What was the purpose of the Federal Reserve Act of 1913?

The Federal Reserve Act of 1913 was established primarily to create a system of federal banks, known as the Federal Reserve System. The main goal of this legislation was to address the problems of financial panics and to provide the country with a safer and more flexible monetary system. The Federal Reserve System serves as the central bank of the United States and regulates the nation’s monetary policy, supervises and regulates banks, maintains financial stability, and provides financial services.

By creating a central banking authority with the ability to manage the money supply and serve as a lender of last resort, the Act aimed to mitigate the risk of bank failures and to enhance the overall stability of the national economy. The establishment of this system allowed for greater government involvement in managing economic fluctuations and responding to banking crises, marking a significant shift from the previously less regulated banking environment.

In this context, the option referring to the creation of a system of federal banks accurately encapsulates the primary intent of the Federal Reserve Act, making it the correct choice. Other options, like creating a system of state banks or regulating stock exchanges, do not align with the primary focus of the Federal Reserve Act, which was specifically about establishing a centralized banking system rather than state-level banking structures or stock market regulations.