Final answer:
The Federal Reserve System, established by the 1913 Federal Reserve Act under President Woodrow Wilson, is the decentralized private banking system controlled by the federal government, responsible for regulating the nation's money supply and interest rates.
Step-by-step explanation:
The decentralized private banking system under federal government control created under Woodrow Wilson is known as the Federal Reserve System. Established by the Federal Reserve Act of 1913, it divided the nation into 12 districts, each with a Federal Reserve Bank. This system functions as a central bank, providing a safety net to private banks, managing money supply, and controlling lending through the setting of interest rates. It is privately owned by member banks yet publicly controlled, ensuring a balance between private interests and public regulation.
The creation of the Federal Reserve was a significant move by President Wilson to offer greater stability and regulation to the nation's banking system. Key decisions made by the Federal Reserve influence the economy by affecting business operations and the general public. The responsibility of the Fed includes supervising member banks, conducting monetary policy, and providing services to maintain the payment system.
In response to economic fluctuations, the Federal Reserve Board has the authority to modify discount rates to either encourage borrowing and spending during recessionary periods or to restrain inflation by making borrowing less attractive. This influential function continues to be the basis of the country's modern banking model and represents one of the most enduring achievements of Wilson's administration.