The Creation of the Federal Reserve in America and the Federal Open Market Committee

The Creation of the Federal Reserve in America and the Federal Open Market Committee

Length: 573 words (1.6 double-spaced pages)

Rating: Good Essays

Open Document

Essay Preview

In the early 1900s, the United States economy was challenged by the weaknesses of the existing national banking system, whose lack of liquidity and an inelastic currency caused a panic in 1907 where the stock market fell nearly 50% from its highest point one year earlier. The ensuing recession and bank runs prompted the creation of the National Monetary Commission and, eventually, reformed banking and currency legislation. This resulting legislation, enacted in 1913, created the Federal Reserve System. The Federal Reserve was initially commissioned with addressing banking panics, but soon assumed additional responsibilities, such as the following: serving as the central United States bank, regulating banking institutions, protecting consumer rights, establishing monetary policy to maximize employment, stabilize prices (prevent or at least manage inflation), moderate interest rates, maintain national financial stability, and strengthen the U.S. global economy.
Of course, these goals are exceedingly lofty and not easily achieved. However, through evaluating and measuring economic vari...

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

The Creation of the Federal Reserve in America and the Federal Open Market Committee

- In the early 1900s, the United States economy was challenged by the weaknesses of the existing national banking system, whose lack of liquidity and an inelastic currency caused a panic in 1907 where the stock market fell nearly 50% from its highest point one year earlier. The ensuing recession and bank runs prompted the creation of the National Monetary Commission and, eventually, reformed banking and currency legislation. This resulting legislation, enacted in 1913, created the Federal Reserve System....   [tags: finance, american history, stock market]

Good Essays
573 words (1.6 pages)

The Federal Reserve And The Fed Essay

- The Federal Reserve The Federal Reserve or the FED is the central banking system in the United States. It was created in 1913 under president Wilson, with the purpose of controlling the stability of the financial system. The monetary policy is the course of action that the FED takes to ensure a stable economy in the United States. In this paper I will explain which of the monetary tools available to the Federal Reserve are most often used and the reasons for that. I will also describe how expansionary activated conducted by the Federal Reserve impact credit avilaiblilty, the money supply, interest rates and security prices, and to conclude I will show the result of the transactions in the fo...   [tags: Monetary policy, Federal Reserve System]

Good Essays
703 words (2 pages)

The Federal Reserve System Works Essays

- The Federal Reserve System In order for people to fully understand how the Federal Reserve System works, they first need to understand that before the creation of the Federal Reserve, when banks were first made they were used by the public just as people use them today. For example: deposits were made into saving and checking accounts, loans were taken out to mortgage a business or a new home. In addition, banks issued bank notes which are the same as paper money today. These bank notes were valued as money since they were backed up by a promise that they would be exchanged for either gold or silver at any time....   [tags: Federal Reserve System, Monetary policy]

Good Essays
797 words (2.3 pages)

Essay on The Federal Reserve System Of The United States

- In different parts of the world, every day of the year different types of transactions are carried out, using as an intermediary which is the engine that moves the world, the money. Every country has its own currency, which has some features or specific restrictions such as where and how it can be used and has the same value. Both in Puerto Rico and the United States used what we know as the dollar also equivalent to 100 cents. There are two types of agencies of the Government of the United States who are responsible or liable for the proper functioning of the currency flow between individuals, businesses and state; The Federal Reserve and the Treasury Department....   [tags: Federal Reserve System, Monetary policy]

Good Essays
1049 words (3 pages)

Essay about The Federal Reserve Act By President Woodrow Wilson

- The Federal Reserve, commonly known as “The Fed” was established in 1913 by congress and signed into law as the “Federal Reserve Act” by President Woodrow Wilson on December 23, 1913. It was created to regulate the banking system in the United States. The U.S. Government affects the economy through fiscal policy (government taxing and spending). The Federal Reserve constructs monetary policy to control interest rates, reserves, and to affect how the banking system relates to the economy overall....   [tags: Monetary policy, Federal Reserve System]

Good Essays
854 words (2.4 pages)

The Federal Reserve Act Law Essays

- The Federal Reserve has kept the United States from going under and having bank runs like the ones in 1930 during the great depression. During the 1930 over 9,000 banks failed causing great damage to the United States economy. The 1930 we hard times that the U.S never want to experience again. President Woodrow Wilson signed the act of the Federal Reserve 1913 which helped during the great depression but not a much as it could. The Federal Reserve has changed since then and does far more than before....   [tags: Monetary policy, Federal Reserve System]

Good Essays
2273 words (6.5 pages)

Essay about Central Bank And The Federal Reserve System

- The Fed is the nation 's central bank which regulates many aspects of the U.S. financial system. The Federal Reserve System consists of member banks, reserve banks, and a board of governors. The board of governors consists of seven members appointed by the U.S. President. "It alone determines the reserve requirements, within statutory limits, for depository institutions." The board also helps other Fed departments handle the selling and purchasing of government securities. The reserve banks are twelve districts which handle all reserve deposits and set the discount rate for commercial banks within their respective regions....   [tags: Monetary policy, Federal Reserve System]

Good Essays
775 words (2.2 pages)

Federal Reserve Open Market Operations Essay

- Federal Reserve Open Market Operations SUMMARY The Federal Reserve's operating strategy for implementing monetary policy involves interest rate targeting through open market operations. The Federal Reserve does not utilize reserve requirements or the discount rate as part of this strategy. Open market operations involves the buying and selling of securities in the open market, in order to influence reserve balances. By manipulating reserve balances, the Federal Reserve can control the price of reserves in the market....   [tags: Economics Fed Market Economy Essays]

Good Essays
3427 words (9.8 pages)

The Federal Reserve Essay

- To understand the purpose and role of the Federal Reserve System, we must first know the origin of the central bank of the United States. On December 23, 1913 President Woodrow Wilson signed The Federal Reserve Act. The primary purpose of the act was to make sure that a supply of money and credit would be available in the United States to meet banking demands by establishing Federal Reserve Banks which would hold the responsibility of supporting the credit structure during periods of financial strain....   [tags: Economics]

Good Essays
2066 words (5.9 pages)

Federal Reserve Act Overview Essay

- FEDERAL RESERVE ACT OVERVIEW The Federal Reserve Act States that, The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy’s long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. (Federal Government, 1977) After several years of financial turmoil and panics, particularly the panic of 1907, the U.S....   [tags: Economics]

Good Essays
1222 words (3.5 pages)