The Federal Reserve turns 100 on Monday. President Woodrow Wilson signed the Federal Reserve Act into law on Dec. 23, 1913. So, Marketplace threw the Fed a “party” to mark its centennial.
Crane & Co. helped us with the invitations, which were printed on paper made out of old Federal Reserve Notes.
“Unfit bills that were removed from circulation by one of the Federal Reserve banks,” explains Peter Hopkins, who runs the Crane Museum of Papermaking.
Crane & Co. no longer manufactures its “old money” line, but Hopkins “stashed away a few skids just in case.”
Mingle among the guests at our “party,” and you’ll get a good sense of the Federal Reserve’s history. Alice Rivlin was Vice Chair of the Fed from 1996 to 1999.
“We came late, we Americans, to the notion that we needed a central bank,” she says.
We had two national banks early on, but the lawmakers didn’t renew their charters.
“Much of this big country, especially the rural central part, was very suspicious of big banks, of New York, of Wall Street,” Rivlin notes.
It’s amazing how things change…
Of course, our invite list included more than former Federal Reserve officials. Derek Brown, who owns Eat The Rich, a Washington oyster bar, and Samantha Withall, beverage director at The Hamilton, created Fed-themed cocktails.
Brown’s is called “Not So Easy Money.” Its ingredients include bourbon, brandy, sherry, bitters, lemon juice and lemon chartreuse. He garnishes it with a crumpled dollar bill.
“Liquid Net Worth” is Withall’s libation. She went to the history books for inspiration. Around the Fed’s founding, apple cider was very popular.
“It’s kind of like a brûléed apple,” she says. This reporter agrees.
Allan Meltzer, who teaches economics at Carnegie Mellon University’s Tepper School of Business, is the author of “A History of the Federal Reserve, Volume 1, 1913-1951” and “A History of the Federal Reserve, Volume 2, 1951-1986.”
According to Meltzer, Americans warmed to the idea of a Central Bank after a few financial panics.
“Wilson came up with a compromise,” he says. “And the compromise was that we would have these regional banks, and they would be semiautonomous. And there would be a supervisory board in Washington.”
The Fed was designed to be independent, Meltzer says. Not political. In fact, Wilson wouldn’t even invite members of the Fed to his parties at the White House.
“That’s a far cry from where we are now.”
Donald Kohn worked at the Fed for 40 years.
“I started in 1970, so I lived four-tenths of the history myself,” he notes.
The last part of his tenure was during the financial crisis, when the Fed lent billions to big banks and began “quantitative easing” – buying bonds and mortgage-backed securities.
“We fought the panic, we limited the panic, we limited the damage to the economy from these adverse developments in financial markets,” Kohn says.
On the Fed’s centennial, Kohn raises a glass to the Fed’s future.
“I think it is a chance to reflect on where the Federal Reserve has been, and how to set up for the next 20 to 100 years,” he says.
That chapter begins next month, when Ben Bernanke steps down as chairman, and the Fed begins to scale back its bond-buying program.
Want to try Derek Brown's custom cocktail, “Not So Easy Money"? Here's how you make it:
Derek's inspiration behind his cocktail:
"I started going through some drinks that had some kind of relationship [to the Fed], and there is one I came across called “Easy Money.” So, this is an old cocktail. It was simple. It was just brandy and bourbon.
Now, that’s delicious. I like Bourbon and I like brandy, but I figured that we needed to make this go down a little easier, as the Fed has had a hard time selling a lot of their monetary policies; so, I wanted to help out, but I kept it strong, because I know they have a hard job, and I want to make sure that, in the long run, they have sufficient grease on the wheels of monetary policy so to say."
And of course, it's not official until it's sung. The Marketplace Staff does it right:
Also, listen to this story about the Fed's secret origins. One hundred years ago, a group of bankers and politicians went to Jekyll Island, off the coast of Georgia, under the guise of a duck hunting trip. When they came back, America had a central bank.