Why was the United States one of
the last of the major industrialized country to have a Central Bank?
Some
political leaders strongly opposed to the formation of a central banking system
in United States; as they feared that central bank would reduce money supply and
would control the monetary system as controlled by the Bank of England .
Other politicians were strongly in favor of a central bank, and tried to
incorporate a privately central bank following in the road map of the Bank of
England.
In
1791, politicians made a deal with Southern law makers to ensure the
continuation of a Bank project; in exchange for support by the South for a
national bank, most of the politicians agreed to ensure sufficient support to
have the national moved from its temporary Northern location to a Southern location. As a result, the First Bank of the United States (1791–1811)
was chartered by Congress. The First Bank of the United States was modeled
after the Bank of England and
differed in many ways from today's central banks. It was only responsible for
only 20% of the currency supply and remaining was in the hand of state. Some
politicians found it as financial
manipulation, and corruption. In 1811, its charter expired and was not renewed
by Congress. After some years federal government chartered, its successor, the Second Bank of the United States (1816–1836)
which was basically a copy of the First Bank. The president, in 1828, denounced
it as an engine of corruption and refused to renew its charter. After this,
state was able to issue more notes against gold.
In 1863, an act was passed which included some provisions regarding central
bank. During 1900s, Bankers felt the real problem was that the United States
was the last major industrialized country without a central bank. Few leaders
stressed the need for an elastic money supply that could expand or contract as
needed, but this plan never gained much traction and leaders knew that it would
be attacked by local politicians similar to the First and Second Banks of the
United States.
The
new President then became the principal mover for banking and insisted that the
regional Federal Reserve banks be controlled by a central Federal reserve. The
Federal Reserve's power developed slowly with time.
The common belief at the time was that a centralized system somehow
the other controlled by the government led to undue manipulation. This attitude
remained quite prevalent well into the 20th century and still has many supporters
today. They believed this centralization of power away from private banks was
dangerous to a sound monetary system and was mostly to the benefit of business
interests in the commercial north, not southern agricultural interests. They
furthermore argued that the creation of such a bank violated the Constitution,
which did not list the creation of a Central Bank of the United States among
the expressed powers allowed to the federal government.
No comments:
Post a Comment