This website uses cookies to ensure you have the best experience. Learn more

History Of The Federal Reserve Essay

1282 words - 5 pages

Today in the United States, we have security in the banking system. People trust that banks wont fail, and their savings will be gone with it. While some people today do not completely trust in the banking system, the situation pales in comparison to the reality that people faced in the late 19th and early 20th centuries. In this time bank failures, economic panics, and slow economic downturns were as common as the seasons. Over time, American society has come to have faith in a Central Bank, known as the Federal Reserve System. The Federal Reserve System has many responsibilities, including, but not limited to, promoting economic growth, setting monetary policy, regulating and overseeing financial institutions, and issuing currency. All of these responsibilities have been very important for maintaining a strong economy, but the history of Central Banking in the United States shows that in the past it was not always a welcome entity.

The First Central Banks
The First Bank of the United States was founded in 1791, headquartered in Philadelphia. Secretary of the Treasury Alexander Hamilton headed the movement to create this first bank. “Alexander Hamilton, the first Treasury secretary, believed a national bank would stabilize the new government’s shaky credit and support a stronger economy — and was an absolute necessity to exercise the new republic’s constitutional powers” (Irwin 2013). With Hamilton’s influence, Congress agreed upon a central banking system. Its functions as a bank were very simple. It accepted deposits, issued notes, made loans, and purchased securities. It was the biggest corporation in the country at the time, and while it provided financial stability, many people did not trust such a powerful institution in the hands of such few people. When the charter ran out in 1811, it was not renewed.
The United States incurred a large debt during the War of 1812, and realized how important a central bank could be when funding and recovering from a war. This led to the establishment of The Second Bank of the United States in 1816. This bank had the same functions as the First Bank, but it was larger with $35 million in capital as opposed to the First Bank’s $10 million. President Andrew Jackson had always argued against a central bank, as he saw it as a threat to democracy. Many others shared this sentiment and the bank saw its expiration in 1836 when its charter was not renewed.
The Era of Free Banking
After the Second Bank fell, a period known as the Era of Free Banking occurred. During this period there was no central regulating mechanism to provide security or liquidity in the banking system. State chartered and unchartered banks offered their own notes, varying in reliability. This era ended when the National Banking Act was passed in 1863, which allowed for nationally chartered banks. These banks issued notes backed by government securities. The goal here was to make secure uniform currency, and a tax was...

Find Another Essay On History of the Federal Reserve

The Federal Reserve System Essay

2320 words - 9 pages piece of constructive legislation of the Wilson era and one of the most important domestic acts in the nation’s history” (Schlesinger pp. 46).      The purpose Federal Reserve Act is “To provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes” (Federal Reserve

The Federal Reserve Essay

1194 words - 5 pages constitutional legality, transparency issues, and monetary policy of the Federal Reserve. Most arguments are based on misconceptions, grossly misstated facts, and the literal overlooking of history, as if banking and finance did not exist before 1913. The Federal Reserve System is the central bank of the United States and crucial part of the banking system, as well the government as a whole. Each proposed solution has numerous fallacies, and they also

The Federal Reserve

1893 words - 8 pages Alexander Hamilton, as Secretary of the Treasury, persuaded Congress to establish the first centralized banking institution (First Bank of the United States) in American in 1791. It was immediately met with suspicion by the farming community, which constituted the large majority of Americans, of being representative of “big money”; when it came up for renewal 20 years later, Congress let its charter expire (Federal Reserve Education.Org, n.d

The Federal Reserve System

729 words - 3 pages The Federal Reserve System is the United States bank. Was created in December 23, 1913 by the congress to provide the nation with a better and stable monetary financial system. The Federal reserve’s is responsible for directing the nation’s monetary policy by persuading money and credit conditions in the economy in tracking down of full employment and stable prices ("Board Of Governors Of The Federal Reserve System", 2014). Also

Role of Federal Reserve

1128 words - 5 pages Federal Reserve exists to play a role as the last resort of lender for the US economy where International Monetary Funds (IMF) exists to play a similar role for global economy. The International Monetary Fund has become a powerful international institution that provides loans to governments of member countries unable to meet their international financial obligations, such as to public and private lenders or to trade partners. The IMF has played

The Federal Reserve

2256 words - 10 pages Money is the anthem of success. It is the tangible spirit of the American Dream that has heartily inspired the masses, the framework for the pursuit of happiness, and no one regulates it more than the United States’ government. The Federal Reserve is the central bank for the United States and serves to handle the nation’s monetary policies in conjunction with the government’s fiscal policies in order to improve the economy. Even in America’s

The Federal Reserve - 1926 words

1926 words - 8 pages Every large economy and most small economies have central banks. Some of the better known central banks are the European Central Bank, the Bank of England, and the Bank of China. The Federal Reserve, well-known as The Fed is the U.S. Central Bank. A central bank is an organization responsible for overseeing the monetary system of a nation. Conspiracy theories describe the Fed as men in top hats and black suits, secretly meeting in dark smoke

The Federal Reserve Act

706 words - 3 pages Discussing the Federal Reserve After reading the article, The Influence of Economists on the Federal Reserve Act, it is apparent the author is trying to suggest that the economists played a major role in the banking reform which led to the development of the Federal Reserve Act. During the late 1800’s and early 1900’s, issues regarding the framework for which the bank operates on was inconsistent and did not perform as projected in foreseeable

The Federal Reserve System

1428 words - 6 pages Federal Reserve 5th District - PAGE 1 - The Federal Reserve SystemECONYour UniversityThe Federal Reserve BankThe fifth of twelve satellite banks in the Federal Reserve solar system belongs to our close neighboring city of Richmond, Va. Its function is not unlike its eleven sister banks that are strategically positioned throughout the country, and together form our nations central banking system. Congress put the construct of the Federal

The Federal Reserve - 2337 words

2337 words - 9 pages The Federal Reserve System is the United States of America’s central banking system and as such is one of the most powerful entities in the country. The Fed, as it is informally known, was created with the enactment of the Federal Reserve Act of 1913, aimed at preserving a system of checks and balances and the decentralized power echoed in the US constitution. It was sanctioned largely in response to a series of financial upheavals, in

Actions of the Federal Reserve System During the ‘Great Contraction’

1784 words - 8 pages .). Banking and Monetary Statistics : 1914-1941. Electronic. Washington, D.C.: Board of Governors of the Federal Reserve System, 1943. Board of Governors of the Federal Reserve System (U.S.). Banking Studies. Electronic. Baltimore, U.S.A.: Waverly Press, 1941. Friedman, Milton, and Anna J. Schwartz. A Monetary History of the United States, 1867-1960. National Bureau of Economic Research. Studies in

Similar Essays

The Purpose Of The Federal Reserve System

2692 words - 11 pages interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds. The Federal Reserve System is the central banking authority of the United States. It acts as a fiscal agent for the United States government and is custodian of the reserve

The Duty Of The Federal Reserve

717 words - 3 pages The Federal Reserve Act was signed into law on December 23, 1913. Due to a series of financial panics around 1907, the Federal Reserve (also referred to as the “Fed”) was created by Congress to promote a stable banking system and an active economy. The Federal Reserves’ greatest client and biggest spender is the government of the United States. All proceeds from taxes generated and disbursements are managed through the account that the

The Federal Reserve System Essay

2023 words - 8 pages and improve the system to better serve the people and the government. (“History of Central Banking” 1-10) Differences in the Three Banks. The Federal Reserve was not set up like the First and Second Banks because it was not designed to conduct business with the general public. The general public could not receive business loans or place deposits with the Federal Reserve. The Federal Reserve was only allowed to make loans and accept deposits

Role Of The Federal Reserve Bank Today

1880 words - 8 pages The history of the Federal Bank began with America’s paper money, known as “continentals.” The Continental Congress printed out the nation’s first currency to finance the American Revolution. However, the congress issued the “continentals” in such significant quantities that it led to inflation. The people lost faith in the notes worth, leaving the nation once again with no common currency. Alexander Hamilton, the first Secretary of