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Working Paper

The Federal Reserve System and World War I: Designing Policies without Precedent

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The Federal Reserve System failed to prevent the collapse of intermediation during the Great Depression (1929-1933) and took action as if it was unaware of policies that should have been taken in the event of widespread bank runs. The National Banking Era panics and techniques to alleviate them should have been useful references for how to alleviate a financial crisis. We suggest that the overwhelming effort to finance World War I combined with a perspective held by contemporary Federal Reserve officials that the central bank legislation was sufficient to overcome financial crises are key reasons why the historical experiences were overlooked.
Topics
Financial policy and implementation
06.29.2015ISSN 2573-7953 WP 15-10DOI 10.26509/frbc-wp-201510
Keywords crisis prevention, liquidity provision, federal reserve act
JEL Classification Codes E58, E61, N22

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Tallman, Ellis W., and Margaret Jacobson. 2015. “The Federal Reserve System and World War I: Designing Policies without Precedent.” Federal Reserve Bank of Cleveland, Working Paper No. 15-10. https://doi.org/10.26509/frbc-wp-201510