Benjamin Strong Jr. (December 22, 1872 - October 16, 1928) was an American banker. He served as Governor of the Federal Reserve Bank of New York for 14 years until his death. Strong influence greatly on the policies and actions of the entire Federal Reserve System - and indeed on the financial policies throughout the United States and Europe.
Video Benjamin Strong Jr.
Kehidupan awal
Strong was born in Fishkill, a Hudson Valley village in New York, and grew up in Montclair, New Jersey, a suburb of New York City. His father's family, especially merchants and bankers, came from British immigrants who arrived in Massachusetts in 1630.
Strong had hopes to attend Princeton University as a brother, but his family suffered financial difficulties while at the time he graduated from Montclair High School. Strongly opted to go to work and become a clerk at the Wall Street investment and financial management firm associated with his father's company.
Maps Benjamin Strong Jr.
Corporate banking career
In 1900, Strong joined a trust company to work as a corporate officer assistant, who eventually replaced his boss. A trust company is a company that mainly manages financial issues from legal beliefs in which a trust company acts on behalf of another person, including individuals (life or death) and the company. Trust can be established for many reasons, including the preservation of historic and natural sites or heirs who are too young to manage their own finances. For large companies, trust companies can act for corporate bondholders, including receiving corporate payments on bonds and distributing them to bondholders. The trust company can usually also perform most commercial bank activities. At that time, many commercial banks were banned by law to manage trust. However, trust companies can do most of the activities of commercial banks. Therefore, commercial banks see the company's trust as a lure of their customers with an appeal to be able to achieve both commercial activity and trust in one company.
In 1904, Strong moved to the Bankers Trust. It has been established a year earlier by a consortium of commercial banks with the premise that it will not lure customers of commercial banks away. In addition to offering general trust and commercial banking functionality, it also acts as a "banker bank" with holds of other bank reserves and trusts the company and lends money to them when they need additional reserves due to unexpected withdrawals. Bankers Trust quickly grew into the second largest US trust company and the dominant Wall Street institution. Although technically it has many shareholders, voting power is held by three J.P. Morgan. Thus, it is widely viewed as a Morgan company. During Panic of 1907, Bankers Trust, including Strong, worked closely with J.P. Morgan to help avoid a general financial collapse by lending money to a healthy bank.
Strong became vice president of the Bankers Trust in 1909, then president in January 1914.
Aldrich's Plan and Federal Reserve Act
The experience of working with Morgan to ease the impact of Panic of 1907 made Strong a strong supporter of banking reform because he realized that voluntary cooperation organized by Morgan was not an adequate means to prevent or handle banking crises. He is not the only one worried - a huge public debate comes after a panic about banking and financial reform. Even healthy banks have problems because their depositors are demanding their money, causing banks to run out of cash and gold. The US public previously opposed the establishment of the central bank. However, many prominent bankers are urging the US Congress to create a central bank that can help healthy banks meet the demands of their depositors as long as banks are run by lending them money for a while.
In 1908, Congress established the National Monetary Commission to evaluate viable alternatives to long-term solutions for the boom and bust finance cycle. At that time, Republicans dominated Congress. The committee chairman is the leading Republican Senate, Nelson Aldrich from Rhode Island. (Nelson Rockefeller was named after Aldrich, his maternal grandfather.)
Strong was one of those elected to attend a ten-day secret conference at the luxurious Jekyll Island Hunt Club retreat in November 1910. Also present were Aldrich, chairman of the National Monetary Commission; A. Piatt Andrew, Assistant Secretary of Finance and Special Assistant of the National Monetary Commission (the only member of the commission other than Aldrich); Paul Warburg, a recent immigrant from Germany's foremost banking family who is a partner at New York's banking house, Kuhn, Loeb & Together.; Frank A. Vanderlip, president of New York City National Bank; Henry P. Davison, senior partner of J.P. Morgan & amp; Together.; and Charles D. Norton, president of Morgan's First National Bank of New York.
What came to be known as the Aldrich Plan was composed by these people during this conference. The plan was written in secret, because the public would never approve a banking reform bill written by bankers - much less a plan for the central bank. In addition, the bankers involved were prominent New York City bankers. Not just the anti-banker US public since Panic of 1907, but the New York City bankers are not particularly trusted in Western and Southern states. Thus, members of Congress from these countries will find it difficult to support the plans devised by New York City bankers. Aldrich's plan carefully avoids summoning the proposed new organization as a "central bank", in the hope of easing concerns about central control. Warburg and others have warned this. It was not cautiously saying its proposal as the establishment of the National Reserve Association. The banker's plan (though not originally) was published on January 16, 1911 as the Aldrich Plan. Aldrich's plan was submitted to Congress on 9 January 1912. However, it was not popular among those who wanted a publicly controlled plan, or who opposed the central bank's concept in any form. As such, it was followed by much debate, but never came to a vote.
In the November 1912 election, Democrats won a landslide victory on a national level - Woodrow Wilson won as president and Democrats ruled both congressional assemblies. The Democratic Party's platform prefers public-controlled plans. Thus, Aldrich's effectively controlled banker plans are dead.
Wilson made this issue one of his top priorities even before he took office. He asked Carter Glass of Virginia, one of the foremost Democratic representatives on the Committee on Banking and Currency Boards, to work with banking experts and develop a compromise bill. Glass worked with Robert Latham Owen and they introduced the Glass-Owens Bill in December 1912. To implement the Democratic wish for a public-controlled plan, the bill proposed a public designated central body in control. To address the mistrust of the West and the South against the powerful New York City banks, the bill decentralizes the system to the districts to limit the strength of New York City banks. However, the bill also has many features of the banker-controlled plan to expand its political appeal. Thus, the outline of Aldrich's Plan ultimately serves as the model on which the Federal Reserve System is based. However, there are significant changes. The level of public control is provided (via the Federal Reserve Board, equivalent to the current Board of Governors, elected by the President of the United States). Also, the role of professional bankers, to some extent, is limited by limiting their apparent control over the operations of Federal Reserve banks in various regions. Aldrich's plan met with Warburg's satisfaction, as he said that minor changes could be adjusted administratively later.
After much debate, Congress passed the bill (with minor modifications) as the Federal Reserve Act on December 23, 1913.
Federal Reserve Career
Strong has concerns about the Federal Reserve Act and is campaigning for change due to changes made from the original Aldrich Plan. Her concerns include:
- the political appointment of the central board will not always have banking knowledge and expertise and
- District banks operate virtually from the central board and thus there is no effective central control. The latter, Strong argues, only perpetuates the "fragmentation and spreading of authority that so confuses American banking and will only cause conflicts and confusion."
With the establishment of the Federal Reserve System in November 1914, Strong was persuaded (regardless of his objection) to become an executive officer (later called "governor" - today, the term "president") of the Federal Reserve Bank of New York. As the leader of the largest and strongest Federal Reserve district bank, Strong became a dominant force in US monetary and banking affairs. A biographer has called it "the de facto leader of the entire Federal Reserve System." This was not only due to Strong's ability, but also because the power of the central board was ambiguous and largely restricted to the oversight and regulatory functions under the Federal Reserve Act of 1913 because many Americans antagonize centralized control.
When the United States entered World War I, Strong was the main force behind the campaign to fund the war effort through bonds owned primarily by US citizens. This allowed the United States to avoid the many post-war financial troubles of the warring parties in Europe. Strongly gradually recognizes the importance of open market operations, or the purchase and sale of government securities, as a means of managing the amount of money in the US economy and thereby affecting interest rates. This was especially important at the time because gold had flooded the United States during and after World War I. Thus, gold-backed currencies are well protected, but prices have been driven substantially by currency expansion due to the gold standard of currency expansion. In 1922, Strong unofficially canceled the gold standard and instead began to aggressively pursue open market operations as a means to stabilize domestic prices and thus internal economic stability. Thus, he started the Federal Reserve's practice of buying and selling government securities as a monetary policy. John Maynard Keynes, a prominent British economist who had not previously questioned the gold standard, used Strong's activities as an example of how the central bank can manage a country's economy without a gold standard in his book "A Tract on Monetary Reform" (1923). To quote one authority, "It's Stronger than anyone else who finds the modern central bank.When we see... [central bankers today] illustrate how they strive to achieve the right balance between economic growth and price stability, is the ghost Benjamin Strong which is floating above it.It all sounds quite clear 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 through open market operations and his willingness to maintain bank liquidity during the panic has been praised by monetarists and strongly criticized by Austrian economists.
With the economic turmoil of Europe in the 1920s, Strong's influence became global. He is a strong supporter of European efforts to return to the gold standard and economic stability. A strong new monetary policy not only stabilizes US prices, they also encourage US and world trade by helping stabilize European currency and finances. However, with almost no inflation, low interest rates and the US economy and corporate earnings soared, boosting stock market gains in the late 1920s. This worried him, but he also felt he had no choice because the low interest rates helped the Europeans (especially the British) in their efforts to return to the gold standard. He gets scorn from some congressional leaders who believe he is too Euro-centric.
The economic historian Charles P. Kindleberger states that Strong was one of several US policymakers interested in troubled European financial affairs in the 1920s, and it did not he died in 1928, just a year before the Great Depression, he might be able to keep stability in the international financial system; although economist Murray Rothbard claims that Strong's manipulation was what caused the Depression in the first place. Writer Bill Bryson specifically recounts Strong's insistence on cutting the Fed's interest rate by half a percent in 1927, leaving Herbert Hoover very angry, sparking a 1928 market bubble, and causing market destruction in 1929.
Strongly diagnosed with tuberculosis in 1916. He struggled with the disease and its complications for the rest of his life. On October 6, 1928 at New York Hospital he underwent surgery for abscesses due to diverticulitis and spent a week recovering when he suffered a recurrence, resulting in his death at the age of 55.
References
Further reading
- Ahamed, Liaquat,
Penguin Books, 2009.ISBNÃ, 978-1-59420-182-0 - Cargill, Thomas F. "Irving Fisher commented on Benjamin Strong and the Federal Reserve in the 1930s." Journal of Political Economy 100.6 (1992): 1273-77.
- Chandler, Lester V., Benjamin Strong: Central Bank , Brookings Institution, 1958.
- Roberts, Priscilla. "Benjamin Strong, the Federal Reserve, and Limits for American American Interwarism Part I: Intellectual Profile of." Federal Reserve Bank from Richmond Economic Quarterly 86.2 (2000): 61. online
- Toma, Mark. Monetary Policy and the Beginning of the Great Depression: Strong Benjamin Myth as Strong Leader (Palgrave Macmillan, 2013)
- Wueschner, Silvano Alfons. Map the 20th century monetary policy: Herbert Hoover and Benjamin Strong, 1917-1927 (Greenwood Publishing Group, 1999)
External links
- Benjamin Strong Collection at the Seeley G. Mudd Manuscript Library, Princeton University
- Sir. Strong Biography at the Federal Reserve Bank of New York
- Benjamin Strong's paper, held at the Federal Reserve Bank of New York, was digitized for FRASER
- Statement and Speech Benjamin Strong, 1915-1922
- Guide to Powerful Family Papers, 1747-1940
Source of the article : Wikipedia
0 Comments