108
Unit 2 Money and Regulation
Creation of the Federal
Reserve System
President Woodrow Wilson signed the Federal Reserve Act in 1913.
Its development was affected by events and failures in the two previous
central banks as well as the development of the country. Figure 5-1 illustrates
historical events in relationship to the development of the US central bank.
Checkpoint 5.1
1. Why were rural citizens opposed to the First Bank of the United
States?
2. What did the US Supreme Court decide in McCullough v. Maryland?
3. Why is the time from 1837 to 1863 known as the era of free banking?
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5. How does a bank panic usually start?
Build Your Vocabulary
As you progress through this course, develop a personal glossary
of banking terms and add it to your portfolio. This will help you build your
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and add it to your personal glossary.
central bank
era of free banking
National Currency Act
Office of the Comptroller of the Currency (OCC)
National Banking Act
bank note
bank panic
bank run
bond
1776
American
Revolution
1812–1814
War of 1812
1861–1865
Civil War
1791–1811
First
Bank of the
United States
1816–1836
Second
Bank of the
United States
1863
OCC
created
1913
The Fed
created
Figure 5-1.
Timeline of US Central Banks
BIZ TIPS
The idea of a central bank
is not a modern one. The
Bank of England, which
is the central bank for
the United Kingdom, was
founded in 1694. Other
nations also had central
banks centuries ago.