The Federal Reserve Rate Controversy

October 28, 1927

Report Outline
Character of the Federal Reserve System
Economic and Financial Issues

On September 6, 1927, the Federal Reserve Board, by direct order, established a rediscount rate of 3½ per cent for the Federal Reserve Bank of Chicago. This was the first occasion in the history of the Federal Reserve System on which the Board established a rate without a prior application from the Federal reserve bank affected, although it is understood that there have been cases in the past in which a rate change was requested in response to pressure from the Board and against the judgment of the directors of the bank affected.

The action taken by the Board in this case has aroused a great deal of criticism. The most vigorous opposition has been voiced in Chicago but there have been numerous protests in the East as well. The Chicago Journal of Commerce said:

“Feeling among Chicago bankers has reached the boiling point. It is so intense that none dares speak his mind. At five o'clock last night bankers who ordinarily leave their desks at 2.30 were sitting about in little groups discussing the thing.

ISSUE TRACKER for Related Reports
Jan. 20, 2023  The Future of Cryptocurrency
Apr. 06, 2018  Financial Services Deregulation
Sep. 26, 2014  Digital Currency
Oct. 05, 2012  Euro Crisis
Jan. 20, 2012  Financial Misconduct
Jan. 13, 2012  ‘Occupy’ Movement
Oct. 24, 2008  Financial Bailout Updated
Sep. 01, 2000  The Federal Reserve
Jun. 22, 1990  S&L Bailout: Assessing the Impact
Nov. 04, 1988  Behind the S&L Crisis
Apr. 26, 1985  New Era in Banking
Nov. 18, 1983  Bankruptcy's Thriving Business
Aug. 07, 1981  Banking Deregulation
Jul. 19, 1974  Banking Stability
Jul. 17, 1968  Banking Innovations
May 06, 1964  Monetary Policy in Prosperity
May 16, 1940  Revision of the Securities Acts
Feb. 27, 1937  Expansion of Branch Banking
Sep. 03, 1935  The Decline of Commercial Banking
Dec. 11, 1934  Proposals for a Government-Owned Central Bank
Sep. 12, 1934  Bank Reserves and Credit Inflation
Nov. 27, 1933  Bank Credit in Depression and Recovery
Aug. 12, 1933  Closed Banks and Banking Reform
Apr. 04, 1933  Unified Control of Banking
Apr. 09, 1932  The Glass Banking Bill
Mar. 24, 1932  The Guaranty of Bank Deposits
Apr. 17, 1930  The International Bank and the Gold Standard
Feb. 08, 1930  Branch Banking and Chain Banking
Apr. 29, 1929  Mergers of Banking Institutions
Oct. 28, 1927  The Federal Reserve Rate Controversy
May 21, 1927  Labor Banking and Finance Since 1920
Jan. 31, 1924  The Northwestern Bank Failures and the Attack on Treasury Savings Certificates
Dec. 01, 1923  Why State Banks Do Not Join the Federal Reserve System, the Effect on the System and the Issues Involved
Nov. 23, 1923  Branch Bank Controversy
Financial Institutions