The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act (signed by Woodrow Wilson), it is a quasi-public and quasi-private (government entity with private components) banking system that comprises (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) twelve regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous other private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils. Since February 2006, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System. Donald Kohn is the current Vice Chairman (Term: June 2006–June 2010).

Banking in the United States

main: Banking in the United States

Central banking in the United States

main: History of central banking in the United States

The first institution with responsibilities of a central bank in the U.S. was the First Bank of the United States, chartered by Congress in 1791 at the urging of Alexander Hamilton. Its charter was not renewed in 1811. In 1816, the Second Bank of the United States was chartered. Early renewal of the bank's charter became the primary issue in the reelection of President Andrew Jackson. After Jackson, who was opposed to the central bank, was reelected, he pulled the government's funds out of the bank. Nicholas Biddle, President of the Second Bank of the United States, responded by contracting the money supply to pressure Jackson to renew the bank's charter. The country entered into a recession, and the bank blamed Jackson's policies. The bank's charter was not renewed in 1836. From 1837 to 1862, in the Free Banking Era there was no formal central bank. From 1862 to 1913, a system of national banks was instituted by the 1863 National Banking Act. A series of bank panics, in 1873, 1893, and 1907, provided strong demand for the creation of a centralized banking system.

The time line of central banking in the United States is as follows:

• 1791–1811

First Bank of the United States

• 1811–1816

No central bank

• 1816–1836

Second Bank of the United States

• 1837–1862

Free Bank Era

• 1863–1913

National Banks

• 1913–Present

Federal Reserve System

Creation of a third central bank

main: History of the Federal Reserve System

The main motivation for the third central banking system came from the Panic of 1907, which renewed demands for banking and currency reform. During the last quarter of the 19th century and the beginning of the 20th century the United States economy went through a series of financial panics. According to proponents of the Federal Reserve System and many economists, the previous national banking system had two main weaknesses: an "inelastic" currency, and a lack of liquidity. The following year Congress enacted the Aldrich-Vreeland Act which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform. The American public believed that the Federal Reserve System would bring about financial stability, so that a panic like the one in 1907 could never happen again; but just 22 years later in 1929, the stock market crashed again, and the United States entered the worst depression in its history, the Great Depression. Critics of the Federal Reserve System including Milton Friedman, Robert Latham Owen and Murray Rothbard p.247 state that the Federal Reserve System helped to cause the Great Depression.