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US Currency
The Continental Congress printed the nation's first paper money (known as "continentals") in order to finance the American Revolution. Due to overprinting however, they led to major inflation. -
First attempt at Central Banking
The first bank was established by Congress in Philadelphia. It was the largest corporation in the country and was dominated by big banking and money interests. After the 20 year charter expired in 1811, it failed to get renewed by Congress by 1 vote. -
Second Try at Central Banking
Congress agreed to charter the Second Bank of the United States. It failed to get renewed mainly due to opposition by Andrew Jackson. -
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The Free Banking Era
Uncharted free banks and State-chartered banks were abundant in this era which ended in about 1865. They issued their own notes which were redeemable with gold and other items. -
The National Banking Act
This act was passed during the Civil War. It provided for for nationally chartered banks, whose circulating notes had to be backed by U.S. government securities. It created a uniform currency for the nation. -
Decentralized Central Bank
The Aldrich-Vreeland Act was passed in 1908, which provided emergency currency issue during crisis. It also established the national Monetary Commission to search for a long-term solution to the nation’s banking and financial problems. It set the stage for an emergence of a decentralized central bank. -
Federal Reserve is created
Woodrow Wilson signed the Federal Reserve Act into law, which created decentralized central bank that balanced the competing interests of private banks and populist sentiment. -
Regional Reserve Banks
12 cities were chosen and opened as Regional Banks -
The Beginning of Open Market Operations
During the 1920s, the Fed began using open market operations as a monetary policy tool. -
The Market Crash and the Great Depression
The stock market crashed in 1929, and the nation fell into the worst depression in its history. Between 1930 and 1933 nearly 10,000 banks failed and the Fed was blamed by many. -
Depression Aftermath
Congress passed the Banking Act of 1933 calling for the separation of commercial and investment banking and requiring use of government securities as collateral for Federal Reserve notes. The Act also established the Federal Deposit Insurance Corporation (FDIC), placed open market operations under the Fed and required bank holding companies to be examined by the Fed, -
The Treasury Accord
When the Korean War broke out in 1951, the Fed broke the practice of supporting government bond interest rates. Ever since, the Fed has been independent in its use of open market operations to support its monetary policy goals. -
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Inflation and Deflation
Inflation grew tremendously in the 1970's leading to the Fed having to make changes to get it under control. Under Volcker's leadership, inflation was brought under control. -
Financial Modernization
The Monetary Control Act of 1980 required the Fed to price its financial services competitively against private sector providers and to establish reserve requirements for all eligible financial institutions. The act marks the beginning of a period of modern banking industry reforms. -
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Longest Economic Expansion
A 10 year economic expansion occured in the 1990's and ended in March of 2001. Decreasing inflation was seen and was the longest economic expansion in the country's history. -
9/11
After the attacks the Fed loaned more that 45 billion to institution in order to provide stability to the economy. A potential liquidy crunch was averted and the Fed softened the effects of the attacks. -
Discount Window Operation Changes
In 2003, the Federal Reserve changed its discount window operations so as to have rates at the window set above the prevailing Fed Funds rate and provide rationing of loans to banks through interest rates.