was charged with specific responsibilities with respect to bank supervision, its responsibilities were limited, and the agency was not the exclusive federal bank supervision agency.
From the beginning, the American political leadership officially recognized that the purposes for which the Federal Reserve System was formed were, in fact, elements of the broader economic and financial objectives of the country (Wallich and Brady, 1988, p. 414). Thus, over the years, the Federal Reserve System's mandate has been broadened to include (1) the maintenance of economic stability in the country, (2) the maintenance of high levels of employment, (3) the maintenance of stability in the purchasing power of the dollar, and (4) the maintenance of a reasonable balance of payments with respect to international transactions (Board of Governors, Federal Reserve System, 1990, p. 7). The mandate established by the Congress for the Federal Reserve System, in effect, establishes the agency's basic monetary policy objectives (Anderson, 1985, p. 20). Within the context of these Congressionally mandated objectives, the Board of Governors establishes specific long term and short term goals, which are designed to assure attainment of the basic objectives.
In the early years of the Federal Reserve System, the basic policy objective was the preservation of the value of the dollar through the protection of the gold standard (Anderson, 1985, p. 24). This policy mandate was gradually expanded to include the maintenance of reasonable interest rate levels, safeguarding the quality of credit, and the prevention of an excessive use of credit for non productive purposes especially speculation.
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