The Federal Reserve Act and Its Impact

Key Events Leading to the Act:

• Aldrich Bill Opposition: Initially, the Democratic Party, led by Woodrow Wilson, opposed Senator Aldrich’s proposal for a central banking system.
• Shift in Stance: After gaining power, the Wilson administration introduced the Glass-Owen Bill, which closely resembled the Aldrich Bill, drawing accusations of duplicity.

Establishment of the Federal Reserve:

• The Federal Reserve Act of 1913 created a privately controlled central bank under the guise of public oversight.
• Critics, like Congressman Charles Lindbergh Sr., warned the Federal Reserve would manipulate credit and cause economic instability to benefit private bankers.

Simultaneous Introduction of Income Tax:

• The passage of an income tax law ensured a steady revenue stream for the government to pay interest on debts incurred through Federal Reserve-issued currency.
• This linked government finances with private banking interests, increasing national debt dependency.

Criticism and Implications:

• Critics argue the Act concentrated financial control in the hands of private interests while presenting it as a public institution.
• The combination of the Federal Reserve Act and income tax law entrenched private influence over national monetary policy.

This chapter highlights the contentious origins of the Federal Reserve, portraying it as a system favoring private banking elites over public interests.

Video and summary of this chapter is here: “22. Fed Act of 1913”
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