The Young Fed

"The making of a central bank-and of America's financial contingency plans. The long-standing description of the Federal Reserve as a "lender of last resort" refers to the central bank's provision of emergency liquidity for banks and financial entities in periods of crisis. As economist Mark Carlson shows, this provision of emergency liquidity is intrinsic to how the Fed was designed but has, at time, proven challenging to implement. The Young Fed examines the origins of the Federal Reserve's emergency-liquidity provision, which along with the setting of monetary policy, has become a critical responsibility. With a focus on the Fed's response to the agricultural and financial crises of the 1920s, Carlson documents the formative deliberations of the country's earliest central bankers: the internal debates during the farming collapse and surrounding Fed intervention; the lessons that were learned; and how those lessons shaped subsequent central-bank policies. Carlson depicts an early Fed that was not wedded to any one doctrine. This young Fed experimented with a variety of approaches to responding to stress ranging from bold spectacles featuring armored cars full of cash to interventions undertaken behind the scenes for fear of inducing panics or bank runs. Carlson's book, weaving previously unpublished material from the Fed archives, constitutes a watershed work in American economic history: a deeply sourced account of how the world's most important central bank developed its particular approach to being a lender of last resort"--