The Federal Reserve Act established the Federal Reserve System as the central banking authority of the United States. In the early 1900s, economists believed that the United States banking system needed reform. The banking system included both state and national banks, which were governed by different (and sometimes overlapping or contrary) laws that made banking operations difficultlegal reserve requirements, for example, varied significantly at the state and national levels. The Federal Reserve System was the answer to this perceived problem.
The Act created 12 regional Federal Reserve banks located in major cities. The Act requires that any bank using the phrase National Bank in its name must be a member of the Federal Reserve System. These banks must maintain minimum levels of reserves with one of the Federal Reserve banks and must deposit a percentage of their customers savings and checking account deposits into a Federal Reserve bank.
An Act To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes.
Be it enacted by the. Senate and House* of Representatives of the United States of America in Congress assembled, That the short title of this Act shall be the "Federal Reserve Act." Wherever the word "bank" is used in this Act, the word shall be held to include State bank, banking association, and trust company, except where national banks or Federal reserve banks are specifically referred to. The terms "national bank" and "national banking association" used in this Act shall be held to be synonymous and interchangeable. The term "member bank" shall be held to mean any national bank, State bank, or bank or trust company which has become a, member of one of the reserve banks created by this Act. The term "board" shall be held to mean Federal Reserve Board; the term "district" shall be held to mean Federal reserve district; the term "reserve bank" shall be held to mean Federal reserve bank.
FEDERAL RESERVE DISTRICTS.
Sec. 2. As soon as practicable, the Secretary of the Treasury, the Secretary of Agriculture and the Comptroller of the Currency, acting as "The Reserve Bank Organization Committee," shall designate not less than eight nor more than twelve cities to be known as Federal reserve cities, and shall divide the continental United States, excluding Alaska, into districts, each district to contain only one of such Federal reserve cities. The determination of said organization committee shall not be subject to review except by the Federal Reserve Board when organized: Provided, That the districts shall be apportioned with due regard to the convenience and customary course of business and shall not necessarily be coterminous with any State or States. The districts thus created may be readjusted and new districts may from time to time be created by the Federal Reserve Board, not to exceed twelve in all. Such districts shall be known as Federal reserve districts and may be designated by number. A majority of the organization committee shall constitute a quorum with authority to act.
Said organization committee shall be authorized to employ counsel and expert aid. to take testimony, to send for persons and papers, to administer oaths, and to make such investigation as may be deemed necessary by the said committee in determining the receive districts and in designating the cities within such districts where such Federal reserve banks shall be severally located. The said committee shall supervise the organization in each of the cities designated of a Federal reserve bank, which shall include in its title tile name of the city in which it is situated, as "Federal Reserve Bank of Chicago.
This is the text of the original Act. Since the time of its original enactment, the Act may have been amended.