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Article: Federal Reserve System
- Article from:
- Dictionary of American History
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FEDERAL RESERVE SYSTEM
FEDERAL RESERVE SYSTEM.
On 23 December 1913, the Owen-Glass Act founded the Federal Reserve System
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the central bank of the United States. "The Fed," as most call it, is unique in that it is not one bank but, rather, twelve regional banks coordinated by a central board in Washington, D.C. A central bank is a bank for banks. It does for banks what banks do for individuals and business firms. It holds their deposits
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or legal reserves
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for safekeeping; it makes loans; and it creates its own credit in the form of created deposits, or additional legal reserves, or bank notes, called Federal Reserve notes. It lends to banks only if they appear strong ...