Federal Reserve System

Prior to the establishment of the Federal Reserve System(FRS), the U. S. economy faced frequent panics, bank failures, and credit scarcity due to unstable banking and financialsystems prevailing in the market. Additionally, due to the rapidindustrialization the decentralized banking system became moreunstable. Specifically, the financial and the economy panicencountered during 1907 forced the congress to establish acentralized bank "The Federal Reserve System".
Congresspassed the Reserve Act in the year 1913 to establish the FRS. The FRS is entitled to provide a safe, secure, and stablefinancial growth for the U. S. As the FRS was created, the structure and functionalities of thecentral bank has evolved in phases. In the year 1935, theFed's monetary policy making body called the Federal OpenMarket Committee (FOMC) was formed to address the financialdepression of the country.
Further, the monetary policy wasrevised from time-to-time to address the financial panics andthe bank runs faced by the public. The monetary policyaddressed the surging inflation faced by passing the FederalReserve Reform Act of 1977. Later, the monetary policy wasentitled to increase the employment rate by passing theEmployment and Balanced Growth act in the year 1978, and itwas decided that the FRS produced the finance report to thecongress twice a year.
Following the severe financial crisis in the year 2007-2008, theU. S. congress passed the Wall Street Reform and ConsumerProtection Act of 2010 to increase the transparency of theworking of the FRS, extend the regulatory responsibilities, andincrease the safety and security of the financial aspects byproviding a new Consumer Financial Protection Bureau. As the working of the FRS directly impacts the financial andeconomical condition of the country and the individuals, itbecomes very important to understand the structure, functionalities, and working of the FRS.