The Federal Reserve was created in 1913 partly in response to the financial instability exposed by the Panic of 1907.
The Panic of 1907 began after failed speculation involving the United Copper Company and spread through banks and trust companies. The Knickerbocker Trust Company collapsed, and withdrawals threatened the stability of other financial institutions. J. P. Morgan organized private support to contain the crisis because the United States lacked a permanent central bank able to act as lender of last resort.
The episode prompted the Aldrich–Vreeland Act of 1908 and the National Monetary Commission’s study of central banking. Those developments helped lead to the Federal Reserve Act, signed by President Woodrow Wilson on December 23, 1913.
The Federal Reserve was not created solely because of one crash. It was the result of a broader debate about currency, banking supervision, reserves, and emergency liquidity in the United States.