In today’s economic times of futility, the Federal Reserve of the United States has been rising in prominence in the media and news. But what exactly does the Federal Reserve do and what is its role in the country’s economy? The Federal Reserve is actually a more recent addition to the country’s economic system and is in fact something that the Federal Government fought against for a long period of time. The Federal Reserve had to go through a tough process to be implemented, but has been standing ever since. The powers and abilities of this institution are extensive and while some feel that consolidating the nation’s economic power in one institution is beneficial, a look at the process and structure of the Federal Reserve shows that while its interests may be in the best interest of Americans, it may not be helping Americans as much as intended.
The Federal Reserve System or the Fed was established by Congress in 1913 after a long and arduous fight to have the Fed’s plan approved. The seeds of the Federal Reserve were sown after the Panic of 1907 lead to the failure of several banks and left Americans looking for a way to change their banking system. Soon after, the National Monetary Commission was created with the task to explore to options of a potential banking reform. This commission had 18 members tasked with finding the problem areas of the banking system and suggesting changes to fix them. The most prominent member of this commission was Senator Nelson Aldrich who many people viewed as the leader of the rich and conservative Americans (Johnson 2010). Senator Aldrich’s position among the elite made the general public skeptical about the true motives of his ideas. Aldrich’s main opposition came from the Progressives who wanted to make the banking system less powerful than it already was. When the first plans of reform, in the aptly titled Federal Reserve Act, were presented by the National Monetary Commission, they were attacked for not appealing to the public masses. In an attempt to gain the support necessary to pass the bill, the bill needed to remove partisan support and make the bill appear as a bipartisan agreement. The new banking reform needed to be an agreement of the American people. The men behind the bill also embarked on an extensive propaganda campaign to try and gain popular support for the bill. There were endorsements coming from trade corporations to newspaper editorials all calling for the support of this bill (Paul, End the Fed 2009). With the combination of these tactics with the support of President Woodrow Wilson who push arduously for the bill to pass, the Federal Reserve Act was passed in Congress and signed by Wilson on December 23, 1913 (Johnson 2010).
While the Federal Reserve may seem to have been the result of a comprehensive study on the failure of the American Banking System, it was actually conceived in a private meeting that was attended by some of the wealthiest and most powerful financial titans at the time. These men, which included the likes of Senator Nelson Aldrich, Assistant Secretary of the Treasury A. Piatt Andrew, and Henry Davison a J.P. Morgan senior partner among others. This secret meeting took place in 1910 at the Jekyll Island Club, a Georgia resort that was co-owned by J.P. Morgan (Paul, End the Fed 2009). The combination of strong government officials and powerful bankers led to the creation of the Federal Reserve Banking System. It seems like it was only a mere formality of debating this proposed system in Congress before it was finally passed in 1913. However, the fact remains that these bankers and government officials created a central banking system, a type of system that Americans have long fought to keep out of the government (Paul, End the Fed 2009). In fact the first two central banks were not supported. Thomas Jefferson even fought against the First Central Bank of the United States under the thought that urban and industrial capitalism would...
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