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Even after 100 years, Fed remains controversial

Americans were suspicious of powerful national financial institutions even before the birth of the Federal Reserve 100 years ago today.

Alexander Hamilton, the first Secretary of the Treasury, pushed for the establishment of the First National Bank of the United States in 1791 to help the newly forged nation pay off the debts from the Revolutionary War, which had left some states bankrupt, and to create a unified currency. 

A bill to extend the charter in 1811 failed to pass the House of Representatives by one vote. After the War of 1812, President James Monroe argued that a new national bank was needed, which led to the chartering of the Second Bank of the United States in 1816. 

 

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 Again controversy emerged. President Andrew Jackson worried that the bank concentrated power in the hands of the few. In 1833, he ordered all federal funds to be removed from the bank. 

When Congress passed the Federal Reserve Act in 1913, the U.S. was recovering from the 1907 financial crisis and the Great San Francisco fire of 1906. The 1907 downturn started with a failed attempt to corner the market on shares of United Copper Co. and the resulting bank runs and failures of financial institutions such as the Knickerbocker Trust Co. 

Wall Street titan J.P. Morgan arranged for a $23 million loan (roughly $558 million in today's money) to save the New York Stock Exchange. Morgan's efforts, though, were probably motivated as much by self-interest as by altruism.  

Since then, suspicion of the Federal Reserve doesn't seem to have ebbed much. A whopping 74 percent of respondents to a recent poll back auditing the Fed -- an idea that has long been advocated by former Rep. Ron Paul, R.-Texas, and now his son Sen. Rand Paul, R.-Ky. 

Rand Paul is widely expected to run for President in 2016, which means that arguments about the Fed are probably going to gain steam in the coming months.
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