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Furnishing an "Elastic Currency": The Founding of the Fed and the Liquidity of the U.S. Banking System

This article examines how the U.S. banking system responded to the founding of the Federal Reserve System in 1914. The Fed was established to end the frequent crises that plagued the U.S. banking system, which reform proponents attributed to the nation's "inelastic" currency stock and dependence on interbank relationships to allocate liquidity and operate the payments system.