When The Fed Did Not Help the Banks

Lessons from Past Financial Crises in U.S.

The U.S. financial system in early 2023 was a mess.

The sudden bank run of Silicon Valley Bank (SVB) and the banking collapse caught people by surprise, and within a week, the entire banking system was in turmoil. The panic spread at an unprecedented rate, with the stock market taking a nosedive.

The Fed immediately backdropped the bank by making depositors whole, but everyone’s reaction was different.

Some see it as a necessary action to protect the financial system, while others view it as an example of the Fed’s overreach and interference in the free market.

For example, some people, such as Balaji Srinivasan, who gained a lot of credibility from his unique take on how COVID was being played out in 2020, have argued that the Fed is evil and have prophesied that the dollar would collapse within 3 months.

In this essay, we will explore the consequences of the Fed not intervening in previous crises such as the Panic of 1907 and the Great Depression.

The Panic of 1907, when there was no Federal Reserve

The Panic of 1907 was a financial crisis in October 1907, triggered by the failure of a bank called Knickerbocker Trust Company in New York City.

A group of speculators, including F. Augustus Heinze, a wealthy copper magnate, and Charles T. Barney…