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Federal Reserve Essay

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The Federal Reserve is the central bank of the United States of America and its main responsibilities include: regulating the country's financial institutions and implementing monetary policy. However, the Fed we know today is not what it was hundreds of years ago. The development of this central bank has not only been a long evolving process, but has been shaped by many political decisions and historical events.

The central bank can be traced all the way back to the Colonial period. where Alexander Hamilton and Thomas Jefferson were at odds about this topic. On one hand, Alexander Hamilton was a strong supporter in the development of a central bank and the need for stable currency. Thomas Jefferson was on the opposite side of the spectrum, …show more content…

The bank was created with a goal of providing some form of stability to America's currency. Even with the bank being widely successful, the Jeffersonian Democrats' opposition in 1811 led to the First Bank of the US to not have a charter …show more content…

However, the Great Recession was one of the toughest challenges the Fed had seen up to this point.The Great Recession was a global economic downturn that lasted roughly from 2007 to 2009. It was caused by a combination of factors such as: deregulation of the financial industry, the stock market plummeting which erased a wide margin of wealth, the utter collapse of the housing market. It was the Fed's job to find a way to fix the economy. The Federal Reserve responded by lowering interest rates to near zero levels, quantitative easing which involves purchasing large amounts of bonds and other securities to attempt to inject liquidity into the market, and established a wide number of lending facilities to provide credit to financial institutions that were struggling during the crisis. Overall, these actions that were taken by the Fed helped to prevent a complete collapse of the economy and allowed it to recover in the following

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Even before the Constitution there was serious debate about a national bank being constitutional. For Thomas Jefferson, James Madison and Alexander Hamilton they had different interpretations of if a national bank is included in the constitution. Hamilton believed the national bank would be the governments chiefs fiscal agent, making it simple to collect taxes, and make payments on loans it would provide national currency, and a source of capital for financing. In contrast Jefferson felt strongly that the bank would conflict with state laws, and Madison argued that the bank proposal was unconstitutional. Other imposing factors included that the American national bank would create corruption.

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President Alexander Hamilton's research and economic theories had a significant influence on the formation of the Second National Bank. As the first Secretary of the Treasury under President George Washington, Hamilton played a crucial role in shaping the economic policies of the young nation. Hamilton's economic theories emphasized the importance of a strong central bank in promoting economic development and stability. He believed that a centralized institution could address the challenges faced by the fragmented banking system of the time and provide stable currency and credit facilities for businesses. In his influential "Report on the National Bank" in 1790, Hamilton argued for the establishment of the First Bank of the United States.

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- What are the two primary mandates of the Federal Reserve? “…so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. ”[1] The two primary mandates, sometimes referred to as the Dual Mandate, would be maximum employment and stable prices. The goal of long-term interest rates is somewhat dealt with when an attempt is made towards stable prices.

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This included the idea of a single currency and having that throughout the U.S. as a way to make things simpler and more efficient (Digital History). This was something Jefferson did agree with saying “It may be said that a bank, whose bills would have a currency all over the states, would be more convenient than one whose currency is limited to a single state (Thomas Jefferson-University of Virginia Press).'' The only problem that Jefferson had with this was that banks would also control people's loans and control their credit. Jefferson thought this would only cause financial corruption throughout the U.S. He felt this would only undermine the state banks that were in order and create a “financial monopoly” only benefiting foreign interests and the wealthy.

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Jefferson believed that because the Constitution did not directly state that the Federal government could create a bank then it was not allowed. Hamilton, on the other hand, believed that because the constitution gave the Federal government the right to coin and distribute money that the government could also create a bank.

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Thomas Jefferson believed that creating a national bank gave too much power to the federal government and was extremely unconstitutional, while Alexander Hamilton stated the “Elastic Clause” and classifying the bank as necessary and proper for the people of our nation. In the Battle of the

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The creation of the first bank in the United States prompted a political debate which started in 1791, and went on in the following years. Hamilton’s plan foresaw a bank provided with special powers and privileges, which gave birth to a wide opposition. Although Hamilton 's idea continues to exist in today’s economic environment, at that time his proposal was met with widespread resistance from individuals such as James Madison and Thomas Jefferson, who considered the creation of a federal bank as unconstitutional. Following to a broad interpretation of the Constitution, Hamilton argued that in order to have an effective bank, Congress should be provided with all the powers required. Jefferson disagreed with Hamilton, and claimed that the establishment of such a bank was not consistent with the powers that the Constitution granted to Congress.

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Alexander Hamilton, a late 18th-century politician, was a major supporter of the National Bank. The National Bank is a bank that facilitates daily transactions and collects tax revenue for the federal government. In the 1790s, there were two distinct sides to this debate: the Hamiltonians and the Jeffersonians. The Hamiltonians, in alignment with Hamilton’s beliefs, believed in a looser interpretation of the Constitution, while the Jeffersonians believed the opposite, in alignment with Thomas Jefferson’s beliefs. Ultimately, this debate ended in 1819 when the Supreme Court ruled the National Bank constitutional in the McCulloch v Maryland case.

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In 1790, Hamilton presented his financial plan to lift the nation of out its foreign and domestic debts, which included creating the Bank of the United States, also known as the federal bank. The creation of the federal bank proved to be Hamilton’s most contentious policy. The bank advanced Hamilton’s policy of regulating the economy through the federal government, which, in turn, would empower the federal government with greater political power to uphold liberty. Fearing the cronyism and bureaucracy that the federal bank would bring to the American government, Jefferson argued that the creation of the federal bank was, in itself, unconstitutional, as “the powers not delegated to the United States by the Constitution, nor prohibited by it to the states, were reserved to the states… To take a single step beyond the boundaries specifically drawn around the powers of Congress is to take possession of a boundless field of power.”

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The problems America faced were whether or not to establish a national bank or state banks, whether to focus on an agricultural economy or an industrial economy, and finally, how to deal with state debt. On his cabinet, Washington had the best federalist, Alexander Hamilton, and democratic-republican, Thomas Jefferson. In 1791, whether or not to install a national bank was a topic. Thomas Jefferson believed in the strict interpretation of the Constitution and argued that instilling a national bank was unconstitutional. The power to choose should have belonged to the state governments (Doc C).

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Hamilton vs. Jefferson Visions to Reality     Thomas Jefferson and Alexander Hamilton both had very defined visions of the scope and power of the new federal government, how they saw the future of the economic development, and what the United States society should become. In my opinion Alexander Hamilton had more of an impact on the United States during the 1820’s and on contemporary government when compared to Thomas Jefferson. His policies did not strictly work during that time and many of his ideas are still seen in today’s society. Jefferson’s views and ideas on/of the national bank, higher tariffs, debt assumption, The Federalist Party, and his support of the ratification of the Constitution are all reasons in why his policies and visions came closer to becoming a reality.     Thomas Jefferson and Alexander Hamilton, molded the gatherings that provoked to the twofold party system under which the U.S. works today.

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Hamilton wanted to create public credit with a treasury system, a national bank, a mint, and increase manufacturing which would help unify the country. On the other hand, there was Jefferson, who opposed a strong central government. He argued that the “wealthy would gain at the expense of ordinary Americans and that Hamilton’s political economy would corrupt the morality of citizens and undermine the social conditions essential to republican government”(Powerpoint). The country would opt for an approach closer to Hamilton’s views. One of the first acts was the National Banking Act.

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Also, Jefferson believed that a national bank would be unconstitutional. He might have thought this would be good for our country but since he was a strict interpreter of the Constitution, he did not think it would be allowed. Hamilton thought this national bank would be good for our country in times of financial need and would provide economic stability. Hamilton, being a loose interpreter of the Constitution, fired back at Jefferson with the Elastic Clause. The Elastic Clause was Article I Section VIII under the Constitution which states that the federal government can do anything that they see as “necessary and proper”.

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Alexander Hamilton was a Federalist who believed in his loose Constructionist views, a support for manufacturing and trade, and a strong national government. Thomas Jefferson, a Democratic-Republican, believed in his strict Constructionist views, a support in agriculture, and a strong state government. These two both played impacts on the Early Republic. However, Hamilton’s views on the Constitution, the central government, and an ideal economy greatly influenced the formation of the United States in the Early Republic times. Hamilton’s loose constructionist ideas overrode Jefferson’s strict constructionist views, as seen in the National Bank.

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In order the help end the recession the United States government along with the Federal Reserve used Fiscal and Monetary to help prevent a worst catastrophe. Fiscal Policies During the Great Recession, there were quite a few Fiscal Policies implemented. The first policy to be implemented was the Economic Stimulus Act of 2008.

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