The Federal Reserve Act of 1913 is a significant piece of legislation that established the Federal Reserve System, the central banking system of the United States. The act was signed into law by President Woodrow Wilson on December 23, 1913, and it marked a crucial reform in the country’s financial and monetary system. The Federal Reserve Act aimed to address issues related to financial panics, banking instability, and the lack of a flexible and responsive monetary system.

Key provisions and features of the Federal Reserve Act of 1913 include:

1. **Creation of the Federal Reserve System:**
– The primary purpose of the act was to create a decentralized central banking system known as the Federal Reserve System. The system consists of twelve regional banks, each serving a designated Federal Reserve District.

2. **Structure of the Federal Reserve System:**
– The Federal Reserve System is composed of the following key components:
– **Board of Governors:** The act established a Board of Governors in Washington, D.C., consisting of seven members appointed by the President and confirmed by the Senate. The board is responsible for overseeing the entire Federal Reserve System.
– **Federal Reserve Banks:** Twelve regional banks were established across the country to serve as the operating arms of the Federal Reserve System. These banks, along with their branches, facilitate banking operations and implement monetary policy.

3. **Functions of the Federal Reserve:**
– The Federal Reserve was granted several important functions, including:
– **Monetary Policy:** The Federal Reserve is responsible for formulating and implementing monetary policy to achieve stable prices and maximum employment.
– **Bank Supervision:** The Federal Reserve has supervisory authority over member banks to ensure their stability and soundness.
– **Clearing and Settlement:** The Federal Reserve facilitates the clearing and settlement of checks and electronic payments.

4. **Discount Window:**
– The Federal Reserve Act established the “discount window,” allowing member banks to borrow funds from the Federal Reserve in times of need. This provides a mechanism for banks to access liquidity and helps maintain stability in the banking system.

5. **Federal Open Market Committee (FOMC):**
– The act created the Federal Open Market Committee, consisting of members of the Board of Governors and representatives from the Federal Reserve Banks. The FOMC is responsible for setting monetary policy, including decisions related to interest rates and open market operations.

6. **Currency and Coinage:**
– The act provided for the issuance of Federal Reserve Notes, which are the primary form of paper currency in the United States. The Federal Reserve also gained the authority to regulate the supply of money in circulation.

7. **Regional Banks:**
– The Federal Reserve Banks were granted certain powers, including the ability to issue currency, make loans to member banks, and serve as the fiscal agents for the U.S. government.

8. **Member Banks:**
– National banks were required to become members of the Federal Reserve System, and state-chartered banks had the option to join. Member banks were required to hold a certain amount of their capital as reserves with the Federal Reserve.

9. **Independence:**
– While subject to some oversight by Congress, the Federal Reserve was designed to be an independent entity to insulate monetary policy decisions from short-term political pressures.

10. **Amendments and Evolving Role:**
– The Federal Reserve Act has undergone amendments over the years, reflecting changes in the financial landscape and the evolving role of the central bank. Notable amendments include those made during the Great Depression and subsequent legislation, such as the Banking Act of 1935.

The Federal Reserve Act of 1913 remains a foundational piece of legislation that established the framework for the U.S. central banking system. The Federal Reserve plays a crucial role in influencing the nation’s monetary and financial conditions, regulating banks, and contributing to the stability and soundness of the overall economy.