Essay On The Federal Reserve System

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The Federal Reserve System was established to provide a central banking system across the United States. Prior to the establishment of the Federal Reserve System markets were very unstable and the public had very little faith in the banking system. The system was developed to provide stability, support, and supervision to the private banking system within the United States.

Prior to the central banking system, as we know it today, there were several attempts prior to it and each had failed prior. Americans citizens and politicians had a long-standing distrust for a banking system that seemed to mimic England’s. It was argued time after time that a central bank would focus its service on catering to the mercantile and large commercial centers of New York, Boston, and Philadelphia, therefore forgetting about the agriculture interest of the United States.

It was even claimed that we separated from England because a central banking system allowed the rich to get richer off the backs of the middle classes money. More importantly in the early days of the United States most individuals thought that a central banking system would not benefit the agricultural community. This created a lot of opposition, because during these heated debates of a central banking system in the eighteenth hundreds and early nineteenth hundreds, the United States was predominantly agriculture.

Then after the panic of 1907 when depositors lined up across the nation’s banks demanding their savings, some political heavyweights knew that our fledging nation needed some economic strength. Because, when depositors of one bank demanded their savings and the demand was more than the bank had on hand, it sent panic through the street. This panic was like a domino eff...

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...erve Banks in their District they are required to hold three percent of their capital as stock in the Reserve Banks.

Other Depository Institutions

There are more than 17,000 nonmember institutions that provide banking services. These institutions are not official members of the Federal Reserve System they are still accountable to the Federal Reserve System’s regulations.

Federal Open Market Committee (FOMC)

The FOMC is considered to be the most important body of the Federal Reserve Systems. Members of the FOMC are responsible for the monetary policy making decisions of the country another words they mange the money supply. Voting members of this committee consist of the Board of Governors, the president of the New York reserve bank, and the president of four other reserve banks, serving on a rotating basis. The chairman of the Board of Governors chairs the FOMC.
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