Chapter 2 The Federal Reserve and Its Powers I. Origins of the Federal Reserve System 1. A central bank regulates a nation’s money supply and financial institutions in an attempt to provide the nation with a stable economic environment and an effective payment system . 2. Prior to the Federal Reserve, the United States had two central banks, but shot down by the fears con centralization of power and economic concentration. 3. Timeline of Central Bank of US. A. 1971-1811 Bank of the United States B. 1816-1832 Second Bank of the United States C. 1837-1863 Free Banking Era D. 1863-1914 National Banking System Era (National Banking Acts) a. Imposed 10% annual tax on State-chartered banks that issued banknotes. b. Required each bank have its banknotes printed by the U.S. Mint . c. Required that each bank back its banknotes with holding of U.S. government bonds that slightly exceeded the value of each banknote issued. d.
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