Episode Notes: Founding of the Federal Reserve System

• Introduction:
  • Topic: Founding of the Federal Reserve System and its impact on the liquidity of the U.S. banking system.
• Pre-Fed U.S. Banking Scenario:
  • U.S. banks frequently faced crises.
  • Causes included inadequate regulation, no lender of last resort, and an inelastic currency.
  • Resulted in bank runs and failures, with banks unable to meet cash demand during financial stress.
• Establishment of the Fed (1913):
  • Goal: Provide an elastic currency and act as a lender of last resort during financial crises.
  • Granted powers to issue currency, set interest rates, and regulate banks.
• Impact on U.S. Banking ...