Rocks and hard places

The Federal Reserve, America’s central bank, was born out of a crisis. The banking panic of 1907 was the biggest US financial crisis up to that point, and only ended when John Pierpoint Morgan, founder of the eponymous bank, pulled together rival bankers to stabilise things. It worked, but also illustrated the need for a central bank to step in as lender of last resort when individual banks or the system as a whole need liquidity and stability. The Fed was therefore set up in 1913 as a system of regional reserve banks, with the New York branch taking the lead in financial market interventions.