Federal Reserve Act Of 1913 Flashcards, test questions and answers

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What is Federal Reserve Act Of 1913?

The Federal Reserve Act of 1913 was a landmark piece of legislation that laid the groundwork for the modern banking system. Signed into law on December 23, 1913, the Federal Reserve Act established the Federal Reserve System, which is commonly referred to as the Fed. The act created a decentralized system of 12 regional reserve banks that had the ability to issue currency, lend money to member banks in times of need, and supervise commercial banks. It also granted broad powers to Congress over monetary policy and set up an independent board of governors tasked with managing the Fed’s activities. Prior to the passage of the Federal Reserve Act, banking in America was a chaotic patchwork system with little oversight or regulation. This led to frequent financial panics and bankruptcies that caused havoc among consumers and businesses alike. In response, Congress sought to create a unified national banking system that could more effectively manage economic crises while also providing stability and security for depositors’ money. The main goal of the Federal Reserve Act was to create a more stable financial market by providing liquidity during times of crisis through its network of regional reserve banks. Through this network it could provide loans or buy assets from struggling banks in order to prevent them from failing. The act also gave Congress control over interest rates and other monetary policies, allowing lawmakers greater influence over macroeconomic conditions. Finally, it created an independent Board of Governors responsible for overseeing all aspects of Fed operations from setting monetary policy goals to supervising regional reserve banks ensuring greater accountability than ever before. Overall, the passage of the Federal Reserve Act was a monumental achievement in American history as it provided much needed stability during difficult economic times while laying down essential guidelines for our modern day banking system.