Chapter 13 Curiosities

The Fed was created to stop bank runs. Bank runs happened when they felt their money was not safe, then everyone would go get the money out of the bank at the same time. Banks didn't have enough money to keep up with the bank runs, so they needed a solution. The Fed was the solution to the bank run problems. It allowed banks to have back up money that the government would loan to them so they can hand out money to everyone in case of a bank run. The Fed stopped the problem of bank runs.