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Disorderly Markets: The Federal Reserve, the Banking Lobby, and the Government Securities Market, 1920-1961

Creative Commons 'BY-NC-ND' version 4.0 license

This dissertation examines the historical roots of Federal Reserve liquidity support policies in the market for U.S. Government securities during the early years of the central bank’s existence, 1920-1961. Drawing on the Federal Reserve System’s archival records, records of congressional hearings, and historical news coverage, I trace a genealogy of the Federal Reserve’s informal mandate to maintain “orderly” conditions in the government securities market. The animating idea behind the maintenance of orderly markets was that the ostensibly self-regulating price mechanism of a “free” government securities market could only be guaranteed through Federal Reserve interventions that would stave off speculative panic and the threat of illiquidity. In other words, the free market could be established and maintained only through continuous intervention. I analyze how the influence of private bankers in the Federal Reserve System helped to ensure that the malleable discourse of orderly markets would be employed to legitimate interventions that benefited the U.S. financial sector. At the same time, it preserved the idea of bond markets as a site of truth, in which the impersonal economic logic of supply and demand—and not the political logic of price support—could be brought to bear on the fiscal state.

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