Federal Reserve Bank

See: 1913 Federal Reserve Act.

The Fed is the central bank of the United States, our version of the Bank of England in the U.K., or the European Central Bank in the EU. Its creation ushered in the modern banking system in the U.S., more or less, so just...uh...maybe send them a thank you card every time you get cash out of the ATM.

Quick history. The United States tried the national bank thing twice during its early history. The second version was eventually killed by Andrew Jackson (who was pretty good at killing stuff: a bunch of the British at New Orleans, a lot of Native Americans in the Trail of Tears, a guy named Charles Dickinson in a duel). For a long time after that, the U.S. currency situation was a mess. People used gold, and bank notes, and sometimes government paper (known as greenbacks, first printed to pay for the Civil War).

Partially as a result of wonky currency situation, the U.S. economy was prone to sudden panics and recessions. It happened in 1836 (in part because of the killing of the second national bank), 1857, 1873, 1882, 1893, 1896, 1907, and 1910. At that point, people had gotten a little tired of the nonsense (four major panics in 20 years will do that), leading to Congress setting up a new central bank: the Federal Reserve.

Created by the 1913 Federal Reserve Act, the Fed is set up to match the federal structure of the U.S. government. It's actually comprised of 12 regional banks. The placement of the banks made more sense in 1913, but they were meant to represent the different parts of the country: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco.

It took a little while for the Fed to get its bearings (it didn't do much to stop the Great Depression from happening), but now the central bank is seen as the key manager of the U.S. economy. It sets interest rates and regulates the banking system.

Led by the Federal Reserve Chairperson, its main policy-making body (called the Federal Open Market Committee, or FOMC), tweaks rates and the money supply in order to balance the economy within the Fed's so-called dual mandate: keeping the value of the currency stable while simultaneously targeting full employment. Basically, the Fed tries to keep both inflation and unemployment as low as possible.