What fundamental event led to the establishment of the Federal Reserve System?

The establishment of the Federal Reserve System in 1913 was primarily prompted by a series of bank runs that occurred in the United States during the late 19th and early 20th centuries. These bank runs were characterized by a sudden demand from bank customers to withdraw their deposits, often triggered by financial panics or fears of bank insolvency. The lack of a central banking system at that time meant there was no mechanism to provide liquidity to banks facing runs, leading to widespread bank failures and economic instability.

Recognizing the need for a more stable banking structure, lawmakers sought to create a central bank that could manage monetary policy, provide a safety net for banks, and act as a lender of last resort to prevent future bank runs and financial crises. This need for a more secure banking environment and improved financial stability directly shaped the Federal Reserve's creation, aimed at ensuring the resilience of the U.S. banking system.