1.
• In the post World War I era, Benjamin Strong realized that gold was no longer the
main factor in controlling credit. The FED started to use open market operations
as a recession began in 1923 when Strong’s idea to purchase a large amount of
government securities evidenced the power of open market operations to
influence the availability of credit in the banking system.
• In October 1929, the stock market crashed, sparking the nation’s worst depression
in history. From 1930-1933, nearly 10,000 banks failed, so President Franklin
Roosevelt declared a bank holiday in 1933.
• In response to the Great Depression, Congress passed the Banking Act of 1933, or
the Glass-Steagall Act, which divided commercial and investment banking, and
