American Finance 101 - What the Average Joe Doesn't Know About the Federal Reserve
By Frank Graham

If you ask the average American what they know about the Federal Reserve Bank, the answer is likely to be that they simply do not know much. What an unfortunate fact, since the Federal Reserve Bank has such a huge impact on the entire American, and by extension, world economy.

The current United States Federal Reserve banking system is not the first attempt at creating a central bank in the U.S. The first central bank was created in 1791 for the purpose of monitoring commercial banks and conducting currency transactions, and only lasted for twenty years. Its charter was not renewed due to its misuse of funds. The second central bank was created shortly after the War of 1812. It went to work attempting to fix the economic crisis of the nation by creating money and financing banks. When the central bank stopped flooding the economy with money, bankruptcies and foreclosures resulted for many borrowers. Much of the property that was purchased with the funds from the more liberal initial policies of the bank ended up back in the hands of the lenders.

What about our current central banking system? The current Federal Reserve System was created in 1913 by the enactment of the Federal Reserve Act. This Act gave the System the responsibility for setting the monetary policy of the United States. This System consists of five separate components: