How did financial panics lead to the formation of the federal reserve system?

Financial panics in the late 19th and early 20th centuries, notably the Panic of 1907, exposed the vulnerabilities in the U.S. banking system, which lacked a central authority to provide liquidity during crises. These crises often resulted in bank runs and severe economic downturns, prompting calls for reform. In response, the Federal Reserve System was established in 1913 to provide a stable monetary framework, serve as a lender of last resort, and mitigate future financial panics. This central banking system aimed to enhance financial stability and restore public confidence in the banking sector.