The Federal Reserve System

Federal Reserve Building, Washington, D.C.
Theodor Horydczak, photographer, circa 1920-1950.
Washington as It Was, 1923-1959

On December 23, 1913, President Woodrow Wilson signed the Owen-Glass Act, creating the Federal Reserve System.

The first major banking reform to follow the Civil War, the Federal Reserve was organized to regulate banking and provide the nation with a more stable and secure financial and monetary system. It remains the central banking authority of the United States, establishing banking policies, interest rates, and the availability of credit. It also acts as the government's fiscal agent and regulates the supply of currency.

Expanded since its founding, in both size and function, the Federal Reserve consists of a board of governors, nominated by the president and confirmed by the Senate, twelve regional Federal Reserve banks, the Federal Open Market Committee, the Federal Advisory Council, a Consumer Advisory Council, and several thousand member banks.

Before the Federal Reserve opened its twelve regional banks and began monitoring banking in November 1914, America's banks functioned in widely divergent ways. These varied banking practices had driven the nation to four major financial crises in less than forty years.

Charles S. Hamlin, November 26, 1917.
Assistant Secretary of the Treasury, 1913-14
Chairman, Federal Reserve Board, 1914-1916
Member of the Board of Governors, 1916-1936
Special Counsel to the Board of Governors, 1936-1938
Prosperity and Thrift: The Coolidge Era and the Consumer Economy, 1921-1929

By requiring all national banks to join the Federal Reserve System, to invest three percent of their holdings in the system, and to hold another three percent subject to call, the "Fed" curtailed the money and credit flow problems characteristic of the late 1800s and early 1900s.

While the early Federal Reserve System answered many of the demands of the growing economy, it proved fallible. After the Great Depression and again, after the financial crisis of the late 1970s, the Federal Reserve was re-examined and overhauled to meet new needs. This process of improvement continues today as the actions of the Fed profoundly impact the national and global economy.

• Search on the term Charles Hamlin Papers in Prosperity and Thrift: The Coolidge Era and the Consumer Economy, 1921-1929. Charles S. Hamlin, who held several key positions in the Federal Reserve Board during its early years, kept extensive notes which provide a behind-the-scenes account of debates among members of the Federal Reserve Board as they forged monetary policy.
  
  The collection also includes articles from issues of The Forum from the 1920s. Of interest in the July 1929 issue is a column by Donald R. Hanson entitled "Why This Prosperity?" in which he offers an overview of the conflict between Wall Street and the Federal Reserve Board about ways the New York Stock Exchange encourages financial speculation. Search on federal reserve in Prosperity and Thrift, 1921-1929 for relevant material.
• Search on bank in American Memory's photographic collections to find images of banks nationwide, including several designed by architect Louis Sullivan.

  
  Farmer's National Bank, Owatonna, Minnesota,
  Louis H. Sullivan, architect, circa 1907.
  American Landscape and Architectural Design, 1850-1920

• Search the full text of Pioneering the Upper Midwest, ca. 1820-1910 on federal reserve to read accounts of the Federal Reserve System by a Midwestern economist, a congressman, and a prominent attorney. Of particular interest is a chapter entitled "More About Practice" in Recollections of an Immigrant, the 1929 autobiography of Andreas Ueland, who served as general counsel to the Federal Reserve Bank of Minneapolis.
• Search the Today in History Archive on the term depression to learn more about tough economic times in the United States. Read, for instance, about the Panic of 1857.
• Listen to "Democracy's Achievement" in American Leaders Speak, 1918-1920 to hear Oklahoma Senator Robert L. Owen, co-creator of the Owen-Glass Act, rally support for the Democratic Party and cite the Federal Reserve as one of the major achievements of the "regenerated" Democratic Party of the Wilson Era. Owen's speech is one of fifty-nine found in the collection.
• To review current banking legislation, search on banking in THOMAS: Legislative Information on the Internet.
• To see more photographs of the Federal Reserve Building in Washington D.C., search on federal reserve in Washington as It Was, 1923-1959.

Home for the Holidays

General Washington Resigning His Commission to Congress, Annapolis, Maryland
Photograph of a painting by John Trumbull.
Touring Turn-of-the-Century America, 1880-1920

George Washington resigned his commission as commander-in-chief of the Continental Army on December 23, 1783, in the senate chamber of the Maryland State House in Annapolis, where the Continental Congress was then meeting.

Although the British had recognized American independence with the signing of the Treaty of Paris on September 3, British troops did not evacuate New York until December 4. After the last British ships left the harbor, Washington bid an emotional farewell to his officers and set out for Annapolis. On the journey south he was met with throngs of well-wishers paying him tribute for his role in the nation's military victory over Great Britain.

Washington left Annapolis at dawn on December 24 and set out for Mount Vernon, his plantation on the Potomac River in Virginia. He arrived home before nightfall on Christmas Eve, a private citizen for the first time in almost nine years.

Maryland State House, Annapolis, Maryland
William Henry Jackson, photographer, circa 1892.
Touring Turn-of-the-Century America, 1880-1920

When Washington visited The Maryland State House in 1783, the structure was incomplete and suffered from a leaking roof. By 1786, when representatives from Maryland and Virginia meeting at the State House rallied support for the movement to remedy defects in the Articles of Confederation, construction of a new dome had begun. Today, the building begun in 1772 is the oldest state house still in legislative use.

Located at the mouth of the Severn River on the Chesapeake Bay, Annapolis was settled in 1649 by Puritans who moved there from Virginia. The town was known in the seventeenth century as Town of Proctor's, Town at the Severn, and Anne Arundel Town before it was named for Queen Anne in 1695. It is home to the U.S. Naval Academy and to St. John's College, founded in 1696.

• To locate more photographs of the historic capital, search on Annapolis in the following collections:
  • Taking the Long View, 1851-1991
  • Touring Turn-of-the-Century America, 1880-1920
  • Washington as It Was, 1923-1959
• Search on George Washington in the Today in History Archive to find more events related to the first president such as his birthday, his experience at Valley Forge, his farewell to his officers, and his first Inaugural Address.
• Visit the George Washington Papers at the Library of Congress, 1741-1799. The collection contains Washington's Letterbooks, Continental Army Papers, and Financial Papers. Currently, more than 30,000 images are available. Search the collection by keyword or browse the letterbooks and financial papers by date. The collection also includes essays about Washington's documents and illustrated Time Lines of the Colonial Period, the American Revolution, and the Early Republic.
• Search A Century of Lawmaking on George Washington to retrieve documents highlighting Washington's interaction with both the Continental Congress and the United States Congress.