23 December 1913: The US Federal Reserve is created

After much debate, Woodrow Wilson finally signed the bill that would create the US Federal Reserve on this day in 1913.

The idea of creating a central bank of the United States is as old as the country itself. But whenever the idea was raised, suspicion followed. The south was wary of the north, the west of the east, regional interests were set against national, and private interests came into conflict with public.

Numerous financial crises followed over the decades as a result. But the Panic of 1907 was the final straw, when a full-blown meltdown was only just avoided. As there had been no central bank to turn on the money taps, it fell on the big bankers, led by JPMorgan, to step into the breach, and shore up the banking system.

In the aftermath of the crisis, the Aldrich-Vreeland Act was passed. It set up the National Monetary Commission essentially a fact-finding mission to Europe to see how things were done there. The commission agreed that a central bank would be a good idea in principle but how it would work was another matter. In a nutshell, the big banking interests, backed by the Republican Party, favoured a centralised lender of last resort that they would control. But agricultural interests demanded a regional system that would be flexible to their needs in terms of credit.

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For a country riven by such internal conflict, the venue for a top-secret meeting of America's most powerful bankers and lawmakers in 1910 was more than a little ironic Jekyll Island, off the coast of Georgia. What emerged was the Aldrich Plan, which set out the principle of a central bank with regional branches. But suspicion raised its ugly head once more and the plan failed. Yet enough of the basic idea survived when the Democrats moved into the White House in 1912.

The Glass-Owen proposal, named after two Democrat congressmen, followed, calling for a regional reserve banking system. President Woodrow Wilson added the central bank idea back in and came up with a compromise: The Federal Reserve Act.

But even that proved highly controversial. During negotiations, the senator for Missouri found himself with a tie-breaking vote, which is why Missouri is the only state with two reserve banks one in St Louis, and the other in Kansas City. After much debating, broad agreement was eventually reached and President Wilson was able to sign the bill into law on 23 December 1913.

Chris Carter

Chris Carter spent three glorious years reading English literature on the beautiful Welsh coast at Aberystwyth University. Graduating in 2005, he left for the University of York to specialise in Renaissance literature for his MA, before returning to his native Twickenham, in southwest London. He joined a Richmond-based recruitment company, where he worked with several clients, including the Queen’s bank, Coutts, as well as the super luxury, Dorchester-owned Coworth Park country house hotel, near Ascot in Berkshire.

Then, in 2011, Chris joined MoneyWeek. Initially working as part of the website production team, Chris soon rose to the lofty heights of wealth editor, overseeing MoneyWeek’s Spending It lifestyle section. Chris travels the globe in pursuit of his work, soaking up the local culture and sampling the very finest in cuisine, hotels and resorts for the magazine’s discerning readership. He also enjoys writing his fortnightly page on collectables, delving into the fascinating world of auctions and art, classic cars, coins, watches, wine and whisky investing.

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