The Federal Reserve Act (ch. 6, 38 Stat. 251, enacted December 23, 1913, 12 U.S.C. ch.3) is the act of Congress that created the Federal Reserve System, the central banking system of the United States of America, which was signed into law by President Woodrow Wilson. Image File history File links Download high resolution version (1275x1753, 363 KB) Summary 1913 newspaper clipping USA Licensing This image is in the public domain in the United States. ... The United States Statutes at Large, commonly referred to as the Statutes at Large, is the official source for the laws and resolutions passed by Congress. ... Look up Act on Wiktionary, the free dictionary Act may refer to: in law, a written document that attests the legality of the transaction. ... is the 357th day of the year (358th in leap years) in the Gregorian calendar. ... Year 1913 (MCMXIII) was a common year starting on Wednesday (link will display the full calendar) of the Gregorian calendar (or a common year starting on Tuesday of the 13-day-slower Julian calendar). ... Title 12 of the United States Code outlines the role of Banks and Banking in the United States Code. ... The Fed redirects here. ... Thomas Woodrow Wilson (December 28, 1856—February 3, 1924), was the twenty-eighth President of the United States. ...

Background

For nearly eighty years, the U.S had been operating without a central bank after the charter for the Second Bank of the United States expired. However, after various financial panics, particularly a severe one in 1907, there was a growing consensus in the American financial community that some sort of banking and currency reform was needed which could provide a ready reserve of liquid assets in case of financial panics and would also provide for a currency that could expand and contract as the seasonal U.S. economy dictated. Some of this was chronicled in the reports of the National Monetary Commission (1909-1912), which was created by the Aldrich-Vreeland Act in 1908. The Second Bank of the United States was a bank chartered in 1816, five years after the expiration of the First Bank of the United States. ... This article does not cite any references or sources. ... National Monetary Commission was a study group created by the Aldrich Vreeland Act of 1908. ... The Aldrich-Vreeland Act of 1908 established a National Monetary Commission which recommended the Federal Reserve Act of 1913. ...

Included in a report of the Commission, submitted to Congress on January 9, 1912, were recommendations and draft legislation with 59 sections, for proposed changes in U.S. banking and currency laws. The proposed legislation was known as the Aldrich Plan, named after the chairman of the Commission, Republican Senator Nelson W. Aldrich of Rhode Island. The Plan called for a system of twelve regional central banks, known as National Reserve Associations, whose actions would be coordinated by a national board of commercial bankers. The Reserve associations would make emergency loans to member banks, create money to provide an elastic currency, and would act as fiscal agents for the U.S. government. State and nationally chartered banks would have the option of subscribing to specified stock in their regional reserve association. is the 9th day of the year in the Gregorian calendar. ... Year 1912 (MCMXII) was a leap year starting on Monday (link will display the full calendar) of the Gregorian calendar (or a leap year starting on Sunday of the 13-day-slower Julian calendar). ... Nelson Wilmarth Aldrich (November 6, 1841 - April 16, 1915) was an American politician. ...

Since the Aldrich Plan essentially gave full control of this system to private bankers, there was widespread opposition to it because of fears that it would become a tool of certain rich and powerful financiers in New York City, referred to as the "Money Trust." From May 1912 through January 1913 the Pujo Committee, a subcommittee of the House Committee on Banking and Currency, held investigative hearings on the alleged Money Trust and its interlocking directorates. These hearings were led by the Democrat lawyer Samuel Untermyer, who later also assisted in preparing the Federal Reserve Act. New York, New York and NYC redirect here. ... The Pujo Committee was a congressional subcommittee which was formed between May 1912 and January 1913 to investigate the so-called money trust, a small group of Wall Street bankers that exerted powerful control over the nations finances. ... Meeting of the House Financial Services Committee The United States House Committee on Financial Services (or House Banking Committee) oversees the entire financial services industry, including the securities, insurance, banking, and housing industries. ... Samuel Untermyer (March 6, 1858- March 16, 1940), also known as Samuel Untermeyer [1] was an American lawyer and civic leader as well as a self-made millionare. ...

In the election of 1912, the populist leaning Democratic Party won control of the White House and both chambers of Congress and that year's party platform stated strong opposition "to the so called Aldrich bill for the establishment of a central bank." However, the platform also called for a systematic revision of banking laws in ways that would provide relief from financial panics, unemployment, and business depression and protect the public from the "domination by what is known as the Money Trust." The U.S. House election, 1912 was an election for the United States House of Representatives in 1912 which coincided with the election of President Woodrow Wilson. ...

Legislative history

To that end, legislation was sponsored in 1913 by the two chairmen of House and Senate Banking and Currency committees, Representative Carter Glass, a Democrat from Virginia and Senator Robert Latham Owen, a Democrat from Oklahoma. According to the House committee report accompanying the Currency bill (H.R. 7837) or the Glass-Owen bill, as it was often called at the time, the legislation was drafted from ideas taken from various proposals, including the Aldrich bill. However, unlike the Aldrich plan which gave controlling interest to private bankers with a small public presence, the new plan gave controlling interest to a public entity, the Federal Reserve Board, with a measure of autonomy to Reserve Banks which, for a period of time, had been allowed to set their district's own discount rate. Also, instead of the proposed currency being an obligation of private banks, the new Federal Reserve note would be an obligation of the U.S. Treasury, and, unlike the Aldrich plan, nationally chartered banks would not have the option of joining as member banks, they were required. The changes were significant enough that opposition to the proposed reserve system plan reversed itself and came largely from the more business friendly Republicans instead of from the more populist leaning Democrats. Carter Glass Carter Glass (January 4, 1858–May 28, 1946) was an American politician from Virginia, who served many years in Congress, as well as U.S. Secretary of the Treasury under Woodrow Wilson. ... This article is about the United States Senator from Oklahoma. ...

After months of hearings, debates, votes and amendments, the proposed legislation, with 30 sections, was enacted as the Federal Reserve Act. The House, on December 22, 1913, agreed to the conference report on the Federal Reserve Act by a vote of 298 yeas to 60 nays with 76 not voting. The Senate, on December 23, 1913, agreed to it by a vote of 43 yeas to 25 nays with 27 not voting. The record shows that there were no Democrats voting "nay" in the Senate and only two in the House. The record also shows that almost all of those not voting on the bill had previously declared their intentions and were paired with members of opposite intentions (See v. 51 Cong. Record, pages 1464, 1487-88).

The Act

The plan adopted in the original Federal Reserve Act called for the creation of a System that contained both private and public entities. There were to be 8 to 12 private regional Federal reserve banks (12 were established) each with its own branches, board of directors and district boundaries (Sections 2, 3, and 4) and the System was to be headed by a seven member Federal Reserve Board made up of public officials appointed by the President (strengthened and renamed in 1935 as the Board of Governors of the Federal Reserve System with the Secretary of the Treasury and the Comptroller of the Currency dropped from the Board - Section 10). Also created as part of the Federal Reserve System was a 12 member Federal Advisory Committee (Section 12) and a single new United States currency, the Federal Reserve Note (Section 16). FRN redirects here. ...

Congress decided in the Federal Reserve Act that all nationally chartered banks were required to become members of the Federal Reserve System. It requires them to purchase specified non-transferable stock in their regional Federal reserve bank and to set aside a stipulated amount of non-interest bearing reserves with their respective reserve bank (since 1980 all depository institutions have been required to set aside reserves with the Federal Reserve and be entitled to certain Federal Reserve services - Sections 2 and 19). State chartered banks have the option of becoming members of the Federal Reserve System and to thus be supervised, in part, by the Federal Reserve (Section 9). Member banks are entitled to have access to discounted loans at the discount window in their respective reserve bank, to a 6% annual dividend in their Federal reserve stock and to other services (Sections 13 and 7). The Act also permits Federal reserve banks to act as fiscal agents for the United States government (Section 15).

Subsequent amendments

In the 1930's the Federal Reserve Act was amended to create the Federal Open Market Committee (FOMC) consisting of the seven members of the Board of Governors of the Federal Reserve System and five representatives from the Federal reserve banks (Section 12B). The FOMC is required to meet at least four times a year (the practice is usually eight times) and is empowered to direct all open-market operations of the Federal reserve banks. The Federal Open Market Committee (FOMC), a component of the Federal Reserve System, is charged under U.S. law with overseeing open market operations in the United States, and is the principal tool of US national monetary policy. ...

Controversy over the origin of the Federal Reserve Act and the nature of the Federal Reserve System has always been part of its history, such as whether Congress has the Constitutional power to delegate its power to coin money or even issue paper money, or whether the Federal Reserve is a tool of the rich and powerful, or whether the Federal Reserves' mistakes deepened the Depression of the 1930s, or whether Federal reserve banks are private or public entities. However, after being amended by some 200 subsequent laws of Congress over the nearly 100 years of its existence, the Federal Reserve Act remains as one of the principal banking laws of the United States. The Fed redirects here. ...

Sources

• Changes in the Banking and Currency System of the United States. House Report No. 69, 63d Congress to accompany H.R. 7837, submitted to the full House by Mr. Glass, from the House Committee on Banking and Currency, September 9, 1913. A discussion of the deficiencies of the then current banking system as well as those in the Aldrich Plan and quotations from the 1912 Democratic platform are laid out in this report, pages 3-11.
• McKinney, Richard J. The Federal Reserve System: Information Sources at the Nation's Central Bank. Vol. 22 Legal Reference Services Quarterly, pp. 29-44 (2003). Briefly explains the historical development of the sections of the Federal Reserve Act and other banking laws and regulations.
• Money Trust Investigation - Investigations of Financial and Monetary Conditions in the United States under House Resolutions Nos. 429 and 504 before a subcommittee of the House Committee on Banking and Currency. 27 Parts. U.S. Government Printing Office. 1913.
• Report of the National Monetary Commission. January 9, 1912, letter from the Secretary of the Commission and a draft bill to incorporate the National Reserve Association of the United States, and for other purposes. Sen. Doc. No. 243. 62d Congress. U.S. Government Printing Office. 1912.
• Voting record on the conference report of the Federal Reserve Act. Vol. 51 Congressional Record, pages 1464 and 1487-1488, December 22 and 23, 1913.
• Wicker, Elmus. The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed. 2005, Ohio University Press, 120 pp. See book review.

is the 9th day of the year in the Gregorian calendar. ... Year 1912 (MCMXII) was a leap year starting on Monday (link will display the full calendar) of the Gregorian calendar (or a leap year starting on Sunday of the 13-day-slower Julian calendar). ...

External links

• Text of the current Federal Reserve Act, at federalreserve.gov
• Text of Federal Reserve Act as laid out in the U.S. Code, Cornell Law School
• Historical Beginnings... The Federal Reserve by Roger T. Johnson, Federal Reserve Bank of Boston
• Modern Money Mechanics - Booklet printed by the Federal Reserve, now out of print
• "Paul Warburg's Crusade to Establish a Central Bank in the United States"
• The Federal Reserve System In Brief - An online publication from the Federal Reserve Bank of San Francisco.