Below is a brief timeline of highlights in the fascinating history of the U.S. Federal Reserve.
1791: Congress, under the guidance of Alexander Hamilton as U.S. Treasury Secretary, created the First Bank of the United States.
1811: Congress disallowed the renewal of the First Bank’s charter.
1816: Congress chartered the Second Bank of the United States.
1836: Again, the U.S. Congress, under the avid leadership of the then-president, Andrew Jackson, voted not to renew the Second Bank’s charter.
1836-1865: This period spawned a flurry of “free banks,” which issued notes that were redeemable by the customer in gold or silver. Bank runs were common well past the turn of the century.
1913: The Federal Reserve Act was passed, under the hand of President Woodrow Wilson. One dozen reserve banks were created, led by a board comprised of seven guiding members chosen by the U.S. President.
1929: The now-famous crash that lead to the Great Depression occurred in October of this year. The nation, already divided about banking reforms, found itself reeling.
1930 – 1933: Over this short period, some 10,000 U.S. banks failed. Congress passed the Glass-Steagall Act in 1933, requiring the separation of investment and commercial banks, and government securities became required collateral for all Federal Reserve notes. The 1933 Banking Act, (Glass-Steagall), established the FDIC, or Federal Deposit Insurance Corporation, in the same year. It also granted several new sweeping powers to the Fed. Gold and silver certificates were recalled by then-president FDR, a blow that effectively killed the gold standard.
1951: The agreement between the Federal Reserve and the United States Treasury overturned the previous structuring of the treasury through assurance of low-cost securities by the Fed. Essentially, this meant that fixed rate monetization by the Fed became a thing of the past.
1978: Reacting to runaway, double-digit inflation, Congress ruled that the Federal Reserve Chairman must testify before them twice a year.
1980: The Monetary Control Act became law, initiating a period of reforms in the contemporary banking industry.
1987: Fed Chairman Greenspan, who served in that position for nearly two decades, assisted the country to head off an all-out crisis after the stock market crash known as Black Monday.
1999: The Glass-Steagall Act was overturned by the Gramm-Leach-Bliley Act, and banks were freed to offer various financial services such as insurance and investment instruments.
Today’s Fed, under Chairman Ben Bernanke, has played an important part in ferrying the country out of a chilling period of financial crisis and back into a slow-growing stability.
Time Magazine: http://www.time.com/time/photogallery/0,29307,1947516_2012438,00.html
Federal Reserve Education: http://www.federalreserveeducation.org/about-the-fed/history/