Chapter 38 2. The wartime Federal Reserve under the manipulation of Strong

Benjamin.Strong came into the public eye in 1904 when he became chairman of the Bankers Trust.At the time, Davidson, a Morgan confidant, was growing concerned about the rise of trust companies, which had broader operations than commercial banks and were less regulated by the government, so they could attract capital at higher interest rates.In order to cope with this new competition, Davidson also started a trust business in 1903 after receiving Morgan's instruction, and Strong became Davidson's specific executor.In the ensuing storm of 1907, the Bankers Trust also joined in the rescue of other financial institutions, which made Strong famous.After the establishment of the Federal Reserve in 1913, Davidson and Paul.Warburg approached Strong for an in-depth discussion, hoping that Strong would serve as the key position of chairman of the Federal Reserve Bank of New York, and Strong readily agreed.Since then, Strong has become the de facto head of the Federal Reserve system, and the intentions of Morgan, Paul, Scheff and other Wall Street giants have been fully implemented in the Federal Reserve.

Strong quickly adapted to his new role. He founded the informal Forum of Fed Directors, which met regularly to discuss wartime Fed guidelines.He manipulated the Federal Reserve's monetary policy in a very subtle way, and concentrated the power scattered among the twelve Federal Reserve Banks in the hands of the Federal Reserve Bank of New York.On the surface, the Federal Reserve System allows twelve local Federal Reserve Banks to set their own discount rates and commercial paper collateral policies according to the actual needs of the region. .By 1917, at least thirteen different categories of commercial paper collateral standards had been established.

However, due to the war, the Federal Reserve Bank of New York actually only used the rapidly increasing national debt as mortgage bills. Since the amount of national debt was far greater than the sum of other commercial bills and the rapid growth, it quickly marginalized the bill mortgage policy of banks in other regions of the Fed , open market operations under Strong's control, soon identified Treasury bonds as the primary and only collateralized instrument, thereby gaining total control over the entire Federal Reserve system. As massive bond sales to finance wars in Europe decimated the amount of money in circulation in the United States, the power of the central bank began to emerge.The U.S. government began to massively increase its national debt, and the Federal Reserve also bought it with an astonishing appetite. A huge amount of Federal Reserve bonds rushed into the circulation field like a river bursting an embankment, making up for the monetary tightening caused by European war bonds.The price was a sharp rise in U.S. national debt. As a result, in just four years (from 1916 to 1920) when the Federal Reserve began to operate at full speed, the U.S. national debt soared 25 times from one billion U.S. dollars to 200 million U.S. dollars. Five billion dollars, all of the national debt is mortgaged by the future tax payments of the American people, and the result is that in the war, the bankers make their money, and the people pay, work, and bleed.