Dissertation > Economic > Fiscal, monetary > Currency

Reform of the Federal Reserve System in 1935

Author SunChao
Tutor HanTie
School Nankai University
Course The history of the world
Keywords Federal Reserve System Banking Act 1935 Real bills theory Recession Monetary policy Marriner Eccles Laughlin Currie Monetary Theory
CLC F827.12
Type PhD thesis
Year 2011
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The 1935 reform of the Federal Reserve System is a major readjustment of the structure and powers of the Federal Reserve System of epoch-making significance in the history of the Federal Reserve Development. It is by the Franklin Roosevelt administration plan, completed in accordance with the idea of ??of Laughlin Currie reform concept, under the auspices of the Marriner Eccles. This reform ultimately the Federal Reserve System to build the central bank became a real sense, so that the cooperation between the government and become one of the keys to promoting the healthy development of the U.S. economy. The basic characteristics of the pre-reform Federal Reserve System, the Federal Reserve reform thinking and the establishment of the reform program, the reform bill debate in Congress to promote the forces of reform as well as the results and significance of the reform, and made more comprehensive and in-depth discussion. According to the 1913 Federal Reserve Act created the Federal Reserve system has many shortcomings. Although the Federal Reserve Board in the law is the regulator of the 12 Federal Reserve Bank, but it is actually neither independent status, also does not have enough power to perform this oversight function. In contrast, the Federal Reserve Bank of touches with business expansion and strength has been continuously enhanced and gradually mastered control over monetary policy. Moreover, Fed policy-makers in the monetary policy guiding ideology is still confined to Yikongzhixian, to adhere has long been out of the U.S. financial actual real bills theory. As a result, the system of decentralized internal conflict, combined with the guiding ideology mistakes, resulting in the Fed misjudged the economic situation in the late 1920s, led to an unprecedented recession. In this state of emergency, the Federal Reserve policy makers still can not wake up and did not take appropriate measures to rescue the economy veering. Obviously, when the Federal Reserve system can not and does not play the role of a central bank. Stepped Great Depression, President Roosevelt announced the implementation of the \However, the various measures of the \1934, Roosevelt's New Deal reformers have started to adjust their thinking to gradually shift to combat the monopoly to promote fair, more massive deficit spending to aid the unemployed and the many poor. Compatible with the adjustment of the Reform, the the Roosevelt government decided to reform the Federal Reserve System. This is not only against eastern bankers monopolized monetary system initiatives, is also ready to do the financing for the government to expand fiscal expenditure. Administration arrangements from the western bankers Eccles as Fed Executive, as the main person in charge of the Fed reform. Eccles in the process of the development of the reform program of the Federal Reserve the currency economist Currie help. They rely on deficit financing out of the economic difficulties and currency management system have many common views. Currie in the late 1920s, monetary policy in the United States to study, identified the mistakes of the monetary policy of the Federal Reserve System is the main cause of depression caused, and puts forward a set of monetary management theory. The basis of this theory, Currie for the reform of the Federal Reserve System to develop a detailed reform plan, trying to currency management authority is concentrated in the hands of the Federal Reserve Board, through open market monetary instruments of monetary management, so that the Fed has the ability to develop and perform the correct monetary policy. Modeled Currie Currie reform plan - Eccles MOU brings together two about the main idea of ??the reform of the Fed, has been the support of President Roosevelt. Administration is the Federal Reserve Reform Act enacted Under the MOU, submitted to Congress for consideration. The bill has been approved on behalf of Western banks, small bankers as well as the central and western farmers congressmen in the House of Representatives passed quickly. However, represents the eastern especially the interests of big banks in the New York area to Carter Glass Senate conservatives, led by the Federal Reserve Reform Act of blocking and amended. The tireless efforts of the reformist leadership Eccles Federal Reserve Reform Act was finally approved by Congress in the case of retaining the basic content of the reform-minded Currie and Eccles, become an important part of the 1935 Banking Law \. Banking Act 1935, most of the empowerment of the monetary management of the newly established Federal Reserve Board. The original is in the semi-autonomous status of the Federal Reserve Bank lost this independence in the past, must obey the decision of the Federal Reserve Board and the regulators. Reform of the Federal Reserve System naturally give up the real bills theory, to develop a flexible monetary policy based on the assessment of the economic situation, in order to maintain economic stability, and well prepared to act as a lender of last resort in the economic crisis. Thus, the Federal Reserve System finally have the power and means to fulfill the basic functions of the central bank, which has become a truly central bank. It is because of the Federal Reserve System continue to strengthen the ability of monetary policy to adjust the economy after the 1935 reform, the Administration began to realize the importance of work with them, and after the Second World War in the cooperation to make the Federal Reserve gradually become Government is an important tool for the implementation of economic policies.

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