Foreword

Seventy-five years ago, on May 18, 1914, the Federal Reserve Bank of St. Louis received its charter. A few months later, with a small staff and in rented quarters, the Bank opened for business. Both for those of us who are engaged in the present-day operations of the Bank and for the members of the public we serve, it is hard to picture the Bank as it was at its inception. It is also difficult to appreciate the problems that had to be resolved in transforming the concept of a regional central bank into a functioning, sound and responsible institution. In commemoration of our anniversary, we are pleased to present this history in which Dr. James Neal Primm, Curators' Professor of History Emeritus at the University of Missouri-St. Louis, recounts those opening days.

The founding of the Federal Reserve System was not only the beginning of our institutional history, it was also the conclusion of more than a century and a quarter of financial experimentation and conflict. It would be difficult, if not impossible, to understand the System without reference to its historical antecedents. Professor Primm examines the era of frontier financing which mixed banking and commerce, of "pet" banks and "wild cat" banks, of requirements for all payments to the federal government to be made in specie and of outcry against the "Cross of Gold," and, with increasing frequency, of financial panics, all as it was seen from and as it affected the central Mississippi Valley. We are reminded of our city's role as a major financial, as well as commercial, center around the turn of the century. St. Louis, prior to the creation of the Federal Reserve System, was the site of a United States sub-treasury for the collection and payment of federal funds, as well as one of only three central reserve cities in the country for the deposit of national bank reserves. This financial prominence, as Professor Primm describes, resulted in a number of local banking, political and business leaders figuring importantly in the legislation establishing the System.

Professor Primm also details the political considerations, proposals and compromises which led to the establishment of the Federal Reserve System. Today, concerns over an inelastic money supply may seem dated, and many of the restrictions placed on the Reserve Banks concerning discounts and investments may sound of issues long since resolved. However, the essential considerations of the draftsmen and legislators over how to design a system that would be responsive to the needs of the entire economy and would promote equitable access to the nation's financial resources are with us as much now as they were in the opening years of our century. The solution they came to, a somewhat unusual quasi-public, quasi-private institution, a decentralized central bank independent within the government, has proven to be a very durable one, indeed.

For our various outside constituencies, we hope that Primm's work will be of historical interest and helpful in understanding the origins of the Federal Reserve. For our directors, officers and employees, now and in the future, we hope that it will be an inspiration by recalling the Bank's proud early heritage.

Thomas C. Melzer
President, Federal Reserve Bank of St. Louis