Charting Twentieth-Century Monetary Policy: Herbert Hoover and Benjamin Strong, 1917-1927

By Silvano A. Wueschner | Go to book overview
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Chapter 1
The Emergence of Factions: Differing Views on the Roles for the Federal Reserve System

This bill creates a "central bank." This plan is much more centralized, autocratic, and tyrannical than the Aldrich plan. It is true we are to have 12 regional banks; but these are but the agents of the grand central board, which absolutely controls them. The power is not with them; they are not in any material matter given independent action; they must obey orders from Washington.

Rep. M. Towner (R. Iowa)1

The Federal Reserve System was officially established on December 23, 1913, when President Woodrow Wilson signed Public Act No. 43, 63rd Congress, or the Federal Reserve Act. The act was the outcome of a banking reform movement that grew out of the panic of 1893, but its immediate origin lay in the financial havoc wrought by the panic of 1907. The movement recognized that there were inherent defects in the American banking system, among which were the lack of an elastic currency, no adequate means of rediscounting commercial paper, and inadequate supervision of banking. The system, as Mark Sullivan later noted, was "a tangle of inadequacy and antiquation,"2 and Congress was

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1
Congressional Record, 63rd Cong., 1st sess., pt. 5: p. 4896.
2
Mark Sullivan, Unpublished Manuscript, in Mark Sullivan File, PPI, HHPL.

-1-

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