(ECONOMICS) the central bank
of the United States; often called "the Fed" for short. Sole bank of issue
for the US dollar since 1971*; issuer of nearly all US currency since 1914.
Created in December 1913 through the Federal Reserve Act; while signed into law by Pres. Wilson, the basic outline of the FRB was developed by the Aldrich-Vreeland Committee (see Aldrich-Vreeland Act
) during the Taft Administration (1909-1913).
In addition to issuing currency, the Fed is responsible for some (but not all) oversight of banks; management of the nation's money supply (using purchases and sales of US Treasury securities
; see monetary policy
); and management of a national check clearing system.
The Fed includes two central managing committees, the Federal Reserve Board
and the Federal Open Market Committee
(FOMC). It also has 12 district banks; each is known as a Federal Reserve Bank
The Federal Reserve System is a member of the International Monetary Fund
(IMF) and the Bank of International Settlements
*Until 1971, the US Treasury issued a small share of bank notes, or "national notes
." They were almost identical in appearance to Federal Reserve notes.
Between 1863 and 1935, federally chartered banks national bank
s were allowed to issue currency equal to 90% of US treasury securities deposited with the US Treasury. After 1914, when the Fed commenced operations, it nearly stopped entirely.
The Federal Reserve System has twelve district banks, whose management is chose by bank holding companies. The president of each district bank is himself likely to have been an officer of a bank holding company
. Hence, regulatory capture
was built into the system from the beginning.