FLOSSI AND THE FED
The Federal Reserve System (the Fed) was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law.
Before the Fed’s creation, the U.S. financial system was unstable, experiencing frequent banking panics and economic recessions. The Panic of 1907, a severe financial crisis that led to bank runs and market collapses, highlighted the need for a central banking system to regulate the money supply and stabilize the economy.
Key Figures Involved in Its Creation:
President Woodrow Wilson – Signed the Federal Reserve Act into law in 1913.
Senator Nelson Aldrich – Led the National Monetary Commission, which studied banking reforms.
Congressman Carter Glass – Helped draft the Federal Reserve Act.
Paul Warburg – A banker and early advocate of central banking reform.
Structure of the Federal Reserve
The Federal Reserve was designed to be an independent central bank with both public and private elements:
The Board of Governors oversees the Fed’s policies and is appointed by the President.
12 Regional Federal Reserve Banks – Each serving different districts across the U.S.
Federal Open Market Committee (FOMC) – Sets monetary policy, including interest rates.
The Fed was created to:
Regulate banks and prevent financial crises.
Stabilize the economy by adjusting interest rates and controlling the money supply.
Act as a lender of last resort during banking panics.
