US Banking System
In 1863, as a means to help finance the Civil War, a system of national banks was instituted by the National Currency Act. The banks each had the power to issue standardized national bank notes based on United States bonds held by the bank. The early national banking system had two main weaknesses. The first was an "inelastic" currency and the second was a lack of liquidity. During the last quarter of the 19th century and the beginning of the 20th century the United States economy went through a series of financial panics. One of the most severe panics, in 1907, made it clear that there was a need for renewed demands for banking and currency reform. The following year Congress enacted the Aldrich-Vreeland Act which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform.
The Federal Reserve System, aka the Federal Reserve or The Fed, is the central banking system of the United States. The system was created in 1913 by the enactment of the Federal Reserve Act. The Federal Reserve Act was a part private and part government banking system composed several different parts. The parts included the presidentially-appointed Board of Governors of the Federal Reserve System in Washington, D.C., the Federal Open Market Committee, 12 regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, numerous private U.S. member banks, and various advisory councils. Currently, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System. Ben Bernanke’s predeceser was the faimed Alan Greenspan. The purpose of the Federal Reserve System is formally stated in the Federal Reserve Act.
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