The Federal Reserve System

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The Federal Reserve System in the United States
In the late 1890s through early 1900s, a depression resulting in the loss of millions of dollars in the United States prompted the government to come up with a system to remedy the nation’s financial state. The Federal Reserve System has been the primary banking system of the United States of America ever since 1913 as a result of the Federal Reserve Act. The Federal Reserve System works to provide the United States with a safer and more stable monetary system for the economy.
The Establishment of the Federal Reserve: The Federal Reserve Act
The Federal Reserve System was established on December 23rd, 1913 through the enactment of the Federal Reserve Act. The Federal Reserve Act contains four
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As the Federal Reserve System has been created by Congress, Congress designed the foundation of the Federal Reserve System in order to let it view the economy and all economic activity from a larger perspective. With that being said, the Federal Reserve System is made up of a Board of Governors in Washington, D.C. along with twelve additional regional Federal Reserve Banks (Fox et al. 2005). These groups hold the responsibility for the supervision and regulation of financial institutions in order to ensure that all consumers may receive fair treatment as they make business agreements with banks. There are seven members of the Board of Governors who are appointed by the President to serve on the board for fourteen years (The Structure of the Federal Reserve System 2003). The Board of Governors are responsible for issuing several regulations, which may be applied to the banking industry in the United States. Another large component of the Federal Reserve System is made up of the Federal Open Market Committee. The Federal Open Market Committee’s structure consists of members of the Board of Governors, presidents of four regional Federal Reserve banks, and the president of the Federal Reserve Bank of New York. The Federal Open Market Committee’s primary responsibility is to supervise all open market operations (The Structure of the Federal Reserve System …show more content…
A few of the flaws of the Federal Reserve System includes the fact that although it is referred to as an independent government entity amongst the public, it is still under the control of Congress, where Congress still holds the authority to grant or limit any authority of the Federal Reserve System. Therefore, Congress may still have an affect on the Federal Reserve System’s ability to make decisions and new policies (Meltzer 2009). Another flaw with the Federal Reserve System includes that although the Federal Reserve System strives to prevent inflation, it is actually accused of encouraging inflation by tempting politicians as well as the public in order to increase the money supply through lack of accountability (Rothbard

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