A History Of The Federal Reserve Why Was It Formed?

History Of The Federal Reserve Why was it Formed?

The Federal Reserve was formed due to financial crises which caused massive problems, not just for the bank that was falling but for all banks. The panic of one bank falling triggered a domino effect on other banks. As one bank failed people not even using that bank saw the panic and would withdraw their deposits even when their bank was not in any danger of failing. Due to the widespread panics that were causing banks to go out of business, banks were in need an emergency reserve so in times of panic. In 1907, the sever panic wreaked havoc on the banking system as the banks did not have enough supply to keep up with the demand of the withdrawals (In Plain English, n.d.). Wide spread panic in

The act was passed as to be an immediate response in times of a panic and to provide emergency currency. The Aldrich Vreeland act established the monetary commission to solve the banks and nation's financial problems long term instead of short fixes. The banker-controlled plan was developed in response to the commission under Senator Nelson Aldrich. During 1912 when Woodrow Wilson was elected he got rid of the Aldrich plan, although this helped set up for an emergency of a decentralized central bank (History of The Federal Reserve, n.d.). Even though Woodrow Wilson was not all that knowledgeable about finance and banking he sought out Virginia Representative Carter Glass. Glass’s knowledge of banking and financial issues led him to become the Chairman of the House Committee on Banking and Finance. Glass worked closely with the Committee’s expert advisor H. Parker Willis, a former professor of economics at Washington and Lee University. Glass and Willis worked on a central bank proposal throughout 1912 (History of The Federal Reserve, n.d.). At the end of the year, the two presented President Wilson with what would become The Federal Reserve Act. Before President Wilson signed the Glass Willis proposal, it was debated for nearly an entire year in Congress. During this time the bill was changed and rewritten as Congress attempted to strike a

This act of terror was designed to strike at the heart of the American financial markets and institutions including the Stock Market. The United States Federal Reserve’s policymakers instantly had a massive challenge to deal with. Because of what could fallow after the attack could cause a financial panic and weaken the financial stability of the entire nation. In response to the attack, The Federal Reserve pushed record-breaking amounts of liquidity into the financial system in order to counteract any financial panic in the public and private sectors. Despite the massive devastation suffered on September 11th the financial well- being of the country suffered minimal damage because of the action of The Federal Reserve (Egan,