No institution wields more power in US finance than the Federal Reserve—but opinion polls indicate most Americans don’t know what it does.
Hours of research by our editors, distilled into minutes of clarity.
No institution wields more power in US finance than the Federal Reserve—but opinion polls indicate most Americans don’t know what it does. Curious about the country's central bank? 1440's got your breakdown of how the Federal Reserve works.
While most Americans grasp the central bank’s impact on curbing inflation, they don’t know that the Fed is tasked with what is called a “dual mandate” to provide price stability and maximum employment. Furthermore, few understand the Fed is independent—it does not answer to Congress or the US president.
Sixteen men and women have held the office of Federal Reserve Chair since 1913, with varying results in the stock markets. While Fed monetary policy is only one part of the recipe for a bull or bear market, a Fed chair is judged by the macroeconomic conditions they leave as a legacy.
The Fed controls the money supply, determines interest rates, and regulates the banking system. Established in 1913 after a volatile series of financial panics, the central bank has managed to retain its legitimacy despite broad critiques against its obscure and independent decision process.
An illuminating chart shows the percentage of Americans who trust the current Fed Chair, going back to 2005. See how we went from Alan Greenspan’s 74% trust level to Janet Yellen’s 38%.
That history includes its doomed early efforts in the First and Second National Banks, as well as its failure to address the worst financial period in US history, the Great Depression.
Republican Sen. Nelson Aldrich of Rhode Island organized a highly secretive meeting of the minds at the world’s most prestigious club on Jekyll Island, Georgia, where a who’s who in the financial world hashed out details over the course of a week.
Pseudo-duck hunters, private train cars in Hoboken, and a thrilling work week over Thanksgiving 1910—all and more are featured in the wild story of how a group of fed-up bankers and lawmakers tried to create an enduring central bank for the US. Records of the meeting managed to remain hidden for decades.
After a series of economic panics induced by a lack of reserve cash at regional banks, the architects of today’s Federal Reserve opted to emphasize the goal of the bank as a reserve at the federal level—thus creating the lasting name.
While controlling a complex and dynamic economy is difficult, interest rates—more specifically, the rate at which banks lend each other money overnight—are a powerful tool. Generally, raising the rate makes purchases more expensive and cools an overheated economy.
The United States is home to more than 33 million businesses, the vast majority of which are small businesses, with millions being created (and others closing shop) every year. These businesses often rely on loans, provide the goods and services that keep the economy flowing, and sometimes even grow large enough to enter public markets or provide private investment opportunities. Explore key topics central to business and finance, from the role of the Federal Reserve to how initial public offerings work, how millions of American students finance higher education, and more.