Central Banks, Global Shocks, and Local Crises: Lessons from the Atlanta Fed's Response to the 1920–21 Recession

Roberds, William; White, Eugene

doi:10.29338/ph2020-15

Journal Article

Central Banks, Global Shocks, and Local Crises: Lessons from the Atlanta Fed's Response to the 1920–21 Recession

Abstract: During late 1920, the president (then called "governor") and board of directors of the Federal Reserve Bank of Atlanta were confronted with an unexpected, devastating collapse in the price of a commodity whose global production was concentrated in their district—cotton. Their judgment was that the fall in cotton prices was temporary and that its effects could be lessened with generous credit policies that did not conflict with the Federal Reserve Act. Other officials within the Federal Reserve System did not agree with this judgment, however, leading to a contentious policy debate and an eventual rollback of the Bank's policy accommodation.

Keywords: Federal Reserve; emergency lending; Section 13(3) of the Federal Reserve Act;

JEL Classification: E58; N12;

https://doi.org/10.29338/ph2020-15