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FEDERAL RESERVE ACT: Congress Establishes a Central Bank to Prevent Financial Crises
In 1913, Congress passed the Federal Reserve Act, creating a central bank to ensure that member banks would be able to obtain loans in times of economic crisis. The system consisted of 12 Federal Reserve banks overseen by a Federal Reserve Board appointed by the president. Supporters of the law argued that the goal of the Federal Reserve is to benefit the public and safeguard against future financial panics, whereas the goal of bankers is to make profits. Therefore, they contended, the U.S. government is better suited to oversee the Federal Reserve system. Opponents of the law argued that giving the president the authority to appoint the Federal Reserve Board would open the system to political abuse, as the president could appoint members who would carry out his political agenda. Bankers have a vested interest in the system, they contended, and would be a better choice to run the Federal Reserve.
Let your students get the facts and decide for themselves: Should the U.S. government or bankers oversee the Federal Reserve system? Be sure to check out Issues & Controversies in American History’s clear and unbiased examination of the Federal Reserve Act this month.
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