The Federal Reserve System

A History of the First 75 Years


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About the Book

For more than 100 years since its inception, the United States struggled through a variety of financial problems, crises, and would-be solutions to the problems of currency, credit and financial stability. On December 23, 1913, Woodrow Wilson signed into law the Federal Reserve Act, creating an institution patterned after the central banks of Europe yet still uniquely American. This is a complete revelation of the workings of the system—the early history, organization, leadership, evolution and development, and major figures. Appendices include the original Federal Act (not readily available elsewhere) and numerous reference tables covering 1914–1989.

About the Author(s)

The late Carl H. Moore wrote several books about economic history. He lived in San Antonio, Texas.

Bibliographic Details

Carl H. Moore
Format: softcover (6 x 9)
Pages: 280
Bibliographic Info: 14 photos, map, glossary, appendices, bibliography, index
Copyright Date: 2011 [1990]
pISBN: 978-0-7864-6735-8
eISBN: 978-0-7864-8761-5
Imprint: McFarland

Table of Contents

Acknowledgments      xi

Preface      xiii

1. The Climax of a Long Struggle      1
Authorship of the Act      2
First United States Bank      3
Problems Persisted      4
Check Collection a Problem      5
A Search for Solutions      5
Democrats Come to Power      5
Ideas Sharply Divided      6
A Quick Summary of the Act      7
Federal Advisory Council      8

2. Getting Organized       10
How Many Fed Banks?      10
Subscribing Capital Stock      10
Hurry Up!      11
Preliminary Organization Committee      12
Surveying Opinions      13
Local Issues Important      13
Decision Time      15
Everyone Happy? No Way!      15
Naming the Federal Reserve Board      18
Politics Again      21
War Breaks Out      21
Fed Bank Directors      24
Open the Banks!      26
The “League”      28

3. Open for Business (1914–1919)      29
Who’s in Charge?      30
Changes in District Boundaries      32
How Can We Make A Profit?      33
A Wartime Atmosphere      34
Gold Settlement Fund      34
A New Currency—Federal Reserve Notes      35
Bank Reserves      37
Setting the Discount Rate      38
A Discount Policy      39
Check Clearing      40
Par Clearance of Checks      41
World War I and the Fed      43
United States Declares War      45
What Role for Gold?      47
A Glance into the Future      48
Governors’ Conference      48
Revisions of the Act Needed       49
A New Task for the Fed      52
Leadership in the Early Years      52
Does the Public Like the Fed?      56

4. A Struggle for Leadership (1920–1929)      57
Where Was the Fed?      57
The Phelan Act       58
No Firm Policy       59
Some Positive Facts      61
Speculation on the Rise      62
Internal Problems at the Fed      63
Politics Erupts      64
A Change in Mood      64
A Problem with Gold      65
Storage of Gold      65
Beginning of Open Market Operations      65
Markets Fall Apart      66
A Time for Action       67
“Tools” of the Fed      70
Leadership at the Fed       71
Day-to-Day Operations at Fed Banks      72
What about Par Banks?      73
Operations during the Decade of the 1920s      74
Legislation      74

5. A Decade of Change (1930–1939)      75
Where Was the Fed?      76
Looking Back      76
How to Handle a Run on Your Bank       77
What Action Should the Fed Have Taken?      78
Roosevelt Elected President       79
The Crisis Had Been Building       79
A New Face at the Fed       84
The Banking Act of 1933      87
Reserves for Feds Suspended      88
The Banking Act of 1935      88
What Fed Policy Now ?      90
Fed Gets a New Home      91
Meanwhile in the Back Rooms of the Feds      92

6. World War II and Its Aftermath (1941–1950)      94
What Role for the Fed?      94
Credit Controls      95
Peace Arrives      96
Now Let’s Deal with Inflation       96
A Change of Presidents      96
Unexpected Support for the Fed      97
Fed Makes a Formal Policy Statement      98
Another Side to the Fed      99
Federal Reserve Bulletin Born      100
Don’t Forecast!      102
How Much Does It Cost?      102
Work Increases at Fed Banks      105

7. The Fed Comes into Its Own (1950–1959)      108
What Was the Accord?      109
Enter Congressman Partman      112
Refining “Independence”      112
Power of the Fed Recognized       113
Challenges within the System      114
Chairman Martin and Washington Politics      115
Behind the Scenes at FOMC      117
The “Desk”      119
Operational Studies in the System       122
What to Do with All Those Checks      122
Counting All That Money      124
Changing Role of the Discount Window      126
Looking Back      128

8. The Public Discovers the Fed (1960–1969)      130
The Fed’s Role      131
Politics as Usual Again      132
Fed’s Independence Challenged Again      133
Problems with Currency      134
Greater Problems with Coin      135
News on the International Front      135
A Substitute for Gold?      136

9. The Soaring Seventies (1970–1979)      139
A New Style of Leadership at the Fed       139
Difficult Economic Problems      140
Congress Wants to Know NOW      141
Evasive Action by the Fed      141
Let the Sunshine In?      142
How about a GAO Audit?      144
Chairman Burns Calls in the Reserves      144
Leadership Changes Again       145
Another First at the Board      145
Increasing Importance of International Factors      146
The Consumer Demands Attention       147
Bank Operations Changing Too      148
Changes Outside the Fed      148
Remote Disbursements a Problem      149
What Can the Fed Do?      151
More Buildings Needed      152

10. Another Banking Evolution (1980–1989)      153
Welcome, Paul Volcker      153
A “Warm” Welcome for the New Chairman      154
Inflation Slowed      155
Major Changes for the Fed and the Banking Industry      156
Changes Welcomed by Consumers      158
Impact on the Fed       159
The Fed Adjusts      160
Daylight Overdrafts      160
Remote Disbursements—A New Check Collection Problem      161
Consumers and the Fed      162
International Developments      163
Legislation      164
Volcker Leaves the Fed      164
A Look Back      168

Appendixes      171
Glossary      171
Copy of Original Federal Reserve Act      173
Commercial Banks Certifying to the Organization of Each Federal Reserve Bank      203
Governors and Directors of Each Federal Reserve Bank, 1914      204
Design of the First Federal Reserve Notes      207
Federal Reserve Banks and Branches, 1989      209
Map o Federal Reserve Districts, 1989      210
Members of the Federal Reserve Board and the Board of Governors with Federal Reserve District of Residence and Term of Service      212
Board of Governors and Official Staff, 1989      214
Federal Open Market Committee, 1989      216
Board of Governors Advisory Councils, 1989      216
Principal Officers at Federal Reserve Banks, 1914–1989      217
Principal Officers at Federal Reserve Banks and Branches, March 1989      223
Number of Officers and Employees at Each Federal Reserve Bank, 1915–1988      224
Number of Employees at Federal Reserve Board and the Board of Governors by Selected Years      224
Sample of a Directive to the Manager of the Trading Desk From the Federal Open Market Committee      225
Discount Rate at the Federal Reserve Bank of New York, 1914–1989      226
United States Marketable Securities and Related Data, 1915–1988      228
Commercial Bank Suspensions, 1892-1988      229
Number of Commercial Banks in U.S., Total Assets, Number of Banks Member of the Federal Reserve System and Related Data, 1915-1988      230
Gold: World Production and Stock Held by United States, 1914–1986      232
United States Federal Debt, 1916-1987      233
Description of Federal Reserve Districts, 1917      234
Income and Expenses of Each Federal Reserve Bank, 1914–1988      238
Statement of Condition as of the End of the Year for Each Federal Reserve Bank, 1914, 1920,1930, 1940, 1950, 1960, 1970, 1980 and 1988      242

Bibliography      261
Index      263

Book Reviews & Awards

“for…readers interested in a general survey of the Federal Reserve history”—Choice.