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.
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.