The Federal Reserve System Project.
In the early 1900s, the United States suffered several recessions. During these hard times, banks were
unable to make new loans. This crisis hurt even the largest and strongest banks. Most people thought
conditions would be better if the nation had a central bank. Acentral bank is a bankers’ bank. Banks can
go to it to borrow money when times are difficult.
Although a central bank was needed, the government did not have enough money to finance one. As a
result, it decided to require all banks with a national charter to contribute funds to build the new central
bank. In return, they would receive some stock in that central bank. The result was the 1913 creation of
the Federal Reserve System, or “the Fed” as it is often called. This was the first true central bank for the
Today, the Fed has a number of very important responsibilities. It manages our currency, regulates
commercial banks, serves as the government’s bank, and conducts certain policies to keep the economy
healthy and strong. To understand how it does all these things, we first need to see how the Fed is
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