View source for Federal Reserve Act

{{Short description|1913 United States law creating the Federal Reserve System}}
{{Use American English|date=March 2025}}
{{Infobox U.S. legislation
| shorttitle = Federal Reserve Act
| =
| longtitle = An Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes
| colloquialacronym =
| nickname =
| enacted by = 63rd
| effective date =
| public law url = [https://fraser.stlouisfed.org/scribd/?title_id=975&filepath=/docs/historical/fr_act/1913_fedresact_publiclaw43.pdf 63-43]
| cite public law = {{USPL|63|43}}
| cite statutes at large = ch. 6, {{USStat|38|251}}
| acts amended =
| title amended =
| sections created =
| sections amended =
| leghisturl = https://web.archive.org/web/20100324115751/http://www.llsdc.org/FRA%2DLH/ <!-- for lack of a better alternative -->
| introducedin = House
| introducedbill = {{USBill|63|HR|7837}}
| introducedby = [[Carter Glass]] ([[Democratic Party (United States)|D]]-[[Virginia|VA]])
| introduceddate = August 29, 1913
| committees = [[United States House Committee on Banking and Currency|House Banking]], [[United States Senate Committee on Banking and Currency|Senate Banking]]
| passedbody1 = House
| passeddate1 = September 18, 1913
| passedvote1 = [https://www.govtrack.us/congress/votes/63-1/h33 287–85, 5 Present]
| passedbody2 = Senate
| passeddate2 = December 18, 1913
| passedvote2 = [https://www.govtrack.us/congress/votes/63-2/s184 54–34]
| conferencedate = December 22, 1913
| passedbody3 = House
| passeddate3 = December 22, 1913
| passedvote3 = [https://www.govtrack.us/congress/votes/63-2/h73 298–60]
| passedbody4 = Senate
| passeddate4 = December 23, 1913
| passedvote4 =[https://www.govtrack.us/congress/votes/63-2/s185 43–25]
| signedpresident = [[Woodrow Wilson]]
| signeddate = December 23, 1913
| amendments = [[1933 Banking Act]]<br>[[Banking Act of 1935]]<br>[[Dodd–Frank Wall Street Reform and Consumer Protection Act]]<br />[[Economic Growth, Regulatory Relief, and Consumer Protection Act]]
| SCOTUS cases =
}}

[[File:Fed Reserve.JPG|thumb|right|Federal Reserve]]

The '''Federal Reserve Act''' was passed by the [[63rd United States Congress]] and signed into law by President [[Woodrow Wilson]] on December 23, 1913. The law created the [[Federal Reserve System]], the [[central bank]]ing system of the [[United States]].

Following the [[1912 United States elections|1912 elections]], in which Democrats gained control of Congress and the presidency, President Wilson, Congressman [[Carter Glass]], and Senator [[Robert Latham Owen]] introduced legislation to create a central bank. The proposal was shaped by debate between those who favored private control of a central bank, such as proponents of the earlier [[Aldrich Plan]], and those who favored government control, including [[Progressivism in the United States|progressives]] like [[William Jennings Bryan]]. Wilson prioritized the bill as part of his [[The New Freedom|New Freedom]] domestic agenda, and it passed Congress largely as introduced.

The Federal Reserve Act created the Federal Reserve System, consisting of twelve regional [[Federal Reserve Bank]]s jointly responsible for managing the [[money supply]], making loans and providing oversight to banks, and serving as a [[lender of last resort]]. It also established the [[Federal Reserve Board of Governors]], members of which are appointed by the president. The [[1933 Banking Act]] amended the Federal Reserve Act to create the [[Federal Open Market Committee]], which oversees the Federal Reserve's [[open market operation]]s. A later amendment required the Federal Reserve to aim for maximum employment, stable prices, and moderate long-term interest rates.

== Overview ==
The Federal Reserve Act created a system of private and public entities. There were to be at least eight and no more than twelve private regional Federal Reserve banks. [[Federal Reserve Bank|Twelve were established]], and each had various branches, a board of directors, and district boundaries. The Federal Reserve Board, consisting of seven members, was created as the governing body of the Fed. Each member is appointed by the U.S. president and confirmed by the U.S. Senate. In 1935, the Board was renamed and restructured. Also created as part of the Federal Reserve System was a 12-member Federal Advisory Committee and a single new United States currency, the [[Federal Reserve Note]]. The Federal Reserve Act created a national currency and a monetary system that could respond effectively to the stresses in the banking system and create a stable financial system. The goal of the system was to ensure that there would always be a supply of money and credit in times of financial strain.<ref>{{Cite journal |last=Sprague |first=O. M. W. |date=1914 |title=The Federal Reserve Act of 1913 |url=https://www.jstor.org/stable/1883621 |journal=The Quarterly Journal of Economics |volume=28 |issue=2 |pages=213–254 |doi=10.2307/1883621 |jstor=1883621 |issn=0033-5533|url-access=subscription }}</ref> With the goal of creating a national monetary system and financial stability, the Federal Reserve Act also provided many other functions and financial services for the economy, such as check clearing and collection for all members of the Federal Reserve.

With the passing of the Federal Reserve Act, Congress required that all nationally chartered banks become members of the Federal Reserve System.  These banks were required to purchase specified non-transferable stock in their regional Federal Reserve banks, and to set aside a stipulated amount of non-interest bearing reserves with their respective reserve banks. Since 1980, all depository institutions have been required to set aside reserves with the Federal Reserve.  Such institutions are entitled to certain Federal Reserve services. State chartered banks were given the option of becoming members of the Federal Reserve System and in the case of the exercise of such option were to be subject to supervision, in part, by the Federal Reserve System. Member banks became entitled to have access to discounted loans at the [[discount window]] in their respective reserve banks, to a 6% annual dividend in their Federal Reserve stock, and to other services.

== Background ==
Central banking has made various institutional appearances throughout the history of the United States. These institutions started with the [[First Bank of the United States|First]] and [[Second Bank of the United States|Second]] banks of the United States, which were championed in large part by [[Alexander Hamilton]].

=== First Bank of United States ===
The American financial system was deeply fragmented after the [[American Revolutionary War]]. The government was burdened with large wartime debts, and the new republic needed a strong financial institution to give the country a resilient financial footing. [[Alexander Hamilton]] and [[Thomas Jefferson]] had opposing views regarding whether or not the US could benefit from a European-style national financial institution. Hamilton was in favor of building a strong centralized political and economic institution to solve the country's financial problem. He argued that a central bank could bring order to the US monetary system, manage the government's revenues and payments, and provide credit to both the public and private sectors. On the other hand, Jefferson was deeply suspicious of a central bank because, he argued, it would undermine democracy. Jefferson and Southern members of congress also believed that a strong central financial institution would serve commercial interests of the north at the expense of Southern-based agriculture interests whose credit was provided by local banks during the post-revolutionary war era.
[[First Bank of the United States|The First Bank of the United States]] was established in 1791 chartered for a period of twenty years. The US government was the largest shareholder of the bank. Despite its shareholder status, the government was not permitted to participate in management of the bank. The bank accepted deposits, issued bank notes, and provided short-term loans to the government. It also functioned as a clearinghouse for government debt. The bank could also regulate state-chartered banks to prevent [[overproduction]] of banknotes. While some credited the bank with helping stabilize government finances and influence the broader economy, it remained a source of controversy. Many [[Jeffersonian democracy|Jeffersonians]] argued that the bank was unconstitutional and concentrated too much financial power in a centralized institution.<ref>{{Cite book |last1=Ellis |first1=Joseph J. |url=https://archive.org/details/americansphinx00jose/page/145/mode/1up?q=central+bank |title=American sphinx : the character of Thomas Jefferson |last2=Rogers D. Spotswood Collection. TxSaTAM |date=1998 |publisher=New York : Vintage Books |others=Internet Archive |isbn=978-0-679-76441-0}}</ref><ref>{{Cite web |title=Founders Online: Opinion on the Constitutionality of the Bill for Establishing … |url=https://founders.archives.gov/documents/Jefferson/01-19-02-0051#:~:text=15%20February%201791-,Opinion%20on%20the%20Constitutionality%20of%20the%20Bill%20for%20Establishing%20a,laws%20of%20Forfeiture%20and%20Escheat. |access-date=2025-04-20 |website=founders.archives.gov |language=en}}</ref> In 1811, the first bank of the United States failed to be renewed by one vote in both the House and the Senate.<ref>{{cite web|url=http://www.let.rug.nl/usa/essays/general/a-brief-history-of-central-banking/the-first-bank-of-the-united-states-(1791-1811).php|title=The First Bank of the United States (1791-1811) < A Brief History of Central Banking in the United States - Edward Flaherty < General < Essays < American History From Revolution To Reconstruction and beyond|website=Let.rug.nl}}</ref><ref>{{cite web|url=https://eh.net/encyclopedia/the-first-bank-of-the-united-states/|title=The First Bank of the United States|website=eh.net}}</ref>

=== Second Bank of the United States ===
After the War of 1812, economic instability necessitated the creation of a second national bank. Due to expanding money supply and lack of supervision, individual bank activity sparked high inflation. In 1816, a [[Second Bank of the United States|second national bank]] was created with a charter of twenty years. Three years later, during the [[panic of 1819]] the second bank of the United States was blamed for overextending credit in a land boom, and would tighten up credit policies following the panic.<ref>{{cite book |last1=Wilentz |first1=Sean |title=The Rise of American Democracy: Jefferson to Lincoln |date=17 September 2006 |publisher=W. W. Horton and Company}}</ref>
The Second bank was unpopular among the western and southern state-chartered banks, and constitutionality of a national bank was questioned. President [[Andrew Jackson|Jackson]] would come into office, and wished to end the current central bank during his presidency. Under the premise that the bank favored a small economic and political elite at the expense of the public majority, the Second Bank became private after its charter expired in 1836, and would undergo liquidation in 1841.

For nearly 80 years, the U.S. was without a central bank after the charter for the [[Second Bank of the United States]] was allowed to expire. After various financial panics, particularly a [[panic of 1907|severe one in 1907]], some Americans became persuaded that the country needed some sort of banking and currency reform that would,<ref>{{cite web |title=The Panic of 1907 |url=https://www.federalreservehistory.org/essays/panic-of-1907 |website=Federal Reserve History}}</ref> when threatened by financial panics, provide a ready reserve of liquid assets, and furthermore allow for currency and credit to expand and contract seasonally within the U.S. economy.

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. 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.<ref name=Commission>[http://llsdc.org/attachments/files/124/FRA-LH_S-Doc-62-243.pdf Report of the National Monetary Commission] {{webarchive|url=https://web.archive.org/web/20100609015132/http://www.llsdc.org/attachments/files/124/FRA-LH_S-Doc-62-243.pdf |date=2010-06-09 }}. 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. 62nd Congress. U.S. Government Printing Office. 1912.</ref> The proposed legislation was known as the [[Aldrich-Vreeland Act|Aldrich Plan]], named after the chairman of the Commission, Republican Senator [[Nelson W. Aldrich]] of Rhode Island.

The Plan called for the establishment of a National Reserve Association with 15 regional district branches and 46 geographically dispersed directors primarily from the banking profession. The Reserve Association would make emergency loans to member banks, print money, and act as the fiscal agent for the U.S. government. State and nationally chartered banks would have the option of subscribing to specified stock in their local association branch.<ref name=Commission /> It is generally believed that the outline of the Plan had been formulated in a secret meeting on [[Jekyll Island]] in November 1910, which Aldrich and other well connected financiers attended.<ref name=Whitehouse>[https://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3815 Paul Warburg's Crusade to Establish a Central Bank in the United States] Michael A. Whitehouse, 1989. In attendance at the meeting were Aldrich; [[Paul Warburg]]; [[Frank A. Vanderlip]], president of National City Bank; [[Henry P. Davison]], a J.P. Morgan partner; [[Benjamin Strong]], vice president of Banker's Trust Co.; and [[A. Piatt Andrew]], former secretary of the National Monetary Commission and then assistant secretary of the Treasury.</ref>

Since the Aldrich Plan gave too little power to the government, there was strong opposition to it from rural and western states because of fears that it would become a tool of bankers, specifically the Money Trust of New York City.<ref>{{Cite journal |last=Wicker |first=Elmus |title=The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed |year=2005 |publisher=Ohio University Press.}} See also [http://eh.net/bookreviews/library/1104 book review].</ref>  Indeed, from May 1912 through January 1913 the [[Pujo Committee]], a subcommittee of the [[United States House Committee on Banking and Currency|House Committee on Banking and Currency]], held investigative hearings on the alleged Money Trust and its interlocking directorates.  These hearings were chaired by Rep. [[Arsene Pujo]], a Democratic representative from Louisiana.<ref name=Pujo>[https://fraser.stlouisfed.org/title/80 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.</ref>

In the [[United States House elections, 1912|election of 1912]], the Democratic Party won control of the White House and both chambers of Congress.  The party's platform stated strong opposition to the Aldrich Plan.  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 would protect the public from the "domination by what is known as the Money Trust." The final plan, however, was quite similar to the Aldrich Plan, with a few revisions. Sen. Carter Glass made these revisions, although the main premise of the Aldrich Plan was in there.<ref name="H-Rept">{{cite web |url=http://www.llsdc.org/assets/FRA-LH_H-Rpt-63-69-pp-1-74.pdf |title=Archived copy |access-date=2009-08-20 |url-status=dead |archive-url=https://web.archive.org/web/20110927113502/http://www.llsdc.org/attachments/files/109/FRA-LH_H-Rpt-63-69-pp-1-74.pdf |archive-date=2011-09-27 }}</ref> Changes in the Banking and Currency System of the United States, House Report No. 69, 63rd Congress to accompany H.R. 7837, from the House Committee on Banking and Currency, was submitted to the full House by [[Carter Glass]], on 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.<ref>Parthemos, James. [http://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/economic_review/1988/pdf/er740403.pdf "The Federal Reserve Act of 1913 in the Stream of U.S. Economic History"] {{Webarchive|url=https://web.archive.org/web/20121019100835/http://www.richmondfed.org/publications/research/economic_review/1988/pdf/er740403.pdf |date=2012-10-19 }}, Federal Reserve of Richmond Economic Review, Richmond, July 1987. Retrieved on 11 November 2013.</ref>

== Legislative history ==
{{unreferenced section|date=April 2016}}
{{Woodrow Wilson series}}
Attempts to reform currency and banking had been made in the United States prior to the introduction of H.R. 7837. The first major form of this type of legislation came through with the [[First Bank of the United States]] in 1791. Championed by [[Alexander Hamilton]], this established a central bank that included in a three-part expansion of federal fiscal and monetary power (including federal mint and excise taxes). Attempts were made to extend this bank's charter, but they would fail before the charters expiration in 1811. Paper money funding of the [[War of 1812]] led to inflation. Banks were allowed to waive redemption in specie while forcing their debtors to repay as usual. In 1816, the U.S. Congress chartered the Second Bank, which pursued contraction policies.<ref>{{Cite book |last=Ph.D |first=Wendy Martin |url=https://www.google.com/books/edition/All_Things_Dickinson/xxfOEAAAQBAJ?hl=en&gbpv=1&dq=%22irredeemable%22+%22Bank+of+the+United+States%22+%22inflation%22&pg=PA599&printsec=frontcover |title=All Things Dickinson: An Encyclopedia of Emily Dickinson's World [2 volumes] |date=2014-01-27 |publisher=Bloomsbury Publishing USA |isbn=978-1-4408-0332-1 |language=en}}</ref> The charter for the Second Bank would expire in 1836, leaving the U.S. without a central bank for nearly eighty years.

In the aftermath of the [[Panic of 1907]], there was general agreement among leaders in both parties of the necessity to create some sort of central banking system to provide coordination during financial emergencies. Most leaders also sought currency reform, as they believed that the roughly $3.8 billion in coins and [[banknote]]s did not provide an adequate money supply during financial panics. Under conservative Republican Senator [[Nelson Aldrich]]'s leadership, the [[National Monetary Commission]] had put forward a plan to establish a central banking system that would issue currency and provide oversight and loans to the nation's banks. However, many progressives distrusted the plan due to the degree of influence bankers would have over the central banking system.<ref>{{Cite book |author-link=Christopher W. Shaw|last=Shaw |first=Christopher W. |title=Money, Power, and the People: The American Struggle to Make Banking Democratic |url=https://press.uchicago.edu/ucp/books/book/chicago/M/bo38871708.html |publisher=University of Chicago Press |year=2019 |isbn=978-0226636337 |location=Chicago |pages=75–82}}</ref> Relying heavily on the advice of [[Louis Brandeis]], Wilson sought a middle ground between progressives such as [[William Jennings Bryan]] and conservative Republicans like Aldrich.<ref>Clements 1992, pp. 40–42</ref> He declared that the banking system must be "public not private, [and] must be vested in the government itself so that the banks must be the instruments, not the masters, of business."<ref>Heckscher 1991, pp. 316-17.</ref>

Democratic Congressman [[Carter Glass]] and Senator [[Robert L. Owen]] crafted a compromise plan in which private banks would control twelve regional [[Federal Reserve Bank]]s, but a controlling interest in the system was placed in a central board filled with presidential appointees.<ref>{{Cite journal |last=Willis |first=Henry Parker |date=1914 |title=The Federal Reserve Act |url=https://www.jstor.org/stable/1804981 |journal=The American Economic Review |volume=4 |issue=1 |pages=1–24 |jstor=1804981 |issn=0002-8282}}</ref> The system of twelve regional banks was designed with the goal of diminishing [[Wall Street]]'s influence. Wilson convinced Bryan's supporters that the plan met their demands for an elastic currency because Federal Reserve notes would be obligations of the government.<ref>Link 1954, pp. 43–53</ref> The bill passed the House in September 1913, but it faced stronger opposition in the Senate. After Wilson convinced just enough Democrats to defeat an amendment put forth by bank president [[Frank A. Vanderlip]] that would have given private banks greater control over the central banking system, the Senate voted 54–34 to approve the Federal Reserve Act. Wilson signed the bill into law in December 1913.<ref>Clements 1992, pp. 42–44</ref>

== Amendments ==
The Federal Reserve Act was amended in major ways over time, e.g. to account for Hawaii and Alaska's admission to the Union, for restructuring of the Fed's districts, and to specify jurisdictions.<ref>Federal Reserve. [http://www.federalreserve.gov/aboutthefed/section2.htm "Federal Reserve Act, Section 2"]</ref>

=== Monetary expansion in World War I ===
In June 1917 Congress passed major amendments to the Act in order to enable monetary expansion to cover the expected costs of World War I, which the US had just entered in April.  The amendments allowed a more flexible definition of the gold backing the dollar currency in circulation.  This relaxation de facto allowed less gold backing for each dollar note, and enabled the currency in circulation to more than double from $465m to $1247m just from June to December 1917. This reform has been argued to have been necessary to finance the expected $2 billion dollar cost of participating in the war for a year. Price inflation followed.<ref>Raymond Fishe. 1991. [https://www.jstor.org/stable/1992748 The Federal Reserve Amendments of 1917: The Beginning of a Seasonal Note Issue Policy]. ''[[Journal of Money, Credit and Banking]]'' 23:3, Part 1 (Aug., 1991), pp. 308-326. (On jstor]).</ref><ref>[https://fraser.stlouisfed.org/files/docs/publications/FRB/1910s/frb_071917.pdf ''Federal Reserve Bulletin'' 3:7, 1 July 1917].</ref>

=== Charter extension ===
The Federal Reserve Act originally granted a twenty-year charter to the Federal Reserve Banks: "To have succession for a period of twenty years from its organization unless it is sooner dissolved by an Act of Congress, or unless its franchise becomes forfeited by some violation of law."<ref>{{cite web|url=https://fraser.stlouisfed.org/title/975 |title=Federal Reserve Act &#124; Title &#124; FRASER &#124; St. Louis Fed |publisher=Fraser.stlouisfed.org |date= |accessdate=2022-07-04}}</ref> This clause was [[McFadden Act|amended]] on February 25, 1927: "To have succession after the approval of this Act until dissolved by Act of Congress or until forfeiture of franchise for violation of law."<ref>{{cite web|url=https://uscode.house.gov/statviewer.htm?volume=44&page=1234#|title=Sixty-Ninth Congress Sess. II|date=1927|page=1234|website=Uscode.house.gov|access-date=5 July 2022}}</ref> The success of this amendment is notable, as in 1933, the US was in the throes of the [[Great Depression]] and public sentiment with regards to the Federal Reserve System and the banking community in general had significantly deteriorated. Given the political climate, including of [[Franklin D. Roosevelt]]’s administration and [[New Deal]] legislation, it is uncertain whether the Federal Reserve System would have survived.

=== Federal Open Market Committee ===
In 1933, by way of the [[1933 Banking Act|Banking Act of 1933]], the Federal Reserve Act was amended to create the [[Federal Open Market Committee]] (FOMC), which consists of the seven members of the Board of Governors of the Federal Reserve System and five representatives from the Federal Reserve Banks. The FOMC is required to meet at least four times a year (in practice, the FOMC usually meets eight times) and has the power to direct all open-market operations of the Federal Reserve banks.

=== 12 USC § 225a ===
On November 16, 1977, the Federal Reserve Act was [[Amendment|amended]] to require the Board and the FOMC "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."  The Chairman was also required to appear before Congress at semi-annual hearings to report on the conduct of monetary policy, on economic development, and on the prospects for the future. The Federal Reserve Act has been amended by some 200 subsequent laws of Congress. It continues to be one of the principal banking laws of the United States.<ref>{{Cite book |last=Barak |first=Gregg |url=https://www.google.com/books/edition/Theft_of_a_Nation/NrYjKTq6zn4C?hl=en&gbpv=1&dq=Federal+Reserve+Act+%22principal%22+banking+law&pg=PA42&printsec=frontcover |title=Theft of a Nation: Wall Street Looting and Federal Regulatory Colluding |date=2012-08-02 |publisher=Bloomsbury Publishing PLC |isbn=978-1-4422-0778-3 |language=en}}</ref>

== Impact ==
The passing of the Federal Reserve act of 1913 carried implications both domestically and internationally for the United States economic system.<ref>{{cite journal |last=Broz |first=J. Lawrence |jstor=2601371 |title=Origins of the Federal Reserve System: International Incentives and the Domestic Free Rider Problem |journal=International Organization |year=1999 |volume=53 |issue=1 |pages=39–70 |doi=10.1162/002081899550805|s2cid=155001158 }}</ref>  The absence of a central banking structure in the U.S. previous to this act left a financial essence that was characterized by immobile reserves and inelastic currency.<ref>Roger T. Johnson, ''Historical Beginnings... The Federal Reserve'', p. 14, Federal Reserve Bank of Boston (1999), at [http://www.bos.frb.org/about/pubs/begin.pdf] {{Webarchive|url=https://web.archive.org/web/20101225064903/http://www.bos.frb.org/about/pubs/begin.pdf|date=2010-12-25}}.</ref> Creating the Federal Reserve gave the Federal Reserve control to regulate inflation, even though the government control over such powers would eventually lead to decisions that were controversial.  Some of the most prominent implications include the internationalization of the [[International use of the US dollar|U.S. Dollar as a global currency]], the impact from the perception of the Central Bank structure as a public good by creating a system of financial stability (Parthemos 19-28), and the Impact of the Federal Reserve in response to economic panics.<ref>Elias, Early and Jordá, Óscar. [http://www.frbsf.org/economic-research/publications/economic-letter/2013/may/crises-before-after-creation-fed/ "Crisis Before and After the Creation of the Fed" FRBSF Economic Letter, May 6, 2013]</ref> The Federal Reserve Act also permitted national banks to make [[mortgage loan]]s for farm land, which had not been permitted previously.<ref>{{cite book |title=A Monetary History of the United States, 1867–1960 |first1=Milton |last1=Friedman |author-link1=Milton Friedman |first2=Anna Jacobson |last2=Schwartz |author-link2=Anna Jacobson Schwartz |year=1963 |page=244 |series=[[National Bureau of Economic Research]] |publisher=[[Princeton University Press]] |isbn=0-691-04147-4 |lccn=63-7521 |url=https://books.google.com/books?id=Q7J_EUM3RfoC&pg=PA244}}</ref>

== Criticisms ==
{{main|Criticism of the Federal Reserve}}
Throughout the history of the United States, there has been an enduring economic and political debate regarding the costs and benefits of central banking.  Since the inception of a central bank in the United States, there were multiple opposing views to this type of economic system. Opposition was based on protectionist sentiment; a central bank would serve a handful of financiers at the expense of small producers, businesses, farmers and consumers, and could destabilize the economy through speculation and inflation. This created even further controversy over who would select the decision-makers in charge of the Federal Reserve. Proponents argued that a strong banking system could provide enough credit for a growing economy and avoid economic depressions. Other critical views included the belief that the bill gave too much power to the federal government after the senate revised the bill to create 12 board members who were each appointed by the president.

Preceding the creation of the Federal Reserve, no U.S. central banking systems lasted for more than 25 years. Some of the questions raised include: whether Congress has the Constitutional power to delegate its power to coin money ([[Enclave Clause|Article 1, Sec. 8, Clause 5]], states: "The Congress shall have power To coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures"), whether the structure of the Federal Reserve is transparent enough, whether the Federal Reserve is a public [[cartel]] of private banks (also called a private banking cartel) established to protect powerful financial interests, fears of inflation, high government deficits, and whether the Federal Reserve's actions increased the severity of the Great Depression in the 1930s (and/or the severity or frequency of other [[boom and bust|boom-bust]] economic cycles, such as the [[late 2000s recession]]).<ref>{{cite journal|author-link2=Christina D. Romer |last1=Hsieh|first1=Chang Tai|last2=Romer|first2=Christina D.|title=Was the Federal Reserve Constrained by the Gold Standard During the Great Depression? Evidence from the 1932 Open Market Program|journal=[[Journal of Economic History]]|year=2006|volume=66|issue=1|pages=140–176|doi=10.1017/S0022050706000064|s2cid=6337216|url=http://faculty.chicagobooth.edu/chang-tai.hsieh/research/jeh%201932%20omo.pdf}}</ref><ref>{{cite journal|title=Monetary Intervention Mitigated Banking Panics during the Great Depression: Quasi-Experimental Evidence from a Federal Reserve District Border, 1929–1933|first1=Gary|last1=Richardson|first2=William|last2=Troost|journal=[[Journal of Political Economy]]|volume=117|issue=6|year=2009|pages=1031–1073|doi=10.1086/649603|s2cid=154627950}}</ref><ref>{{cite journal|last=Wheelock|first=David C.|url=http://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf|title=Monetary Policy in the Great Depression: What the Fed Did, and Why|journal=Federal Reserve Bank of St. Louis Review|pages=3–28}}</ref>

== References ==
{{Reflist}}

=== Works cited ===
* {{cite book|last1=Clements|first1=Kendrick A.|title=The Presidency of Woodrow Wilson|date=1992|publisher=University Press of Kansas|isbn=978-0-7006-0523-1|url-access=registration|url=https://archive.org/details/presidencyofwood00clem}}
* {{cite book |title=Woodrow Wilson |last=Heckscher |first=August |publisher=Easton Press |year=1991}}
* [[Arthur S. Link|Link, Arthur S.]] ''Woodrow Wilson and the Progressive Era, 1910–1917'' (1954) [https://archive.org/details/woodrowwilsonpr00link online]

== External links ==
* [https://www.govinfo.gov/content/pkg/COMPS-270/uslm/COMPS-270.xml Federal Reserve Act] ([https://www.govinfo.gov/content/pkg/COMPS-270/pdf/COMPS-270.pdf PDF]/[https://www.govinfo.gov/app/details/COMPS-270/ details]) as amended in the [[United States Government Publishing Office|GPO]] [https://www.govinfo.gov/help/comps Statute Compilations collection]
* [http://www.federalreserve.gov/generalinfo/fract/ Text of the current Federal Reserve Act], Board of Governors of the Federal Reserve System.
* [https://www.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_3.html Text of Federal Reserve Act as laid out in the U.S. Code], Cornell Law School.
* [https://fraser.stlouisfed.org/title/966 The original Federal Reserve Act], including the signature of Woodrow Wilson
* [https://fraser.stlouisfed.org/title/975 The original Federal Reserve Act], and index
* [https://web.archive.org/web/20080516102112/http://minneapolisfed.org/pubs/region/89-05/reg895d.cfm Paul Warburg's Crusade to Establish a Central Bank in the United States] by Michael A. Whitehouse, 1989.
* [http://www.frbsf.org/publications/federalreserve/fedinbrief/index.html  The Federal Reserve System In Brief] {{Webarchive|url=https://web.archive.org/web/20080121043238/http://www.frbsf.org/publications/federalreserve/fedinbrief/index.html |date=2008-01-21 }} – An online publication from the Federal Reserve Bank of San Francisco.
* [https://web.archive.org/web/20100324115751/http://www.llsdc.org/FRA%2DLH/ The Federal Reserve Act of 1913 – A Legislative History], Law Librarians' Society of Washington, DC, Inc., 2009
* [https://fraser.stlouisfed.org/theme/32 Historical documents related to the Federal Reserve Act and subsequent amendments]
{{Commons category}}
{{Money and central banking within the contemporary United States (pre–1913)}}
{{Federal Reserve System}}
{{Bank regulation in the United States}}
{{Woodrow Wilson}}
{{Authority control}}

[[Category:1913 in American law]]
[[Category:Federal Reserve System|Act]]
[[Category:United States federal banking legislation]]
[[Category:Real property law in the United States]]
[[Category:Presidency of Woodrow Wilson]]
[[Category:1913 in economic history]]
[[Category:December 1913 in the United States]]