The Federal Reserve

Today in the United States, we have security in the banking system. People trust that banks wont fail, and their savings will be gone with it. While some people today do not completely trust in the banking system, the situation pales in comparison to the reality that people faced in the late 19th and early 20th centuries. In this time bank failures, economic panics, and slow economic downturns were as common as the seasons. Over time, American society has come to have faith in a Central Bank, known as the Federal Reserve System. The Federal Reserve System has many responsibilities, including, but not limited to, promoting economic growth, setting monetary policy, regulating and overseeing financial institutions, and issuing currency. All of these responsibilities have been very important for maintaining a strong economy, but the history of Central Banking in the United States shows that in the past it was not always a welcome entity.

The First Central Banks

The First Bank of the United States was founded in 1791, headquartered in Philadelphia. Secretary of the Treasury Alexander Hamilton headed the movement to create this first bank. “Alexander Hamilton, the first Treasury secretary, believed a national bank would stabilize the new government’s shaky credit and support a stronger economy — and was an absolute necessity to exercise the new republic’s constitutional powers” (Irwin 2013). With Hamilton’s influence, Congress agreed upon a central banking system. Its functions as a bank were very simple. It accepted deposits, issued notes, made loans, and purchased securities. It was the biggest corporation in the country at the time, and while it provided financial stability, many people did not trust such a powerful institution in...

... middle of paper ...

...issues that needed to be addressed. After much debate about the functions and composition of the central bank, it was finally implemented in 1913.

Conclusion

Over the years, the Federal Reserve has grown and evolved significantly. And while it has been useful in promoting growth, employment, and regulation of financial intermediaries, it can’t stop financial crisis all together. The Federal Reserve didn’t prevent the Great Depression, or the financial panic in 2008. “…Opposition to a central bank, rooted as deeply as it was in the American psyche, didn’t go away. Instead, it evolved” (Irwin 2013). While the Federal Reserve is a scapegoat for blame in these times, it has to do it’s best to evolve and make the best out of these situations. Just as the past central banks did, The Federal Reserve continues to evolve every day with the ever complex and growing economy.