ECON 330 Chapter Notes -Business Cycle, Economic And Monetary Union Of The European Union, Reserve Requirement
12 Feb 2014
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Chapter 16: central banks and the federal reserve system: Federal reserve system has the most unusual structure and it was created in 1913. The fear of centralized power in american society was a major source of resistance towards the creation of the central bank. Another source of this hostility was the traditional american distrust for moneyed interests like the central bank for example. This open hostility towards the existence of a central bank led to the demise of the first two experiments of central banking whose main function was to police the banking system--the first. The termination of the charter for the second bank of the united states created a problem for the financial markets. There was no lender of last resort to provide reserves in order to prevent bank panics. This led to bank panics between the 19th and early 20th century. Bank panics became such a regular thing during this time period, occurring every 20 years.
