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Liberal Politics U. Robert Longley. History and Government Expert. Robert Longley is a U. Facebook Facebook. Congress oversees the entire Federal Reserve System. And the Fed must work within the objectives established by Congress. Yet Congress gave the Federal Reserve the autonomy to carry out its responsibilities without political pressure. The Federal Reserve System was developed and continues to develop as an interesting blend of public and private interests and centralized and decentralized decision-making.
As you continue reading, you will learn about the Fed's structure and responsibilities—what the Fed is and what it does. In Plain English. In Plain English Menu. History of the Fed. History and Purpose of the Fed. History and Responsibilities of the Fed. Board of Governors. The Act provided for a Reserve Bank Organization Committee that would designate no less than eight but no more than twelve cities to be Federal Reserve cities, and would then divide the nation into districts, each district to contain one Federal Reserve City.
The Dilemma of the New York Fed. In , the Bank opened an office in East Rutherford, New Jersey to accommodate currency and check processing operations and conduct electronic payments. In , the Bank opened a branch in the city of Buffalo to serve institutions located in the ten later increased to 14 westernmost counties of New York State.
The Buffalo branch was closed in October During this crisis, the economy looked as if it would crash. To ward off the depression that would follow, Wall Street asked for J. Morgan called a meeting of powerful individuals who could make a difference. Together, they put cash back into the markets, allowing the banks and government to remain afloat. In a way, the Bank Panic was good, as it convinced Congress that the central bank would be a valuable institution.
Six years later, Congress passed legislation and established the Federal Reserve System. These individuals researched the central bank concept by visiting Europe and seeing how the governments there operated. The centralized systems of Britain and Germany made the biggest impression on the commission and were thus the foundation for developing the Federal Reserve System. The National Monetary Commission tweaked the model to include further improvements that the systems of other countries displayed.
This act laid the foundation for the creation of a central bank to reduce volatility in the economy. The regulations are very clear on the function, purpose, and structure of the system. Congress changes the Federal Reserve Act as the financial systems evolve.
President Woodrow Wilson signed the act into law and empowered 12 reserve banks. These Federal reserves can legally print money and thus control the cash supply. Therefore, the banks cannot print money on demand, as this would allow inflation to spiral out of control.
While Congress can amend the bill, the Fed actually operates outside government control. Many people also believe that early intervention by the Fed would have prevented or at least lessened the impact of the Great Depression. Could the Fed have prevented the depression? Would lower interest rates have kept the economy going? World War II is credited with ending the depression. The Federal Reserve bought several government securities, and this injected some much-needed cash into the country and helped inflation remain low.
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