History of the Federal Reserve

Patricia Gomez Daniel Chavez

1914-1919: Fed Policy During the War

In the middle of 1914 when the World war began, banks did not have an issue because of the emergency currency under the AldrichVreeland Act of 1908. The U.S began to trade goods with Europe , which helped finance the war until 1917. In 1917 the U.S declared war on Germany.

1920s: The Beginning of Open Market Operations

In World War 1, Benjamin Strong, who was the head of
the New York Fed from 1914 until his death in 1928, realized that gold was no longer served as the main factor in credit. Strong's action to start a recession in 1923 gave evidence of the open market operations that influenced the credit in the banking system. During the 1920s the Fed opened, open market operations as a monetary tool. Strong also changed Fed by making relations with other central banks, like the Bank of England.

1929-1933: The Market Crash and the Great Depression

During 1920s, Virginia Representative Carter Glass, warned that stock market would lead to consequences. In October 1929, he predicted that the stock market would crash. Nation fell into the worst depression in its history. From 1930 to 1933, about 10,000 banks crashed. By March 1933, President Franklin D. Roosevelt

1933: The Depression Aftermath

Because of the Great Depression they passed the Banking Act of 1933. This called for the split in banking. The act lead to Federal Deposit Insurance Corporation (FDIC) to open market. Roosevelt recalled all gold and silver certificates, effectively ending the goals and any other metallic standards.

1935: More Changes to Come

Since the Act of 1935 caused more changes for the Feds Structure including Federal Open Market Committee. (FOMC) ,they removed the Treasury Secretary and the Comptroller of the Currency from the Feds governing members terms at 14 years. in 1978 the Humphrey-Hawkins Act need Fed chairman to report twice annually on a monetary policy.

1951: The Treasury Accord

In 1942 after the U.S entered World War ll, the Federal Reserve System committed to keeping low interest rates. When a problem got between Treasury and the Fed when Treasury decided that the central bank had to maintain the peg after the Korean War began in 1950

President Harry Truman and John Snyder were both big supporters of low interest rate peg. Many on the board of Governors understood that keeping low peg rates caused inflation.

1970s-1980s: Inflation and Deflation

in the 1970s inflation was a big thing. producer and consumer prices rose, and oil prices doubled. in 1979 when Paul Volcker became Fed chairman, a big thing was need to stop inflation in the U.S economy. in the 1980s, chairman overall accomplished getting inflation under control.

1980: Setting the Stage for Financial Modernization

Monetary Control Act of 1980 had the Fed price its financial services. This act marked the start of modern banking industry. in 1999 the Gramm-Leach-Bliley Act was passed. Then the Act of Glass-Steagall Act was passed in 1933.

September 11, 2001

on september 11, 2001 when terrorist attacks on New York, Washington, and Pennsylvania were made the Federal Reserve was put on test. Fed lowered interest rates and loans more than $45 billion to financial institution to have the U.S economy stable.

January 2003: Discount Window Operation Changes

in 2003 the Federal Reserve changed discount window operations to have rates above Fed Fund rates.

2006 and Beyond: Financial Crisis and Response

In the early 2000s low mortgage rates and access to credit made homeownership more available to a large variety of people. The house boom went up securitization of mortgages, which is a process where mortgage get together into securities that are traded in financial markets.

1990s: The Longest Economic Expansion

After Alan Greenspan became Fed chairman, stock market crashed on October 19, 1987. Orders were given to the Fed to make a statement before the trading on october 20 began. The 10-year expansion of the 1990s came to close in March 2001 and the recession ended in November 2001. in 1990 stock market lowered interest rate quickly

U.S. Currency

the first paper money to come out named as continentals. continentals where fait money notes and were issued in such quality that it led inflation this inflation was accelerated during the war. people started to lose faith in the continentals and was practically utterly worthless.

First Attempts At Central Banking

The first american bank was established by the congress. This bank was dominated by big banking and money interest. The treasury secretary was Alexander Hamilton

A Second Try Fails

In 1816 congress agreed to charter the second bank of the united states. andrew jackson was elected president in 1828 and he rejected the plan of a second bank, and was his attack on its banker-controlled power. which touched a popular nerve with americans.

The Free Banking Era

In this era there were state-chartered banks and unchartered bank free bank. And their money was redeemable in gold or pieces. banks also started to offer deposits to enhance commerce. Because of this the New York clearing house association was established to provide citys banks to exchange checks.

Financial Panics Prevail

National banking act of 1863 establish some measures of currency stability for the growing nation, bank runs and financial panics. Which continued to affect the economy. the biggest economic depression was triggered by a banking picnic.

A Very Bad Year

in 1907 huge fight was broken out and was a failure in wall street. triggering a particular severe banking.