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Formation of The Federal Reserve System

The Federal Reserve System, established by the Federal Reserve Act in 1913 and put into operation the following year, has in modern times taken on some of the qualities of an unelected fourth branch of government, an economic Supreme Court. Even when it was first established, and long before its full influence was understood, President Woodrow Wilson referred to the Federal Reserve Board as the "Supreme Court of Finance." Yet the United States existed for nearly 140 years without the Federal Reserve, and for the greater part of that period, the United States had no central bank of any sort.

From 1836, when the charter of the Second Bank of the United States was permitted to lapse, until the formation of the Federal Reserve, the functions associated with a central bank were either performed by the Treasury Department or else were left undone. As we will see, the greater part of central banking functions fell into the latter class. This absence of a central bank was not a sort of oversight; it was deeply engrained in American culture. In the view of many Americans, a central bank was not only unnecessary, the country could do better without one. A central bank had indeed been founded within three years of the adoption of the Constitution, but it was never popular and was allowed to lapse at first opportunity, as was its successor a quarter-century later.

The Federal Reserve System, the third effort in the United States to provide the functions of a central bank, came into being only with the Federal Reserve Act of 1913, when a variety of economic and political forces converged to encourage the foundation of a central bank. Perhaps more important, the Federal Reserve could come into being only after a number of other political and cultural forces, which had previously resisted with success the introduction of central banking, were weakened to the point where they could no longer prevent its enactment. Even with the chang...

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Formation of The Federal Reserve System. (1969, December 31). In LotsofEssays.com. Retrieved 08:21, March 29, 2024, from https://www.lotsofessays.com/viewpaper/1690475.html