Question

When Congress established the Federal Reserve in 1913, what was its main responsibility? When did Congress broaden the Fed's responsibility?

Answer 1

The Federal Reserve, established in 1913, initially focused on regulating and stabilizing the banking system, with goals of maximum employment, stable prices, and moderate long-term interest rates. Its responsibilities have since expanded to include supervising banks, providing financial services, and conducting monetary policy.

Step-by-step explanation:

When Congress established the Federal Reserve in 1913, its main responsibility was to provide greater regulation and stability to the nation's banking system. This was crucial because financial panics due to bank failures were not uncommon and often led to economic downturns. The Federal Reserve Act set the stage for the modern central banking system, in which the Fed would manage interest rates and credit conditions to influence the level of economic activity.

Originally, according to the Federal Reserve Act, the Fed's three original goals were to promote maximum employment, stable prices, and moderate long-term interest rates. Congress broadened the Fed's responsibilities over time, with the central bank now also supervising and regulating banks, providing them with financial services like loans, and conducting the nation's monetary policy via tools like open market operations.