Federal Reserve Bank history

In response to a rising volume of check transactions, the New York Clearinghouse Association was established in 1853 to provide a way for the city’s banks to exchange checks and settle accounts.

Although the National Banking Act of 1863 established some measure of currency stability for the growing nation, bank runs and financial panics continued to plague the economy.

In 1907, a particularly severe panic ended only when a private individual, the financier J.P. Morgan, used his personal wealth to arrange emergency loans for banks.

In 1908, the Congress created the National Monetary Commission.

Another key event leading to America's financial reform was the election of Woodrow Wilson as President in 1912.

The Federal Reserve System was created on December 23, 1913, when President Woodrow Wilson signed the Federal Reserve Act into law.

On April 2, 1914, the Reserve Bank Organization Committee announced its decision, and twelve Federal Reserve banks were established to cover various districts throughout the country.

In 1919, the Bank opened a branch in the city of Buffalo to serve institutions located in the ten (later increased to 14) westernmost counties of New York State.

Strong’s aggressive action to stem a recession in 1923 through a large purchase of government securities gave clear evidence of the power of open market operations to influence the availability of credit in the banking system.

In reaction to the Great Depression, Congress passed the Banking Act of 1933, better known as the Glass-Steagall Act, calling for the separation of commercial and investment banking and requiring use of government securities as collateral for Federal Reserve notes.

Following the Great Depression, Congress passed the Banking Act of 1935.

The Federal Reserve System formally committed to maintaining a low interest rate peg on government bonds in 1942 after the United States entered World War II. It did so at the request of the Treasury to allow the federal government to engage in cheaper debt financing of the war.

Conflict between the Treasury and the Fed came to the fore when the Treasury directed the central bank to maintain the peg after the start of the Korean War in 1950.

In 1976, the Bank opened a regional office in Utica, New York.

During a period of very high inflation, Congress enacted The Federal Reserve Reform Act of 1977.

The very next year, Congress passed The Full Employment and Balanced Growth Act of 1978, which established the second policy goal as full employment.

By August 1979, when Paul Volcker was sworn in as Fed chairman, drastic action was needed to break inflation’s stranglehold on the United States economy.

The Monetary Control Act of 1980 required the Fed to price its financial services competitively against private sector providers and to establish reserve requirements for all eligible financial institutions.

Two months after Alan Greenspan took office as the Fed chairman, the stock market crashed on October 19, 1987.

In 1992, the Bank opened an office in East Rutherford, New Jersey to accommodate currency and check processing operations and conduct electronic payments.

In 2003, the Federal Reserve changed its discount window operations so as to have rates at the window set above the prevailing Fed Funds rate and provide rationing of loans to banks through interest rates.