A Historic Banking Birthday: Happy 100th, Fed!
Monday marks the birthday of the American Federal Reserve, which was signed into creation by President Woodrow Wilson in 1913. As with any birthday, this marks a time for reflecting on the past accomplishments in the lifetime of the entity — and past failures, of course.
The most important events and policy implementations the Fed has been involved in over its long history are arguably the Panic of 1907, which resulted in its creation, Congress passing the Federal Reserve Reform Act of 1977, Alan Greenspan’s leadership years, and its soon to be tapered Bond Buying Program in 2008.
According to the Wall Street Journal, the Fed was created to aid the country in its fiscal policy following the Panic of 1907 — in which concerns over bank durability erupted after the Knickerbocker Trust Company fell to pieces. The Federal Reserve Reform Act opened the doors for the Federal Reserve to get its hands far dirtier and more heavily involved in affecting change within the country’s economy.
Alan Greenspan’s takeover from 1987 and 2006 changed how it functioned. Following the Reform Act, the Fed had worked to prevent asset bubbles. After Greenspan took over, the tactic changed to simply coming in and dealing with the resultant burst — one that current Fed Chair Ben Bernanke considered effective enough to continue during his time as chair. Ben Bernanke’s big move, the stimulus program of quantitative easing — $85 billion worth of bond purchases.
According to the Wall Street Journal, the stimulus plan has doubled the stock markets since 2009 — but hasn’t pushed the economic growth past 2 percent. “One value that strikes me as having been at least as important as any other has been the Federal Reserve’s willingness, during its finest hours, to stand up to political pressure and make tough but necessary decisions,” said Bernanke during a central bank ceremony — according to Market Watch.
“No one can claim in every crises the Fed got its policies exactly right. But what is beyond debate is that this institution has served the country well,” said the former Federal Reserve Chair, Paul Volcker, according to Market Watch.