306:, and New York City bankers were particularly distrusted in the West and the South. Thus, members of Congress from these states would find it hard to support a plan drawn up by New York City bankers. The Aldrich Plan carefully avoided calling its proposed new organization a "central bank" in the hope of reducing concerns about central control. Warburg and others had warned against that. It instead carefully worded its proposal as the establishment of a National Reserve Association. The bankers' plan, but not its origin, was publicized on January 16, 1911 as the Aldrich Plan, which was submitted to Congress on January 9, 1912. However, it was not popular among those who wanted a public-controlled plan or who opposed the concept of a central bank in any form. Thus, it was followed by much debate but never came to a vote.
211:, which had been founded the year before by a consortium of commercial banks on the premise that it would not lure commercial bank customers away. In addition to offering the usual trust and commercial banking functions, it also acted as a "bankers' bank" by holding the reserves of other banks and trust companies and loaning them money when they needed additional reserves due to unexpected withdrawals. Bankers Trust quickly grew to be the second largest US trust company and a dominant Wall Street institution. Despite technically having numerous stockholders, the voting power was held by three associates of
324:, and they introduced the Glass-Owens bill in December 1912. To implement the Democrats' desire for a public-controlled plan, the bill proposed a central public-appointed body in control. To address the Western and Southern distrust about powerful New York City banks, the bill decentralized the system into districts to limit the power of the New York City banks. However, the bill also had many features of the banker-controlled plan to broaden its political appeal. Thus, the general outline of the Aldrich Plan eventually served as the model upon which the
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European currencies and finances. However, with virtually no inflation, interest rates were low and the US economy and corporate profits surged, fueling the stock market increases of the late 1920s. That worried him, but he also felt he had no choice because the low interest rates were helping the
Europeans (particularly the British) in their effort to return to the gold standard. He earned the scorn of some congressional leaders who believed that he was too Eurocentric.
398:, a prominent British economist who had previously not questioned the gold standard, used Strong's activities as an example of how a central bank could manage a nation's economy without the gold standard in his book "A Tract on Monetary Reform" (1923). To quote one authority, "It was Strong more than anyone else who invented the modern central banker. When we watch... describe how they are seeking to strike the right balance between economic growth and
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set up for many reasons, such as for historic and natural site preservation or for legal heirs too young to manage their own finances. For large corporations, trust companies can act for the corporation's bondholders, including accepting the corporation's payments on the bonds and distributing them to the bondholders. At the time, many commercial banks were forbidden by law to administer trusts; however, trust companies could carry out most
371:. As the leader of the Federal Reserve's largest and most powerful district bank, Strong became a dominant force in US monetary and banking affairs. One biographer has termed him the "de facto leader of the entire Federal Reserve System." That was not only because of Strong's abilities but also because the central board's powers were ambiguous and, for the most part, limited to supervisory and regulatory functions under the 1913
390:, as a means of managing the quantity of money in the US economy and thus affecting interest rates. That was particularly important at the time because gold had flooded into the United States during and after the war. Thus, its gold-backed currency was well-protected, but prices had been pushed up substantially by the currency expansion due to the
394:-imposed expansion of currency. In 1922, Strong unofficially scrapped the gold standard and instead began aggressively pursuing open market operations as a means of stabilizing domestic prices and thus internal economic stability. Thus, he began the Federal Reserve's practice of buying and selling government securities as monetary policy.
402:, it is the ghost of Benjamin Strong who hovers above him. It all sounds quite prosaically obvious now, but in 1922 it was a radical departure from more than two hundred years of central banking history." His policy of maintaining price levels during the 1920s by open market operation and his willingness to maintain the
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With the
European economic turmoil of the 1920s, Strong's influence became worldwide. He was a strong supporter of European efforts to return to the gold standard and economic stability. Strong's new monetary policies stabilized US prices and encouraged both US and world trade by helping to stabilize
301:
What came to be known as the
Aldrich Plan was drafted by these men during the conference. 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. In addition, the bankers involved were prominent New York
230:
The experience of working with Morgan to alleviate the effects of the Panic of 1907 made Strong an ardent advocate of banking reform because he realized that the voluntary cooperation organized by Morgan was not an adequate means of preventing or dealing with banking crises. He was not the only one
199:
to work as an assistant to a corporate officer and eventually succeeded his boss. A trust company is one that primarily administers the financial matters of legal trusts in which the trust company acts on behalf of others, including both individuals (living or dead) and corporations. Trusts can be
332:. Also, the role of professional bankers was, to some extent, limited by confining their overt control to the operation of the Federal Reserve banks of the various regions. The Aldrich Plan met with Warburg's satisfaction, as he said that minor changes could be adjusted administratively later.
231:
worried since a great public debate ensued after the panic about banking and financial reform. Even sound banks had problems because their depositors demanded their money, causing the banks to run low on cash and gold. The US public had been previously opposed to the establishment of a
358:
The district banks operated virtually independently of the central board and thus there was no effective central control, which Strong argued simply perpetuated the "fragmentation and diffusion of authority that had so bedeviled
American banking and would only lead to conflict and
382:, Strong was a major force behind the campaigns to fund the war effort via bonds owned primarily by US citizens, which enabled the country to avoid many of the postwar financial problems of the European belligerents. Strong gradually recognized the importance of
246:
to evaluate viable alternatives for a long-term solution to the cycles of financial boom and bust. At the time, Republicans dominated
Congress. The chair of the committee was a leading Senate Republican,
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elected as president, and the party gaining control of both houses of
Congress. The platform favored a public-controlled plan. Thus, the Aldrich banker-controlled plan was effectively dead.
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of
Virginia, one of the leading Democratic representatives on the House Committee on Banking and Currency, to work with banking experts and develop a compromise bill. Glass worked with
204:
activities. Commercial banks thus saw trust companies as luring away their customers with the attraction of being able to accomplish both commercial and trust activities at one company.
425:
states that Strong was one of the few US 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
328:
was based, but there were significant changes. A degree of public control was exerted via the
Federal Reserve Board, the equivalent of today's Board of Governors, selected by the
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in
November 1914, Strong was persuaded (despite his reservations) to become the executive officer (then called the "governor"; today the term would be "president") of the
452:
in 1916 and struggled with the disease and its complications for the remainder of his life. On
October 6, 1928 at the New York Hospital, he underwent surgery for an
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266:, Assistant Secretary of the Treasury and Special Assistant to the National Monetary Commission (the only other commission member besides Aldrich);
187:. Strong opted to go to work and became a clerk at a Wall Street investment and financial management firm associated with his father's employer.
239:
to create a central bank that could help sound banks meet the demands of their depositors during a bank run by temporarily lending them money.
219:, Bankers Trust, including Strong, worked closely with J.P. Morgan to help avoid a general financial collapse by lending money to sound banks.
655:
Roberts, Priscilla. "Benjamin Strong, the Federal Reserve, and the Limits to Interwar American Nationalism Part I: Intellectual Profile of."
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and campaigned for changes because of the alterations made from the original Aldrich Plan. His concerns included the following:
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specifically recounts that Strong's insistence on cutting the Fed's discount rate 0.5% in 1927, made US President
172:. His father's family were primarily merchants and bankers, descended from a British immigrant who had arrived in
442:
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Hunt Club retreat in November 1910. Also in attendance were Aldrich, chair of the National Monetary Commission;
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429:, he might have been able to maintain stability in the international financial system. However, the economist
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after an older brother, but his family experienced temporary financial difficulties when he graduated from
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The political appointees of the central board would not necessarily have banking knowledge and expertise
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Monetary Policy and the Onset of the Great Depression: The Myth of Benjamin Strong as Decisive Leader
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Cargill, Thomas F. "Irving Fisher comments on Benjamin Strong and the Federal Reserve in the 1930s."
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claimed that it was Strong's manipulations that caused the Depression in the first place. The author
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and spent a week recovering when he suffered a relapse, resulting in his untimely death at only 55.
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for 14 years until his death. He exerted great influence over the policy and actions of the entire
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Strong became a vice-president of Bankers Trust in 1909 and then its president in January 1914.
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Charting twentieth-century monetary policy: Herbert Hoover and Benjamin Strong, 1917-1927
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Strong was one of those selected to attend a secret ten-day conference at the luxurious
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Wilson made the issue one of his top priorities even before he took office. He asked
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After much debate, Congress passed this bill, with some minor modifications, as the
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The History of the Descendants of Elder John Strong, of Northampton Massachusetts
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and indeed over the financial policies of all of the United States and Europe.
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In the November 1912 elections, Democrats won in a national landslide with
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furious, fueled the market bubble of 1928, and led to the disastrous
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because so many Americans were antagonistic to centralized control.
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banking family who was a partner in the New York banking house of
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held at the Federal Reserve Bank of New York, digitized for the
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Mr. Strong's Biography at the Federal Reserve Bank of New York
215:. Thus, it was widely viewed as a Morgan company. During the
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Strong, Benjamin (1918). "War Loans vs. Business as Usual".
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City bankers. The US public had been anti-banker since the
294:; and Charles D. Norton, president of the Morgan-dominated
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Strong, Benjamin (1917). "Financing Government Loans".
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http://archive.lewrockwell.com/rothbard/rothbard43.html
140:(December 22, 1872 – October 16, 1928) was an American
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was named after Aldrich, his maternal grandfather.)
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Federal Reserve Bank of Richmond Economic Quarterly
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840:Presidents of the Federal Reserve Bank of New York
791:President of the Federal Reserve Bank of New York
617:Lords of Finance: The Bankers Who Broke the World
521:Lords of Finance: The Bankers Who Broke the World
43:Governor of the Federal Reserve Bank of New York
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758:Newspaper clippings about Benjamin Strong Jr.
8:
771:Guide to the Strong Family Papers, 1747-1940
406:of banks during panics have been praised by
958:Federal Reserve Bank of New York presidents
386:, or the purchases and sales of government
55:October 5, 1914 – October 16, 1928
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817:
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752:Statements and Speeches of Benjamin Strong
731:at the Seeley G. Mudd Manuscript Library,
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963:Montclair High School (New Jersey) alumni
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270:, a recent immigrant from a prominent
235:, but many leading bankers urged the
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226:Aldrich Plan and Federal Reserve Act
718:(Greenwood Publishing Group, 1999)
548:The World in Depression, 1929-1939
242:In 1908, Congress established the
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968:People from Montclair, New Jersey
953:Economists from New York (state)
508:Benjamin Strong: Central Banker
369:Federal Reserve Bank of New York
146:Federal Reserve Bank of New York
650:Benjamin Strong: Central Banker
478:Benjamin Strong, central banker
378:When the United States entered
296:First National Bank of New York
144:. He served as Governor of the
652:, Brookings Institution, 1958.
347:Strong had concerns about the
284:National City Bank of New York
179:Strong had hopes of attending
1:
636:Journal of Political Economy
490:Dwight, Benjamin W. (1871).
244:National Monetary Commission
762:20th Century Press Archives
714:Wueschner, Silvano Alfons.
16:American banker (1872–1928)
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948:Economists from New Jersey
943:Deaths from diverticulitis
729:Benjamin Strong Collection
711:(Palgrave Macmillan, 2013)
578:(The Individualist, 1971)
563:America’s Great Depression
534:America’s Great Depression
448:Strong was diagnosed with
410:and harshly criticized by
363:With the formation of the
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743:Papers of Benjamin Strong
689:The North American Review
668:The North American Review
594:Doubleday, 2013. Ch. 15,
592:One Summer: America, 1927
576:Milton Friedman Unraveled
207:In 1904, Strong moved to
195:In 1900, Strong joined a
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893:William Joseph McDonough
506:Lester Vernon Chandler,
191:Corporate banking career
545:Kindleberger, Charles,
443:market collapse in 1929
423:Charles P. Kindleberger
421:The economic historian
638:100.6 (1992): 1273–77.
365:Federal Reserve System
343:Federal Reserve career
339:on December 23, 1913.
326:Federal Reserve System
150:Federal Reserve System
648:Chandler, Lester V.,
384:open market operation
292:J.P. Morgan & Co.
185:Montclair High School
170:Montclair, New Jersey
733:Princeton University
290:, senior partner of
276:Kuhn, Loeb & Co.
181:Princeton University
168:, and was raised in
65:Position established
851:Benjamin Strong Jr.
536:(2000), page xxxiii
412:Austrian economists
396:John Maynard Keynes
373:Federal Reserve Act
349:Federal Reserve Act
337:Federal Reserve Act
282:, president of the
251:of Rhode Island. (
160:Strong was born in
138:Benjamin Strong Jr.
887:E. Gerald Corrigan
881:Anthony M. Solomon
857:George L. Harrison
801:George L. Harrison
574:Rothbard, Murray,
565:(2000), page xxxiv
561:Rothbard, Murray,
532:Rothbard, Murray,
322:Robert Latham Owen
280:Frank A. Vanderlip
253:Nelson Rockefeller
162:Fishkill, New York
104:Fishkill, New York
76:George L. Harrison
920:
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905:William C. Dudley
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798:Succeeded by
659:86.2 (2000): 61.
630:978-1-59420-182-0
476:Lester Chandler,
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101:December 22, 1872
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288:Henry P. Davison
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114:October 16, 1928
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71:Succeeded by
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938:1928 deaths
933:1872 births
907:(2009–2018)
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895:(1993–2003)
889:(1985–1993)
883:(1980–1984)
877:(1975–1979)
871:(1956–1975)
865:(1941–1956)
859:(1928–1940)
853:(1914–1928)
754:, 1915-1922
435:Bill Bryson
408:monetarists
380:World War I
359:confusion."
237:US Congress
213:J.P. Morgan
61:Preceded by
927:Categories
795:1914–1928
785:New office
464:References
388:securities
156:Early life
97:1872-12-22
404:liquidity
176:in 1630.
51:In office
701:25121846
680:25121655
125:New York
764:of the
760:in the
644:2138834
624:, 2009.
454:abscess
164:in the
747:FRASER
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678:
661:online
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596:passim
552:(1986)
510:(1958)
480:(1958)
272:German
142:banker
127:, U.S.
106:, U.S.
697:JSTOR
676:JSTOR
640:JSTOR
626:ISBN
456:for
111:Died
91:Born
766:ZBW
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672:206
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