"You cannot, therefore, include the bank-note under the generic designation of money, without finding yourself immediately embarrassed by the claims of bills of exchange, bankers' cheques, and a variety of other typifications of the same principle of credit, all of which being more or less competent to perform, and, in point of fact, performing the functions of money, and some of them on a scale of vast extent, have primâ facie just the same pretensions to be rated as money which bank-notes have." (On the Regulation of Currencies, 29)
As reported by Norman Angell in his 1929 book, The Story of Money, the noted American historian Dr. Charles A. Beard declared, "the Federal Reserve Act of 1913 represents the union of 'Jacksonian hopes' with 'financial propriety'." The Federal Reserve Act is fundamentally different from the proposal sponsored by Republican Senator Nelson Aldrich that came out of the 1910 meeting on Jekyll Island.
The Democratic administration of President Woodrow Wilson pushed through the Federal Reserve Act of 1913 as a populist measure, with the support of William Jennings Bryan, "the Great Commoner," at that time Wilson's Secretary of State, with the assistance of Carter Glass, Democratic Congressman from Virginia, whose greatest achievement is considered the 1933 Glass-Steagall Act that, until jettisoned by Congress in the 1980s, restored necessary separation of function to America's financial system. One of the goals of the Federal Reserve Act was to break up the concentrated control over money and credit held primarily by financier J. P. Morgan, and centered in New York City. The "Pujo Committee" (from the fact that Democratic Congressman Arsène Pujo of Louisiana chaired the committee) assigned the major share of blame for the disastrous "Panic of 1907," when the Dow lost 50% of its value, to Morgan.
The Federal Reserve Act of 1913 did, in fact, overthrow the reign of the British Currency School and Wall Street in the United States from 1914 until 1917, when the United States entered World War I. At that time, the Congress decided to finance the war by borrowing rather than raising taxes, and figured out a way ("open market operations") to circumvent the prohibition in the Act against the Federal Reserve dealing in primary government securities.
That is, the Federal Reserve was and remains forbidden to purchase government debt directly from the United States Treasury ("primary securities"), another branch of the government. The idea was to prevent the federal government from being able to monetize its deficits, and to provide the private sector with a "flexible" currency based on the country's industrial, commercial, and agricultural assets instead of a "fixed" currency backed by federal government debt, as was the case under the National Bank Act of 1864. The Federal Reserve is, in theory, only empowered to purchase "secondary" government securities already on the "open market" in order to regulate the reserve requirements of member commercial banks.
