The Federal Reserve System

A History


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About the Book

The Federal Reserve banking system was created in 1913 in an effort to bring coherence to nationwide banking practices and prevent crises like the financial panic of 1907. Since it began operating in 1914, the Federal Reserve has played a crucial role in determining American financial policy and practice. It is largely an entity unto itself, operating independently, rarely subject to the political machinations of Congress or the presidency. Yet few Americans know how it works, and even fewer know anything of its history.
This history of the Federal Reserve begins by giving an overview of American banking practices before the Federal Reserve’s formation. The events leading to the Reserve’s creation, and its early trials and tribulations, are then documented. Subsequent chapters track the Federal Reserve’s history: its role during times of financial and military crisis, its relationship to each presidential administration, and the Fed’s evolution as its leadership has changed over the years. The history wraps up with the Alan Greenspan era, explaining major changes in the institution’s operating procedures since the 1980s. An appendix lists all members of the Federal Reserve Board of Governors, from its formation until 2003.

About the Author(s)

Donald R. Wells, professor emeritus of Economics from the University of Memphis, has written extensively in the areas of free banking, the Canadian Banking System, and the reaction of the U.S. and Canadian banking systems to periods of depression. His scholarly interests range beyond economics—he is also the author of The Race for the Governor’s Cup: The Pacific Coast League Playoffs, 1936–1954 (2000). He lives in Bartlett, Tennessee.

Bibliographic Details

Donald R. Wells
Format: softcover (6 x 9)
Pages: 224
Bibliographic Info: bibliography, appendices, index
Copyright Date: 2004
pISBN: 978-0-7864-1880-0
eISBN: 978-0-7864-8219-1
Imprint: McFarland

Table of Contents

Table of Contents

Preface 1

 1. U.S. Banking before the Federal Reserve 7

 2. The Aldrich-Vreeland Act Prevents a Panic in 1914 21

 3. Original Uncertainty Regarding Exercise of Fed Authority 25

 4. The Federal Reserve’s Role in World War I 29

 5. The Discovery of a New Tool for the Federal Reserve 35

 6. The Fed in the 1920s 41

 7. The Fed in the 1929–1933 Contraction 47

 8. Policy Changes in the Roosevelt Administration 61

 9. The Fed’s Role in World War II 77

10. The Fed Between World War II and the Korean War 85

11. The Korean War and the Accord with the Treasury 91

12. “Bills Only” as an Act of Independence 97

13. Operation Twist and President Kennedy’s Tax Cut 107

14. Chairman Martin’s Battle with President Johnson Over Inflation 111

15. Nixon Replaces Martin with Burns and Inflicts Price Controls on the Economy 119

16. Supply Shocks in the 1970s Make Unemployment and Inflation Worse 125

17. Carter Replaces Burns with Miller and Inflation Worsens 131

18. The Volcker Era Begins and the Fed Gets Control Over All Banks 137

19. Volcker’s Fed Slows Inflation at a Cost 145

20. Volcker Is Reappointed but There Are Changes on the Board 153

21. The Greenspan Era Begins 161

22. The Fed’s Response to the Thrift Crisis 167

23. Economists Dominate the Board Under Greenspan 173

24. Changes in the Fed’s Operating Procedure after the 1980s 185

Conclusion 193

Appendix A: Membership of the Board of Governors of the Federal Reserve System, 1913–2003 199

Appendix B: Persons Serving as Chairman of the Board of Governors 202

Bibliography 203

Index 211

Book Reviews & Awards

“highly recommended”—Choice; “thorough…essential”—Midwest Book Review; “a fine survey history”—History: Reviews of New Books.