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System of federal reserve by essay
System of federal reserve by essay
System of federal reserve by essay
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Every large economy and most small economies have central banks. Some of the better known central banks are the European Central Bank, the Bank of England, and the Bank of China. The Federal Reserve, well-known as The Fed is the U.S. Central Bank. A central bank is an organization responsible for overseeing the monetary system of a nation. Conspiracy theories describe the Fed as men in top hats and black suits, secretly meeting in dark smoke filled rooms colluding about how to use the American banking system as their private banking cartel to systematically destroy the value of our currency, drain the wealth of the American public and enslave the federal government by perpetually expanding debt. These men of great wealth, political power and social influences have come together to control the world. What is the Fed, why was it created, and what is its purpose?
Before American Independence, the central bank of the colonies was the Bank of England. Some Founding Fathers were strongly opposed to the central banking system which many believed led directly to the American War of Independence. However, eight years after the Revolutionary War, the U.S. Congress at the suggestion of the Secretary of the Treasury Alexander Hamilton, established the First Bank of the United States. The bank was given a twenty year charter, but many Americans were uncomfortable with the idea of a large and powerful central bank. Thomas Jefferson saw it as an engine for speculation, financial manipulation, and corruption. Therefore, Congress refused to renew it in 1811.
In 1816, Congress once again created a central bank, in response to the inflation that resulted from the increase in banknotes printed to pay off the debt produced by the War of 1812. Afte...
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... its net income to the Treasury each year. Since its founding in 1913, the Federal Reserve System evolved to meet the needs of our changing financial system and growing economy. Although bankers run the twelve banks, these banks are still supervised by the Federal Reserve Board whose members are appointed by the President to represent public interests.
Works Cited
FederalReserve. federalreserveeducation.org. n.d. 21-26 April 2014. .
Griffin, G. Edward. The creature from Jekyll Island : a second look at the Federal Reserve. Westlake Village: American Media, 1998.
Marc D.Weidenmier, and Kerry A. Odell. "Real Shock, Monetary Aftershock:The 1906 San Francisco Earthquake and the Panic of 1907." The National Bureau of Economic Research (2002): 46.
Taylor, Timothy. The Instant Economist. New York: The Penguin Group, 2012.
This bank held government money and controlled the economy by making it easier for local banks to borrow money from it to loan it to manufacturers and factories. As the idea arose the cabinet, Jefferson protested that such a bank was unconstitutional because it favored the north over the south since the bank did not loan money to farmers for land expansions. Being true as it is, the bank drastically boosted our economy and had a great future for our nation. Since it was unconstitutional, a compromise said that the bank would only be funded for 20 years. So as soon as Andrew Jackson was elected, he destroyed the bank. In response to this, our nation suddenly falls into a major depression. No one had jobs and the economy was dying. This showed the brilliance of the national bank and how much it helped our economy. Adding onto this, the bank began the formation of the Federalist and Democratic
The Constitution, however, does not specifically prohibit Congress from establishing a bank. The Marshall court found that the creation of a national bank would affect the welfare of the nation; therefore, the Constitutionality of creating the bank was legitimate. The power comes from the “necessary and proper” clause, which is listed under the powers of Congress, not its limits, in Article I section 9. Justice Marshall shows how the word “necessary” may have different meanings depending on the context of the sentence and by the intention of the person using the word. In Article I section 10 the phrase “absolutely necessary” is applied with stronger meaning regarding imports or exports, and is different than the word “necessary” used alone in this case, which was intended to mean indispensable by the framers of the Constitution.
As the new century approached, a national crisis began to develop in the United States. The nation faced a severe depression, nationwide labor unrest and violence, and the government’s inability to fix any of the occurring problems. The Panic of 1893 ravaged the nation and became the worse economic crisis of its time. The depression’s ruthlessness contributed to social unrest and weakened the monetary system’s strength, leading to a debate over what would be the foundation of the national currency. As the era ended, the US sought to increase its power and strength.
The issue of whether or not America should have a National Bank is one that is debated throughout the whole beginning stages of the modern United States governmental system. In the 1830-1840’s two major differences in opinion over the National Bank can be seen by the Jacksonian Democrats and the Whig parties. The Jacksonian Democrats did not want a National Bank for many reasons. One main reason was the distrust in banks instilled in Andrew Jackson because his land was taken away. Another reason is that the creation of a National Bank would make it more powerful than...
Jefferson believed the creation of the National Bank was unconstitutional. In the article “Jefferson and the Louisiana Purchase” the author argues, “While it a National Bank was not expressly mentioned in the Constitution, Hamilton felt that the elastic clause (Art I., Sect. 8, Clause 18) gave the government the power to create such a body. Jefferson completely disagreed. He felt that all powers given to the National Government were enumerated. If they were not expressly mentioned in the Constitution then they were reserved to the states” (http://americanhistory.about.com). But under Hamilton’s National Bank, the United States had developed the financial credit necessary to receive a loan large enough for the Louisiana Purchase. With that being stated I am sure anyone can see why this would cause a problem for Jefferson if he believed the creation of the National Bank was unconstitutional. Jefferson believed that the Constitution was to be strictly interpreted and that government should act within the stated boundaries. Jefferson also favored limited government and believed that congress should be restricted to enumerated powers listed in the Constitution. The major difference between Jefferson and Hamilton concerning executive power rests with Jefferson’s faith in the body politic as represented by the
...an Buren declared that he would retain Jackson’s Specie Circular. Within a week, on May 10th, the Panic of 1837 erupted in New York with banks refusing to redeem in specie. It turned out that none of the banks had hard cash available. Van Buren and his successor President William Henry Harrison were unable to solve the depression. On June 8th, 1840 a bill was passed in the Senate providing for the repeal of the Independent Treasury Act. The bill passed the House and it was signed by the newly elected Whig President Tyler. Although victorious Whigs repealed the Independent Treasury in 1841, they were unable to replace it with a national bank. Revived in 1846 by a new Democratic administration, the Independent Treasury remained in operation until the Federal Reserve System was created in 1913.
Thomas Jefferson was an opponent of the adoption of the original Constitution, believing like many Anti-Federalists, that it gave the Federal government too much power, while depriving powers to the states. Jefferson was also adamant in opposing the emergence of a national bank. He believed that this would deprive the states of power to an even greater extent while further empowering the Federalists and the federal government. Additionally, the Anti-Federalists had adopted a very strict interpretation of the Constitution, and that all powers of the federal government were not legitimate unless specifically stated. Going by this interpretation would mean that a national bank would not be able to be established, as that was not a right of the federal government specifically stated in the Constitution. Although a national bank did emerge, the Anti-Federalists did make other accomplishments that coincided with their agendas. One of the most major successes of the Anti-Federalists was passing ten amendments to the Constitution. The first amendments were collectively known as the Bill of Rights. These amendments gave rights that Federalists believed were implied in the original Constitution, but Anti-Federalists wanted them specifically written in, as to avoid any possible ambiguity as to what fundamental
Another federal legislation that was passed into law during the period was the Federal Reserve Act. The Federal Reserve Act of 1913, focused its energies on creating a new banking system with twelve regional Federal Reserve Banks, and each of whom were owned by member banks in its district. Also, all of the national banks automatically were members while state banks could join if they wished.
One such issue was that of the National debt and creating a National Bank. In 1790, Alexander Hamilton proposed that Congress should establish a national bank, in which private investors could buy stock, could print paper money, and keep government finances safe. Washington signed the bill establishing a national bank and started a strong foundation for a thriving economy and a stable currency.
The 1906 San Francisco earthquake was one of the largest earthquakes in the United States. Even though it only lasted less than a minute, the damages and aftermath of the earthquake were disastrous. These damages were not just from the earthquake, but also from other hazards that occurred because of it. It also had a huge effect on the people living in San Francisco. Many people, the government, and other countries helped the city of San Francisco with relief goods like food and clothing. The city used up their resources in order to rebuild the city and spent a lot of money. This earthquake also started a scientific revolution about earthquakes and its effects.
After the first War for Independence, The United States was approximately $52 million in debt. Due to having such bad financial problems, the United States created a national Bank to create one unified currency, to take away all state debts, and to issue loans to the people to promote growth. This National Bank was created by Alexander Hamilton who was a Federalist, and once Jefferson came to be the President, he continued the idea of the national bank because it was helping to reduce the national debt. The primary reason for the National Bank being a representation of a Federalist idea was because since it was issuing loans to people it was able to promote industrial growth which was one of the main goals of the Federalist party. From Jefferson continuing the use of the National Bank thru his presidency he demonstrates his need to continue a loose constructionist idea.
Metzler, Allan H. A History of the Federal Reserve, Vol I and II. University Press Books, 2002
2) Davis, Gareth. The Destruction of the Second Bank of the United States Rationale and
] This catastrophic event is caused by the accumulation of a large scale of speculation by not only investors but also banks and institutions in the stock market. Though the unemployment rate was climbing during the 1920s and economy was not looking good, people on Wall Street were not affected by the depressing news. The optimism spread from Wall Street to small investors and they were investing with the money they don’t have, which is investing on margin as high as 90%. When the speculative bubble burst, people lost everything including houses and pensions. The main reason ...
Grant, Peter. "The Giant J.P. Morgan and The Panic of 1907." The New York Daily News 20 Mar. 1998: 49 "J. P. Morgan". Dictionary of American Biography. New York: Charles Scribners and Sons, 1934. Vol. 7 "J. P. Morgan". International Directory of Company Histories. Chicago: St. James's Publishing, 1990. Vol. 2