A. CENTRAL BANKING AND THE FEDERAL RESERVE SYSTEM

THE FEDERAL RESERVE SYSTEM

History and Purpose. During the nineteenth century, the United States was plagued by banking panics. These occurred when people attempted to turn their bank deposits into example on bank panics in the last chapter). When they arrived at the banks, they found that the banks had an inadequate supply of because the supply of as fixed and mailer than the amount of bank  Ban’ failure and economic downturns After the panic of 1907, agitation and to the Federal Reserve Act of 1913 which was to “provide for the establishment of Federal reserve banks [and] to furnish an elastic currency. ” As currently constituted, the Federal Reserve System consists of 12 regional Federal Reserve Banks, located in New York, Chicago, Richmond, Dallas, San Francisco, and other major cities.

The structure was. originally designed in the populist age to ensure that different areas would have a voice in banking matters and to avoid too great a concentration of central-banking powers in Washington or in the hands of the eastern bankers. Each Federal Reserve Bank today distributes coins and currency, supervises and regulates banks in its districts, and is part of a nationwide’ payments system. The major purposes of the Federal Reserve are as follows: Today the Federal Reserve’s duties fall into four general areas: (1) conducting the nation’s monetary policy; (2) supervising and regulating banking institutions; (3) maintaining the stability of the financial system; and (4) providing certain financial services to the government and the public.

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