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MONETARY POLICY OF THE FEDERAL RESERVE GUIDING THE ECONOMYI WHAT IS THE FEDERAL RESERVE The Federal Reserve System is the central bank of the UnitedStates It acts as the nations banker as well the primary supervisorof the nations banks Its primary function is formulatingimplementing and supervising national monetary policy which is carried out by the Federal OpenMarket Committee FOMC A Brief History President Woodrow Wilson signed into law the Federal Reserve Acton December 23 1913 At a time when the US economy was expandingthe Federal Reserve system was created to halt the economic chaos Although the Federal Reserve system has operated as the central bank of the US since1913 it was not the first central bank of our country In 1791Alexander Hamilton issued a twenty year charter for the Bank of theUnited States the first central bank of the US In the late sixteenth century theprimary industry in the US was agriculture Historically there hasbeen great mistrust between agrarian enterprises and banking The ideaof a central bank with extensive economic power was not well received by themajority of the US population In 1811 the charter for the Bank ofthe United States was up for renewal and was voted down by congress In 1816 Congress created the Second Bank of the United States It too waschartered for twenty years and was more powerful than the firstcentral bank With its additional power it was also met withsignificant opposition Its charter expired in 1836 After the termination of the first two centralbanks the country went into periods of economic chaos From the end of the Civil War through the turn of the century theUS economy grew at tremendous rate The National Banking Act of 1863created national banks and gave them the sole privilege of noteissuance This put an end to state bank issued currency and created a much more stablecurrency Each of the national banks held their own reserves which wasnot easily transferred from an institution with
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