Prior to the establishment of the Federal Reserve System

(FRS), the U.S. economy faced frequent panics, bank failures,

and credit scarcity due to unstable banking and financial

systems prevailing in the market. Additionally, due to the rapid

industrialization the decentralized banking system became more

unstable. Specifically, the financial and the economy panic

encountered during 1907 forced the congress to establish a

centralized bank "The Federal Reserve System". Congress

passed the Reserve Act in the year 1913 to establish the FRS.

The FRS is entitled to provide a safe, secure, and stable

financial growth for the U.S.

As the FRS was created, the structure and functionalities of the

central bank has evolved in phases. In the year 1935, the

Fed's monetary policy making body called the Federal Open

Market Committee (FOMC) was formed to address the financial

depression of the country. Further, the monetary policy was

revised from time-to-time to address the financial panics and

the bank runs faced by the public. The monetary policy

addressed the surging inflation faced by passing the Federal

Reserve Reform Act of 1977. Later, the monetary policy was

entitled to increase the employment rate by passing the

Employment and Balanced Growth act in the year 1978, and it

was decided that the FRS produced the finance report to the

congress twice a year.

Following the severe financial crisis in the year 2007-2008, the

U.S. congress passed the Wall Street Reform and Consumer

Protection Act of 2010 to increase the transparency of the

working of the FRS, extend the regulatory responsibilities, and

increase the safety and security of the financial aspects by

providing a new Consumer Financial Protection Bureau.

As the working of the FRS directly impacts the financial and

economical condition of the country and the individuals, it

becomes very important to understand the structure,

functionalities, and working of the FRS.