The Federal Reserve

|

The Federal Reserve|

Plight or Hero of the American Economy?|

|

|

|

In today’s economic times of futility, the Federal Reserve of the United States has been rising in prominence in the media and news. But what exactly does the Federal Reserve do and what is its role in the country’s economy? The Federal Reserve is actually a more recent addition to the country’s economic system and is in fact something that the Federal Government fought against for a long period of time. The Federal Reserve had to go through a tough process to be implemented, but has been standing ever since. The powers and abilities of this institution are extensive and while some feel that consolidating the nation’s economic power in one institution is beneficial, a look at the process and structure of the Federal Reserve shows that while its interests may be in the best interest of Americans, it may not be helping Americans as much as intended.

The Federal Reserve System or the Fed was established by Congress in 1913 after a long and arduous fight to have the Fed’s plan approved. The seeds of the Federal Reserve were sown after the Panic of 1907 lead to the failure of several banks and left Americans looking for a way to change their banking system. Soon after, the National Monetary Commission was created with the task to explore to options of a potential banking reform. This commission had 18 members tasked with finding the problem areas of the banking system and suggesting changes to fix them. The most prominent member of this commission was Senator Nelson Aldrich who many people viewed as the leader of the rich and conservative Americans (Johnson 2010). Senator Aldrich’s position among the elite made the general public skeptical about the true motives of his ideas. Aldrich’s main opposition came from the Progressives who wanted to make the banking system less powerful than it already was. When the first plans of reform, in the aptly titled Federal Reserve Act, were presented...