Federal Reserve Bank of New York , Federal Reserve Bank of New York. Liberty Loan Committee and Strong, Benjamin, 1872-1928 "Address given at the Hotel Martinique, before the New York State Bankers Association, Group VI." December 9, 1915, https://fraser.stlouisfed.org/title/1317/item/4009, accessed on May 12, 2025.

Title: Address given at the Hotel Martinique, before the New York State Bankers Association, Group VI

Date: December 9, 1915
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image-container-0 ADDRESS AT HE? YORE SGLtfE BAKJGRS ASSOCIATION GROUP VI, HOTEL LL'BTIKIQUE, HEW YORK CITY, DEO. 9, 1915. Delivered by Mr. Benjamin Strong, Jr. The Federal Reserve Bnks have nov/ been in operation about one year. Daring that time, so much discussion has taken place and so much has been written in regard to the important features of the Act:.and the operations of the banks, that one runs the risk of tiresome reiteration in any further dis cussion of theie subject s. Nor can very much be said in regard to the busi ness actually conducted by the banks in this period, for the volume has been inconsiderable and its character of slight i.tiportance, compared to the volume and character of the work of organization. Few difficulties are presented in employing men and organizing the machinery to enable one bank to conduct a large business. A great many difficulties sere presented, however, in organizing twelve banks on very short notice, and so developing their machinery that they will work in har mony and unison. I shall not attempt any detailed reveiew or the methods ♦ th-it have been employed to bring about the results so far accomplished. The policy of the system as a whole, h s been very largely determined by the Fed eral Reserve Board as expressed in the various regulations which it has is sued. The physical and mech nicil organization of the banks and the plans for their harmonious operation have bean perfected through frequent meetings of the Governors of the banks, as well as of various members of their staffs, such as the auditors, and in other cases, the transit managers and the assist ant cashiers. It may be asked why so much time ha3 been devoted to organization in a br.nk such as ours, which ir.s but $12,000,000 invested at interest, and where the balancc of its assets consist singly of £-200,000,000 in cash. In
image-container-1 other words, why hasten organization any faster than the business develops? I think a complete answer to this question can be made by calling your at tention to the responsibilities which will rest upon this country and upon the Federal Reserve Banks as an important part of its banking machinery, in re- effecting necessary A adjustments which ultimately must be made as a result of the war. It would be foolhardy to prophesy what this process of readjust ment will be, but some of the effects of the readjustment I think can be discerned at this time. People who have been accustomed to doing busi ness with banks, to a great extent measure the ability of the banks to meet their liabilities by the amount of the bank’s gold resources. The degree of confidence felt in a bank by its customers, may also be felt in a larger m y by an entire nation as to its banking system, and this is par ticularly true in those countries whose banking systems are based upon a centralized control of gold reserves which are held by central banks nfiiich have the exclusive right of note issue. Daring this present period, we are exporting vast quantities of goods to Europe and notwithstanding the huge loans which we are extending to foreign nations and banking institutions and notwithstanding our purchases of large amounts of American securities formerly held abroad, our customers in foreign countries find it necessary to ask their banks to ship us large amounts of these gold reserves in pay ment for their purchases* Since the gold movement started in our favor, we have received about $400,000,000 in this way. Much of this gold, if not all of it, immediately finds lodgement in the banks, and to some extent in Reserve Banks. In other words, our ratio of reserves to bank liabilities is be come unduly large and the ratio abroad is being correspondingly reduced. In order that these payments may be made, the belligerent nations have even induced their citizens to give up their gold to the banka, thereby
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Date: December 9, 1915
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