History of the Federal Reserve Bank
There is no other bank in the United States that is more powerful than the Federal Reserve Bank. It has enormous power over the money supply within the country. The function of the Federal Reserve Bank is to bring about or maintain an economy that is balanced. The Federal Reserve Bank is in effect the third central bank of the country. This bank does have an interesting history that is very much a part of the history of the United States.
The Federal Reserve Bank is the third central bank. The first and second banks of the USA make commercial loans, buy securities, accept deposits and issue currency for foreign exchange trading. Because of this they were regarded as competition by other banks in the country. Free banking merged and during this time there was a great deal of opposition against the first and second banks. This led to a system for national banks that was established in 1863. But this system was not perfect because it did have two flaws. These were an inflexible currency and no liquidity.
The reason for the inflexibility was because the country’s banks based their currency on rise and fall of the value of the US. The reason there was no liquidity was because of the reserve system that was static. The reserves of all of the banks in the country had to be deposited in the reserve city banks. In turn, the reserve city banks had to deposit their own reserves in central city banks. During the season of planting all the banks had call in their deposits. Reserves were added when it was the season for harvesting. If there were banks that did not have reserves called in loans and they also sold stock and bonds and more.
The banks that were seen as having liquidity difficulties would see their investors taking out their money. It can be seen that central banks had the power to regulate an entire country and its citizens. At this time the English king, George III decided the Americans (America was still a colony) were to only borrow English money that came from England’s central bank. They also had to pay the interest. The colonists in America refused and this resulted in a revolution.
But after this war there were still difficulties with those who wanted to control the money. The agenda of the international bankers was that of controlling the giving out of money and loans with interest. Circumstances were manipulated to make Americans suddenly take out their money from the country’s banks. This resulted in a requirement of a central bank in the US. In the year 1910 a meeting was held to begin plans for such an institution. The Federal Reserve act was agreed to by President Woodrow Wilson in 1913.
The whole point for the creation of a Federal Reserve was to keep the system of banking as stable as possible. This would result in an economy that was also stable. The Federal Reserve accomplishes this by the control of inflation. In order to do this it has to control money supply. If you have an interest in how the Federal Reserve operates and it’s very important function in the US there is a lot of information online. Simply key in the words ‘Federal Reserve’ and you will see plenty of data on this very subject.