federal reserve

5 major moments in Federal Reserve history

Highlights of the central bank's history
Highlights of the central bank's history © Triff/Shutterstock.com

As the U.S. Federal Reserve gears up to celebrate its centennial on Dec. 23, don't expect a wild and crazy night.

"These are the very serious, boring people you knew in college," jokes John C. Edmunds, finance professor at Babson College in Wellesley, Mass. "They don't like parties, they don't like surprises, they go to bed at 9 o'clock and they only drink mineral water."

They may be boring, but the economy they deal with on a daily basis is vital to the nation. The central bank has wielded power over the financial lives of Americans for almost 100 years.

Comprised of a Board of Governors, a Federal Open Market Committee and 12 regional banks, the Fed monitors inflation and unemployment, regulates banks, and raises and lowers interest rates. And when the Fed speaks, it can affect your wallet.

To illustrate, in May, Fed Chairman Ben Bernanke testified before Congress that the Fed could soon begin tapering its bond-buying program. It quickly caused volatility in stock and bond markets and a jump in mortgage interest rates.

Here are five key moments in the Fed's history chosen by Allan H. Meltzer, Carnegie Mellon University professor and author of "A History of the Federal Reserve." Find out about the recession you've never heard of, the Fed's B.O. problem, the rise of "Darth Volcker" and more.

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One hundred years calls for a big celebration, but for the Fed, it's just another day on the job.

The Fed monitors things like unemployment and inflation. It has to power to regulate banks and raise or lower interest rates. And in doing so, affects how easy it is for consumers to borrow, spend and save. All of this is meant to steer the economy towards healthy, steady growth.

The Fed helped guide the country through the Great Depression, curb runaway inflation in the 70s and most recently, the Fed stepped in after the housing market collapse in 2007 and the Dow Jones drop in 2009.

Presidents Barack Obama and George W. Bush both signed stimulus bills that provided tax cuts, consumer protections measures, and government spending programs. The Fed assisted the government by bailing out failing financial institutions and lowering its interest rates to nearly zero, injecting money into the economy in hopes that it would quickly bounce back.

 

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