Federal Reserve Act
On December 23, 1913, President Woodrow Wilson signed the Federal Reserve Act, creating a US central bank fifty years after the country had explicitly rejected one. The Panic of 1907, which J.P. Morgan had ended through private coordination from his library, had made clear the US could not safely operate without a lender of last resort. The Fed's design was a political compromise: twelve regional Reserve Banks (so no single city dominated), private member-bank ownership (to limit federal political control), and a Board of Governors in Washington (to limit private capture). The compromise has survived for over a century, with the Fed's actual powers expanding substantially each time it has had to confront a crisis the framers did not anticipate.
Senator Carter Glass and Representative Henry Steagall — the same two who would later sponsor the 1933 banking firewall — were instrumental in passing the Federal Reserve Act. The 1913 Fed had no statutory mandate to manage employment or inflation; those came in 1946 (Employment Act) and 1977 (Humphrey-Hawkins). The Fed's powers as currently understood are largely the product of a century of crisis-response institutional drift.
02 · Greenbacks & the Fed
Before 1862 the United States had no federal currency. State-chartered banks issued their own notes; over 7,000 different note designs circulated by the Civil War. The war forced the federal government to create a national currency for the first time, and the panics of the late 19th century forced it to create a central bank to backstop that currency. Two laws passed in 1862 and 1863, and the Federal Reserve Act of 1913, are the institutional foundation that the SEC, the FDIC, and every later regulator was built on top of.
Read the full era →