The bank failures of 1907, which caused cash shortage problems, led to the creation the Federal Reserve System.
The first major financial crisis of the 20th century was the Panic of 1907. The panic sparked the monetary reform movement that resulted in the creation of the Federal Reserve System.
A lack of liquidity and an inelastic currency were the old national banking system's two main flaws. In 1908, Congress passed the Aldrich-Vreeland Act, which formed the National Monetary Commission and permitted for the creation of an emergency currency. Senator Aldrich and leaders of the nation's leading financial and industrial groups worked on a revision during a covert meeting on Jekyll Island that later served as the foundation for the Federal Reserve Act.
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