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Benjamin Strong Jr.
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Benjamin Strong, Jr. (December 22, 1872 – October, 16, 1928) was an American economist. He 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.
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.
Strong was also involved in the establishment of the Federal Reserve System.
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Encyclopedia
Benjamin Strong, Jr. (December 22, 1872 – October, 16, 1928) was an American economist. He 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.
Economic policies and advocacy
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.
Strong was also involved in the establishment of the Federal Reserve System. After the panics of the 1890s, leading bankers believed a private central bank should be created to issue money. The public was adamantly opposed to the establishment of a central bank. 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 a partner in the New York banking house of Kuhn, Loeb & Co.; Senator Nelson Aldrich (Nelson Rockefeller was named after Aldrich, his maternal grandfather); A. Piatt Andrew, 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 & Co.; 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 written in secrecy, as the public would never approve of a banking reform bill written by bankers; much less of a plan for a central bank. The Aldrich Plan was introduced in the U.S. Congress, and followed by much debate, but never came to a vote, because the party in favor of it was voted out, and the Glass-Owens Bill was introduced instead.
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 (via the Board of Governors, selected by the President of the United States), and limited the role of professional bankers in its operation to that of the 12 branches. It met with Warburg's satisfaction, as he said that minor changes could be adjusted administratively later. The term Central Bank purposely was kept out of its name, as Warburg and others warned it would not be passed otherwise.
A bill creating the Federal Reserve System was approved by Congress three years later, after much heated debate, and signed into law on December 23, 1913 after initial hesitation on the part of President Woodrow Wilson, and after a conference between him and Bernard Baruch, one of his largest campaign donors. The Federal Reserve System is similar to the National Reserve Association proposed by The Aldrich Plan, but with vastly differing management and control.
Strong became President of Banker’s Trust in 1914, and shortly thereafter was appointed Governor of the Federal Reserve Bank of New York the same year, which position he maintained until his death in 1928.
Economic historian Charles P. Kindleberger states 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 maintain stability in the international financial system.
Further reading
- Ahamed, Liaquat, Lords of Finance: The Bankers Who Broke the World, Penguin Books, 2009.
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