NPR’s Planet Money reports on the 100th anniversary of the birth of the US Federal Reserve. In the wake of the Panic of 1907, J.P. Morgan “persuaded” bankers from around the country to pool their resources, which allowed them to deal with mounting bank runs.
That worked, but the powers that be in DC didn’t particularly like the idea of a private solution… and one that was in the hands of just one person.
Senator Nelson Aldrich began to work on a more stable solution: the creation of a central bank. Although this idea had been successfully implemented in other countries, Aldrich knew that Americans wouldn’t cotton to the notion:
But just consider that name: central bank. Throughout American history, both of those words — “central” and “bank” — had been deeply unpopular. The thought of a bunch of rich bankers in New York controlling a powerful central bank did not inspire confidence.
It took some time, and some twists and turns, but in 1913 President Woodrow Wilson signed the legislation that created the Federal Reserve.
We’ll never know whether “Central Bank” legislation would have passed. But we do know that politicians 100 years ago understood that some words come loaded with meaning – for better or worse – and that reframing can change the conversation. Happy Birthday, Federal Reserve!