ABSTRACT
If the Interstate Commerce Commission was seen as a representative administrative agency by the Progressive Era, how versatile was the commission thought to be as a model for new regulation? This chapter answers this question by analyzing the creation of the Federal Reserve System in 1913. It focuses on the institutional construction of the Federal Reserve Board, widely perceived to be the second independent regulatory commission although being part of a central banking system. Although it now has a firm footing in the federal government, the reason for Americans’ acceptance of the creation of a new central banking system despite their hatred of bankers in the aftermath of the Panic of 1907 has remained a mystery. This chapter argues that agency judiciality was the key. The Woodrow Wilson administration managed to sell the reserve system to the Americans by analogizing the proposed FRB as a regulator of banks similar to the ICC. In doing so, the administration treated the commission as a tribunal almost as authoritative as the Supreme Court. The fact that the FRB could be linked to the ICC and the Court without pressure from lawyers confirms that the commission model could be utilized in any regulatory policy.
