Central banks are chartered by national governments to have a legal monopoly over a nation’s currency and bank reserves. To manage a nation’s money supply, they use monetary policy tools, such as open market operations (e.g., buying/selling gold, silver, government debt securities, etc.); setting reserve requirements (i.e., deposits of currency, gold or silver that must be held at the central bank) for commercial banks and financial institutions; and acting as lender of last resort for solvent but illiquid commercial banks and financial institutions during a financial crisis. Central banks also supervise commercial banks and financial institutions.

The United States Constitution provides the legal foundation for a central bank in Article I, Section 8, Clauses 5 and 6, which give Congress the power “to coin money [and] regulate the value thereof,” and Clause 18 to make laws “necessary and proper for carrying [out] the foregoing powers.” America’s first central bank was established in 1791 by the 1st Congress....

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