On December 23 1913 president Woodrow Wilson picked up a gold pen and signed into law the Federal Reserve Act It had taken members of Congress more than five years and a lot of debate to develop the act The new law established the Fed eral Reserve as a central bank for the United States As he signed the bill President Wilson said he was grateful to have a part in creating the new organization He believed it would be of lasting benefit to the business of the country The Federal Reserve was established in response to banking panics that rocked the Ameri can economy in the late 1800s and early 1900s The purpose of the Federal Reserve was to prevent such panics by controlling the country's money supply In the more than 100 years of its exis tence the role of the Federal Reserve also known as the Fed has expanded significantly It now plays a major part in the U S econ omy Unlike most other government agencies the Fed operates independently The Fed's independence as well as its response to various financial crises has earned it both praise and criti cism over the years Today the role of the country's central bank remains as controversial as at its
Another act President Wil son signed into law in 1913 provided for America's first federal income
FARMERS MECHANICS SAVINGS
CHAPTER ONE Getting Started The Federal Reserve was not the nation's first attempt at a central bank a government bank to control the nation's money supply Two previous central banks had been established one in 1791 and the other in 1816 Each had lasted for 20 years before closing The first bank was troubled by fraud The second was closed by president Andrew Jackson For a time America went without a central bank Hundreds of banks across the country issued their own colorful banknotes and counterfeit money was everywhere Banks were only loosely regulated Many made risky loans Some did not keep enough money in their reserve accounts the accounts used to clear customers checks or provide customers with currency These conditions led to banking panics in the late 1800s and early 1900s Panics were often sparked by rumors that a bank owner had gotten into financial trouble in the stock market Nervous customers would make a run on the bank That is they would pull their money out of the bank In many cases the bank did not have enough money to pay all its customers As a re During the Panic of 1893 bank runs became common as hundreds of banks closed throughout the
