History and economic influence of the federal reserve system.

History and economic influence of the federal reserve system

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Abstract

The Federal Reserve , which is a Central Bank , is one of its most powerful institution in economic matters . The US congress in 1913 established the federal reserve . It was mainly designed to give the US more security , elasticity and stability in its economy and financial structure (Hafer , 2005 . The federal reserve is charged with the implementation of monetary policies and the overseeing of regulations and management of banking institutions

in the US . Its other duties include protecting the consumer credit rights , maintaining the strength and stability of the financial system and provision of a wide range of services to the citizens , government and other financial institution both in and out of the US . Though its importance is unquestionable , its objectivity and efficiency has been under constant question as there is increased concern on the degree of political influence

History

Before the twentieth century all attempts to have central banks were met with stiff resistance as the majority were of the view that such a move will make America British like , something that did not go well with the majority considering the Britons had colonized the US . When Thomas Woodrow Wilson was elected president , things took a new direction Under his leadership , the federal reserve and the sixteenth amendment came into place even though they were British like systems

The federal reserve act also known as The Glass-Owen Bill , popularly referred to as the federal reserve act , was passed on the 23rd of December 1913 . The republican controlled senate made it possible to pass the bill unanimously (The Federal Reserve Bank of Richmond , 2008 Within an hour of its passing it was made law was made law after the presidential ascent . Th nature of its inception and the situation surrounding it has always been viewed with suspicion in terms of political motive . According to the act the federal reserve is an independent central bank though , ironically , the federal government President is charged with the responsibility of appointing its chair (Meltzer Greenspan , 2008 . The act further gave the federal government the power over all monetary policies in US banks . The original law found criticism especially in its Sec . 30 where the right to amend or alter the act is reserved (Meltzer Greenspan , 2008

Other controversies in the original act were in Sec . 341 , where the federal reserve is said to have a succession period of twenty years from its on set unless it is dissolved by the act of congress . The act has not been amended that much and the only noticeable change is the Sarbanes-Oxley act of 2002 that made it impossible for any public official to be a member of the federal reserve board , a director or an officer . This was a step in trying to bring about accountability and minimize the effect of politics on the outfit as its funding is largely from the congress which is a political outfit (Krautkramer...