The Federal Reserve

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Recommended: Progressive era of the united states

The Progressive Era, from 1901 to 1918, was centered on change. There were four main goals of Progressivism: protecting social welfare, promoting moral improvement, fostering efficiency, and creating economic reform. President Woodrow Wilson, elected in 1912, made the most important change of the early 1900s; he passed the Federal Reserve Act.

American citizens have been wary of a government-controlled banking system since the formation of the country. The people did not trust centralized government action, and they were largely agrarian people, knowing little about the banking industry. Still, Alexander Hamilton, the first secretary of the Treasury, was determined to create a national bank. His efforts resulted in the establishment of the First Bank of the United States in 1791, and later, its successor, the Second Bank. Both of these banks were unsuccessful. They competed with the state and private banks, with each printing its own banknotes. Banks were unstable and untrustworthy; failures and loss of deposits were widespread.

In 1863, with the country in the midst of the Civil War, Congress created the National Bank Act. The country was financially pressed by the war, and the economy was rapidly expanding. The act chartered and regulated a system of private banks. These banks introduced a uniform, federal currency into circulation. All other state banknotes were taxed, effectively eliminating them. Although the legislation provided banking standards, regulated loans, and “established minimum amounts of capital to be held by the banks”, it did not solve the economic problems.

The Panics of 1873 and 1907 brought attention to the need for reform. In 1873, there was a currency dispute. During the Civil War, people had largel...

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Hummel, William. "The Federal Reserve System." Home Page. N.p., 30 Aug. 2006. Web. 20 Dec. 2009. .

Lehnert, Andreas. "Federal Reserve Act (1913): Major Acts of Congress ." eNotes - Literature Study Guides, Lesson Plans, and More. . N.p., n.d. Web. 20 Dec. 2009. .

"NYSE, New York Stock Exchange > About Us > History > Timeline > Timeline ." NYSE, New York Stock Exchange . N.p., n.d. Web. 20 Dec. 2009. .

"The Federal Reserve System." U.S. Government Info - Resources. The New York Times Company, n.d. Web. 20 Dec. 2009. .

Woelfel, Charles J.. Encyclopedia of Banking & Finance. 10 ed. New York: McGraw-Hill, 1994. Print.

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