Can You Explain The Basic Structure Of The Federal Reserve System?

During the nineteenth century, banking panics plagued the United States. These occurred when people suddenly attempted to turn their bank deposits into currency. When we arrived at the banks, they found that the banks had an inadequate supply of currency because the supply of currency was fixed and smaller than the amount of bank deposits. Bank failures and economic downturns ensured. After the severe panic of 1907, agitation and discussion led to the Federal Reserve system Act 1913, which was to provide for the establishment of Federal reserve banks to furnish an elastic currency.


As currently constituted, the Federal Reserve System consists of 12 regional Federal Reserve Banks, located in New York, Chicago, Richmond, Dallas, San Francisco and other major cities. The regional structure was originally designed in a populist age to ensure that different areas would have a voice in banking matters and to avoid too great a concentration of central banking powers in Washington or in the hands of the Eastern bankers. Each Federal Reserve Bank today operates a nationwide payments system, distributes coin and currency, and supervises and regulates banks in its districts.

The federal reserve has traditionally conducted open market operations through the purchase and sale of government bond.