REACTION TO VIDEO: PURPOSE AND ACTIVITIES OF THE UNITED STATES FEDERAL RESERVE SYSTEM
The creation of the Federal Reserve System through the Federal Reserve Act of 1913 stated four goals for the organization. These goals were as follows:
a. The Federal Reserve System was to act as the central monetary authority for the country. In this capacity, the agency was expected to expand and contract the countryÆs money supply according to the needs of the economy.
b. The agency was to act as a lender of last resort. In this role, the Federal Reserve System was expected to furnish additional funds to member banks during periods of financial crisis.
c. The Federal Reserve System was to establish and operate an efficient system for the clearing and collecting of checks. This payment system was to be operational nationwide.
d. The agency was expected to add vigor to bank supervision in the country. Although the Federal Reserve System 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. Thus, over the years, the Federal Reserve SystemÆs mandate has been broadened to include the maintenance of economic stability in the country, the maintenance of high levels of employment, the maintenance of stability in the purchasing power of the dollar, and the maintenance of a reasonable balance of payments with respect to international transactions. The mandate established by the Congress for the Federal Reserve System in effect establishes the agencyÆs basic monetary policy objectives. Within the context of these congressionally mandated objectives, the Board of Governors...