The Federal Reserve: Independence Gained, Independence Lost…
The Fed since its establishment in 1914 has had to struggle to maintain its independence from the Treasury and so recent experience must be viewed in historical context. The Federal Reserve Act gave the institution a considerable amount of independence from the fiscal authority. The Reserve banks could set their discount rates based on the demands by member banks to discount eligible paper.
The Fed since its establishment in 1914 has had to struggle to maintain its independence from the Treasury and so recent experience must be viewed in historical context. The Federal Reserve Act gave the institution a considerable amount of independence from the fiscal authority. The Reserve banks could set their discount rates based on the demands by member banks to discount eligible paper. Government securities were not included in eligible paper so that the Fed, was not created to be a central bank to finance short run government revenue shortfalls.
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