Who gave the Federal Reserve the power to create the money necessary to cover its checks?
The Congress. Because this power to create money is given by the Constitution to Congress, only the Congress can delegate this power. And this it has done in creating the Federal Reserve System an agency of Congress authorized to create money. 49. How does the Federal Reserve change the money supply? First, by increasing or decreasing the amount of bank reserves which the member banks of the Federal Reserve System have to their credit on the books of the Federal Reserve banks. Second, by regulations which tell the member banks the maximum amount of bank deposits they may create per dollar of reserves. 50. What is the formula that determines the maximum amount of money available to business and consumers? Expressed mathematically this is a simple formula A x B = C where: A = Amount of bank reserves; B = Number of dollar deposits member banks may create per each dollar of reserves; and C = Total bank deposits. 51. Can the Federal Reserve authorities change the money supply formula? Yes.
