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Lesson+6--Fed+History - Lesson 6 Fed History(Depression to...

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Lesson 6 Fed History (Depression to Modern Fed) Closed for the Holiday (The Bank Holiday of 1933) http://www.bos.frb.org/about/pubs/closed.pdf Marriner Stoddard Eccles and Banking Act of 1935 Federal Reserve Bank of Minneapolis http://www.minneapolisfed.org/publications_paper/pub_display.cfm?id=3562 Romer Roundtable: An Imperfect Parallel, Raymond Stone, The Economist, (June 19, 2009) http://www.economist.com/blogs/freeexchange/2009/06/romer_roundtable_an_imperfect Treasury-Federal Reserve Accord 1951 http://www.richmondfed.org/publications/research/special_reports/treasury_fed_accord/background/
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Between 1930 and 1933 40% of the Banks in the US Closed
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Banks were closing between 1930 to 1933. Everyone started taking their money out of U.S and started putting their deposits in foreign banks. Gold was going along this money back in the day. So, gold was also leaving United States when the money was going out of the U.S banks. Gold was coming in to the U.S and going out. Money Supply was going down. Banks were concerned about this, gold leaving. The fed raised the discount rates and would compensate for the money supply going down. But if the discount rates go up, the credit goes down and made the recession worse. The idea was to keep the gold in the U.S but higher interest rates backfired it. Pepole wouldn’t be able to afford anything because of the higher rates.
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In lousinia made a holiday that made some significance named the holiday after a pirate. But changed their mind after.
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FDR Calls for a Bank Holiday March 6, 1933- let things cool off.
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Plan for Reopening Banks
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Reopening of Banks
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Deposit Insurance--FDIC
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Bank Holiday, A Turning Point
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Eccles- the most important person in the FED more imp than bernacky , FDR, the New Deal and a Restructured Federal Reserve. Eccles father had two wives so kept moving away from cities to move away from the undervalued stigma. Dr. Rexford G. Tugwell, one of Roosevelt's closest advisors, invited Eccles to Washington for a number of conferences. While there he testified before the Senate Finance Committee, advocating many of the measures that would become cornerstones of the New Deal. While traditional economics stressed a hands-off, open market approach from government and balanced budgets, Eccles proposed public works to relieve unemployment and direct relief measures, as well as a minimum wage, unemployment insurance, and old age pensions.
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Eccles made speeches about govt getting involved in the economy, to stimulate the ecomony. He belived the Keynes ideas because he read about Keynes theory.
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A.P. Giannini- Eccles went to work for him. They belived that farmers needed money. His bank, AP Gianni bank dealt with the farmers and low key people. Now is the largest bank, called Banmk of America. AP Gianni hated the NY banks because they only lend to big companies.
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