The Federal Reserve Essay

1893 words - 8 pages

Alexander Hamilton, as Secretary of the Treasury, persuaded Congress to establish the first centralized banking institution (First Bank of the United States) in American in 1791. It was immediately met with suspicion by the farming community, which constituted the large majority of Americans, of being representative of “big money”; when it came up for renewal 20 years later, Congress let its charter expire (Federal Reserve Education.Org, n.d., p. 1). 223 years later, the Federal Reserve is met with the precise criticism (that they cater to the agenda of powerful private bankers) it received from the early agrarian Americans. Compounding this negative perception is the exodus of the Fed’s ...view middle of the document...

Shortly after the war, the System tried to stop the gold outflow by tightening credit and brought a sharp economic recession in 1920-21. However, they learned a lot from experience, and discovered the effect of open market operations on bank reserve position. The System was so weak that the country was driven to the Great Depression. It suffered the worst in 1933.
These developments led to changes in the Federal Reserve structure and practice. For the first time, there was an authority to regulate stock market margins, and the board was granted the power to vary reserve requirements.
World War II brought inflationary pressures on the economy. The Federal Reserve helped the Treasury borrow at law interest rates. The inflationary impact was restrained by price controls and the issuing of savings bonds. Sharp price hikes were witnessed in 1947 and 1948.
Another period of inflation came with the outbreak of the Korean War in 1950. In 1951, and agreement was reached with the Treasury stipulating that Federal Reserve policy should not be subordinated to Treasury financing. After 1951, the Reserve focused more on domestic economic stabilization. From 1954-1960, price stability and monetary restrictions were emphasized.12 During this period, the Reserve was also concerned with the country’s gold depletion. Thus, in 1969 the Congress abandoned the gold reserve requirements for Reserve liabilities.
There are twelve Federal Reserve banks in different parts of the nation; stock in each Federal Reserve Bank is owned by the member banks of its district. Each bank’s subscription is equal to 3% of its capital and surplus, and another 3% is subject to call.3 The Federal Bank of New York is the wealthiest and chief international link of the system.4
The Federal Reserve banks do not deal with the general public and they do not seek profit. They perform services for commercial banks and for the U.S. Treasury. They maintain substantial control over the supply of money and credit in the economy due to their influence on the reserve positions of commercial banks. This control in turn influences the flow of aggregate demand for goods and services, thus affecting the nation’s output, price level and employment. The Board of Governors is appointed by the President, subject to Senate confirmation, and they serve for a term of fourteen years. The President appoints a chairman from among the Board members.1
Each Federal Reserve Bank has nine directors: district member banks choose six and the Board of Governors choose the other three. The directors of each bank choose their president who should be approved by the Board of Governors, in whom leadership of the bank largely centers.5
The Federal Open Market Committee (FOMC) is the most important the Federal Reserve in respect to monetary policy. The FOMC consists of seven board members and five Reserve bank presidents, always including the New York president. All the Reserve bank presidents...

Find Another Essay On The Federal Reserve

The Federal Reserve Essay

2256 words - 10 pages Money is the anthem of success. It is the tangible spirit of the American Dream that has heartily inspired the masses, the framework for the pursuit of happiness, and no one regulates it more than the United States’ government. The Federal Reserve is the central bank for the United States and serves to handle the nation’s monetary policies in conjunction with the government’s fiscal policies in order to improve the economy. Even in America’s

The Federal Reserve System Essay

1428 words - 6 pages Federal Reserve 5th District - PAGE 1 - The Federal Reserve SystemECONYour UniversityThe Federal Reserve BankThe fifth of twelve satellite banks in the Federal Reserve solar system belongs to our close neighboring city of Richmond, Va. Its function is not unlike its eleven sister banks that are strategically positioned throughout the country, and together form our nations central banking system. Congress put the construct of the Federal

The Federal Reserve

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

The Federal Reserve

1926 words - 8 pages Every large economy and most small economies have central banks. Some of the better known central banks are the European Central Bank, the Bank of England, and the Bank of China. The Federal Reserve, well-known as The Fed is the U.S. Central Bank. A central bank is an organization responsible for overseeing the monetary system of a nation. Conspiracy theories describe the Fed as men in top hats and black suits, secretly meeting in dark smoke

The Federal Reserve Act

706 words - 3 pages Discussing the Federal Reserve After reading the article, The Influence of Economists on the Federal Reserve Act, it is apparent the author is trying to suggest that the economists played a major role in the banking reform which led to the development of the Federal Reserve Act. During the late 1800’s and early 1900’s, issues regarding the framework for which the bank operates on was inconsistent and did not perform as projected in foreseeable

History of the Federal Reserve

1282 words - 5 pages time, American society has come to have faith in a Central Bank, known as the Federal Reserve System. The Federal Reserve System has many responsibilities, including, but not limited to, promoting economic growth, setting monetary policy, regulating and overseeing financial institutions, and issuing currency. All of these responsibilities have been very important for maintaining a strong economy, but the history of Central Banking in the United

The Purpose of the Federal Reserve System

2692 words - 11 pages interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds. The Federal Reserve System is the central banking authority of the United States. It acts as a fiscal agent for the United States government and is custodian of the reserve

How the Federal Reserve Runs the Country

1581 words - 6 pages The Federal Reserve System (The Fed) is the central bank of the United States. It was created by congress by the passage of the Federal Reserve Act in 1913. The Federal Reserve System is composed of the Board of Governors (in Washington D.C.), and twelve regional Federal Reserve Banks located in major cities (New York, St. Louis, Boston, Philadelphia, Kansas City, Richmond, Chicago, San Francisco, Minneapolis, Atlanta, Dallas and Cleveland

The Duty of the Federal Reserve

717 words - 3 pages The Federal Reserve Act was signed into law on December 23, 1913. Due to a series of financial panics around 1907, the Federal Reserve (also referred to as the “Fed”) was created by Congress to promote a stable banking system and an active economy. The Federal Reserves’ greatest client and biggest spender is the government of the United States. All proceeds from taxes generated and disbursements are managed through the account that the

Federal Reserve System and the Great Depression

972 words - 4 pages FlemingJordan FlemingMr. Alex Blumenstock07 October 14ENGL 1010The Federal Reserve System and the Great DepressionThe Federal Reserve System impacted many major economic situations of the United States during the 20th and 21st centuries. One example of this impact occurred during the Great Depression of the 1930's. This paper will analyze how the Federal Reserve System stimulated the creation, continuation, and end of the Great Depression.The

What´s The Federal Reserve System

1891 words - 8 pages What is the Federal Reserve System? The Federal Reserve was founded in 1913 in response to the 1907 as a result of a severe financial panic. Up until this point in U.S history the United States did not have a concrete currency like it does today, instead thousands banks had their own currency and depending on the stability of the bank, the money was worth more. After the 1907 crisis, several national known politicians gathered at Jekyll Island

Similar Essays

The Federal Reserve System Essay

2023 words - 8 pages After the Revolutionary War, many of the country’s citizens were in great debit and there was widespread economic disruption. The country was in need of an economic overhaul and the new country’s leaders would need to decide how to do this to ensure the new country did not fall apart. After two unsuccessful attempts at a national banking system, the Federal Reserve System was created by the Federal Reserve Act of 1913. Since its inception

The Federal Reserve System Essay

2320 words - 9 pages The Federal Reserve System Even before the creation of the Federal Reserve, banks were used by the public just as we use them today. Deposits were made into savings accounts. Loans were taken out to mortgage a home or finance a new business. Banknotes were issued and spent when the public borrowed from the banks. Borrowers spent these banknotes just as paper money is spent today. These bank notes were valued as money since they were backed

The Federal Reserve Essay 1194 Words

1194 words - 5 pages Calls to “End the Fed” have raged for some time now, with most proponents of this movement being part of grassroots movements such as The Tea Party, and the now infamous Occupy Wall Street crowd. Even some elected officials, from both the Democratic Party and Republican Party have questioned the existence of the Federal Reserve, most notably Ron Paul. Most arguments regarding the demolition of the Federal Reserve System revolve around the

The Federal Reserve System Essay

729 words - 3 pages The Federal Reserve System is the United States bank. Was created in December 23, 1913 by the congress to provide the nation with a better and stable monetary financial system. The Federal reserve’s is responsible for directing the nation’s monetary policy by persuading money and credit conditions in the economy in tracking down of full employment and stable prices ("Board Of Governors Of The Federal Reserve System", 2014). Also