Our unique central bank.

• Author: Adams, Tucker Hart
• Position: The ECONOMIST

A few years ago, before the Great Financial Crisis, I doubt the average American could have told you the name of our central bank. Although business reports occasionally included Chairman Ben Bernanke's latest pronouncement or a squib on the decision to keep overnight interest rates at historic lows, the Federal Reserve Bank wasn't of much interest outside the financial industry and a few economists.

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But in our search for a scapegoat for the recent economic catastrophe, the Fed has assumed a prominent spot on our radar screen.

Our Federal Reserve Bank is a latecomer to the central banking scene--the Bank of England, for example, has been around since 1694. However, there was a brief experiment with central banking early in our history. Following the Revolutionary War, there were more than 50 types of bills, coins and notes issued by both states and individual banks (the origin of the term "banknote") in circulation. The First Bank of the United States was created by Congress in 1791 in an attempt to standardize our currency. But when its charter expired in 1811, charter renewal was defeated in Congress by one vote.

After a five-year hiatus, the Second Bank of the United States was chartered in 1816, in the wake of the inflation that followed the War of 1812. It was plagued by fraud and corruption (both early banks were privately held), and it fueled land speculation by over-extending credit. It was heartily disliked by President Andrew Jackson, and its charter was not renewed. The U.S. was without a central bank for almost 80 years, until our current Fed was created by an act of Congress in 1913, after a series of disastrous financial crises and recessions--one lasting 65 months in the 1870s, another lasting 38 months in the 1880s, four recessions totaling 78 months between 1899 and 1912.

A reflection of American distrust of centralization of power, our Federal Reserve System is composed of a seven-person Board of Governors in Washington, DC., and 12 regional banks. Colorado is part of the Kansas City Federal Reserve Bank. Members of the Board of Governors are appointed by the U.S. president for 14-year terms and must be confirmed by the Senate. In the middle of his term, the president appoints the Fed chair, also confirmed by the...