The Federal Reserve System during the War
The task undertaken in this study has been to set forth the effects of the war upon money, credit and banking, rather than to write a comprehensive history of developments in money, credit and banking during the war. A large volume would be required to treat adequately the extraordinary developments in the United States during the war, in view of the inauguration of our federal reserve system.
But it has been possible to trace the main movements in money, credit and banking, growing out of the war down to March, 1917, when the United States broke with Germany, with comparatively little reference to the federal reserve system.
The federal reserve system had not been set going when the great war broke out at the end of July, 1914. The Federal Reserve Board was not organized till August 12, 1914, and the federal reserve banks were not opened for business till November 16, 1914. It was the Aldrich-Vreeland notes, and the close cooperation of existing banks, clearing houses, stock exchanges and the Treasury, which met the first shock of the war. The flood of gold which came to us beginning with December, 1914, made, as shown by our curve for call rates in New York,1 the easiest money market in the history of Wall Street, and made it largely unnecessary, before April, 1917, for the banks generally to have recourse to rediscounting at the federal reserve banks.2 Certain of the country federal reserve banks, as those at Dallas, Kansas City and Atlanta, began to rediscount substantially soon after they began business, particularly as the rise in agricultural prices and the revival of agricultural prosperity made increasing demands on the loan funds of the member banks in these districts.____________________