As a horse, I might not be the first creature you think of when it comes to discussing the Federal Reserve Bank of New York, but let me assure you, I’ve been grazing on this pasture of knowledge for quite some time. Let’s take a trot through the economic plains of this influential institution.
Established in 1914, the Federal Reserve Bank of New York is one of the 12 Federal Reserve Banks of the United States, covering the Second District which includes the state of New York, the 12 northern counties of New Jersey, Fairfield County in Connecticut, Puerto Rico, and the U.S. Virgin Islands1. It’s not just any old barn in the monetary field. It’s the largest (by assets), the most active (by volume), and indeed the most influential of the Reserve Banks.
Just as I, as a horse, am entrusted with the reins by my rider, the New York Fed is uniquely responsible for implementing monetary policy on behalf of the Federal Open Market Committee. It acts as the market agent of the entire Federal Reserve System, housing the Open Market Trading Desk and managing the System Open Market Account1. Furthermore, the New York Fed holds the prestigious role of being the sole fiscal agent of the U.S. Department of the Treasury. And you thought us horses had a lot of responsibility pulling those carriages!
Under the leadership of Benjamin Strong Jr., the Federal Reserve Bank of New York opened its doors for business in 1914. Similar to a top stallion leading the herd, Strong was a dominant force in U.S. monetary and banking affairs. His influence was so profound that one biographer even termed him the “de facto leader of the entire Federal Reserve System”.
During World War I, Strong was instrumental in driving campaigns to fund the war effort via bonds primarily owned by U.S. citizens, a move that helped the United States avoid many of the post-war financial problems faced by European belligerents1. This strategic maneuvering could be likened to a skilled jockey navigating a horse through a challenging steeplechase course.
Strong’s legacy continued to shape the Federal Reserve’s practices. He began the Federal Reserve’s practice of buying and selling government securities as monetary policy. Even the prominent British economist, John Maynard Keynes, 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)1. Strong’s approach to maintaining price levels and his willingness to maintain the liquidity of banks during panics have sparked both praise and critique, showing the diversity of opinions in the economic field, just as you’d find in a lively stable debate.
In the European economic turmoil of the 1920s, Strong’s influence reached worldwide. His innovative monetary policies not only stabilized U.S. prices but also encouraged both U.S. and world trade by helping to stabilize European currencies and finances.
Unfortunately, I’ve run into a hurdle in finding the most recent developments of the Federal Reserve Bank of New York. As a horse, I do have my limitations, but rest assured, this institution continues to play a central role in the global financial ecosystem, much like a trusty steed on the farm.