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A tour de force of historical reportage, America’s Bank illuminates the tumultuous era and remarkable personalities that spurred the unlikely birth of America’s modern central bank, the Federal Reserve. Today, the Fed is the bedrock of the financial landscape, yet the fight to create it was so protracted and divisive that it seems a small miracle that it was ever establish A tour de force of historical reportage, America’s Bank illuminates the tumultuous era and remarkable personalities that spurred the unlikely birth of America’s modern central bank, the Federal Reserve. Today, the Fed is the bedrock of the financial landscape, yet the fight to create it was so protracted and divisive that it seems a small miracle that it was ever established. For nearly a century, America, alone among developed nations, refused to consider any central or organizing agency in its financial system. Americans’ mistrust of big government and of big banks—a legacy of the country’s Jeffersonian, small-government traditions—was so widespread that modernizing reform was deemed impossible. Each bank was left to stand on its own, with no central reserve or lender of last resort. The real-world consequences of this chaotic and provincial system were frequent financial panics, bank runs, money shortages, and depressions. By the first decade of the twentieth century, it had become plain that the outmoded banking system was ill equipped to finance America’s burgeoning industry. But political will for reform was lacking. It took an economic meltdown, a high-level tour of Europe, and—improbably—a conspiratorial effort by vilified captains of Wall Street to overcome popular resistance. Finally, in 1913, Congress conceived a federalist and quintessentially American solution to the conflict that had divided bankers, farmers, populists, and ordinary Americans, and enacted the landmark Federal Reserve Act. Roger Lowenstein—acclaimed financial journalist and bestselling author of When Genius Failed and The End of Wall Street—tells the drama-laden story of how America created the Federal Reserve, thereby taking its first steps onto the world stage as a global financial power. America’s Bank showcases Lowenstein at his very finest: illuminating complex financial and political issues with striking clarity, infusing the debates of our past with all the gripping immediacy of today, and painting unforgettable portraits of Gilded Age bankers, presidents, and politicians. Lowenstein focuses on the four men at the heart of the struggle to create the Federal Reserve. These were Paul Warburg, a refined, German-born financier, recently relocated to New York, who was horrified by the primitive condition of America’s finances; Rhode Island’s Nelson W. Aldrich, the reigning power broker in the U.S. Senate and an archetypal Gilded Age legislator; Carter Glass, the ambitious, if then little-known, Virginia congressman who chaired the House Banking Committee at a crucial moment of political transition; and President Woodrow Wilson, the academician-turned-progressive-politician who forced Glass to reconcile his deep-seated differences with bankers and accept the principle (anathema to southern Democrats) of federal control. Weaving together a raucous era in American politics with a storied financial crisis and intrigue at the highest levels of Washington and Wall Street, Lowenstein brings the beginnings of one of the country’s most crucial institutions to vivid and unforgettable life. Readers of this gripping historical narrative will wonder whether they’re reading about one hundred years ago or the still-seething conflicts that mark our discussions of banking and politics today. 


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A tour de force of historical reportage, America’s Bank illuminates the tumultuous era and remarkable personalities that spurred the unlikely birth of America’s modern central bank, the Federal Reserve. Today, the Fed is the bedrock of the financial landscape, yet the fight to create it was so protracted and divisive that it seems a small miracle that it was ever establish A tour de force of historical reportage, America’s Bank illuminates the tumultuous era and remarkable personalities that spurred the unlikely birth of America’s modern central bank, the Federal Reserve. Today, the Fed is the bedrock of the financial landscape, yet the fight to create it was so protracted and divisive that it seems a small miracle that it was ever established. For nearly a century, America, alone among developed nations, refused to consider any central or organizing agency in its financial system. Americans’ mistrust of big government and of big banks—a legacy of the country’s Jeffersonian, small-government traditions—was so widespread that modernizing reform was deemed impossible. Each bank was left to stand on its own, with no central reserve or lender of last resort. The real-world consequences of this chaotic and provincial system were frequent financial panics, bank runs, money shortages, and depressions. By the first decade of the twentieth century, it had become plain that the outmoded banking system was ill equipped to finance America’s burgeoning industry. But political will for reform was lacking. It took an economic meltdown, a high-level tour of Europe, and—improbably—a conspiratorial effort by vilified captains of Wall Street to overcome popular resistance. Finally, in 1913, Congress conceived a federalist and quintessentially American solution to the conflict that had divided bankers, farmers, populists, and ordinary Americans, and enacted the landmark Federal Reserve Act. Roger Lowenstein—acclaimed financial journalist and bestselling author of When Genius Failed and The End of Wall Street—tells the drama-laden story of how America created the Federal Reserve, thereby taking its first steps onto the world stage as a global financial power. America’s Bank showcases Lowenstein at his very finest: illuminating complex financial and political issues with striking clarity, infusing the debates of our past with all the gripping immediacy of today, and painting unforgettable portraits of Gilded Age bankers, presidents, and politicians. Lowenstein focuses on the four men at the heart of the struggle to create the Federal Reserve. These were Paul Warburg, a refined, German-born financier, recently relocated to New York, who was horrified by the primitive condition of America’s finances; Rhode Island’s Nelson W. Aldrich, the reigning power broker in the U.S. Senate and an archetypal Gilded Age legislator; Carter Glass, the ambitious, if then little-known, Virginia congressman who chaired the House Banking Committee at a crucial moment of political transition; and President Woodrow Wilson, the academician-turned-progressive-politician who forced Glass to reconcile his deep-seated differences with bankers and accept the principle (anathema to southern Democrats) of federal control. Weaving together a raucous era in American politics with a storied financial crisis and intrigue at the highest levels of Washington and Wall Street, Lowenstein brings the beginnings of one of the country’s most crucial institutions to vivid and unforgettable life. Readers of this gripping historical narrative will wonder whether they’re reading about one hundred years ago or the still-seething conflicts that mark our discussions of banking and politics today. 

30 review for America's Bank: The Epic Struggle to Create the Federal Reserve

  1. 4 out of 5

    R.K. Gold

    I am sorry if my review turns into a summary of this book I just love to talk about it. So I gave this book a second read because I was struggling to remember some of its main points and am so happy to refamiliarize myself with the material. It builds a strong argument by starting with what America was like before it centralized its bank. The Revolutionary War ended in 1783 and it wasn't until December 1913 that the Fed Reserve Act passed under President Wilson. During that 130 year period, there I am sorry if my review turns into a summary of this book I just love to talk about it. So I gave this book a second read because I was struggling to remember some of its main points and am so happy to refamiliarize myself with the material. It builds a strong argument by starting with what America was like before it centralized its bank. The Revolutionary War ended in 1783 and it wasn't until December 1913 that the Fed Reserve Act passed under President Wilson. During that 130 year period, there were two attempts at centralizing the bank, both failed when the government failed to renew their charters. The second failure coming from President Andrew Jackson, who considered banking regulations beneficial for the American elite, which directly countered his populist movement. After the crash of 1893 and 1907 the need to centralize banking entered the forefront of political debate. The unregulated market created competing monopolies, which could game the economy. In 1907 a failed attempt to take over the copper monopoly triggered a panic. Banks ran out of reserves when everyone tried to cash out at the same time and country had a financial collapse. This led some of the harshest critics, like Nelson Aldrich into advocates for a centralized bank. He failed to pass his own bill, but a couple years later the Fed Reserve act (Owen-Glass Bill) borrowed heavily from Aldrich. Not to make this review political, but I feel like this is an important read given the political climate today. Populism can have dangerous consequences and can lead to undisciplined decisions. Though it has its faults, the federal reserve is beneficial to the American economy.

  2. 4 out of 5

    Lobstergirl

    I really was expecting this to be more exciting. It was so dry I finished it four hours ago and I'm still chugging ice water. I will say, though: thank goodness our politicians got together and decided having a central bank was necessary and were able to overcome the typical American resistance to anything federal or centralized or (LOOK AWAY) partly run by the government. Just imagine if we had only created a central bank the same year we came up with Obamacare. It's really quite remarkable that I really was expecting this to be more exciting. It was so dry I finished it four hours ago and I'm still chugging ice water. I will say, though: thank goodness our politicians got together and decided having a central bank was necessary and were able to overcome the typical American resistance to anything federal or centralized or (LOOK AWAY) partly run by the government. Just imagine if we had only created a central bank the same year we came up with Obamacare. It's really quite remarkable that the central bank and the income tax happened in the same year, 1913. (view spoiler)[I haven't read much about the income tax, but it sounds like the secret to getting it accomplished was baby steps. A 1% tax was levied on incomes above $4,000 (higher rates on higher incomes). Most Americans weren't even subject to the income tax because they didn't earn enough. Now imagine if Bernie Sanders had lived back then and demanded a 20% tax. Baby steps, people. They're okay. Sometimes they're the only way to get things done. (hide spoiler)]

  3. 4 out of 5

    Mark Mortensen

    As a former business major who leans toward the sales and marketing side I was on edge as to whether I really wanted to read a comprehensive historical analysis of the Federal Reserve, an arena that often receives low grades. Throughout the 18th and 19th Century American civilization managed finances without a Federal Reserve System. As America grew and travel expanded gold and silver certificates along with other notes became a popular addition to currency. The constant strain on private and co As a former business major who leans toward the sales and marketing side I was on edge as to whether I really wanted to read a comprehensive historical analysis of the Federal Reserve, an arena that often receives low grades. Throughout the 18th and 19th Century American civilization managed finances without a Federal Reserve System. As America grew and travel expanded gold and silver certificates along with other notes became a popular addition to currency. The constant strain on private and commercial banks lacking insurance created a lingering fear of “runs” and potential banking collapses. The panic of 1907 escalated the crisis. The book details the individuals who were instrumental in creating the Federal Reserve during President Woodrow Wilson 1st term shortly before the onset of World War I. Although the institution was hailed by many, opponents considered the new central bank to be another expansion of big government. I view the Federal Reserve that sets America’s monetary policy as serving an integral part of our governmental system through a marriage of “for better or for worse”.

  4. 4 out of 5

    Jean

    I heard Lowenstein on the New York Times book review podcast and it sounded interesting. I had just finished “Courage to Act” by Ben S. Bernanke and this book seem to fit right into the topic. The book starts in 1787 and follows the topic of the need for a Federal Bank. Alexander Hamilton fought for a central bank but many opposed a strong federal government. Lowenstein goes into detail about President Wilson and his fight for the Federal Reserve and how they passed the “Federal Reserve Act of 19 I heard Lowenstein on the New York Times book review podcast and it sounded interesting. I had just finished “Courage to Act” by Ben S. Bernanke and this book seem to fit right into the topic. The book starts in 1787 and follows the topic of the need for a Federal Bank. Alexander Hamilton fought for a central bank but many opposed a strong federal government. Lowenstein goes into detail about President Wilson and his fight for the Federal Reserve and how they passed the “Federal Reserve Act of 1913.” This is a story of politics, disagreements, decisions, including crises that culminated in the Federal Reserve Act. Lowenstein’s account of the financial crises before the establishment of the Fed powerfully demonstrates that it is imperative for the Federal Reserve System to maintain its effectiveness and independence from politics. The author gives us striking portraits of key figures well known and unknown, involved in the creation of the central bank. The book is well written and well researched. The author writes in an engaging manner that makes dry material interesting. There are currently a number of reforms being proposed in Congress that would undermine the effectiveness and independence of the Federal Reserve. This is a must read book to fully understand the history and all the issues involved, so one can understand the critical nature of the proposed changes to the Federal Reserve Act. Robertson Dean did a good job narrating the book. The book was not too long at nine and half hours.

  5. 5 out of 5

    Mehrsa

    This book has some flaws--it's very in the weeds of it all and too little analysis for my taste. However, it's one of the best central bank histories out there and fills a big void in banking history. Hopefully, accounts like this will put to rest the conspiracy theorists, cranks, and gold standard folks out there. The book also redeems Wilson in my view. A flawed president (mostly because he was a white supremacist), he's ultimately responsible for bringing together the divergent views on the f This book has some flaws--it's very in the weeds of it all and too little analysis for my taste. However, it's one of the best central bank histories out there and fills a big void in banking history. Hopefully, accounts like this will put to rest the conspiracy theorists, cranks, and gold standard folks out there. The book also redeems Wilson in my view. A flawed president (mostly because he was a white supremacist), he's ultimately responsible for bringing together the divergent views on the fed. It's amazing how central this debate was in US policy and how little attention Federal reserve governance seems to get today. Thanks to Lowenstein and others, hopefully this is changing.

  6. 5 out of 5

    Frank Stein

    The story of the creation of the Federal Reserve has been told many times, not least by its creators. As the author notes, eight different people who had a hand in its drafting wrote memoirs about it, and others filled out interviews and articles with their memories. As often as not, these memoirs attacked and defamed the other creators as mere publicity-seekers with little input into the real draft of the final act. Later, others wrote academic histories of the struggle, assigning blame and pra The story of the creation of the Federal Reserve has been told many times, not least by its creators. As the author notes, eight different people who had a hand in its drafting wrote memoirs about it, and others filled out interviews and articles with their memories. As often as not, these memoirs attacked and defamed the other creators as mere publicity-seekers with little input into the real draft of the final act. Later, others wrote academic histories of the struggle, assigning blame and praise as they felt deserved. Clearly, all of these people understood that the creation of the Fed was a crucial moment in American history that required understanding, but before now there has never been a single, popular book about this moment. This one fits the bill nicely. It's well written, if a little circuitous, and gives the reader a sense of the stakes involved. It helps that there are some good characters here. There's Frank Vanderlip, the Illinois farm boy and former reporter, who worked in the Treasury before becoming head of the nation's largest bank, National City. Vanderlip then used this position to push for more centralized power and more banker control. There's Paul Warburg, the scion of a wealthy German Jewish family, who first came to New York in 1902 and was shocked at the backwards financial conditions and incipient panics that dominated American banking life. He decided to stay and become a citizen so he could help fix the problem. Warburg worked closest with Senator Nelson Aldrich of Rhode Island, who had no problem feathering his own nest, with U.S. Steel stock provided by supporters or a street railway monopoly granted him in his home state, but in his last years created the first plan for a new centralized bank for the United States. There is also Carter Glass, the racist Virginia chair of the House Banking Committee, who tried to learn about banking in his free time and ended up playing perhaps the single biggest roll in drafting the final bill. These players all fought over seemingly picayune issues, such as how many "Reserve Banks" there should be (Warburg and Aldrich wanted one, or at most four, Glass wanted up to 20), whether banks should be allowed to branch abroad, how much reserves banks should keep, whether entrance in the new system should be mandatory or not, whether state banks could join, how much dividends banks would get on their stock in the new Reserve Banks, etc. Such minutiae may seem irrelevant, but each question meant millions won and lost for certain groups, and shaped the fate of our monetary and banking system down to today. On the whole, the author is a clear booster for the Fed, but he shows the many different paths it could have taken. Although I don't agree with all of it, I'm glad someone out there wrote a book that almost any American can use to understand an essential moment in our history.

  7. 4 out of 5

    Wej

    A couple of years ago I would have never predicted that I might spend my Christmas break reading a history of establishing the Federal Reserve, but that’s exactly what I did. More than that, I have actually enjoyed this book. Roger Lowenstein described the historical and economic conditions that led to passing the Federal Reserve Act in 1913. The American legislators and bankers were afraid of European-style centralisation, and of a European style central bank. This opposition could be traced ba A couple of years ago I would have never predicted that I might spend my Christmas break reading a history of establishing the Federal Reserve, but that’s exactly what I did. More than that, I have actually enjoyed this book. Roger Lowenstein described the historical and economic conditions that led to passing the Federal Reserve Act in 1913. The American legislators and bankers were afraid of European-style centralisation, and of a European style central bank. This opposition could be traced back to Andrew Jackson and his hostility to the National Bank. It took an outsider, Paul Warburg, to forcefully push for a reform of American financial system. His knowledge of European central banking and the recent crisis of 1907 prepared the ground. The early draft, the Aldrich Plan, took the reformers to a secluded Jekyl Island (later renamed Jekyll Island), the ever since feeder for conspiracy theorists. The first draft did not succeed, due to, among other things, opposition to its spiritual father - Nelson Aldrich. The book follows the characters involved in shaping the Fed, including Carter Glass, and at the earlier stage - J.P. Morgan. The idea of a central bank, even though modified to fit the American requirements, eventually gathered enough supporters, including Woodrow Wilson to be made into a law. This act was one of the three major reforms of the US financial system, along with the creation of the Securities and Exchanges Commission and the Glass-Steagall Act.

  8. 4 out of 5

    Satya Ananthu

    Too many competing ideologies, too many currencies, fear of federal control etc. etc. Finally Federal Reserve was created after a failed version of national bank. I hardly remember more than a few names from this book, but it was quite informative and helped me understand a little bit about different political forces in the United States. As someone said 'There is no limit to how much you can accomplish if you don't care who gets the credit', this effort has been a result of many leaders' work an Too many competing ideologies, too many currencies, fear of federal control etc. etc. Finally Federal Reserve was created after a failed version of national bank. I hardly remember more than a few names from this book, but it was quite informative and helped me understand a little bit about different political forces in the United States. As someone said 'There is no limit to how much you can accomplish if you don't care who gets the credit', this effort has been a result of many leaders' work and foresight, though few people fought for the credit in the aftermath.

  9. 5 out of 5

    Aaron Arnold

    Many people have strong opinions about the Federal Reserve, despite not having a clear idea of what it is, what it does, how it's structured, or who's in charge. However, even if that describes you, don't feel so bad, because ignorance has been practically a second father to the Fed since the beginning. America's allergy to central banking has endured from the founding, through multiple painful financial crises and recessions, and even through to the relatively peaceful and prosperous present. A Many people have strong opinions about the Federal Reserve, despite not having a clear idea of what it is, what it does, how it's structured, or who's in charge. However, even if that describes you, don't feel so bad, because ignorance has been practically a second father to the Fed since the beginning. America's allergy to central banking has endured from the founding, through multiple painful financial crises and recessions, and even through to the relatively peaceful and prosperous present. As Lowenstein ably demonstrates through his description of the Federal Reserve Act's drafting, debate, and passage, the Federal Reserve's complex structure and arcane operations are less a product of smoke-filled rooms than the unavoidably complicated nature of high finance, as well as the often-terrible political compromises necessary to shepherd such a controversial piece of legislation through the drama of the Progressive Era. Since the "End the Fed" movement is still with us, as it most likely will be for some time, it's worth reading on why the Fed exists, what problems its creators were trying to solve, and how it ended up quite the way it did. Nowadays, central banks are a given in the international financial landscape - less a feature than the foundation. Yet despite the best efforts of Alexander Hamilton and many other government officials during the early years, the US did not get a truly permanent central bank until just before World War I. Despite otherwise rapid economic growth, in comparison to European nations the US had an unusually fragile monetary system that was vulnerable to frequent panics and recessions. Individual banks issued their own notes, which made taking out loans and redeeming debts across state lines difficult. Rural banks in particular had asset flows that tracked the harvests, which could leave their reserves critically low if too many farmers needed to withdraw at once. Local banks had to rely on public perception of their stability and trustworthiness, which meant often that they went bust very suddenly, completely wiping out deposits. Many banks had deep ties to corruption-intense industries like railroads that were subject to intense, unstable bursts of speculation. And, since nothing travels faster than bad news, nationwide financial contagions could spread in a flash but take years to recover from. Yet public mistrust of centralized government, which was even shared by Presidents such as Andrew Jackson, meant that America more or less muddled through recession after recession, relying on the private sector to clean up its own messes. The low point was the Panic of 1907, a particularly harsh but certainly not the only bank crisis/recession around the turn of the 20th century. Borne of a misbegotten attempt to corner the market on copper, the collapse of the instigator's firm led to a wave of bank closures. In normal conditions in a fractional reserve system, it isn't an issue when banks owe each other large sums of money, since only a small percentage of deposits will ever be withdrawn at a time. But when credit becomes scarce, each bank tries to call in its debts from all the others, and with a sufficiently leveraged system where the total amount of loans outstanding can be greater than the total amount of reserves, everyone goes bankrupt. In most European countries at the time, the central bank would step in and, in the words of Economist editor Walter Bagehot, "lend freely, at a penalty rate, against good collateral", but in the US, Wall Street was forced to rely on the person of JP Morgan to coordinate relief as the banking crisis became particularly pronounced. Thanks to his personal reputation and his powers of persuasion, Morgan was able to calm the markets and arrange for some measure of stability, but it was clear that this state of affairs couldn't continue. The United States needed a central bank, and so Senator Nelson Aldrich and banker Paul Warburg began their efforts to design one. For conspiracy theorists, this is where the story really begins. There are plenty of books out there with titles like "The Creature From Jekyll Island" that imply that the creation of the Federal Reserve was some kind of sinister plot foisted on an unwary public to debauch the currency/tighten the grip of Wall Street/empower a tyrannical federal government/extend the tentacles of international banks/destroy freedom/etc. However, as Lowenstein shows, the eventual passage of the Federal Reserve Act in 1913 was only one step, though the crucial one, in the long struggle to give the United States a modern banking system with the powers of crisis-prevention that we now take for granted. Many of the peculiarities of the Federal Reserve that intrigue people - its quasi-public/private structure, its dispersion into regional banks, its insulation from direct public accountability, its somewhat circuitous control over the money supply, the fact that dollar bills say "Federal Reserve Note" instead of "U.S. Government note" - are less the product of deliberate conspiracies than the many rounds of bitter negotiations and painful compromises it took to get a bill through Congress during an unusually turbulent period in American governance. The Progressive Era's expansion on the powers of the federal government is under-appreciated today, maybe because the similar expansions in the Civil War/Reconstruction and the New Deal are easier to explain to high schoolers. It's easy to see why the federal government would assume new responsibilities when during a civil war or economic calamity, less easy when the catalyst is monetary and administrative structural reform. However, you can't understand the Federal Reserve without understanding something about where its progenitors were coming from. Senators like Nelson Aldrich (patrician Rhode Islander, a pawn of Big Sugar), Carter Glass (conservative Virginian, of later Glass-Steagall fame), and Latham Owen (populist Oklahoman) had their own motives for pursuing reform, but in trying to draft a passable bill, each had to face some tough political questions: - Ordinary people might not like a government bank because it's the government, unless they're farmers, who will love it, but banks will hate it because it's competition - what should its powers be? - Conservatives want Federal Reserve directors appointed by bankers, but Progressives want them appointed by the President - what's the best way to balance independence with accountability? - Many people hate the idea of a single central bank, but splitting it into several regional banks (as many as 20 in some drafts) could be dangerous in a crisis, and that still leaves no direct involvement by states themselves - how should it be structured? - Notes issued by the federal government directly and backed by "full faith and credit" would involve the least corporate control, but notes issued by the Federal Reserve and backed by member banks reserves would quiet inflation worries - what legal status should money issued by this bank have? - The original plan was outlined by Senator Aldrich, a backer of the hated tariff and a notorious tool of the sugar trust in his home state, as well as Paul Warburg, a foreign banker - can the people trust anything about it? - And what would the creation of a central bank imply about other important issues of the day, such as the gold standard vs free coinage of silver, or about high tariffs? Unfortunately, all of these touchy questions were debated in an unusually turbulent political environment. The election of 1912 featured a three-way race between incumbent Republican William Howard Taft, Democrat Woodrow Wilson, and Progressive Theodore Roosevelt, whose friendship with Taft was ended by Roosevelt's disappointment at his conservativism. The election exposed the limitations of the two-party system to accommodate all of the different disputes at play: the ideological battle of conservatism vs populism vs progressivism, the economic struggle of bankers vs farmers vs merchants, and the regional arguments of Northeast vs South vs West. And in many ways, the victorious Democrats might have been the last party you'd expect to lead a successful banking reform initiative, not only because their base of support in the South was hostile, but also because notorious anti-banker and perennial candidate William Jennings Bryan became Secretary of State in the Wilson administration. Yet Wilson, whose background as a Princeton professor included political science and public administration, was convinced that America needed a legitimate central bank. While the later part of the book can seem tedious unless you're interested in the minutiae of historical lobbying efforts, Lowenstein highlights Wilson's direct involvement as a major factor in getting the bill passed. It's a fascinating counter-example to many other instances of successful reform, such as Barack Obama's more hands-off approach to the Affordable Care Act, but is more in line with other historical examples such as LBJ and the Great Society legislation. While some of Wilson's other initiatives such as the League of Nations failed despite him ruining his health over it, his shepherding of the bill in this instance made the difference. The legislative horse-trading also makes you appreciate the fine line between pandering to special interests and speaking up for forgotten voices - there's no logical reason for the Fed's 12 branches as opposed to 11 or 13, but sometimes you have to buy some votes, and the true alternative to a flawed bill isn't a better bill, but no bill at all. The Federal Reserve's mandate would be enlarged and expanded by successive bills, but the foundation was finally set. The Federal Reserve has not always done a great job, as even its staunchest supporters would recognize. Whether you buy Milton Friedman's theory in A Monetary History of the United States that the severity of Great Depression was the Fed's fault or not, it's indisputable that its twin missions of price stability and full employment have been heavy burdens, and its responsibilities have only increased over time. Many people would like to get rid of it entirely, and technology has produced possible alternatives like bitcoins that seem worthy of exploration. Certainly there's a debate to be had over the proper method of ensuring accountability for individuals who wield such dangerous power. However, you can dislike how something is run without wanting to blow it up entirely, and contemporary accounts like Neil Irwin's The Alchemists suggest that for all its flaws, the Fed is about the best institution you could expect, given its history, its mission, and the political and social constraints that it operates under. Seeing the messy story of its origin, recounted by Lowenstein with his typical skill and diligence, reminds us that the American political system is designed to produce compromise, not perfection. Ultimately we get the Federal Reserve we deserve.

  10. 5 out of 5

    Lynn

    As someone critical of the unforeseen consequences of Fed interventions and its monetary policies, Lowenstein does offer a good historical background to the reasoning and original intent behind the 1913 Federal Reserve Act. While the story of the political struggle traced through the key figures can be riveting, I do find it unsettling the author's dismissive attitude towards any arguments against the Fed. The need for a central bank was simply unquestioned. The free banking era was portrayed as As someone critical of the unforeseen consequences of Fed interventions and its monetary policies, Lowenstein does offer a good historical background to the reasoning and original intent behind the 1913 Federal Reserve Act. While the story of the political struggle traced through the key figures can be riveting, I do find it unsettling the author's dismissive attitude towards any arguments against the Fed. The need for a central bank was simply unquestioned. The free banking era was portrayed as outdated, inefficient and deficient to the growing financial needs of the nation, and public concerns and distrust over a powerfully centralized banking institution merely overblown. It's easy to overlook the fact that U.S. experienced the fastest economic growth in the 19th century and became the world's dominant industrial nation without persistent government interventions. There were panic and economic cycles, but they tend to be short-lived, often followed by a quick economic recovery (unlike the Great Depression and the financial crisis of 2008, despite all the monetary and fiscal stimulus). While the Fed was initially established as a lender-of-last-resort, its role had steadily expanded as the country moved away from the gold standard, so had its balance sheet. In the aftermath of the latest financial crisis and in amidst of an increasing public outcry over the large private banks being "too big to fail", shouldn't we at least take some precaution over the central banks' unlimited power in suppressing interest rates (some in the negative territory these days) that fueled the excessive leverage and risk-taking to begin with?

  11. 5 out of 5

    Tony Cavicchi

    Roger Lowenstein weaves a tale of the ghost of Andrew Jackson and the men who made the Federal Reserve. Contra the modern libertarian complaints of progressive Woodrow Wilson forcing a monstrosity of big government onto America, the creation of the Federal Reserve was much more nuanced. Lowenstein walks through the issues of fiat currency, the gold standard, currency reserves and legal tender, reserve discounting, deposit insurance, the Chicago vs. New York banking rivalry, central bank vs. regi Roger Lowenstein weaves a tale of the ghost of Andrew Jackson and the men who made the Federal Reserve. Contra the modern libertarian complaints of progressive Woodrow Wilson forcing a monstrosity of big government onto America, the creation of the Federal Reserve was much more nuanced. Lowenstein walks through the issues of fiat currency, the gold standard, currency reserves and legal tender, reserve discounting, deposit insurance, the Chicago vs. New York banking rivalry, central bank vs. regional banks, and banker board vs. presidential appointment. Of course, with such a sprawling issue set the politicians involved were a wide cast constantly shifting ideas and allegiances. Lowenstein shows how different the past was--and how similar the concerns about a central bank were then to the complaints about the Federal Reserve today. In Lowenstein's tale Wilson comes across as a moderate navigating a middle course between progressive firebrands Teddy Roosevelt and William Jennings Bryan (in odd and unusual alliance) and the bankers' interests represented by Senator Nelson Aldrich. No matter your opinion of the Federal Reserve today, the description of the status quo ante is mind-boggling, with over 7,000 forms of currency circulating in the United States.

  12. 5 out of 5

    Jdb

    This is an interesting and easy read. While I was hoping for more explanations of how our monetary system works, the narrative was true to the book’s title. There is a lot of detail about the who, what, where, and when of negotiations leading to the Federal Reserve Act. Although tedious at times, it is a classic example of the dichotomy of our Constitutional system: any positive but radical change has a tortuous path to enactment. And this is as it should be for our founding fathers understood f This is an interesting and easy read. While I was hoping for more explanations of how our monetary system works, the narrative was true to the book’s title. There is a lot of detail about the who, what, where, and when of negotiations leading to the Federal Reserve Act. Although tedious at times, it is a classic example of the dichotomy of our Constitutional system: any positive but radical change has a tortuous path to enactment. And this is as it should be for our founding fathers understood from history how sudden passions of the majority can be tyranny of the minority.

  13. 4 out of 5

    Josh Friedlander

    Few quotes are more famous in the history of liberalism than Adam Smith's "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public". In some ways the Federal Reserve, whose origin story is described in this book, proved an exception to this rule. American presidents James Madison and Andrew Jackson had twice allowed central banks to sunset, worried about the concentration of too much wealth in the hands of the Few quotes are more famous in the history of liberalism than Adam Smith's "people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public". In some ways the Federal Reserve, whose origin story is described in this book, proved an exception to this rule. American presidents James Madison and Andrew Jackson had twice allowed central banks to sunset, worried about the concentration of too much wealth in the hands of the central government. It took the intervention of Paul Warburg, a German immigrant and scion of a famous banking family, to push for something like the European model of a central bank which would provide a stable source of capital in liquidity crunches like the Panic of 1907, as well as the fortuitous political alignment of Woodrow Wilson's first term. As told by Lowenstein - a veteran Wall Street Journal reporter - this was basically a benign conspiracy by financiers to modernise and stabilise America's financial plumbing, against the ghost of Andrew Jackson. (Of whom Warburg quoted approvingly in his private diary "to my thinking, the country had greater cause to mourn on the day of his birth than on that of his decease".) And although he doesn't deal much with modern events, outside of occasional comparisons to the 2008 financial crisis, Lowenstein does connect the resistance around the founding of the Fed to still-popular conspiracy theories. When searching YouTube for "Federal Reserve" the first result is a video called "Century of Enslavement", followed up by "What You're Not Supposed to Know About America's Founding", (the latter produced by the John Birch Society). Lowenstein's book looks only at the founding of the Fed, against Progressive opposition best represented by Theodore Roosevelt (who split with his erstwhile friend Taft to run as a third-party Progressive [or "Bull Moose"] Party), and William Jennings Bryant (the populist most famous for his "cross of gold" speech supporting bimetallism). The result of the three-way split in the 1912 election was a resounding victory for the moderate Democrat Woodrow Wilson, who appointed Bryant as his Secretary of State. Wilson (then and since the only US president to hold a PhD) had a Democratic Senate and was able to push through the bill, after much editing and debating. Also instrumental was Carter Glass, who as creator of the Federal Reserve Act, the Securities Exchange Act creating the SEC, and the Glass-Steagall Act may well be the most influential single financial regulator of all time. Overall I'd recommend this book mainly to connoisseurs of American financial history (for whom this is a mere canapé next to Milton Friedman and Anna Schwartz's A Monetary History of the United States 1867-1960. But it can shed light on America's complex (and sometimes self-defeating) political system. Two odd quotes I liked: "It is a truism of capitalism that if money is injected into the system, no matter the intent, some of it will end up benefiting well-connected financiers." (of Wilson) "Indeed, he once mused that had he been alive in 1776, rather than see the nation split into thirteen ragtag fiefdoms, he might have been a Tory."

  14. 4 out of 5

    Al Berry

    A short interesting look at the creation of the federal reserve, probably closer to 3.5 than 4. The battles within the divided republican and Democratic parties to bring about a central bank, brief background on the need for and comparison with Europe, but mostly a look at the historical stewardship of the legislation.

  15. 4 out of 5

    Cian O hAnnrachainn

    With all the current chatter about banks and bank bail-outs, Roger Lowenstein's AMERICA'S BANK is a timely read. The book is not for everyone, diving into the deep end of the financial pool as it does, but for those who wonder how America's banking system got to where it is today, the book is highly informative. Mr. Lowenstein presents the decade-long political struggle to re-introduce a federal bank, something that Europeans take for granted but one that was lacking in America for most of its e With all the current chatter about banks and bank bail-outs, Roger Lowenstein's AMERICA'S BANK is a timely read. The book is not for everyone, diving into the deep end of the financial pool as it does, but for those who wonder how America's banking system got to where it is today, the book is highly informative. Mr. Lowenstein presents the decade-long political struggle to re-introduce a federal bank, something that Europeans take for granted but one that was lacking in America for most of its existence. On the heels of yet another financial panic in 1907, a regular occurrence in a nation that was adamantly anti-centralism, several influential bankers and politicians came together to battle against that attitude. The author does a fine job of showing how big egos collided as financiers wrangled with America's elected representatives to bring about a central bank to organize monetary policy in the European mold. The story is intriguing, although perhaps too inclined to look to our modern era as the backdrop for the Edwardian period prior to the First World War. In general, I found the book fascinating, with its explanation of how disparate lines of thought were brought together for disparate reasons, with all the give and take expected of legislative combat. The drive to win credit after the successful introduction of the Federal banking system is not forgotten in the epilogue, and caps off a tale of ambition and a burning desire for acclaim that saw the many authors of the bill all proclaiming themselves the sole winner who had to vanquish his foes. I am left with one question, however, that Mr. Lowenstein does not address. With so much of the anti-central bank animus ascribed to President Andrew Jackson, why, then, is it Alexander Hamilton's image that's suggested to be removed from the currency to make room for a woman? Disclaimer: Penguin provided a free copy of the book through the First to Read programme, so there you go.

  16. 4 out of 5

    Gregg Wingo

    What could be drier than a book about the creation of the Federal Reserve, right? Well, Lowenstein is up to the challenge. The creation of the Fed was not, however, a straight forward legislative process due to the legacy of the various incarnations of the Bank of United States and the presidency of Andrew Jackson so his task is made decidedly easier. One of the founders of the Fed, German-born banker Paul Warburg was so alienated by Jackson's legacy that he wrote in his dairy this quote from Ne What could be drier than a book about the creation of the Federal Reserve, right? Well, Lowenstein is up to the challenge. The creation of the Fed was not, however, a straight forward legislative process due to the legacy of the various incarnations of the Bank of United States and the presidency of Andrew Jackson so his task is made decidedly easier. One of the founders of the Fed, German-born banker Paul Warburg was so alienated by Jackson's legacy that he wrote in his dairy this quote from New York Mayor Philip Hone about the president's death: "The universal American nation is in mourning. Stripes, black...darken the columns of the newspapers....Now, to my thinking, the country had greater cause to mourn on the day of his birth than that of his decease". Warburg along with political spider master and Rhode Island's U.S. Senator Nelson Aldrich, the senator's personal secretary Arthur Shelton, Henry P. Davison, former J.P. Morgan protege, the future CitiBank's president Frank Vanderlip, and Assistant Secretary of the Treasury Piatt Andrew literally disguised themselves and headed out to "remote Jekyl Island" in 1910 to secretly create the basic outlines of the Federal Reserve System. Utilizing his background as a reporter, Lowenstein crafts a riveting tale of the before, during, and after of the Jekyl Conference. He divides the story in to two parts: The Road to Jekyl Island and The Legislative Arena plus an introduction concerning the history of banking in America and the role of Southern racist and Virginia Congressman Carter Glass in birthing the Fed. The book is both history and biographies of the principal characters from bankers and demagogues to legislators and presidents. It is an important analysis of American politics and the origins of one of the world's most important institutions. Fortunately, Roger's tales are far more interesting than Alan Greenspan Fed statements...

  17. 5 out of 5

    Vincent T. Ciaramella

    I really, really enjoyed this book! This is my second book that I read by Roger Lowenstein and I want more. I am hoping he is currently working on something new. If you haven't guessed, this book deals with the history leading up to the creation of the Federal Reserve and the Federal Reserve Act. It goes back into our history as a nation and outlines why people were (and still are) distrustful of centralized authority. While I won't share my views as they don't add anything to this review, it gav I really, really enjoyed this book! This is my second book that I read by Roger Lowenstein and I want more. I am hoping he is currently working on something new. If you haven't guessed, this book deals with the history leading up to the creation of the Federal Reserve and the Federal Reserve Act. It goes back into our history as a nation and outlines why people were (and still are) distrustful of centralized authority. While I won't share my views as they don't add anything to this review, it gave me a lot to think about. I really recommend this to anyone. It is just an interesting piece of both financial and American history. It's an easy read. You don't have to be a Yale graduate or have a background at Goldman Sachs to understand it. Lowenstein does a great job communicating complex issues for a mainstream audience. It's also rather short so you won't be reading this five months later. Do yourself a favor and pick this up. You won't be disappointed.

  18. 4 out of 5

    Susan

    You think our banking system is complex and ridiculous now. A little over 100 years ago, the United States did not have a central bank helping to stabilize and structure our banking system. Crazy! Banks issued their own notes based on their own capital and an odd system of deposits with larger banks to work as some sort of reserve system. If you took your money on a trip, it could devalue as you made your way across the state. And the fall harvest pretty much guaranteed an annual run on the bank You think our banking system is complex and ridiculous now. A little over 100 years ago, the United States did not have a central bank helping to stabilize and structure our banking system. Crazy! Banks issued their own notes based on their own capital and an odd system of deposits with larger banks to work as some sort of reserve system. If you took your money on a trip, it could devalue as you made your way across the state. And the fall harvest pretty much guaranteed an annual run on the banks similar to what we see in It's A Wonderful Life. Despite this unsettling situation, it took 11 years of debate to reach an agreement establishing what is now called the Federal Reserve. Of course, bankers wanted certain conditions, politicians wanted certain conditions, and random special interest groups that most people wouldn't think should be involved had to insert their wants and desires. The drive to reach consensus was so forceful that one man, Paul Warburg, an immigrant from Germany, became a naturalized citizen so that he had more clout when advocating for the modernization of the US banking system. Detailed research and excellent writing are able to bring this huge topic into a deep but manageable presentation. I received a preview copy from NetGalley in exchange for an honest review.

  19. 4 out of 5

    Edgar Raines

    A wonderful narrative history tracing the origins of the creation of the Federal Reserve to the Panic of 1907 and emphasizing the key roles played by Senator Nelson Aldrich and the banker Paul Warburg in creating the concept and William Jennings Bryan, Woodrow Wilson, and Representative Carter Glass in pushing the legislation through Congress. The Federal Reserve System was a progressive reform with conservative roots---and perhaps because of that rather effective.

  20. 5 out of 5

    Jing Conan Wang

    I recently finished the book of "American's Bank" by Roger Lowenstein. This book describes the history of how the federal reserve system was built. Since US federal reserve has such a huge impact on the world's economy, this book could help us understand how the world's financial system evolved. Before the birth of the Federal Reserve, there were two trials of building a central bank in the US. However, neither of them lasted very long because of American people's aversion to centralized control. I recently finished the book of "American's Bank" by Roger Lowenstein. This book describes the history of how the federal reserve system was built. Since US federal reserve has such a huge impact on the world's economy, this book could help us understand how the world's financial system evolved. Before the birth of the Federal Reserve, there were two trials of building a central bank in the US. However, neither of them lasted very long because of American people's aversion to centralized control. In contrast, the financial system in the European continent was more centrally-coordinated from the beginning. For example, the Bank of England had been the lender of last resort for the UK for a few centuries. There was a severe final crisis in 1907, which was mitigated thanks to J.P. Morgan's personal efforts. However, the financial crisis highlighted the need of an institution to coordinate financial efforts in America. The initial plan for Federal Reserve was initialized by Republican senator Aldrich. Aldrich is an elitist senator and has a close tie with prominent business leaders at the time. After several trips to Europe, he got very interested in the Financial System in the European continent. Another important person for the creation of the Federal reserve is Paul Warburg, which was a recent immigrant from Germany. He is a strong advocate of a central bank and not soon after he landed the new continent he started to give speeches about the necessity of a central bank in the US. Aldrich, Warburg and a few other key persons had a discussion in Jekly island and created the initial proposal of an act to create a central bank in the US. Unfortunately, the politics changed quickly. Early 20th century was a transitional period in which progressivism was becoming the mainstream of American politics. Democrats took the chance to attack big corporations and Wall streets. In 1912, Democrats swept the election and Woodrow Wilson became the president. Aldrich was soon out of the center of power and his plan was denounced by Democrats. Although on the surface, Democrats didn't like what Aldrich's plan. They soon started to work on a banking reform plan that borrowed many designs from Aldrich's plan. The end result was very similar to Aldrich's plan. Wilson pushed the federal reserve act as one of his first agendas in the office and act was passed in 1913. The federal reserve system was soon established in the following years. It took more than 6 years from the conceive of the idea to the establishment of the federal system. This seems to be a slow process. However, considering that the act has such a huge impact on the world even after 100 years after it was passed, the caution was well justified. In addition to learning the history of the US financial system, this book is also a good tutorial about US political system and its effect on public policy. The democratic process may be slow, which could be demonstrated by the fact that there was no central bank in most of the 19th century despite the strong need. However, it could make sure that the passed policy is really what society needs. Even if Aldrich and the Republican lost power in 1912, Democrats took the torches of establishing the federal reserve because this was necessary for the welfare of American people. In all senses, the federal reserve is an American bank established for American people.

  21. 4 out of 5

    Fraser Kinnear

    Definitely a much better read if you already have a working understanding of monetary policy and how central banks work. Some stuff I learned: - The US had 2 central banks in its early history, the second of which was shut down by Andrew Jackson in 1836, who left a lasting impact on American political culture against the idea of central banking (it took >80 years to overcome Jackson's ghost and establish our third and current institution). Much of this weariness about centralization exists in our Definitely a much better read if you already have a working understanding of monetary policy and how central banks work. Some stuff I learned: - The US had 2 central banks in its early history, the second of which was shut down by Andrew Jackson in 1836, who left a lasting impact on American political culture against the idea of central banking (it took >80 years to overcome Jackson's ghost and establish our third and current institution). Much of this weariness about centralization exists in our culture today, and was first identified by Tocqueville. - Currency, in the form of bank notes, was enormously complicated in the US prior to our central bank. Every state had a list of banks that all had their own notes (there were >8,000 different currencies in use as of the Civil War, issued by >1,000 banks). Cash was discounted in part based on the distance from use from that bank (e.g., a Rhode Island bank's notes might appear in Indiana, but would be worth far less than it might be in Maine, due to the likely circuitous route the note would probably take before it could be redeemed). - The cyclone of currencies were solved in part in the 1860's by collecting banks under a national charter that would thereafter share a currency. In order to issue these standardized notes, banks had to hold currency with the US government via buying Federal debt, which was how the Union financed the Civil War. - Early cash reserve requirements that were placed on banks created a lot of market fragility. Banks had to have a net reserve, but didn't want to sit on it in their own vaults, so would lend it to larger banks, which then invested it in equity markets. When cash was needed at the smaller banks, there would be a chain reaction of withdrawls that would result in large selloffs in the stock market. This happened frequently, because the US economy went through annual cycles of needing cash, driven by our agricultural economy. - The Panic of 1893 leads me to really want to read more about JP Morgan. About 2/3 of the book detailed the founding of our existing bank, starting with the negotiations at Jeckyll Island which was (unsurprisingly) much more benign than the tinfoil hatters would purport. I would have liked more detail here.

  22. 5 out of 5

    Richard Hessney

    There was a joke at the time of the Federeral Reserve Bank's creation in 1913 that it had so many fathers its mother must've been a very immoral woman. After the Panic of 1907, a credit crisis, Wall St, Main St and the federal government agreed banking reform was necessary, but it took six years for the Glass-Owen Act establishing a central bank to be signed by President Woodrow Wilson. The U.S. had not had a central bank for over 70 years since the Second Bank of the U.S. was abolished in the J There was a joke at the time of the Federeral Reserve Bank's creation in 1913 that it had so many fathers its mother must've been a very immoral woman. After the Panic of 1907, a credit crisis, Wall St, Main St and the federal government agreed banking reform was necessary, but it took six years for the Glass-Owen Act establishing a central bank to be signed by President Woodrow Wilson. The U.S. had not had a central bank for over 70 years since the Second Bank of the U.S. was abolished in the Jackson Era. The result was several financial panics, no lender of last resort, no uniform currency, and periods when cash (however defined) and credit were scarce. It's a dry, complicated story of how the Federal Reserve came to be, but Wilson's election in 1912 was key. Banking reform was one of his main agendas, and he had the skill to sort out competing plans and steer the best compromise through Congress. The Fed hasn't been perfect in the last 100 years--it tightened credit during the Great Depression, making things worse--but imagine what would've occurred in 2008-9 if the Fed wasn't there to shore up a financial system on the brink of collapse. Of course other big banks helped by buying failing institutions (some with Fed loans), but the Fed was the main player through quantitative easing, which loosened credit and kept the system afloat. In fact, the Panic of 1907 has many parallels to 2008-9, except that it wasn't caused by a housing bubble. Nonetheless, it led to a huge bank run, little credit activity to keep business humming, and cash disappearing (hoarding). Finally, I feel the "epic struggle" of the subtitle is kind of hype. Yes, there were many players and plans batted around for six years, but I can think of other true epic struggles in American history: the Civil War, women's suffrage, and civil rights. The Fed is very important but not in their league.

  23. 4 out of 5

    Karthik Vaidyanathan

    An interesting history of the creation of the Federal Reserve in a tumultuous era. Having read "When Genius Failed" by Lowenstein, I had high expectations for this book, and it delivered on them. "America's Bank", which traces the creation and passage of the Federal Reserve, clearly shows how the Jacksonian ideal of a decentralized banking system for the U.S. was overcome and how a central bank, something that seemed so anathema to America, became essential to our functioning society. Lowenstein s An interesting history of the creation of the Federal Reserve in a tumultuous era. Having read "When Genius Failed" by Lowenstein, I had high expectations for this book, and it delivered on them. "America's Bank", which traces the creation and passage of the Federal Reserve, clearly shows how the Jacksonian ideal of a decentralized banking system for the U.S. was overcome and how a central bank, something that seemed so anathema to America, became essential to our functioning society. Lowenstein starts off with a sketch of the financial landscape before the Fed: a lack of reliable credit, hoarded reserves that sat idle in vaults, an unstable currency, and a poorly-functioning system that was in dire need of change. One man, Paul Warburg, recognized the shortcomings of the American financial system and the necessity of a central bank. As an immigrant, he understood how the instability of its financial system would prevent the U.S. from competing effectively on an international stage with more established European nations. There were two phases to get to the Fed: first, the recognition that America's banking system needed to be strengthened; and two, that a central banker that served as a lender of last resort would have to be free from government interference and remain relatively apolitical. By looking at the overall economic conditions of the U.S. in the early 1900s while getting into the details of the individuals who created and shaped the Federal Reserve Act, Lowenstein is able to convey how the desires and hopes of individuals like Warburg and Carter Glass shaped our modern American economy. There are many names in this narrative, but Lowenstein is excellent at not making them seem overwhelming to a causal reader. Overall, this book is recommended for anyone interested in the history of modern finance.

  24. 5 out of 5

    Breakingviews

    By Edward Chancellor The Federal Reserve’s influence is so pervasive that we cannot imagine a world without it, writes Roger Lowenstein in his new book, “America’s Bank: The Epic Struggle to Create the Federal Reserve.” Yet Americans have always blown hot and cold about their own central bank. Its first two incarnations were short-lived. President Andrew Jackson shuttered the Second Bank of the United States in 1836 - a move which reflected the public’s distrust of an over-mighty and centralizing By Edward Chancellor The Federal Reserve’s influence is so pervasive that we cannot imagine a world without it, writes Roger Lowenstein in his new book, “America’s Bank: The Epic Struggle to Create the Federal Reserve.” Yet Americans have always blown hot and cold about their own central bank. Its first two incarnations were short-lived. President Andrew Jackson shuttered the Second Bank of the United States in 1836 - a move which reflected the public’s distrust of an over-mighty and centralizing institution. Given the Fed’s modern role as supreme arbiter of global monetary policy and its capacity to foster financial calamities, such concerns appear remarkably prescient. The political impetus that led to the Fed’s establishment in 1914 derived from the financial panic seven years before. This crisis followed a run on New York’s trust companies – deposit-taking institutions, which were lightly regulated, highly leveraged and more speculative than the mainstream national banks that dominated in this era. The trusts resembled in no small measure the shadow banking system which sprouted up prior to, and since, the Lehman Brothers bust. A century ago, however, there was no Ben Bernanke at the ready to open up the monetary spigots. Instead, the august figure of John Pierpont Morgan was called upon to perform the role of chief financial firefighter. After runs on the trust companies started, Morgan corralled the bankers, sent his men to check the books of failing trusts, allowed the insolvent ones to fail but provided funds for others. The panic soon passed, leaving many with a sense that the U.S. financial system was in dire need of reform. Paul Warburg, a scion of the influential Hamburg banking family and partner at Kuhn Loeb, argued vociferously for the establishment of a central bank like those operating at the time in Europe. The country’s banking reserves, he complained, were scattered around the country which meant they couldn’t adequately provide liquidity in times of panic. Warburg proposed a central reserve, a “modern central bank” run by “our best trained business men.” Besides, the aged Morgan might not be around during the next financial conflagration. No other private individual could conceivably assume the mantle of America’s greatest banker. The powerful Republican senator for Rhode Island, Nelson Aldrich, a crony of big business whose daughter had married a Rockefeller, took up Warburg’s proposal. Aldrich headed the Senate’s monetary commission and travelled to Europe to find out how things were ordered there. In late 1910 he secretively gathered together at a country club on an island off the coast of Georgia a small cabal comprising some leading bankers (including Warburg) and a Harvard University economist to fashion proposals for a new central bank. The Aldrich Plan, as it became known, became the blueprint for the Federal Reserve Act that President Woodrow Wilson signed into law a couple of years later. The eventual bill to establish the Fed was sponsored by two Democrats, Senator Carter Glass of Virginia and Congressman (later Senator) Robert Owen of Oklahoma. By that date, Aldrich had retired from the Senate. His role in the gestation of the Fed was downplayed. Bitter disputes later emerged between those seeking the credit. “Asked once about the identity of the Fed’s father,” Lowenstein writes of Warburg, “he replied that he didn’t know but that judging from the number of men who claimed the honor, ‘its mother must have been a most immoral woman.’” Lowenstein doesn’t question for a moment the pressing need for a central bank. In his view, the country’s banking system was “antiquated, disorganized and deficient.” The national banks were too conservative – they held reserves equivalent to a quarter of deposits. Consumer credit was undeveloped. The farmers cried out for funding and squealed loudly when agricultural prices fell. Panics on Wall Street were frequent. Reading the argument of “America’s Bank” it is easy to forget that the United States rose to become the world’s dominant industrial nation without the assistance of a central bank and that by 1900 New York had overtaken London as the world’s financial capital. Lowenstein glosses over the fact that the panic of 1907 was quelled without public funds and followed by a rapid economic recovery without any long-lasting ill effects. He also shares former Fed Chairman Bernanke’s loathing of deflation, despite the fact that declining prices in the late 19th century were a sign of rising productivity and posed no danger to economic health. James Stillman, the deeply conservative head of National City Bank, the corporate forerunner of today’s Citigroup, decried Warburg’s central bank plans. “Why not leave things alone?” he asked the German-born technocrat. Stillman, according to Lowenstein, “regarded panics as natural and worthy rituals which cleansed the markets of excesses that he himself studiously avoided.” Perhaps he was right. In retrospect, there appears a historical inevitability to the creation of the Fed. At the turn of the 20th century, America could just about do without a central bank since the currency was backed with gold, whose ebb and flow automatically dictated monetary policy. But by 1914, the international gold standard was about to become a victim of world war. The subsequent history of the century was of the spread of fiat currencies, rising government profligacy, intermittent bouts of inflation, and ever-increasing debt burdens. A society intent on living beyond its means, and kicking the can of financial consequences forever into the future, is liable to resort to the central bank’s printing press. The founders of the Fed did not exactly foresee any of this. Their aim was simply to create an effective lender of last resort to act during market panics. There’s no doubt that the Fed has fulfilled this role effectively. But the unforeseen consequences of Fed interventions continue to this day – as lender-of-last-resort operations encourage risk taking, while the Fed’s ultra-low policy rate facilitates leverage and leads to deteriorating credit standards. Furthermore, the Fed doesn’t consider properly its global influence, directing monetary policy solely to domestic conditions. A century after the founding of America’s central bank seems as good a time as ever to reconsider these failings. (This item has been corrected in paragraph seven to make clear Owen was a congressman at the time of the bill.)

  25. 4 out of 5

    R J M

    ~99% of the public has no concept of what Fed is or does. Nor do they (think they) care. But they CERTAINLY should. The Fed exists basically to maintain viability of the banks to support the US economy. Theoretically, that means big business have access to lending funds when necessary, like when nobody want to purchase their stock or management doesn't want to sell more stock. As I'm writing this in August 2020, the US stock market has already returned to pre-pandemic levels due in part to the Fed ~99% of the public has no concept of what Fed is or does. Nor do they (think they) care. But they CERTAINLY should. The Fed exists basically to maintain viability of the banks to support the US economy. Theoretically, that means big business have access to lending funds when necessary, like when nobody want to purchase their stock or management doesn't want to sell more stock. As I'm writing this in August 2020, the US stock market has already returned to pre-pandemic levels due in part to the Fed's actions to assist big banks by lowering interest rates to essentially zero driving certain asset values up (like home prices). That's despite a widespread business downturn that - for most businesses - threatens their long term existence. Many privately held small businesses have already shut their doors, with more to come over the next several months. The Fed really can't help them and isn't really designed to. A better understanding of the history and role of the Fed in today's society would be beneficial to everyone in understanding how "the economy" actually works. This book helps address that need, if only in a small way.

  26. 4 out of 5

    Rapp

    When discussing the Federal Reserve with my high school Economics class, I realized that I wanted to learn more about how the Fed was formed and how it worked. Roger Lowenstein's book was a perfect place to begin. I expected the book to be rather dry and heavy reading--and doubted whether I'd have time to get through it at the end of the school year--but it was a veritable page turner. Lowenstein begins his story at the end of the Roosevelt Administration and carries it through the Taft and Wilso When discussing the Federal Reserve with my high school Economics class, I realized that I wanted to learn more about how the Fed was formed and how it worked. Roger Lowenstein's book was a perfect place to begin. I expected the book to be rather dry and heavy reading--and doubted whether I'd have time to get through it at the end of the school year--but it was a veritable page turner. Lowenstein begins his story at the end of the Roosevelt Administration and carries it through the Taft and Wilson administrations. The Federal Reserve legislation began under the leadership of a Republican senator (Aldrich) and was finished by Democrats. The process took two decades, yet bore fruit. I found the political background helpful and insightful, as Lowenstein gives context hailing back to the framing of the Constitution (a favorite historical topic of mine). The explanations of the economics of banking, the shortcomings of gold standard banking and advantages of central banking were very well explained. I went from being a skeptic of the Fed to a skeptic of gold for a modern economy.

  27. 4 out of 5

    Mark Lawry

    There are perhaps other better books that explain why we have a Federal Reserve, how it works, how the Fed has saved us from depressions while we were in recesssions, why money works, what money actually is, and why the entire world left the gold standard. Getting off the gold standard in the U.S. won't happen until 1971. However, most conspiracy freaks (at least in my experience) tend to argue that the creation of the fed and getting off the gold standard was all one big conspiracy. Both fears There are perhaps other better books that explain why we have a Federal Reserve, how it works, how the Fed has saved us from depressions while we were in recesssions, why money works, what money actually is, and why the entire world left the gold standard. Getting off the gold standard in the U.S. won't happen until 1971. However, most conspiracy freaks (at least in my experience) tend to argue that the creation of the fed and getting off the gold standard was all one big conspiracy. Both fears are pure populists nonsense. Lowenstein only gives a brief description of life before the creation of the Fed and why we needed it. He then spends the rest of the book on the history of the creation of the legislation. When we contemplate the hatred between the various players involved it really is amazing anything actually gets accomplished in the U.S.

  28. 4 out of 5

    Brad Mills

    This book is heavily leaning towards pro-Keynsian pro-central bank propaganda, but it's a very good read to hear about the history of how the Federal Reserve came to be. I'm a bitcoiner, so I'm very interested in economics, money and the history of money. I've read a lot of political financial books like Currency Wars, a lot of trading books, etc. Many people don't know that the Federal Reserve is a private bank. It's not part of the US government, and US dollars are not backed by gold. I wanted to This book is heavily leaning towards pro-Keynsian pro-central bank propaganda, but it's a very good read to hear about the history of how the Federal Reserve came to be. I'm a bitcoiner, so I'm very interested in economics, money and the history of money. I've read a lot of political financial books like Currency Wars, a lot of trading books, etc. Many people don't know that the Federal Reserve is a private bank. It's not part of the US government, and US dollars are not backed by gold. I wanted to learn the history of how the Federal Reserve came to be. This is the political story of money in America after the civil war up to when the Federal Reserve Act of 1913 was signed. I don't agree with everything in the book, but if you're interested in the history of money, it's a must read.

  29. 5 out of 5

    Andrew

    The United States is idiosyncratic in so many ways, but perhaps one of our most culturally persistent and odd qualities is our deep mistrust of centralized power. From that perspective, it is rather shocking to live in an era in which our money, our central bank, and economic institutions rule the world. How America turned from a myopic rural society with an ill-fitted financial system into the modern-day colossus is a haphazard and meandering journey. Lowenstein does a decent job of bringing to The United States is idiosyncratic in so many ways, but perhaps one of our most culturally persistent and odd qualities is our deep mistrust of centralized power. From that perspective, it is rather shocking to live in an era in which our money, our central bank, and economic institutions rule the world. How America turned from a myopic rural society with an ill-fitted financial system into the modern-day colossus is a haphazard and meandering journey. Lowenstein does a decent job of bringing together the various threads of the narrative, but in the end I found his book a poor accounting of this transformation. Too fixated on personalities and too little contextualized with social and economic forces, this book fails as an accounting of the Federal Reserve's unique structure and place in history. Read more at https://znovels.blogspot.com/2020/05/...

  30. 4 out of 5

    Peter Murray

    And epic struggle indeed to create the Fed. America's resistance to central control created instead a system of disparate banks which, come the fall harvest, the farmers would suck dry and trigger a panicked run on the banks - as sure as the turning of the seasons. It was to Europe we had to learn that a central banks makes the kind of sense that pooling water in a firehouse is far better than storing a buck in each household. Creating the Fed was a complicated, detailed affair and Lowenstein ha And epic struggle indeed to create the Fed. America's resistance to central control created instead a system of disparate banks which, come the fall harvest, the farmers would suck dry and trigger a panicked run on the banks - as sure as the turning of the seasons. It was to Europe we had to learn that a central banks makes the kind of sense that pooling water in a firehouse is far better than storing a buck in each household. Creating the Fed was a complicated, detailed affair and Lowenstein has done his job cataloging the people, the battles, the secrets and the epiphanies that made it complicated, and he does so with lots and lots of detail. An interesting and important story definitely. An abridged version would be no less important - and very likely more interesting.

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