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The 1913 Federal Reserve Act was a pivotal congressional act that helped establish the Federal Reserve System as it exists today. It is one of the United States financial system’s most influential laws.

In the years prior to 1913, financial panics occurred in the United States with regularity. The panic of 1907, during which the New York Stock Exchange fell almost 50% from its 1906 high, saw many banks and companies go bankrupt. The country needed a currency reform that could provide a degree of financial stability.

Signed into law by President Woodrow Wilson, the 1913 Federal Reserve Act created the Federal Reserve System, also called the Fed. The Fed is the Central Bank of the United States.

The Fed manages the nation’s monetary policy through manipulations of the nation’s money supply and interest rates. The Fed also established the 12 regional Federal Reserve Banks. Each can print money to ensure economic stability.

While the system has slightly changed in response to events like the Great Depression of the 1930s, today it still serves the purpose for which it was intended. The Fed uses policy to weather the volatility that comes with normal business and economic cycles.

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