Chartering Super-Special Banks: Firm Formation and the Federal Reserve Act

Abstract

There is not an overwhelming case to be made that the Federal Reserve System (FRS) should be analyzed as a bureau instead of as a firm or set of firms. Accordingly, I discuss the formation of the FRS in relation to the framework developed by William Gartner for describing the phenomenon of new venture creation. This framework illuminates the role played in the passage of the Federal Reserve Act by non-politician planners, some of whom knew well that they were destined to hold desirable positions within the incipient FRS. The role of such planners is not well illuminated by the conventional public choice framework, in which politicians are viewed as more or less acting alone in directing the formation of bureaus to enforce the parameters demanded by voters.

Keywords: bureaucracy, central banking, National Banking System, political entrepreneurship

JEL Classification: B52, D73, E58, L32, M13, N21