Today in History - Federal Reserve Bank Opens for Business in New York
By M.C. Millman
The New York Federal Reserve Bank opened for business on November 16, 1914.
Federal Reserve banks were established through the U.S. Congress Federal Reserve Act of 1913, which was meant to provide the nation with a safer, more flexible, and more stable monetary and financial system through the creation of a central bank.
The Reserve Bank Organization Committee was formed as a result of the Federal Reserve Act. It designated that there would be no more than twelve cities that would have Federal Reserve banks. The United States was then divided into districts, with each district containing one Federal Reserve City.
While there was no doubt that New York would receive a Federal Reserve Bank, the size of that bank was a highly controversial issue. There were those who suggested that the New York Federal Reserve Bank should hold half the capital of the entire system since it would be the one to deal with the European central banks. Others argued that the European banks should deal with the Federal Reserve System as a whole and not just the New York Federal Reserve entity.
When the Reserve Bank Organization Committee announced the locations and districts of the twelve Federal Reserve banks on April 2, 1914, the New York branch's influence was restricted to New York State alone.
The reality was, though, that with over $20,000,000 in capital stock, the New York Bank still had nearly four times the capitalization of the smallest banks, making it the largest and most dominant bank in the system despite efforts to the contrary.
The initial staff of New York's new Federal Reserve Bank consisted of seven officers and 85 clerks on the day it opened. On that same day, the bank took in $100 million from 211 member banks.
The bank expanded rapidly, adding new staff as needed during the early years, which meant it soon needed larger accommodations.
A land purchase was made in Manhattan, and a public competition of the architectural design was held. The winning design was one that was meant to resemble the palaces in Florence, Italy.
The new location was open for business in 1924, with the bank vaults located 86 feet below street level and built into the bedrock. By 1927, those vaults contained ten percent of the world's entire store of monetary gold.