The Federal Reserve says of itself in The Federal Reserve System: Purposes and Functions, that "it was founded by Congress in 1913 to provide the nation with a safer, more flexible, and more stable monetary and financial system".

Those who argue in favor of the Federal Reserve says that the many crises — or "panics" as they were known then — faced by the American economy throughout the nineteenth century could have been avoided if a centrally planned economic system (central bank) had been in place.

So, how have they done?

Only sixteen short years after the creation of the Federal Reserve, the United States suffered the worst economic catastrophe in history — something the Federal Reserve failed to prevent. The Great Depression dwarfed the previously-referred-to panics, or recessions, that occurred during the nineteenth century, during which time the Federal Reserve was not in existence.

Another bout of economic instability infected the US during the 1970s and 1980s, which saw an incredible rise in inflation as a series of increasingly worse recessions occurred. The Great Inflation, as it was known, provides yet another example of the failure of the Federal Reserve to direct this increasingly complex economy.

The Constitutionality of the Federal Reserve as well as its supervision and accountability remain in question. Under no article nor section in the Constitution is there a mention of the right of the Congress to establish a central bank; however, in 1913 the Federal Reserve System was created by an act of Congress. The Federal Reserve Bank is run by a board of seven "governors" appointed for fourteen-year non-renewable terms by the President and confirmed by the senate. This permanent, ad-hoc "fourth" branch of government has the power to influence the value of the dollar as well as the economy in general, yet is relatively immune to the will of the people. With fourteen-year terms, the governors are more or less free to do as they please with little, if any, chance for the American people to hold them responsible for their actions. The board can be thought of as analogous to a hypothetical group of fourteen-year cabinet members who, as a whole, would wield as much or more power than the President.