The Federal Reserve was created in response to financial panics and banking crises from "summary" of A Monetary History of the United States, 1867-1960 by Milton Friedman,Anna Jacobson Schwartz
The Federal Reserve System, established in 1913, emerged as a response to a series of financial panics and banking crises that plagued the United States in the late 19th and early 20th centuries. The need for a central banking authority became increasingly apparent as the country faced recurring episodes of economic turmoil, marked by bank failures, currency shortages, and disruptions in financial markets. The Panic of 1907, which led to a severe contraction in credit and widespread bank runs, served as a catalyst for the creation of the Federal Reserve. During this crisis, the lack of a coherent national monetary system exacerbated the economic instability, highlighting the pressing need for a more robust and flexible banking system. Prior to the establishment of the Federal Reserve, the United States relied on a fragmented and decentralized banking system, characterized by numerous state-chartered banks operating independently. This decentralized struc...
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