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The Federal Reserve System and World War I: Designing Policies without Precedent

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Abstract

The Federal Reserve System failed to prevent the collapse of intermediation during the Great Depression (1929-1933) and took action as if it was unaware of policies that should have been taken in the event of widespread bank runs. The National Banking Era panics and techniques to alleviate them should have been useful references for how to alleviate a financial crisis. We suggest that the overwhelming effort to finance World War I combined with a perspective held by contemporary Federal Reserve officials that the central bank legislation was sufficient to overcome financial crises are key reasons why the historical experiences were overlooked.

Suggested Citation

  • Margaret M. Jacobson & Ellis W. Tallman, 2015. "The Federal Reserve System and World War I: Designing Policies without Precedent," Working Papers (Old Series) 1510, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:1510
    DOI: 10.26509/frbc-wp-201510
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    References listed on IDEAS

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    1. David C. Wheelock, 1992. "Monetary policy in the Great Depression: what the Fed did and why," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 3-28.
    2. Wheelock, David C, 1990. "Member Bank Borrowing and the Fed's Contractionary Monetary Policy during the Great Depression," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(4), pages 409-426, November.
    3. Gorton, Gary, 1985. "Clearinghouses and the Origin of Central Banking in the United States," The Journal of Economic History, Cambridge University Press, vol. 45(2), pages 277-283, June.
    4. Timberlake, Richard H., 1993. "Monetary Policy in the United States," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226803845, December.
    5. Timberlake, Richard H, Jr, 1984. "The Central Banking Role of Clearinghouse Associations," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 16(1), pages 1-15, February.
    6. Wicker,Elmus, 2000. "Banking Panics of the Gilded Age," Cambridge Books, Cambridge University Press, number 9780521770231, October.
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    More about this item

    Keywords

    Crisis prevention; liquidity provision; Federal Reserve Act;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-

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