How the Federal Reserve Works

How the Federal Reserve Works

Have you ever taken a close look at paper money? Each U.S. bill has the words “Federal Reserve Note” imprinted across the top.¹

But many individuals may not know why the bill is issued by the Federal Reserve and what role the Federal Reserve plays in the economy. Here’s an inside look.

The Federal Reserve, often referred to as the Fed, is the country’s central bank. It was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system.² Prior to its creation, the U.S. economy was plagued by frequent episodes of panic, bank failures, and limited credit.

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