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The Federal Reserve System (also the Federal Reserve; informally The Fed) is the central banking system of the United States. Created in 1913 by the enactment of the Federal Reserve Act, it is a quasi-public (government entity with private components) banking system^[1] composed of (1) the presidentially appointed Board of Governors of the Federal Reserve System in Washington, D.C.; (2) the Federal Open Market Committee; (3) 12 regional Federal Reserve Banks located in major cities throughout the nation acting as fiscal agents for the U.S. Treasury, each with its own nine-member board of directors; (4) numerous private U.S. member banks, which subscribe to required amounts of non-transferable stock in their regional Federal Reserve Banks; and (5) various advisory councils. As of February 1, 2006, Ben Bernanke serves as the Chairman of the Board of Governors of the Federal Reserve System.

In 1863, in order to help finance the Civil War, a system of national banks was instituted by the National Currency Act. The banks each had the power to issue standardized national bank notes based on United States bonds held by the bank. According to proponents of the Federal Reserve System and many economists, the early national banking system had two main weaknesses an "inelastic" currency; and a lack of liquidity.^[2] During the last quarter of the 19th century and the beginning of the 20th century the United States economy went through a series of financial panics.^[2] A particularly severe panic in 1907 provided the motivation for renewed demands for banking and currency reform.^[3] The following year Congress enacted the Aldrich-Vreeland Act which provided for an emergency currency and established the National Monetary Commission to study banking and currency reform.^[4]

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