America’s Bank summary

After the serious economic depression known as the Panic of 1893, the United States entered a period of economic prosperity that for many, seemed as if it would last forever.

This was an illusion, of course. The fantasy was shattered in 1907, when a three-week-long market crisis led the US economy to shrink by some 40 percent.

Though government oversight of banking is commonly accepted today, it was a nascent idea in the early twentieth century.

As you’ll soon discover, social and political reform was critical to bringing about this shift in perspective.

In what sounds like a scene straight out of a movie, a small, secret group of bankers and politicians met on an island off the coast of Georgia in 1910 to discuss the future of banking.

One of them was Republican Senator Nelson Aldrich from Rhode Island. While he had once been staunchly opposed to a central bank, the Panic of 1907 and a study of Europe’s central banking model had convinced him otherwise.

The meeting on Jekyll Island off the coast of Georgia resulted in the release of the Aldrich Plan in January 1911.

Though the plan wasn’t used in its entirety, it did raise a number of issues that were critical to the final act to create a centralized banking system, called the Federal Reserve Act.

Soon after the Aldrich Plan was introduced, in 1913, Woodrow Wilson became the twenty-eighth president of the United States.

Wilson was an admirer of both a strong federal government and laissez-faire economics, and as such, he symbolized a compromise between the economic viewpoints of Republicans and Democrats.

Despite the benefits it offered, the establishment of the “Fed” did not solve all the financial worries in the United States.

Laws require time to take effect, and the Federal Reserve Act was no exception.

History has a tendency to repeat itself. The Federal Reserve today faces many of the same issues it did a century ago, with people voicing concerns over the unbridled power of banks and the inability of governments to adequately control them.

Let’s connect the dots between the past and present. The suspicion with which banks are regarded today, for instance, is reminiscent of the Progressive Era, during which the general population felt that banks could and did misuse their power.