Benjamin Strong Jr.

From Wikipedia, the free encyclopedia

Benjamin Strong Jr. (1872 - October 1928) served as Governor of the Federal Reserve Bank of New York for 14 years until his death. Strong exerted great influence over the policy and actions of the entire Federal Reserve System.

His policy of maintaining price levels during the 1920s through the open market purchase of securities, and his willingness to maintain the liquidity of banks during panics, have been praised by monetarists and harshly criticized by Austrians.^{[citation needed]}

Strong was also involved in the establishment of the Federal Reserve System. After the panics of the 1890s, many believed a strong central bank was necessary to provide liquidity to the banking system; the question was how it would operate and who would control it. Strong, who was Vice President of Banker’s Trust of New York, was JP Morgan's emissary to the secret Jekyll Island (Georgia) expedition in 1910 -- one of the selected members who stayed at the luxurious Jekyll Island Hunt Club retreat in November for a private ten day conference. Also in attendance were Paul Warburg, a recent immigrant from a prominent German banking family who was receiving a $500,000 annual salary as a partner in the New York banking house of Kuhn, Loeb and Company, Senator Nelson Aldrich (Nelson Rochkefeller was named after his maternal grandfather), A. Piatt Andrews, Assistant Secretary of the Treasury and Special Assistant to the National Monetary Commission (the only other NMC member besides Aldrich), and other bankers including Frank Vanderlip, president of the National City Bank of New York, Henry P. Davison, senior partner of J. P. Morgan Company, and Charles D. Norton, president of the Morgan-dominated First National Bank of New York.

What came to be known as the Aldrich Plan was drafted by these men during their conference at Jekyll Island. The plan was done in secrecy as the public was leery of Wall Street and the banking system in general. The Aldrich Plan was introduced in Congress, but was voted down. primarily due to a structure which in effect allowed the proposed National Reserve Association to be controlled by bankers.

The general outline of the Aldrich Plan did eventually serve as the model upon which the Federal Reserve System was created with, however, significant changes that placed control into political hands and limited the role of professional bankers in its operation. A bill creating the Federal Reserve System was approved by Congress three years later after much heated debate, and hurriedly signed into law on December 23, 1913 after intial hesitation^{[citation needed]} on the part of President Woodrow Wilson and a resulting conference between him and Bernard Baruch,^{[citation needed]} one of his largest campaign donors. The Federal Reserve System is very similar to the National Reserve Association created in The Aldrich Plan, but with vastly differing management and control.

Strong became President of Banker’s Trust in 1914, right before being appointed Governor of the Federal Reserve Bank of New York the same year, which position he maintained until he died in 1928.

Economic historian Charles P. Kindleberger says that Strong was one of the few American policymakers interested in the troubled financial affairs of Europe in the 1920s, and that had he not died in 1928, just a year before the Great Depression, he might have been able to help keep the international financial system more stable.