The Federal Reserve Essay

2337 words - 9 pages

The Federal Reserve System is the United States of America’s central banking system and as such is one of the most powerful entities in the country. The Fed, as it is informally known, was created with the enactment of the Federal Reserve Act of 1913, aimed at preserving a system of checks and balances and the decentralized power echoed in the US constitution. It was sanctioned largely in response to a series of financial upheavals, in particular an especially severe panic in 1907. Throughout its existence and our countries existence there have been numerous instances in which economic and financial turmoil has risen and as a result there has been the need to intervene in the market to correct these issues before they spiral further out of control to our countries detriment. Through the decades as new complications have come about the Fed has evolved and expanded. Initially, the Fed was to be somewhat of an overseer for smaller banks, keeping them afloat and while holding them to stiff regulations; it has since advanced as a result of dire events. The Great Depression for example saw several changes in policy and regulation, and so too has the recession we have recently endured. Some policies and tools used have been very controversial but left with little recourse they were acted upon. To say the least, the recent recession has been every bit as complex and controversial as one would expect, but even more so has been the Fed’s course of action to attack it.
The FED’s duties today, are to manage the nation's monetary policy, supervise and regulate banking institutions, and maintain the stability of the financial system. The Fed controls the growth in the nation’s money supply, sets reserve requirements, approves proposed mergers and new branches, and inspects state member banks. In addition, it establishes consumer regulations, authorizes the formation of bank holding companies, and approves all holding company activities and acquisitions. It also provides financial services to depository institutions, the U.S. government, and foreign official institutions.
The Fed controls the nation’s money, thus influencing every aspect of its citizen’s lives. In times such as the recession we are currently experiencing, it is the Fed who we look toward to right the ship once it has ventured off course and it is the Fed we typically blame when things do not fall into place. Through limited yet profound powers the Fed has served its purpose in keeping the American citizens trust in the banking system, though it is often controversial in doing so. In analyzing the Federal Reserve’s importance we begin with the very reason for its existence and continued need, money.
Money is largely considered the glue and in many ways and times the destroyer of civilizations. Money issues classes to the masses, definitively dividing the haves and have-nots. Furthermore, money is often central to allegiances and the formation of enemies on every possible level of human...

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