Richard Hessney's Reviews > America's Bank: The Epic Struggle to Create the Federal Reserve
America's Bank: The Epic Struggle to Create the Federal Reserve
There was a joke at the time of the Federeral Reserve Bank's creation in 1913 that it had so many fathers its mother must've been a very immoral woman. After the Panic of 1907, a credit crisis, Wall St, Main St and the federal government agreed banking reform was necessary, but it took six years for the Glass-Owen Act establishing a central bank to be signed by President Woodrow Wilson. The U.S. had not had a central bank for over 70 years since the Second Bank of the U.S. was abolished in the Jackson Era. The result was several financial panics, no lender of last resort, no uniform currency, and periods when cash (however defined) and credit were scarce. It's a dry, complicated story of how the Federal Reserve came to be, but Wilson's election in 1912 was key. Banking reform was one of his main agendas, and he had the skill to sort out competing plans and steer the best compromise through Congress. The Fed hasn't been perfect in the last 100 years--it tightened credit during the Great Depression, making things worse--but imagine what would've occurred in 2008-9 if the Fed wasn't there to shore up a financial system on the brink of collapse. Of course other big banks helped by buying failing institutions (some with Fed loans), but the Fed was the main player through quantitative easing, which loosened credit and kept the system afloat. In fact, the Panic of 1907 has many parallels to 2008-9, except that it wasn't caused by a housing bubble. Nonetheless, it led to a huge bank run, little credit activity to keep business humming, and cash disappearing (hoarding). Finally, I feel the "epic struggle" of the subtitle is kind of hype. Yes, there were many players and plans batted around for six years, but I can think of other true epic struggles in American history: the Civil War, women's suffrage, and civil rights. The Fed is very important but not in their league.
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