Federal Bank Of Commerce : The Knickerbocker Trust Company

The Bank of the United States was designed to make money and build an economy. It was designed by men like Alexander Hamilton and Robert Morris, but did not benefit the common citizen as much as wealthy investors. Why did a fledgling government need to borrow millions from overseas in order to invest in a “national” bank, to turn around and then borrow the same money back and pay interest on it? The banking system developed by Alexander Hamilton and Robert Morris was prime pickings for speculators, and laid the groundwork for a history of unscrupulous activity regarding our nation’s money supply that continues to this day. The signatures on the Constitution were barely dry before corruption and

Federal Reserve System, commonly referred to as Fed, was established in 1913. This was after American congress passed the Federal Reserve Act in December the same year, establishing a new set of institutions which were meant to govern the relationship between banks, the government, and the production of money (Broz 1997 p. 1). The Federal Reserve System divides the nation in 12 districts, each with its own federal reserve bank (Boyes & Melvin, 2006). Overall administrative structure of the system consists of: Board of Governors. The board is headed by a chairman who is appointed by the president to a four year term (Boyes & Melvin, 2006). The chairman serves as a leader and also as a spokesperson for

1913: Federal Reserve Act made Federal Reserve Board to oversee national banking system with 12 regional districts, paper money issuance, and its-own central bank.

The credit system of the country had ceased to operate, and thousands of firms went into bankruptcy (Born...,.12). Something had to be done that would provide for a flexible amount of currency as well as provide cohesion between banks across the United States. (Hepburn, 399) This knight in shining armor, as described in the story of the bank run, was the Federal Reserve. The Federal Reserve Act of 1913 helped to establish banks as a united force working for the people instead of independent agencies working against each other. By providing a flexible amount of currency, banks did not have to hoard their money in fear of a bank run. Because of this, there was no competitive edge to see who could keep the most currency on hand and a more expansionary economy was possible.

On December 23, 1913, due to a series of financial panics, the Federal Reserve System was created. The Federal Reserve, or the Fed, is the central banking system of the United States of America. The major financial crisis that mainly created the Fed system was the Panic of 1907, also known as the Knickerbocker Crisis. During the Panic of 1907 the New York Stock Exchange fell almost 50% from its peak the previous year. The Great Depression of 1930 was a key factor in the changes to the system. Through the years the Feds’ roles and responsibilities have expanded and its structure has evolved. Although the system was created because of an crisis, the U.S. Congress has established three key objectives for the monetary policy in the federal Reserve

Despite the suspicious by many Americans back then that banks have an inherent nature to serve the wealthy elite over the common people, there was an underlying agreement stretching

The Bank of the United States had the most power out of all the banks in America and it was the primary depository for the funds of the Washington government. Although, it controlled and minted much of the nation’s gold and silver, it did not distribute paper money. Unlike many smaller banks, the national bank was stable in value and vital to expanding the nations economy. However, the Bank of the United States was a private institution, not accountable to the people rather just to its wealthy moneyed investors. Nicholas Biddle, the banks president, held an immense and unconstitutional amount of power over the nations financial affairs. Some, including Jackson believed that the bank’s existence was against the equality advocated through American democracy. The Bank War began in 1832, when Daniel Webster and Henry Clay presented Congress with a bill to renew the Bank’s charter, even though it was not set to expire until 1836. Clay’s motive for pushing the bill four years earlier was to cause an election issue, however many had the same views on the bank as Jackson. The bill was passed and immediately vetoed by Jackson. His veto message resonated with constitutional consequences and increased the power of presidency, yet Jackson vetoed this bill because he believed the federal government did not have the power to control the nations

After the nation’s banks were hit hard by a severe financial panic in 1907, the United States President and Congress decided the nation’s banking system needed reformed and strengthened. Subsequently, in 1910, a small group of bankers and politicians secretly met on Georgia’s Jekyll Island for 10-days and drafted an outline of a new central banking system that would protect the United States economy from future financial crises and provide the platform for America to thrive. This outline, known as the Aldrich Plan named after Senate Republican of Rhode Island, Nelson Aldrich was submitted to congress but was voted down. However, this would later serve as the model for which the Federal Reserve Act was based. The Federal Reserve Act was signed into law on December 23, 1913, by Woodrow Wilson and established the Federal Reserve, or the Fed, as the central bank for United States.

When the idea of the first U.S bank was proposed in 1790 the antifederalists believed that the banks should be primarily controlled by the states according to the 9th Amendment, while federalist believed that those kinds of powers should be held by the government. In one of his letters Hamilton stated, “If all the public creditors receive their dues from one source [the government]…their interest[s] will [be] the same. And having the same interests, they will unite in support of the fiscal arrangements of the government.”1 This showed that Hamilton, and the federalists, believed that if financial matters were controlled by one bank more loaners would support the government. The political parties’ opposing views on topics such as this made the process of approval more

After the Revolutionary War, many of the country’s citizens were in great debit and there was widespread economic disruption. The country was in need of an economic overhaul and the new country’s leaders would need to decide how to do this to ensure the new country did not fall apart. After two unsuccessful attempts at a national banking system, the Federal Reserve System was created by the Federal Reserve Act of 1913. Since its inception, the Federal Reserve System has evolved into a central banking system that grows with the country. The Federal Reserve System provides this country with a central bank that is able to pursue consistent monetary policies. My goal in this paper is to help the reader to understand why the Federal

The Federal Reserve System was founded by Congress in 1913 to be the central bank of the United States. The Federal Reserve System was founded to be a safer, more flexible, and more stable monetary financial system. Over the years, the role of the Federal Reserve Board and its influence on banking and the economy has increased. Today, the Federal Reserve System's duties fall into four general categories. Firstly, the FED conducts the nation's monetary policy. The FED controls the monetary policy by influencing credit conditions in the economy. The FED measures its success in accomplishing these goals by judging whether or not the economy is at full employment and whether or not prices are stable. Not only

The purpose of its creation was pretty straight-forward, that is, to prevent failures in banking (Meltzer & Allan, 2010). During the time of its inception, the United States had gone through a vicious banking crisis in 1907. The crisis gained importance as it was observed how Knickerbockers Trust failed to receive support from its peers, even after voluntarily seeking for it. It ultimately faced collapse due to failure in receiving support. This also had a significant influence on the psychology of the public as the peers of Knickerbockers apart from not recuing it, also cancelled payments to each other. The New York Stock Exchange collapsed by fifty per cent until liquidity was injected by the initiatives of financier J.P. Morgan which then relieved the situation to some extent. The legislators then in response vehemently advocated putting in place a central banking system, which would be able to provide liquidity in the case of a wholesale downfall. It can be said with hindsight that the machinery back then used to be very sophisticated. The Wall Street Journal also published a comprehensive fourteen-part series which emphasized on the need for a central banking system. The idea received further endorsements from the public groups and trade organizations. Hence the Federal Reserve was born. It was meant to be a politically autonomous institution that would provide stability to the financial system, protect the

Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds.

The Great Depression is undoubtedly one of the most significant events in American and world history. It was the most widespread depression in the 20th century affecting most nations in the world and lasting for as long as a decade. However, there still remain unanswered questions regarding the cause of the great depression. One of the most debated topics regarding the Great Depression continues to be the role of the Federal Reserve (Fed) in causing and prolonging the crisis. The Federal Reserve, the central banking system of the United States, was created on December 23, 1913, with the enactment of the Federal Reserve Act, primarily in response to a series of financial panics in 1907. The Fed had being in existence for 15 years before the

The bank was not a central bank; it just held an account for the government and had little control over the fiscal policies in each state. However, the state banks still resented the power that the bank had. This is extremely hard to comprehend when comparing the power of the First Bank and the current Federal Reserve System.