelson W. Aldrich (R-RI).
Aldrich’s previous plan called for a system that would be monitored and regulated primarily by bankers. This plan proved unpopular with much of the American public, who interpreted it as an attempt to concentrate the nation’s wealth under the unscrupulous jurisdiction of greedy Wall Street bankers. The plan suffered further when it was vehemently denounced by populist and three-time Democratic presidential candidate William Jennings Bryan. As Secretary of State to President Wilson, Bryan helped Wilson, Glass, and Willis sculpt HR 7837 into a plan that would place Federal Reserve regulation primarily under the watchful eye of government, rather than under a banking community.
After a difficult passage through the House and Senate, which involved a tedious series of compromises with lawmakers and the banking community, the Federal Reserve Act was passed. Under the act, 12 regional Federal Reserve Banks were established. These strategically located banks are responsible for maintaining depository financial institutions, assisting in the supervision and regulation of various financial operations, and the circulation of newly printed Federal Reserve Notes. The Federal Reserve is governed by a board of directors, appointed by the president, which operates in Washington, DC.
Protect your devices with Threat Protection by NordVPN
