The Federal Reserve is surrounded by mystery, debate and conspiracy in general. Most Americans are familiar with its role in the management of monetary policy; few know the doomed saga of its development. The Federal Reserve was created in 1913, which followed many years of financial instability, banking failures and economic panics. Rich bankers, powerful politicians and that good old boy, a business leader all had a significant influence on the shape of its development. Some saw it as a measure for future emergencies, some others considered it as a system of giving concentration to the source of money. One hundred twenty years on, the roots of the Fed continue to raise more questions than answers about its genesis.
Banking Chaos
The United States had previously been plagued by banking panics. Banks collapsed on a regular basis, emptied savings and caused problems of confidence in the financial sector in general.
Panic of 1907
In 1907 a serious financial disturbance caused the inadequacy of the system of banking to be put to the test. Many leaders felt reform was necessary because of the panic.
Secret Island Meeting
The most well-known of all is a secret meeting on Jekyll Island, GA, in 1910. Private consultations of financial and political figures were held relating to banking reforms.
Powerful Bankers
A number of key financialists were involved in the initial planning. This participation later led to accusations of private interests influencing the future of the central bank.
Political Support
The Federal Reserve will never have been made by the banks. Politicians from the leader pushed to make reform recommendations happen legislation that can pass congress.
Public Distrust
Americans were not averse to centralized banking authority. The legislators had to make the new system appealing in terms of providing public checks on balances and upholding financial expertise.
The Federal Reserve Act
The Federal Reserve Act was passed by Congress in December 1913. The bill formally created the Federal Reserve System and altered the way that Americans finance their lives forever.
Stabilizing Markets
The supporters envisioned that it would decrease the number of financial panics, allow for quick liquidity to be injected to the system, and make banking more stable.
Ongoing Controversies
Some analysts complain the Fed ascribes too much power to financial institutions. Questions of transparency and accountability have been played out to this day.
Economic Influence
The Fed has come to have an increasingly prominent impact on the rates of interest, inflation, and employment, as well as on the overall health of the economy.
