America’s central bank was founded through the Federal Reserve Act of 1913, which was largely a reaction to the Panic of 1907 that caused inflation-adjusted GNP to fall 12% (twice as bad as the fall during the 2008 crisis).
“After the panic ended, there was a broad sense that reform was needed, although consensus on the exact nature of that reform was elusive. Some called for an institution similar in structure to the Bank of England at the time, with centralized power, owned and operated by the banking system. Some wanted control to be lodged with the federal government in Washington instead… The resulting institution was a compromise, created by the Federal Reserve Act in 1913… a more federated system was created, establishing the Federal Reserve Board in Washington and the 12 Reserve Banks located around the country.”
Read More:Â The History and Structure of the Federal Reserve
