Early Federal Reserve Notes and Federal Reserve Bank Notes: The Nation's Central Bank

Federal Reserve notes, which comprise more than 99 percent of today's paper currency, were first issued by Federal Reserve Banks in 1914. The Federal Reserve System was established by the Federal Reserve Act of 1913, which, in part, called for the creation of an independent central bank to furnish an elastic money supply that would expand and contract in response to the economy's changing demand for money. Such flexibility in the financial system acts as a stabilizing influence on prices and credit in the economy.