Lesson Learned from the Panic of 1907

March 15, 2016

What was life like before the Federal Reserve existed? This video featuring former Federal Reserve Chairman Ben Bernanke explains how In 1907, a financial panic that threatened to annihilate the economy led to the Federal Reserve System’s creation. Transcript follows.

Transcript: Financial Panics in the 1800s and Early 1900s

Ben Bernanke: Hello, how are you? Welcome.

Narrator: Thanks very much for making the time. What would life be like without the Federal Reserve?

Bernanke: We don't have to speculate. We know what it looked like because there was no Federal Reserve before 1913. During the 19th century, there were periodic financial crises, where people would run on the banks and pull out their deposits or the stock market would crash.

Narrator: When most of us think of bank runs, we think of the stock market crash of 1929. But in 1907, a massive panic threatened to annihilate the economy. There was nothing the government could do to stop it. Until billionaire J.P. Morgan and his rich friends tapped into their personal wealth to bail out the banks.

Bernanke: Which led Congress to say, "Look, enough is enough. We've got to have a central bank that can manage these crises." And that was the beginning of the process that led to the Federal Reserve.

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