Bernanke’s Recession-Fighting Weapon Developed by 1900s Banker
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The first weapon Federal Reserve Chairman Ben S. Bernanke deployed against the worst recession since World War II owes a singular debt to Paul M. Warburg, a banker in the 1900s who understood money markets more than any contributor to the Federal Reserve Act.
When President Woodrow Wilson signed the act on Dec. 23, 1913, its central purpose was to serve as a backstop to a financial system that had lurched from one crisis to the next in the preceding decades. The concept of backstop lending came from Warburg, a native of Germany whose writings reveal concern that he never got appropriate credit for his role.