92. Fed Deep Dive, Part 3: The Fed’s Origin Story—from Reaction to Responsibility

Before the Fed existed, J.P. Morgan literally had to bail out the banking system. That’s when the U.S. realized depending on wealthy individuals to prevent financial collapse wasn’t sustainable—and the Federal Reserve was born.

In this episode, I (Jessie!) try to wrap my head around how the Fed went from an emergency backstop in 1913 to one of the most powerful institutions in the world. Jess helps me trace the Fed’s messy glow-up: from freezing during the Great Depression to gaining real tools and some independence after World War II.

Here’s what we learned:

• The Fed wasn’t created to run the economy—it was just supposed to stop bank panics.
• It failed hard in the 1930s, so Congress gave it more power and structure.
• During WWII, it worked closely with the Treasury, but inflation forced a breakup in 1951.
•  That split gave us the independent Fed we have today—aka the one that’s not supposed to take political orders.

It turns out, Fed independence isn’t just some finance nerd hill to die on—it’s what helps protect the entire economy from political chaos.

If you’re like me and thought, “Wait, the Fed didn’t always manage the economy?”—this episode is for you. And yes, we’ve got more Fed deep dives coming. Because wow… there’s a lot more to unpack.