Federal Reserve
As a lender of last resort during the Panic of 1907, Morgan emphasized the need for the creation of the Federal Reserve. Morgan's voluntary efforts showed how government should take responsibility for economic crises, not private institutions. His bailout served as a wakeup call for Congress. Morgan showed Congress how an effective central bank would stabilize the economy.
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"In the following days, acting like a one-man Federal Reserve system, Morgan decided which firms would fail and which survive. Through a non stop flurry of meetings, he organized rescues of banks and trust companies, averted a shutdown of the New York Stock Exchange, and engineered a financial bailout of New York City" (Chernow 145). "During the 19th and early 20th century, financial panics and bank runs plagued our nation. The Panic of 1907 prompted Americans to call for a central bank. In response, Congress passed the Federal Reserve Act...to provide our nation with a more stable and secure monetary and financial system" (Federal Reserve History, para. 1) |
"Without Morgan’s intervention, the Panic would probably have spread more broadly and would have caused much more economic misery: more unemployment, more bankruptcies, less economic growth, and more failed financial institutions" (Bruner).