Making a Central Bank Out of the Federal Reserve: A Historical Perspective on Wartime Amendments to the Federal Reserve Act

Jane Knodell

Review of Political Economy, 2024, vol. 36, issue 1, 31-58

Abstract: One of the signature policy achievements of the Progressive era was the passage of the Federal Reserve Act in 1913. This paper argues that the original Act did not create an effective central bank and consequently did not bring about significant structural change in domestic monetary institutions. Early leaders of the Federal Reserve, frustrated with the constraints on reserve bank operations, actively lobbied Congress to secure changes to the Act. These efforts only succeeded after the U.S. entered World War 1 in the spring of 1917, triggering a transformation in the monetary base that elevated the position and centrality of the Federal Reserve. Seen in this light, the wartime amendments were a victory for the activist institution-builders within the Federal Reserve in addition to being essential for the federal government's ability to finance the war effort.

Date: 2024
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DOI: 10.1080/09538259.2022.2164185

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