The Federal Reserve was created after the Panic of 1907 exposed weaknesses in the United States banking system.
The Panic began in October 1907 after an unsuccessful attempt to corner the shares of United Copper Company triggered runs on banks and trust companies. The crisis spread because the United States had no central bank able to supply emergency liquidity. Financier J. P. Morgan helped organize private rescue efforts to prevent wider financial collapse.
The episode prompted a national investigation and led to the Aldrich–Vreeland Act of 1908. That law created the National Monetary Commission, whose work influenced the Federal Reserve Act of 1913. The Federal Reserve began operations in 1914.
The Federal Reserve was not created immediately during the panic itself. A common confusion is to credit the later Federal Deposit Insurance Corporation, which was established in 1933 during the banking crisis of the Great Depression.