The Street

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FEDERAL RESERVE

At Cedar Street the bulk of the Federal Reserve Bank—it is enormous—swallows up the vista to the north. But before it to the right lies a large, open area, Chase Manhattan Plaza, and on the plaza, resting on spindly stilts, is the Chase Manhattan Bank. The building is a glass and aluminum box, in fact, the first built in the downtown financial district, where “the more masonry, the better” once was the rule and standard of sturdiness. The new glass buildings may look a bit vulnerable, but the vaults lie deep in the granite bedrock of the island beneath the architectural fancies above.

In 1961 many feared that downtown was losing out in aesthetic and economic attractiveness to the business district uptown. David Rockefeller of Chase planned his new headquarters to be the first International Style skyscraper in the neighborhood and to stand in its first plaza. But the building is an oversize and rather timid copy of the Lever House on Park Avenue, and despite its impressive height and the expanse of open space on which it sits, it seems too dim to be a fitting home for a bank put together with extraordinary guile by John McCloy, one of the legendary Wall Street lawyers, who contrived to have the relatively tiny Manhattan Company take over the gigantic Chase National Bank to get around charter restrictions.

 

A BANKER’S BANK

Just north of the plaza stands a Florentine palazzo, no taller than fourteen stories but dominating every building in sight with not just its bulk but its distinctive masonry cladding of limestone and sandstone and its extraordinary wrought-iron work. Authority is the word that best describes it. This is the Federal Reserve Bank of New York, which stands on a rise commanding the lowlands of Wall Street to the south, looking just like what it is, the most powerful actor in the money markets of the country.

After the Panic of 1907, when Morgan was summoned from the General Convention of the Episcopal Church to get the major banks together and borrow funds from the Secretary of the Treasury to sort out the mess, many proposals for monetary reform as well as investigations of the Money Trust erupted. When Woodrow Wilson was elected President in 1912, one of the earliest reforms of his New Freedom program was the creation of the Federal Reserve System to assure that banking crises would not occur again. A central bank on the model of the Bank of England or the Bank of France was obnoxious to the South and West, so a decentralized bank with twelve members was created pretty much by Carter Glass, the representative from Virginia, a tough little man who spoke out of the side of his mouth as if he had been reared in New York’s Hell’s Kitchen rather than in the South. But as Wilson is supposed to have said, Glass said more out of the side of his mouth than most men said with the whole thing. In 1912 he used his sotto voce powers of persuasion to deliver the entire Virginia delegation to Wilson. .Then he mastered banking theory and practice and the principles of the proposed reforms of Sen. Nelson Aldrich to create the Federal Reserve System. The Aldrich-Vreeland Act of 1908, bearing Senator Aldrich’s name, had in fact been written by Paul Warburg of Kühn, Loeb, a keen student of the European central banks; Henry Pomeroy Davison, who was to become a Morgan partner; and Benjamin Strong of Bankers Trust.

The architects York & Sawyer won the strenuous competition for the project. Seeking a proper style to house the most prestigious of all the planned banks, they decided on a palazzo based on the fortress houses of the great Florentine banking and political families, and elements of many of the most famous Florentine structures appear in the massing and decoration of the building.

The bank did not succeed in warding off future crises (though it was indispensable in financing the First World War), and in fact, it fueled the speculative fervor of the twenties. Today people look to the Fed (its monetary policies are set by the Federal Open Market Committee in Washington but executed in the New York market) to see what the monetary supply is up to.

To put it simply, the operations of the bank create or destroy money, not in a physical sense—though old bills are shredded on the premises—but by raising or lowering bank reserves on which the amount of credit depends, and through their open-market purchases or sales of government securities. One measure of the New York bank’s importance is that in 1986 its president’s salary was, at $170,800, more than twice that of the chairman of the Federal Reserve Board itself.

“FOR THE WIDOW AND THE ORPHAN”

We have been standing for a long while as I discourse, and though it is midday and the day a sunny one, we have been standing in complete shadow. The shadow is cast far across the plazas by a monumental pile behind us and to our left at 19 Nassau, the Equitable Building of 1915.