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Federal Reserve Presentation

By: Dienesha, Chris, & Norlin

1751-1751: U.S. Currency

To be able to pay for the American Revolution, the government printed its first money called continentals. It inflated quickly, that it later became useless. When the banks charter expired in 1811, it wasnt renewed by Congress.

1791-1811: First attempt at Central Banking

With Alexander Hamilton as head of the treasury, Congress established the First Bank of the United States.

1816-1836: A Second Try Fails

Congress decided to have a Second Bank of the United States. Andrew Jackson was against the banking system. Congress did not manage to renew the banking charter in 1836.

1836-1865: The Free Banking Era

State chartered banks and unchartered banks took hold. Banks also demanded deposits to have the banking industry going.

1863: National Banking Act

The NBA was passed during the Civil War so that nationally chartered banks whose circulating notes, had to be backed up by the government securities.

1873-1907: Financial Panics Prevail

With the NBA established, it help regulate money measure, but bank runs and financial panics continue hurting the economy. In 1893, the worst depression happened in the United States. It only stabilized with the help of J.P. Morgan.

1907: A Very Bad Year

Investments in Wall Street ended in a disaster, causing a banking panic. J.P. Morgan was asked to help again, a banking reform was asked by the people of the nation. People believed that a strong central banking authority was needed to have a healthy and fluid banking system.

1912: Woodrow Wilson as Financial Reformer

Although Wilson wasnt good enough to be a financial reformer, he did seek advice from Virginia Representative Carter Glass. By December 1912, Glass and Willis presented Wilson the Federal Reserve Act.

1913: The Federal Reserve System is Born

By December 23, 1913, President Woodrow Wilson signed the Federal Reserve Act into law.

1914: Open for Business

Before beginning the central bank, the Reserve Bank Operating Committee had to build a working center. By November 16, 1914, the 12 cities that were chosen by the RBOC were already open for business.

1914-1919: Feed Policy During the War

When World War I broke out in the mid1914, U.S. banks continued to work good. To help Europe, the U.S. would send goods instead of money. But once the U.S. declared war on Germany, it was pretty difficult for us to pay our expenses.

1920s: The Beginning of Open Market Operations

After World War I, Benjamin Strong, head of the NY Fed (1914-1928), realized that gold no longer was good for carrying money. During the 1920s, the Fed began using open market operations.

1929-1933: The Market Crash & The Great Depression

In October 1929, the stock market crashed and the nation fell into a great depression. From 1930-1933, many banks failed, and President Franklin Delano Roosevelt declared a bank holiday. Many people blamed the Fed.

1933: The Depression After Math

Congress passed the Banking ACt of 1933, the Glass-Steagall Act. The Act established the Federal Deposit Insurance Corporation. Roosevelt returned all gold and silver certificates, ending the gold.

1935: More Changes to Come

The Banking Act of 1935 called for some changes in Fed and the Federal Open Market Committee. Going to World War II, the Employment Act promised maximum employment to the list of Feds responsibilities.

1951:The Treasury Accord

The Federal Reserved wanted to maintain a low interest rate on government bonds right when the government entered WW2 War which they did. President Harry Truman and Secretary of Treasury John Synder both were supporters of the low interest rate.The President felt it was his duty to protect the citizens by not lowering the value of the bonds that they purchased during the war.The Federal Reserved was more focused on the need to contain inflationary pressures in the economy because of the Korean War. After a fierce debate between the Fed and Treasury for control over interest rates they both came to an agreement called the Treasury-Fed Accord.This eliminated the obligation of the Fed to convert the debt of the treasury at a good rate and needed for the independence of central banking.

1970s-1980s:Inflation and Deflation

The 1970s was a skyrocket for inflation. Producer and Consumer prices rose, oil prices rose, and the federal deficit doubled. By August 1979, when Paul Volcker was sworn in as chairman drastic changes had to be made to deduce the inflations stronghold on the U.S. economy. By 1980, through the struggles they were successful.

1980: Setting the Stage for Financial Modernization

The Monetary Act of 1980 required the Fed to price its financial services competitively against private sectors and to establish reserve requirements on all eligible financial institutions.This Act marks the beginning of a period of modern banking industry reforms. The 1999 act called Gramm-Leach-Biley Act allowed banks to offer a variety of financial services including investment banking and insurance.

1990s :The Longest Economic Expansion

Two months later after Fed chairman Alan Greenspan took office the stock market went into a crash on October 19,1987. He ordered the Fed to say a one-sentence statement before the start of trading on October 20.The 10- year economic expansion which started in the 1990s and ended in March 2001. To respond to the bursting of the stock market bubble the Fed lowered interest rates.During the 1990s the Fed used a monetary policy on situations like the credit crunch in the early 1990s and the Russian default on government to keep financial problems from affecting the government.

September 11, 2001

After the attacks from terrorists in the cities of New York,Washington, and Pennsylvania the Fed lowered interest rates and loaned more than $45 billion to financial institutions to provide strength to the U.S. economy. Fed played the role of decreasing the effects of the 9/11 attacks on U.S. financial markets.

January 2003: Discount Window Operation Changes

In 2003, the Fed changed its windows operations so to have rates above the current Fed Funds rates and also provide rationing of loans to banks through interest rates.

2006 and Beyond: Financial Crisis and Response

In the early 2000s low mortgage rates and access to credit made homeownership possible for a lot more people increasing house prices. In 2007 the financial health of other led to a huge destruction in the wholesale lending market. As markets started to freeze the federal reserve expanded its own loan lending to financial institutions to make sure they had funding for everyday operations. The Federal Reserve increased the availability of discount window loans to banks through the Term Auction Facility. The Federal Open Market cut its target for the federal fund rates over a year bringing it to a zero in December 2008.