Founding the Federal Reserve: Narrative Institutional History and Central Banking in the United States, 1789-1955

Abstract

This dissertation attempts to make two contributions. First, it is a historical investigation of pivotal points of inflection in the history of the U.S. Federal Reserve System, from the long nineteenth century through 1955. Second, it attempts to give content to the ill-defined sub-discipline of institutional history beyond organizational biography, historical institutionalism, and new institutional economics. Instead, by taking up the history of the U.S. Federal Reserve System, the dissertation seeks to bridge a divide between different versions of the concept of “institution” that permeate both common language and academic discourse, namely, institutions as “rules, laws, and norms,” institutions as organizations, and institutionalization as a historical process. The dissertation argues that institutions are both rules and organizations, and that the historical process of “institutionalization” is both more fragile and more random than most previous accounts suggest. I call this kind of institutional history “narrative institutional history” to distinguish it from the study of institutions associated with quantitative economic history.

In service of both substance and theory, I tell the Fed’s story through multiple “foundings,” a pluralization meant to invoke periods of intense institutional change. We cannot understand the Fed’s creation as the legislative compromises of the Progressive Era, as the story usually goes. Instead, the Fed is a moving target, an institution that goes through fallow periods of institutional inertia and sudden bursts of institutional change. This early history of the Fed tells us not only about how U.S. society grappled with the perennially thorny problem of defining the national and international basis for money, functionally and structurally, but also how laws, norms, rules, and organizations struggled to solve those problems—and how actors well after the fact sought to reinterpret past history to justify and legitimize their own preferred policies. In the process, the dissertation asserts the independence of institutional history as a viable subdiscipline, distinct from, if related to, cognate subdisciplines such as political, economic, intellectual, legal, social, and cultural history.