Federal Reserve Centennial
Learn about central banking and the Federal Reserve System. Find resources for teaching about the purposes and functions of the nation’s central bank, the history of the Federal Reserve, and its roles and responsibilities. Resources include free videos, maps, photos, and lesson plans.
December 2013 marked the 100-year anniversary of the signing of the Federal Reserve Act, which created the nation's central banking system as it is known today. We invite you to learn more about us, our history, our people, and how the Federal Reserve affects you.
Explore 100 Years of Fed History
Visit the Federal Reserve History Web Gateway to learn more about the Federal Reserve through artifacts, videos, biographies, and more! Visit FederalReserveEducation.org for lesson plans on Fed History and a variety of personal finance and economic topics.
How does the Federal Reserve affect the lives of Americans?
Through their own words, Federal Reserve employees and others examine the role and responsibilities of the Federal Reserve and how its work affects the lives of people both inside and outside the Fed.
Federal Reserve Banks
The Federal Reserve System is made up of twelve districts or service areas.
Each of the 12 Federal Reserve Banks is separately incorporated, and each has its own president and board of directors. Presidents are appointed to five-year terms by the bank’s board of directors. Each branch office also has its own board of directors.
The directors serve three-year terms and represent the various sectors of the economy, including business and industry, agriculture, finance, labor, and consumers.
Although the Reserve Banks were created by legislative act, they receive no budget appropriations from Congress. Each of them is self-sufficient, earning income from interest on financial holdings, from interest on loans to depository financial institutions, and from fees for the services provided to those institutions.
At the end of each year, Reserve Banks return to the U.S. Treasury all earnings in excess of operating expenses.
Board of Governors of the Federal Reserve
The Board of Governors in Washington, DC, provides general oversight of the Reserve Banks. It is composed of seven members who are appointed by the President and confirmed by the Senate to serve 14-year terms, which are staggered so that one expires every two years.
Federal Open Market Committee (FOMC)
The Federal Open Market Committee (FOMC) is the System’s main body for carrying out an important role in the U.S. economy: the formulation and conduct of monetary policy.
The committee is composed of twelve members, including the seven members of the Board of Governors and five of the Reserve Bank presidents.
The New York Reserve Bank’s president serves continuously and is the FOMC’s vice chairman. The other Reserve Bank presidents serve four at a time in one-year rotating terms. The Cleveland Reserve Bank’s president serves in alternate years with the president of the Chicago Bank. All twelve Reserve Bank presidents attend FOMC meetings, and all actively participate in policy discussions.
The History of the Federal Reserve System
Many people are surprised to learn that the Federal Reserve System is not the first U.S. central bank. Congress made two unsuccessful attempts at central banking before the Federal Reserve was established.
The System's earliest precursor, the First Bank of the United States, was established by Congress in 1791 on a 20-year charter, with the mandate to "manage the government's money and to regulate the nation's credit." The Bank acted as the government's fiscal agent, marketing its securities, holding its revenues, and paying its debts.
The federal government maintained partial control of the Bank, but it was led primarily by private investors. The Bank's main office was located in Philadelphia and its branches were concentrated in large northeastern cities.
The Bank successfully carried out its mandate, but met with considerable opposition. Some Americans feared the Bank because of its size. Some believed it was dominated by narrowly defined private interests. And some criticized its geographic concentration. Congress narrowly defeated the re-chartering of the Bank in 1811.
A number of problems quickly surfaced when the U.S. economy operated without a central bank:
- There was no agency to regulate banking and credit.
- Many private banks began issuing their own currency, but the value of these notes was not strictly controlled, nor was this money uniformly accepted.
- The availability of currency varied widely by region.
- The government lacked a reliable mechanism for marketing its securities and a reliable institution to provide it with banking services.
Four years of bank runs and other economic disruptions convinced Congress that the country needed a central bank, and the Second Bank of the United States was chartered in 1816. Much like its predecessor, the Second Bank was predominantly private ownership and its governance was geographically centralized. Many Americans also viewed this Bank, in the words of then-President Andrew Jackson, as "a concentration of power in the hands of a few men irresponsible to the people." When its charter expired in 1836, the Second Bank of the United States ceased its role as America's central bank.
Again, the country was plagued with a hodgepodge of private currencies issued by commercial banks. Although Congress passed a number of acts aimed at restoring balance to the nation's financial system, the U.S. economy suffered the shocks of bank panics and failures. Following a severe bank panic in 1907, Congress created the National Monetary Commission to study the nation's money and banking system and to recommend changes.
After much debate, Congress passed the Federal Reserve Act, which President Woodrow Wilson signed into law in December 1913. The act established the Federal Reserve Banks, whose purpose would be to furnish an elastic currency for the country and to establish more effective banking supervision. The System was specifically designed to be insulated from short-term political pressures, to be a partnership of public and private control, and to represent regional economies and various sectors of the economy.