why was the federal reserve established ?
http://en.wikipedia.org/wiki/Federal_Reserve_System
The Federal Reserve System was established in the United States in order to provide a more stable and secure monetary and financial system. It was created in response to recurring financial panics and banking crises that occurred in the late 19th and early 20th centuries.
To understand why the Federal Reserve was established, we need to look back at the history of the United States during that time. Prior to the establishment of the Federal Reserve, the country experienced periods of economic instability, frequent bank failures, and a lack of a centralized system to manage the nation's money supply.
In the late 19th century, the United States operated under a system known as the National Banking System. However, this system had several flaws. There was a lack of uniformity among the various national banks, resulting in different regulations, currencies, and financial practices across the country. This lack of coordination made the financial system vulnerable to panics, bank runs, and economic downturns.
The catalyst for the creation of the Federal Reserve was the financial panic of 1907. This crisis highlighted the need for a centralized institution that could serve as a lender of last resort, provide liquidity to banks in times of crisis, and stabilize the nation's financial system. In response to this panic, prominent bankers, politicians, and economists advocated for the creation of a central bank.
The Federal Reserve Act was signed into law by President Woodrow Wilson on December 23, 1913. The primary objectives of the Federal Reserve System were to promote a more stable banking system and a more responsive monetary policy. It was designed to provide a lender of last resort to banks, supervise and regulate the banking industry, conduct monetary policy to promote economic stability, and maintain the integrity and value of the U.S. dollar.
In summary, the Federal Reserve was established to address the recurring financial crises, stabilize the banking system, provide a centralized authority over monetary policy, and promote economic stability in the United States. The creation of the Federal Reserve was aimed at preventing and mitigating financial panics and promoting a more secure and responsive financial system.