Editing Federal Reserve Act (section)

== Legislative history ==
{{unreferenced section|date=April 2016}}
{{Woodrow Wilson series}}
Attempts to reform currency and banking had been made in the United States prior to the introduction of H.R. 7837. The first major form of this type of legislation came through with the [[First Bank of the United States]] in 1791. Championed by [[Alexander Hamilton]], this established a central bank that included in a three-part expansion of federal fiscal and monetary power (including federal mint and excise taxes). Attempts were made to extend this bank's charter, but they would fail before the charters expiration in 1811. This led to the creation of the Second Bank of the United States. In 1816, the U.S. Congress chartered this Second bank for a twenty-year period to create irredeemable currency with which to pay for the costs of the [[War of 1812]]. The creation of congressionally authorized irredeemable currency by the Second Bank of the United States opened the door to the possibility of taxation by inflation. Congress did not want state-chartered banks as competition in the inflation of currency.{{citation needed|date=January 2016}} The charter for the Second Bank would expire in 1836, leaving the U.S. without a central bank for nearly eighty years.

In the aftermath of the [[Panic of 1907]], there was general agreement among leaders in both parties of the necessity to create some sort of central banking system to provide coordination during financial emergencies. Most leaders also sought currency reform, as they believed that the roughly $3.8 billion in coins and [[banknote]]s did not provide an adequate money supply during financial panics. Under conservative Republican Senator [[Nelson Aldrich]]'s leadership, the [[National Monetary Commission]] had put forward a plan to establish a central banking system that would issue currency and provide oversight and loans to the nation's banks. However, many progressives distrusted the plan due to the degree of influence bankers would have over the central banking system.<ref>{{Cite book |author-link=Christopher W. Shaw|last=Shaw |first=Christopher W. |title=Money, Power, and the People: The American Struggle to Make Banking Democratic |url=https://press.uchicago.edu/ucp/books/book/chicago/M/bo38871708.html |publisher=University of Chicago Press |year=2019 |isbn=978-0226636337 |location=Chicago |pages=75–82}}</ref> Relying heavily on the advice of [[Louis Brandeis]], Wilson sought a middle ground between progressives such as [[William Jennings Bryan]] and conservative Republicans like Aldrich.<ref>Clements 1992, pp. 40–42</ref> He declared that the banking system must be "public not private, [and] must be vested in the government itself so that the banks must be the instruments, not the masters, of business."<ref>Heckscher 1991, pp. 316-17.</ref>

Democratic Congressman [[Carter Glass]] and Senator [[Robert L. Owen]] crafted a compromise plan in which private banks would control twelve regional [[Federal Reserve Bank]]s, but a controlling interest in the system was placed in a central board filled with presidential appointees.<ref>{{Cite journal |last=Willis |first=Henry Parker |date=1914 |title=The Federal Reserve Act |url=https://www.jstor.org/stable/1804981 |journal=The American Economic Review |volume=4 |issue=1 |pages=1–24 |issn=0002-8282}}</ref> The system of twelve regional banks was designed with the goal of diminishing [[Wall Street]]'s influence. Wilson convinced Bryan's supporters that the plan met their demands for an elastic currency because Federal Reserve notes would be obligations of the government.<ref>Link 1954, pp. 43–53</ref> The bill passed the House in September 1913, but it faced stronger opposition in the Senate. After Wilson convinced just enough Democrats to defeat an amendment put forth by bank president [[Frank A. Vanderlip]] that would have given private banks greater control over the central banking system, the Senate voted 54–34 to approve the Federal Reserve Act. Wilson signed the bill into law in December 1913.<ref>Clements 1992, pp. 42–44</ref>