The Federal Reserve Act of 1913 established the Federal Reserve System. This was done in response to a confusing system of independent state and national banks that operated under different and sometimes contrary laws.
The Federal Reserve System became the country's central banking authority. Twelve Federal Reserve banks were established in major cities: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. These have jurisdiction over larger regions, usually including multiple nearby states. The Act caps the total number of these banks at 12.
The Federal Reserve Act also established the legal authority of these banks to issue Federal Reserve Notes, more commonly known as dollars. All nationally chartered banks were required to become members of the Federal Reserve system and to purchase stocks in the regional bank that oversaw them. State chartered banks were given the option of joining the system, but joining was not required.
President Woodrow Wilson passed the Act, which was part of a larger currency reform plan. A number of amendments have since been made to the Act, such as an extension of its charter, the creation of the Federal Open Market Committee and a formal requirement of the Reserve to set continual goals of maximum employment, stable prices and moderate long-term interest rates.