Question

After two failed attempts at creating a central bank for the United States (First and Second Bank of the United States), in what ways did the political tide change in favor of creating the third attempt (The Federal Reserve)?

Answer 1

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Abstract

In mid of seventeen centuries there was beginning to foundation of the first institution recognized as a central bank, founding of the first institution recognized as a central bank, he Swedish risk bank.

Established in 1668 as a joint stock bank, it was chartered to lend the government funds and to act as a clearing house for commerce.

Later the transition from Central Bank to Federal Reserve System has been done by the creation of the Federal Reserve in 1913.

Though opening of central bank of United States in 1816, the Second Bank closed in 1836, when Congress failed to override President Andrew Jackson's veto of the reauthorization of the Second Bank.

Ways / Steps the political tide change in favor of creating the third attempt

1. The United States was considerably more unstable financially before the creation of the Federal Reserve.
2. Seasonal cash crunches and a high rate of bank failures made the U.S. economy a riskier place for international and domestic investors to place their capital.
3. The lack of dependable credit stunted growth in many sectors, including agriculture and industry.
4. New America did not want to be made in the image of Britain, and also favored a more decentralized state-by-state approach to its political economy.
5. Congress ultimately passed the The 1913 Federal Reserve Act is U.S. -- legislation that created the current Federal Reserve System.
6. Congress developed the Federal Reserve Act to establish economic stability in the United States by introducing a central bank to oversee monetary policy.
7. The law sets out the purpose, structure, and function of the Federal Reserve System. Congress can amend the Federal Reserve Act and has done so several times.

The Federal Reserve System belongs to a later wave of central banks, which emerged at the turn of the twentieth century.

These banks were created primarily to consolidate the various instruments that people were using for currency and to provide financial stability.

Many also were created to manage the gold standard, to which most countries adhered.

Central banks adhered to the gold standard’s rule of maintaining gold convertibility above all other considerations.

The amount of money banks could supply was constrained by the value of the gold they held in reserve, and this in turn determined the prevailing price level.

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