Thread by @LarrySchwe94560

1) A very brief history of the Fed.

2) The conspiracy view is that it was concocted by rich bankers & congresscritters on Jekyll Island.

3) Nothing could be further from the truth.

4) Eugene White, in his great study, "Regulation & Reform of American Banking," traced . . .

4) contd . . . the origins of the Fed. It came, not from big bankers, but from COUNTRY banks across the US to help reduce their liability in big swings or panics.

5) Through the American Bankers Assoc., thousands of them worked to develop a system that would achieve 3 things.

6) (We're talking 1870 onward here). First, provide a "lender of last resort" for banks that were actually solvent, but cash poor during runs. Second, expand/contract the money supply during high periods of borrowing or periods when people were "cash rich." (Planting/harvest).

6) contd . . . Last---and this will shock many of you---the ABA wanted to reduce the power of NEW YORK BANKS.

7) Over a period of more than 30 years, the ABA and country bankers worked on a series of plans that would achieve these goals.

8) The solution they came up with was the Fed. In their minds a 12-district-bank system would a) reduce the power of NY, making it only one of 12; provide the "lender of last resort"; and allow for expansion/contraction of the $ supply.

9) In the plan submitted/approved by Congress, the NY Fed was one of 12, and in fact only 3 were really in the "north" or "northeast." Most of the Fed banks were strung throughout the west, midwest, and south.

10) The Fed was soooo conservative that it failed in its mission.

11) Despite skyrocketing growth, solid businesses, the Fed refused to expand the $ supply in the 20s; worse, we had net influxes of gold from abroad, which should have automatically required a significant expansion. Instead, the Fed hoarded $ & helped cause the Great Depression.

12) But the Fed's failure was not a reflection on what those who created it wanted it to be.