The Federal Reserve System
On December 23, 1913 President Woodrow Wilson signed the Federal Reserve Act into law. The Federal Reserve Act provides for the “establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes” (1). There are several laws that affect the Federal Reserve Act. Some examples are the Banking Act of 1935; the Banking Holding Company Act of 1956; the International Banking Act of 1978; the Depository Institutions Deregulation and Monetary Control Act of 1980; the Financial Institution Reform, Recovery and Enforcement Act of 1989; and the Federal Deposit Insurance Corporation Improvement Act of 1991. The main objectives of the Federal Reserve which were defined by Congress include “economic growth in line with the economy’s potential to expand, a high level of employment, stable prices and moderate long-term interest rates” (2).
The decisions the Federal Reserve makes are not subject to the approval of the President, therefore the Federal Reserve is the independent central bank. However, the Federal Reserve is overseen by Congress. The Federal Reserve must work within the objectives defined by Congress.
The Federal Reserve System is structured with a Board of Governors and twelve regional Federal Reserve Banks in order to get a broad view of the economy and the economic activities of the nation. The responsibility of regulating and supervising members of the Federal Reserve System and their activities are shared between the Board of Governors and the twelve main Federal Reserve Banks This group sees that consumers get adequate information an ...