The FED was created because of a fear of bank runs. If there was a central bank that could lend money to banks, people would not be scared of banks being low on money. This when then cause less bank runs and lead to a more stable economy.
Along with your point, this plan was created in secret, so that the people would not realize that the solution to this problem was a giant central bank, because the thought of this scared the people. So the came up with the"Federal Reserve" to make it sound better.