Federal Reserve System

Prior to the establishment of the Federal Reserve System
(FRS), the U.S. economy faced frequent panics, bank failures,
and credit scarcity due to unstable banking and financial
systems prevailing in the market. Additionally, due to the rapid
industrialization the decentralized banking system became more
unstable. Specifically, the financial and the economy panic
encountered during 1907 forced the congress to establish a
centralized bank "The Federal Reserve System". Congress
passed the Reserve Act in the year 1913 to establish the FRS.
The FRS is entitled to provide a safe, secure, and stable
financial growth for the U.S.
As the FRS was created, the structure and functionalities of the
central bank has evolved in phases. In the year 1935, the
Fed's monetary policy making body called the Federal Open
Market Committee (FOMC) was formed to address the financial
depression of the country. Further, the monetary policy was
revised from time-to-time to address the financial panics and
the bank runs faced by the public. The monetary policy
addressed the surging inflation faced by passing the Federal
Reserve Reform Act of 1977. Later, the monetary policy was
entitled to increase the employment rate by passing the
Employment and Balanced Growth act in the year 1978, and it
was decided that the FRS produced the finance report to the
congress twice a year.
Following the severe financial crisis in the year 2007-2008, the
U.S. congress passed the Wall Street Reform and Consumer
Protection Act of 2010 to increase the transparency of the
working of the FRS, extend the regulatory responsibilities, and
increase the safety and security of the financial aspects by
providing a new Consumer Financial Protection Bureau.
As the working of the FRS directly impacts the financial and
economical condition of the country and the individuals, it
becomes very important to understand the structure,
functionalities, and working of the FRS.