Today in History

Today in History: December 23

The Federal Reserve System

Federal Reserve Building
Federal Reserve Building, Constitution Ave. Front View of Federal Reserve I,
Washington, D.C.
Theodor Horydczak, photographer, ca. 1920-50.
Washington as It Was: Photographs by Theodor Horydczak, 1923-1959

On December 23, 1913, President Woodrow Wilson signed the Owen-Glass Act, creating the Federal Reserve System, an independent agency of the U.S. Government. Before the Federal Reserve began its operations in November 1914, America's banks functioned in widely divergent ways. These varied banking practices resulted in four major financial crises in less than forty years.

Under the terms of the first major banking reform to follow the Civil War, the Federal Reserve System, or “Fed,” was designed to keep the economy healthy through the formulation of U.S. monetary policy. As the nation’s money manager and central banking authority, the Fed has regulatory and supervisory responsibilities and ensures that sufficient amounts of currency and coin circulate to meet the public’s demand. It also establishes interest rates and monitors the availability of money and credit.

The Federal Reserve consists of a board of governors, nominated by the president and confirmed by the Senate to serve fourteen-year terms of office, twelve regional Federal Reserve Districts--or regions, and branches of Federal Reserve banks in twenty-five other cities. The Federal Open Market Committee sets the Fed’s monetary policy--carried out through the trading desk of the Federal Reserve Bank of New York. The Federal Advisory Council, the Consumer Advisory Council, and the Thrift Institutions Advisory Council advise the Federal Reserve Board directly on its various responsibilities.

Charles S. Hamlin
Charles S. Hamlin, November 26, 1917.
Prosperity and Thrift: The Coolidge Era and the Consumer Economy, 1921-1929

All national banks chartered by the federal government are required to join the Federal Reserve System; to subscribe to capital stock in the Federal Reserve Bank in an amount equal to six percent of its combined capital and surplus; to invest three percent (as a reserve requirement) of their holdings in the system; and to hold another three percent subject to call. These stipulations enabled the Fed to curtail the money and credit flow problems characteristic of the late 1800s and early 1900s and to respond to many of the demands of the growing economy. Nonetheless, the early Federal Reserve System proved fallible. After the Great Depression and again after the inflation and disinflation crises of the 1970s and 1980s, the role of the Federal Reserve was reexamined and overhauled to meet new needs. New banking acts were passed and the banking industry underwent reforms. This process continues today as the actions of the Fed profoundly impact the national and global economy.

Home for the Holidays

Painting of Washington resigning his commission
Gen. Washington Resigning His Commission to Congress
Photograph of a painting by John Trumbull.
Touring Turn-of-the-Century America: Photographs from the Detroit Publishing Company, 1880-1920

George Washington resigned his commission as commander in chief of the Continental Army on December 23, 1783, in the Senate chamber of the Maryland State House in Annapolis, where the Continental Congress was meeting.

Although the British had recognized American independence with the signing of the Treaty of Paris on September 3, British troops did not evacuate New York until December 4. After the last British ships left the harbor, Washington bid an emotional farewell to his officers and set out for Annapolis. On the journey south he was met with throngs of well-wishers paying him tribute for his role in the nation's military victory over Great Britain.

Washington left Annapolis at dawn on December 24 and set out for Mount Vernon, his plantation on the Potomac River in Virginia. He arrived home before nightfall on Christmas Eve, a private citizen for the first time in almost nine years.

Annapolis State Capitol
Annapolis State Capitol [Maryland State House],
William Henry Jackson, photographer, circa 1892.
Touring Turn-of-the-Century America: Photographs from the Detroit Publishing Company, 1880-1920

When Washington visited the Maryland State House in 1783, the structure was incomplete and suffered from a leaking roof. By 1786, when the Annapolis Convention was held at the State House to address defects in the Articles of Confederation, construction of a new dome had begun. Today, the building begun in 1772 is the oldest state house still in legislative use.

Located at the mouth of the Severn River on the Chesapeake Bay, Annapolis was settled as Providence in 1649 by Puritans who moved there from Virginia. The town was also known in the seventeenth century as Town of Proctor's, Town at the Severn, and Anne Arundel Town. In 1694, the colonial capital of Maryland was moved there from St. Mary’s City and it was renamed Annapolis in honor of Princess (later Queen) Anne of England.  It is home to the U.S. Naval Academy and to St. John's College, founded in 1696 as King William's School.