merritt sherman, active with the fed since 1926, describes one of its early tools to regulate bankingivity-- the discount rate. that was the first tool used whenhe fed was created, the discount rate being the rate that is charged to member banks when they need to come in toet additional reserves. and it is raised to restraitheir borrowing, lowered to encourage their borrowing. through world war i, through the roaring twenties, most and went abouttheir bu. the system was safe then one day, it all came tumbling down. october 24, 1929, the greatest stock market crash in history marked the beginning of years of economic devastation. banks failed by e thousands. the fed failed its major test. we asked economist lester chandler for an explanation professor chandler, the fed was set up to pvent bank failures and avoid depressions, all of whichappened in the 1930s. whatent wrong? within the federal reserve system, nody knewwho was too what where the resee actreserve was coerneystem, r one cel bankwnthe aldricpn wihes aat wasupposetoosomeing cen, oa fel reserve ar t they coun'cidewho was do. i

merritt sherman, who was with the federal reserve then tells us why roosevelt took this action.roosevelt was trying to do was to create a period in which the whole banking system individual banks could be reviewed by bank examiners, by experts who had a great deal of information about banks and enable them, through the procedure of licensing banks to reopen, to carry out the promise made by the president that any bank that was reopened would be able to stay open. in his fireside chat fdr told the nation that the reopened banks were safe. let me make it clear that the banks will take care of all needs. and it is my belief that hoarding, during the past week has become an exceedingly unfashionable pastime. roosevelt did more. legislation following the bank holiday extended the federal reserve's powers forced banks to meet tougher regulatory standards p and created the federal deposit insurance corporation to guarantee customers' accounts up to $10,000. give me my 60 cents. how do i know you got 60 cents? here's my bankbook. all right, that's fine. 5, 10, 15, 20, 25, 30, 35, 40, 45