Term: 1913 Federal Reserve Act
Type: U.S. federal legislation
Signed into law by: President Woodrow Wilson
Date enacted: December 23, 1913
Also known as: The Federal Reserve Act
Purpose: To establish the Federal Reserve System as the central bank of the United States
Definition
The Federal Reserve Act of 1913 is a landmark U.S. law that created the Federal Reserve System — the central banking authority of the United States. Its goal was to stabilize the American banking system by creating a flexible and secure monetary structure, managing the money supply, and providing a lender of last resort during financial crises.
Key Features
- Creation of the Federal Reserve: Established a central bank with a decentralized structure of 12 regional Reserve Banks.
- Monetary Policy Powers: Granted authority to manage interest rates and control the money supply.
- Lender of Last Resort: Gave the Fed power to provide emergency liquidity to banks.
- Federal Reserve Board: Created a governing board to oversee operations and set national policy.
- Elastic Currency: Authorized the issuance of Federal Reserve Notes — now the U.S. dollar.
- Bank Supervision: Enhanced regulatory oversight of commercial banks.
Common Use Cases
- Referenced in discussions about U.S. central banking and monetary policy
- Studied in economics and finance programs as foundational legislation
- Used to explain the origin of the Federal Reserve’s role in economic stability
Benefits or Advantages
- Helped stabilize the banking system after the Panic of 1907
- Allowed for responsive monetary policy to changing economic conditions
- Gave the U.S. government tools to manage inflation, unemployment, and credit
- Provided emergency support to banks in times of crisis
Examples or Notable Applications
During the Great Depression, World War II, and the 2008 financial crisis, the Federal Reserve used its powers under the Act to support the U.S. economy. The structure and authority established by the Act still govern the Federal Reserve today, with updates through later amendments.
External Links
- Federal Reserve History: The Federal Reserve Act
- Investopedia: Federal Reserve Act
- U.S. National Archives: Federal Reserve Act (1913)
This post is for informational purposes only and does not constitute legal or financial advice.