the fourth branch the federal reserve''''s unlikely rise to power (2005)

[...]... attempt to address the question systematically Among other things, it traces the development of the organization through three principal crises out of which the modern System was formed It evaluates the events of these periods in the context of the struggle to establish the Federal Reserve in the early years of the twentieth century It draws inferences to the common factors that enabled the Fed to overcome... crises Once again, financial men in the United States were fascinated by its accomplishments, and they undertook to produce an American version 6 The Fourth Branch Their efforts came to partial fruition in 1913 with passage of the Federal Reserve Act THEN AND NOW The need for a central bank had become evident in a series of financial crises that plagued the American economy in the latter part of the. .. in the open market The Federal Reserve Board in Washington would obtain the funds it needed by assessing the Reserve Banks "The Reserve Banks have expenses to meet," the board asserted in its Annual Report for 1914, "and while it would be a mistake to regard them merely as profit-making concerns and to apply to them the ordinary test of business success, there is no reason why they should not earn their... it gave the Federal Reserve central authority to establish regulatory standards for expansion and to determine the permissibility of other new activities In so doing, it made the Federal Reserve a principal arbiter of the barrier that has, throughout American history, kept banking and other commercial firms separate.2 The System was, thus, given substantial power to alter the structure of the economy... organization repeatedly prevailed in difficult circumstances to become what some now believe to be the most powerful institution in the United States The historical background of the System and the episodes reviewed shed light on the nature of the organization itself, its relationship to the federal government and to the banking community, how it managed to grow stronger in periods of adversity, and how it... historical significance became apparent, the Federal Reserve System took on a new name— "The Fed." In the following discourse, the organization is referred to as the Federal Reserve System, the Federal Reserve or, simply, the System, until the developments that resulted in the current nomenclature are reviewed and evaluated Introduction 15 Chapter 6 provides an analysis of the nature and sources of the. .. balances designed to prevent complete control by either the banking community or the federal government The powers of the System were limited In contrast to earlier federal banks, the Federal Reserve has been a success if only because it survived, but its success has been far more than that Its size, powers, and influence have grown dramatically over the years The locus of authority within the System has... confronted by the Act Many believed that sustaining the gold standard would adequately deal with the problem of inflation Congress did not expect to have to pay for any of this The Reserve Banks would obtain funds from deposits of member banks necessary to 8 The Fourth Branch meet reserve requirements and from the members' purchase of stock They were expected to earn their own way by making loans at their... element of the story, for our immediate purpose, is Glass' rhetoric As late as 1927, he felt it useful to present his views in terms of the century-old Bank War Even at that late date, the story resonated in the banking, political, and academic communities to which his book was addressed The Federal Reserve's Legacy 19 The Banks of the United States The Second Bank was preceded by the First Bank of the United... "great men" who have come to its rescue Therefore, they beg the question as to the sources of the Federal Reserve's capacity to resist widespread criticism and grow in the face of deficient policy A more systematic, if less flattering, explanation of the System's continued success can be inferred from some of the criticism of the last twentyfive years It has been alleged that the Federal Reserve, aiming . Library of Congress Cataloging-in-Publication Data Shull, Bernard, 193 1- The fourth branch : the Federal Reserve's unlikely rise to power and influence / Bernard Shull. p. cm. Includes. survival of the organization itself came into question. The Fourth Branch: The Federal Reserve's Unlikely Rise to Power and Influence, then, grew out of this question long after the colleague. of the struggle to establish the Federal Reserve in the early years of the twentieth century. It draws inferences to the common factors that enabled the Fed to overcome economic disasters to