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thanks everyone for coming it's so great to have everyone here for those of you that we're hoping for lots of singing and dancing that might be it so just a fair warning I'm Neil Willardson I'm the senior vice president general counsel here at the Federal Reserve Bank in Minneapolis it's November first in 29 years ago 28 years ago today rather I started at the Federal Reserve so it's great to have everyone here for my 20th anniversary and I should make a particular point to acknowledge in the front row is the individual hired me the former general counsel the Federal Reserve Bank of Minneapolis Shelly zine and Carolyn so welcome to shell and Caroline Carolyn's crowded thank you well before I get started I want to kind of get a sense of the audience here how many of you have seen Hamilton the play go ahead Wow oh great now adding to that keep your hands up how many of you listen to the soundtrack okay a fair amount I think we're about 40% don't worry it's not a prerequisite so but those of you that have if you want to join in sing along if you hear a lyric or something feel free it might just make things a little more interesting the next thing I want to ask is how many of you been to a conversation with the Fed before one of these sessions okay we got about 30 percent of people well it's great to have everyone here we are also live-streaming this so welcome to everybody out there including my parents and Worthington Minnesota nice to have them here my in-laws and Wilmer and my family is my immediate families up front here in the third row so if there's any booing it might just come from them so you can maybe you know try to counteract that with your work but thank you so much for coming so let's go ahead and get started well here's here's why we're here to discuss Alexander Hamilton and his influence on the central bank not only did Alexander Hamilton start the first Bank the United States but he was a visionary for much of our central bank as it appears today in the Federal Reserve and he was America's first central banker and so whether you've seen the musical or not I hope today the goal is for he to get it a little better sense of who Hamilton was and how in he influenced the Federal Reserve I will of course allow for some questions and comments the end this slide gives you a sense of where we're going today first who was Hamilton what was he about how did he get started in life and where did he go with his career second the focuses today's presentation its influence on the Federal Reserve and it's very difficult to talk about Alexander Hamilton without talking a little bit about Aaron Burr and the duel in 1804 if you've come to a fed conversations of the Fed in the past and a number of you have you know that we often begin with a disclaimer and so I have not one but at least three disclaimers today the first one is the usual one which is the words today are my own and not those of the Federal Reserve Board the chair or the Federal Reserve Bank in Minneapolis it turns out Jay Powell was a pretty busy guy he's working on that FOMC meeting coming up so I didn't get a chance to clear my remarks with him this time around the second thing is that I drew heavily for the today's talk from a fair amount of research of course lin-manuel Miranda's great play Hamilton the Ron Journal 2004 biography of Hamilton which also was was motivating of and Manuel Miranda's work but then a number of financial history articles and books and because I I think have extensive bibliography I posting that on the banks website so when the video gets posted the bibliography will as well so if you find something particular interesting maybe that'll motivate you to dig further the next disclaimer is I will make some shameless references to Hamilton to play tonight so listen to the listen for those feel free to laugh along or join in and song and then finally and this gets the Q&A because in the introductions I ran into some people that I hate to say it are probably more of a Hamilton expert than I am so there's people from colleges there's people from high schools that are fed that our US history experts so if we get to the end and I get stumped on the questions I'm gonna revert to Socratic method and so I'm gonna ask the audience for their deserves of support so I am a Fed history nut I always have been and if you look carefully on YouTube you'll find a YouTube video for me a few years ago on the hundred anniversary of the Federal Reserve I see one or two people nodding mostly family members you know there's there's four hundred and nine hits right now out there in that video and it turns out if I get about ten million more the Federal Reserve gets ten cents from YouTube so take a look that's my expertise but today I'm talking about Hamilton so let's move on this is a map and you can see here where Hamilton was born and nevus in the British West Indies and he was born it's not exactly clear he was either born in 1855 or 1857 or sorry 1755 five or 1757 thank you that's audience participation I appreciate that though in in on his tombstone in in New York on Trenton your Trinity Church it says that he died at age 47 so he himself and his wife suggested that he was born in 1757 in and I think the reason was it could have been some uncertainty maybe Hamilton really was born in 1757 but when Cherno and others looked at the records in nevus they really found it was more likely was born on 1755 we think that perhaps Hamilton wanted to look a little more like a child prodigy when he was applying to school at King's College and so that maybe helped support that and he also was looking for a job as an apprentice very early on and the younger you were as an apprentice maybe the more likely her to be hired but nevertheless it's very clear even though his birth date is clear it was really clear that Hamilton had a very challenging childhood he was born out of wedlock very early on his father left their family his mother got sick died when Hamilton was around 13 and you could say that Hamilton was a founding father without a father and at the age of 14 founded a trading charter right that's from the play thank you and so he was a very industrious person actually ran a trading company in st. Croix and where he really became popular and thought and people thought a great deal of Hamilton was while he was on st. croix hurricane hit in 1772 and he wrote an account of that hurricane that was published in the local newspapers and got picked up by other areas and people were so impressed by his writing and his thoughtfulness that they all took a collection in st. Croix and said let's send this guy to the colonies let's send him to New York so he got he got sent there and people really saw his great promise now you know the turn old book and it took me my family knows mm you know several weeks to get through it it's a very thick book as it turns out and and there's a huge amount of details about Hamilton's history so I thought to myself what is the best way to sort of convey Hamilton in a pretty short form so I thought to myself well what if Hamilton was around today and he was kind of looking for a job what would he do well he would put up a LinkedIn page so imagine imagine this is this is something like 1796 Hamilton is no longer Treasury secretary he's returned to New York City decides you know I need a network a little I need another job I just I just got out of this Treasury secretary gig and we'll talk about that role in just a minute so what he does is he talks about it you know who he is he's estates monies that economists he's an attorney he's a policy adviser he's kind of the whole package here entrepreneur influencer and you see things like his affiliations so we went to Kings College which is now Columbia went there for a little while brilliant student of course originally was talking about going to Princeton Kent Aaron Burr went to Princeton but Hamilton is decided to go to King College ultimately leaves King College to join the US Army and be part of the Revolutionary War and there he linked up with some his influencers so this is you know your LinkedIn buddies right so you see some pretty cool people on this list right so George Washington founder of our country he was he led the revolutionary war efforts with Hamilton as his side and his side as aide to camp he sets this Washington course sets a standard as the first president knighted States serving from 1789 to 1797 and and then those have you seen the musical you notice that Hamilton when he comes to New York he meets his buddies in the in the tavern right man rant Miranda does this great job of depicting Hamilton's buddies Lafayette America's favorite founding Frenchman Lawrence and Mulligan and he kind of describes them all meeting at the same time in this tavern well it doesn't quite happen that way it happens over a period of years but it's a great way to describe their relationship and how he gets to be friends with them also on those lists we do see Aaron Berger we're gonna talk about him a little while but we also see people like John J and James Madison of course those are the folks that helped write the Federalist Papers so these are something like 85 papers that are drafted in Hamilton does the heavy lifting rights 51 of those those and I mean just does a huge job there Madison writes a bunch 29 I believe and John and John Jay writes another six we'll talk about those in just a second now the other thing that Hamilton's doing and he can put this on his LinkedIn pages yeah I was there during the signing of the Constitution on September 17 1787 pretty cool thing in this picture is Howard Christie painted this in the 1930s and 40s and you can see Alexander Hamilton right there whispering to the Benjamin Franklin and Christie does this neat depiction of all the delegates the key delegates at the Constitutional Convention what he doesn't do is he he doesn't include the three that doesn't sign that don't sign the Constitution he doesn't include the 13 that left during the convention but it's it's a neat piece and and there's really a couple key components that Hamilton plays with respect to the Constitution first he writes the call for the Constitution so he's the one that decides along with some other people hey this this this these articles and Confederations are not really working the way they should so we need to get together form a new form of government in the in meet in Philadelphia to develop this constitution and oops I'm gonna go back one and then the other key point was although Hamilton was one of those people that a frequent speaker at the Constitutional Convention many of his ideas were not taken they were viewed more like favoring in some cases a monarchy type system he pulled back from those but ultimately probably the key contribution that Hamilton made was when I touched on earlier and that's writing these Federalist Papers these are a series of papers and 89 papers that are written over a period of six months an incredibly prolific process that Hamilton oversaw during this key period and the goal of those peddler's papers to urge citizens to support the ratification the Constitution and they're originally published anonymously in New York newspapers the basic theme is a Constitution will preserve the Union and empower the federal government to act firmly and coherently in the national interest and remember that Hamilton was one of those guys that was not born in the United States born in the British West Indies did not have that close state connection like some of the other folks Jefferson and Madison very focused on Virginia work and also in their political orientation focused on state rights and also individual rights so Hamilton was particularly well suited to be influential at the time and these papers were not only published in the papers influenced the states and their citizens to ratify the Constitution but when you look at this US Supreme Court case is that where they're these papers are cited more than 300 times in US Supreme Court cases so their site is Authority for interpreting the Constitution so turning back to Hamilton's LinkedIn page it's fun to look at you know Hamilton's noting that Hamilton's appointment to the Constitution convention itself came from his father-in-law Philip Schuyler and I think people know that Philip Schuyler was was the father of Eliza Angelica help me and Peggy so so in in Hamilton in his wife Eliza were the true classic couple of their day they're kind of the in-crowd she has wealth and status he didn't have you those things but was incredibly ambitious had big ideas and wanted to make a name for himself was willing to roll his sleeves up and have big ideas on behalf the country Eliza was a true partner and as we'll talk about in a bit she worked well after Hamilton's death Hamilton dies dies at age 47 well he thought 49 49 or 47 and and she well after Hamilton's death works works tirelessly to maintain his position his authority his position as a patriot as somebody who helped form the nation in the most positive way she lived well into her 90s to try to do that at the core of Hamilton's LinkedIn page of course are his employment roles he was the aide to camp for George Washington in that role in Washington was well known for a number of his papers and things that he wrote during the Revolutionary War well Hamilton wrote large parts of those it was really Hamilton's writing and in fact Hamilton wanted to get out as we noted people had seen the play Hamilton desperately wanted to get out to the field and in fight and in Washington just kept bringing him back hands like no I need you here you're more important here in the audience it's alright you're more important here the audience of course you are but but no you're more important here in the office and you could possibly be out in the field so really focused on that but so before I turn to the contributions of Alexander Hamilton and central banking I want to make a little bit of a comment it's one thing that you know when you look at this list of of contributors and in Hamilton's his colleagues that he lists there's something that we do is you know who do you have listed and it's largely white men in it and it's hard not to notice that and in fact I was reading a number of things recently about this time period and there's a couple of things that I want to bring out one from Thurgood Marshall they vote the former Associate Justice u.s. supreme court the second from Joseph Ellis a best-selling historian and Ellis said something I think that was thoughtful was recently republished in the Time magazine Ellis said when the founders were talking about we the people they weren't including black people they weren't including Nate Americans and they weren't including women and in Ellis went on to say when race or gender enters into the question the founders are going to disappoint you and that was Ellis at the time Thurgood Marshall did a wonderful speech on the end of two hundred anniversary of the US Constitution in 1987 and he said the founders the Constitution included what he called intentional defects and key omissions from the start and especially those involving slavery in that way Marshall was advocating as many do now today is that the Constitution should be considered a living document so that was something way back then but we should look more broadly at the Constitution so I just wanted to make that comment before we move on to Hamilton's role in the financial institution so so in financial institutions more broadly in the financial revolution so George Washington becomes president 1789 he's thinking about who should be on his cabinet and he makes some really key decisions in the first one what he turns to somebody who's she's trusted a great deal and that is Alexander Hamilton to be a secretary of the Treasury the other person he turns to to be a key member of his cabinet is Thomas Jefferson so this is going to set up over the next several years a bit of a rift right Jefferson is very popular very thoughtful but going back to when we talked about Madison Jefferson was in this camp viewed the country as better suited through more of an agrarian approach the idea of finance and commerce maybe that's okay but re
lly we should be more individualistic focus we should be more focused on states rights Hamilton when he becomes a member of the cabinet starts working extremely quickly to form his Treasury Department so just to give you a sense of the difference between Hamilton and Jefferson and how they get started Hamilton within the first year has 53 members in the Treasury Department it doesn't seem like a lot relative of the size of the government today but that's a lot compared to Jefferson State Department as three people right and Knox's War Department this doesn't include the military or at large but three people so Hamilton does it an amazing job of sort of building up the staff he feels he needs to effectively run the Treasury Department in fact you could say that Hamilton doesn't hesitate he exhibits no restraint so so you're picking up on this I'm really pleased about that okay so this idea of a financial institution comes from Richard Silla and David Cohen's book and he notes a couple key things about that first is that public finance is a part of the way the country should run in the idea that there needs to be revenues and spending from government for there to be an effective country writ large there should be a central bank that aids a government finances and also serves as an ode to banking more broadly the dollar should be a unit of account in a medium exchange there should be something within the country at the time there are various foreign currencies various types of medium exchange that were taking place there was really no common currency at the time and Hamilton had a view and he exhibited this again through some very detailed papers that the country his growth could be fostered through business through banking and through markets and then he has a specific plan in one of the key aspects of his plan is to say that the assumption of war debts the colonies was really expensive to run the Revolutionary War States funded large parts of that individuals were owed money from the Revolutionary War and Hamilton was a big Abbot to say we got to pay those off a couple reasons why we want to do that one is we're not going to be able to do a war again if we need to if we don't pay our debts so people look at that and they go well we're not gonna get paid we're not gonna be able to do another war the other reason is the whole idea that there's funding for running the government there's the ability to tax and also debt of the government helps bring people together for purpose of having a Federalist type system a governmental system that's it's a republic like Hamilton will talk about so the idea that this would cement federalism and in thought and he thought that unless the country had strong that it could borrow money effectively it would ultimately never be a successful country so this isn't just about the financial system it's really bringing the idea of having a federal government a country that works together for a common common set of goals so he like Hamilton always does he's incredibly prolific writer and thinker in a policymaker and even though we talk about Hamilton central bank that word really isn't used until the well into the 1800s he talks about a National Bank and there were if you saw the slides earlier there were three banks at the time they were state banks but the idea of a National Bank with some components of the the embedded components of the financial plan and that included the concept of the US currency the idea of a fiscal agent for the government's bank and these are concepts that really began with Hamilton and some of these things of course currency and fiscal agent are the types of things that still are part of the Federal Reserve today okay well it sounds self-evident right that we should have this I've made the case on behalf of Hamilton turns out not everybody disagrees democracy just like today is a little bit messy in the 1790s and Hamilton thought what he has a good idea but there were more than a few people that didn't like it and these two were among them Tom Thomas Jefferson and James Madison they were diametrically opposed Foles right to Hamilton they didn't like a number aspect of the plan including the idea of the ability to tax and the disagreement really just goes back to this view of society and the way things ought to go Jefferson was a farmer a large landowner Liberty was incredibly important to him democracy new concept but okay but really let's use the states as a mechanism for government rather than a focus on the federal government and they were concerned really about too much federal power of eesof eda States going back to a ham and g wash that sounds kind of hip doesn't it I was I was going for that so so you know it Hamilton has these great ideas and it must be nice to have Washington at your side if you're Hamilton and and this isn't from the play but I thought this was a nice alliterative phrase that reflects Hamilton and Washington's view it's constitutional it's commercial it's workable like it's economical so that's the best you're gonna get from you tonight I mean wrap with that but that's it so then what happens we've got the ultimate battle setup right we have we have Jefferson and Madison on one side we have Hamilton and maybe watch it tune on the other we're gonna see where this goes so this is where the room where it happened the room where it happened right so as it happens people are hanging out in New York that's where everybody is 1790 Jefferson has a place kind of close to Hamilton if has anybody been to the New York Fed Donna Maiden Lane anybody been down there this is this a couple of you have it's down on the southern a chance they have a great gold tour so we have the cash here and Joe was kind enough to open up the cash not open up the cash to nice be careful so lets you view the cash department today those of you that took the tour and if you didn't get a chance you want ticket tour feel free to let me know we can get to make sure to get you in they have gold there in the New York Fed and in the room where it happened in the place where Jefferson and Madison and Hamilton all got together was at 57 Maiden Lane right down there by the New York event and this is probably the most important famous meeting in probably the history of our country again Jefferson runs into Hamilton and says you know wanted to come over I'm gonna arrange the menu the venue and the seating for us and we'll get together and talk about it well the room is set up for a discussion or maybe an argument for the financial plan and this is where the magic of lin-manuel Miranda in the Hamilton play comes through because what does he do he's like how do we know what happened there were only three people there so the way Hamilton or the way that Miranda describes us he says let's have Aaron Burr describe what happened he should know or not really he wants to be in the room where it happened that's what that's so so Miranda when he talks about what happened in the room he brings burrs perspective nasai dove looking in and those of you that might have signed up for this thinking that I would know what happened in that room it turns out I know just as much as Aaron Berger so I'm a little sorry for the bait and switch but I'll talk a little bit about what some of the historians talked about during this this really key meeting in key time in what they really described as a chess match between Madison and Jefferson and that Hamilton on the other side Hamilton was really keenly focused on this idea of assumptions to death assumption of dead and not only was financially made sense it not only was a promise but it was ultimately to cement that he felt was necessary to keep federalism together Jefferson Madison really hated the idea but they were willing to entertain a quid pro quo and what was that at the time this is again 1790 there's a serious debate about where the nation's capital should be there were really three contenders Philadelphia with so many important things that happened Declaration of Independence Articles of Confederation the Constitution was signed in Philadelphia huge population at the time I think one the most populous cities in the country there's New York which was fast becoming the financial center so people like Hamilton liked that idea and some of Hamilton's buddies and then there was Jefferson and Madison that said well there's we have this place down by the by Virginia along the Potomac that might be a good place to and that was really their preference they were really united in the desire to have the nation's capital at Potomac River in the location now known as Washington DC so the story goes that Jefferson and Madison agreed to the financial plan and create in exchange for the creation of the nation's capital in DC what happens then is the legislation does pass 39 to 20 in assented President Washington for signature under the law at the time Washington has ten days to sign it so Washington's pretty smart pretty savvy great politician so he says you know what let me do this let me send that to Jefferson and my secretary of state and my attorney general Randolph and see what they think well you got a pretty good idea what Jefferson's gonna say he doesn't like it and he now puts forward a constitutional argument as does Randolph and says you know what there isn't anything in the Constitution about all this stuff there's nothing in the Constitution about a National Bank or a central bank and therefore we think it's unconstitutional again ten day period so I don't know what day that Hamilton so watched entak sup the opinions of Jefferson and Randolph and sends them to Hamilton and you think well Hamilton how much time does he had this is like homework you know yet you have like two days to write your views unconstitutionality you would expect that maybe Hamilton did a little pre work but Hamilton promptly pulls an all-nighter and yeah alright you know what this is like great students in the class like yeah pull an all-nighter he pulls an all-nighter writes this beautiful piece on the constitutionality of the national plan and says you know every power in the government includes a mean requisite and applicable to the attainment at the ends such that the power for a National Bank is implicit in the Constitution it isn't necessary to be expressly noted the Constitution in that view is one of those things that carries its way and makes its way into various use of US Supreme Court cases along the way Jeffers Washington rather signs a bill On February 25th agreeing with Hamilton in the next day he signs a bill that provides for the residents of the Capitol in Washington DC this is an early particularly depiction in the Capitol okay so we signed the bill and the National Bank and it opens this door shortly thereafter in this picture just gives a high-level overview of the National Bank the United States Hamilton proposed it in 1790 Washington signs of bill in 1791 the bank stock then goes on sale sells out with an hour flowers there's a panic I'll talk about that in a bit in 1792 and 20 years later 1811 it closes down so there was only a 20 year period for the first Bank United States or at that time it's just called the Bank United States it's just like the Great War becomes a first world war after you have the Second World War in the same way this is the Bank of the United States and becomes the first bank when the second bank comes around in the mid and or later on the 1800s the basic principles the Bank United States are still some of those foundations that led to the Federal Reserve and that's where we're going to turn to next so what I'm going to do now is proceed to fill out this chart if you're like me you have you'd like to have like a checklist right so yeah they get the groceries do the laundry we're gonna walk through some of the key components of Bank United States using core ideas of governance talking about leadership talking about their roles and responsibilities and what I hope to have you get from all this is where there's great similarities between there's a pretty good chance this will be dropped by the way between now and the end of day so be ready for those of you in the front row that might be a bonus I don't know but so you're gonna get a sense of those areas where it's very similar between the Bank United States and where there's some considerable differences now with today's Federal Reserve so let's just start with the office the main office of the Bank United States is set in Philadelphia and even though Alexander Hamilton was not a fan of branches ultimately agreed to it because the shareholders of the Bank United States thought we should have branches all across the country and the picture up here shows the dots where those branches are of course there all along the eastern seaboard the first one is in Boston the last one is down in the work near the New Orleans and and that's the general format of the bank United States the Federal Reserve formed in 1913 Woodrow Wilson signs the Federal Reserve Act in December 13 1913 the Reserve Bank's open in 1914 as you might expect yes there was a fight between Minneapolis and st. Paul about where that should be Minneapolis won this one you know later the hockey team would go to st. Paul so maybe who knows maybe that was a good deal I don't know but so we end up with it here in Minneapolis and you can see the picture the Federal Reserve again thinking back this is 1913 we see a little bit of an Eastern influence here our 9th Federal Reserve District is here we have Montana North and South Dakota Minnesota the Upper Peninsula Michigan and Northwest Wisconsin's part of our district it's a fairly large geographic district in terms of population it's a little over 1% of the total u.s. population we have a branch in Helena Montana there's another 23 branches in addition these reserve banks all around the country we are a corporation of the United States formed under the Federal Reserve Act here so if people say I work for the government I say not quite we're a quasi-governmental organization here the Federal Reserve Bank of Minneapolis the Board of Governors in Washington is an independent federal agency so they are an agency those that oversee us here at the Reserve Banks that's now turned to shareholders and it gets a little bit interesting here as soon as I can make it interesting here they were don't let me go back one the bank united states had a substantial capitalization one was formed in and it was a very fact the largest corporation of its kind of any kind when it was formed back in 1791 they capitalized with initially 10 million dollar capital which is a very large amount especially if you think about inflation and the size of the organization and when it was set up it was set up as is a bit of again a quasi-governmental concept with 20% of the stock held by the government but the remaining 80% of the stock held by individual so there was literally a public offering back in 1790 and 1791 for the stock of the Bank United States and honestly by all measures this was messy there were a script issued that would ultimately lead to the purchase of stock is there was originally listed at $25 with a wild lead to something like $300 a share then shot back down to 150 dollars a share and in fact this was sort of the first opportunity for Hamilton to get involved in crisis management because there was some severe problems in the credit market that were caused in places like New York ultimately things settled down and things went relatively well thereafter there was a later crisis in 1792 that was some individual tried to basically corner the securities markets a credit debt markets at the time Hamilton made a similar move to inject to purchase securities in the market and now turning to the Federal Reserve I think something was learned through that process in the 1790s and when the Federal Reserve Act was formed the idea that there'd be some initial capital it's that's owned ultimately that there's ownership but that ownership is by member banks the United States under under the law so member banks are the shareholders of the Federal Reserve System but when you think of share ownership of control that's not what member banks have here what they get
n return for their capital investment in the Federal Reserve System is a six percent dividend or in the case the largest bank in a recent legislation something more like a three percent dividend and that for the latter there's a calculation that makes that happen but I just want to make sure that there's really no typical control of those financial interest it's really a public institution that has a stock ownership by the member banks then looking at other aspects here this is a picture of Thomas willing originally the first president of Bank was offered to oliver wolcott who had a significant job in the treasury department and it turns out this individual was willing to serve well was not so that's Thomas willing who was willing to serve so yes so that's that individual he's the president there are 25 directors that are that are chosen by the shareholders to be the directors in the main office in Philadelphia and not surprisingly to some they were largely in New York and in Pennsylvania so the most money areas of the country at the time the most financial functional areas of the country had the large parts of the directors and there were other states that had one or two but they were largely based in Philadelphia and New York and then Hamilton himself wrote the bylaws and the Articles I mean for those of us are sort of like governance geeks it's kind of fun to get down and craft those Hamilton himself writes these documents and one of things he says is you know we think about a quorum requirement I went back to look at this and there were 25 directors but there were only eight required for a quorum right and you can probably guess why travel right so you have to get there there was no telecommunications there was thing like that so we're gonna have to get to the place and you could imagine might be difficult to get a quorum for a real meeting that can make things happen so a very large number each of those branch offices that I showed earlier from Boston down to New Orleans have another 13 directors that's in contrast the Federal Reserve the oversight of the Federal Reserve's by the by the Board of Governors currently four governors you know they are nominated by the president confirmed by the Senate so we only have four right now Jay Powell is the chair of the Board of Governors they oversee the Reserve Bank's and then each Reserve Bank's has a set of outside directors that I'll show you in a minute nine directors that are public directors not insiders to the Federal Reserve and then this Charter is you noted earlier there's a 20-year charter for the bank a United States the Federal Reserve interesting a lot of people know this when it was first formed by the legislation in 1913 had a 20-year Charter because people went back and said well we got to see if it works we want to see if we want to keep it around let's make sure that gets renewed in 1927 and the McFadden act Congress decided let remove the 20 year limitation instead have an unlimited charter for the federal reserve system that does mean that if Congress decides at some point they don't want to have a central bank you can go through that process to decommission the Federal Reserve but for now there's basically no no expiration to the Fed okay let's talk about leadership no these are not the directors from the bank of the United States these are the directors from our main office in Minneapolis and our Helena branch really a proud to have such a wonderful group of directors our current chair is Ken Powell the former chairman and president of General Mills we have a number of other folks kathy neset who works in the oil business in new york Shri Zahir the Dean of the Carlson school Harry Melander who has who works in the labor labor area used to have a wide range of people were various industries in various segments of the country the the the district of the Federal Reserve Bank in Minneapolis so it goes all the way from Montana to to Wisconsin and Michigan and then our Helena branch directors are all folks from from Helena in the Bank United States he thought it was important to have staggered terms likewise these folks have three-year terms and they can serve up to two or three-year terms and then they move on there's Thomas willing that is not pon Thomas willing that's Neel Kashkari so I've got a bigger picture of Neal because I thought it was important to have your boss in really big big picture so that's Neel Kashkari and after Neal started two years and ten months ago I somehow became the other Neal or or an i eel I'm fine with that I'm behind the scenes guy as you can probably tell already but Neal is our president CEO this is really a key role he not only serves as a president of our organization of 1,100 people in Minneapolis and Helena but he also is our representative to the Federal Open Market Committee so every six weeks our president goes to Washington takes information from our board of directors on the ground information that they give us about what's happening their sector what's Happ district and uses that information to help inform the discussions that the Federal Open Market Committee table and that consists of the governor's seven governor's now for right now and then the presidents on a rotating basis are voting members five people served on the FOMC as voting members but all attend and provide that information if they receive from the directors so that gives you a general sense of the directors now I want to turn to the scope of responsibilities and I've noted here where there's some similarities between the Bank United States and the Federal Reserve where we are the government's bank right here at the Federal Reserve Bank in Minneapolis we are the site that provides the the distribution and servicing of Treasury security savings bonds and alike on behalf of the country so that's a role that we play among others as a government's bank the Federal Reserve the Bank United States had some more even more governmental functions like the collection of taxes took place by the Bank United States just so you know I'm not collecting tax so if you get a call from somebody saying you have not paid your tax and you should send it to this money this place that is not for me in fact that's a scam if you don't know public service announcement the IRS will not call you on the phone tell you that you owe the money nor would the Bank of the United States do that because as you know there were no telephones at that time so public service announcement completed so those are some similarities where there are some differences are in areas like monetary policy the concept of monetary policy was really not part of the Bank United States they weren't thinking in terms of the economy they weren't thinking in terms of interest rates they weren't thinking about the dual mandate of employment and inflation that really guides a Federal Reserve this is a picture of Jay Powell the chair of the Federal Reserve people know Janet Yellen was Jay Paul's predecessor prior to that Ben Bernanke so probably names that are ringing a bell to you as I mentioned next week is the FOMC meeting and almost always those are Tuesday and Wednesday of any given week the announcements tipping typically taking place on Wednesday next week because of elections it's going to be Wednesday and Thursday so you'll see that Federal Reserve announcement on Thursday whatever it is and of course I would not tell you what that was even if I know and I don't know what that's going to be so monetary policy is a key part of the Federal Reserve's were all that was not part of the Bank United States and then Bank regulation this is a picture of Randy Randall Quarles who's the vice chair in charge of supervision at the Board of Governors and the Federal Reserve is responsible for supervising member banks these are state member banks that's also super charged with supervising bank holding companies and firms in this area that might spring to mind is organizations like TCF and US bank the Federal Reserve is responsible for supervising the holding company but not the bank itself the bank itself in those cases supervised by the Office of the Comptroller the currency of the Treasury Department so we have a key role Bank Bank regulation and then in the area of payment systems this is a picture of Lael Brainard also abort board member and the Federal Reserve has responsibility for the distribution of currency and coin you saw that if you did the tour we have cash coming in we count it we sort it we make sure that it's not counterfeit will you make sure that it's not worn too much and then we just packaged it up and distribute it out to for the institution on an order on an orderly basis an order basis we also help facilitate large payments between banks and we act as a banker for the government so Lael is the key role on the number as a keynote role and a number of Fed committees including those responsible for payments clearing and settlement a couple other highlights I want to touch on and then we'll open it up to some I guess we should do something about the dual pretty soon so let's maybe turn to that next I wanted to dimension that there were there were financial statements the Bank United States actually had financial statements back in the 1800s the Fed does a lot more of that and we get audited if anybody has a question our finances our audit our former chief financial officer is here you tired in the end of June Paul Rimmer I'd and Paul would tell you that we're audited several times over our current external auditors KPMG what's not audited was not reviewed in the way that it's expressed this way as people say the monetary policy process the Federal Reserve is an independent one so that's for good reason that's going to be another conversation with the Fed down the road but that part of the process isn't but in terms of our securities portfolio our cue step numbers for our securities are all online there's a great deal of transparency and also transparency in terms of monetary policy process meeting minutes are published the chair holds press conferences after FOMC meetings and chair Polo's actually increase the amount of transparency to associate with the FOMC I've touched on stability earlier the Federal Reserve was really born out of crisis 1907 was a significant run on banks significant financial crisis and when formation the Fed closely followed that after a huge study by Congress and others to facilitate the process of the formation of fat in 1913 I'm gonna skip over the discount window function because we have to talk about Aaron Burr we haven't had a chance to talk about it much yet in in Hamilton and burr are forever linked through their 1804 burrow duel and Berle was born in 1756 so he's either one year younger one year older than Hamilton he was he was extraordinary also in the Revolutionary War he was an officer in the army he served in the war it's a successful lawyer successful politician he served in the New York State Assembly was a New York Attorney General served as US senator he's got an impressive resume to be clear there was a little bit of an issue in 1800 there was a bit of a battle between Burr and Jefferson tied in electoral college goes the House of Representatives Hamilton even though Burr was kind of a Federalist puts his name behind Jefferson and says you know what you should vote for Jefferson so thought of that that was maybe the turning point why Jefferson our third president knighted States and not burn then in 1804 burr runs for governor of New York and guess who shows up again so Hamilton shows up again in 1804 supports burrs opponent burr losses again see a pattern here I think we do well Hamilton pretty close to burn policy he didn't support him because he thought burr was in it for himself he felt that burr ought not to be trusted with the reins of government in some ways a duel isn't the most interesting part of the history between these two the two sort of notoriously exchanged a series of letters prior to the duel they were very gentlemanly about this process it wasn't just show up and take it take a shot eh there's not like the Old West there's a there's a process and the whole idea was that they'd engaged in this time-honored process often largely to avoid being in a duel a series of letters that I thought about putting up here but then I thought what some were contemporaneous contemporary contemporary way rather to describe the duel so I've asked Joel man one of our economists to come up here where are you Joel to help me out and Joel is gonna play Aaron Burr so Aaron Burr sir so the modern day of doing the duel Twitter war am i right okay ten paces alright sir I was going to be President to the United States and then I was going to be New York Governor and you got in my way dude you get in your own way and I only said that Jefferson was by far not so a dangerous man admittedly I did call you a mister mischievious enemy but we had a history and not a bad one we both served in the Continental Army yeah in Washington pick me as a decamp it must be nice to have Washington on your side I spent my time in the field not at a desk a ham I remember a time when I saved you and your crew at the Battle of Long Island that was a long time ago before you ran against Phillip Schuyler and for Senate in one and you know Schuyler was the father of my beloved Eliza Angelica and Peggy okay but we both founded banks and I know they are very important and you know they're very important for commerce true and you know how I like banks but yours was a Water Company disguised as a bank though and we were both New York lawyers in fact worked together in a pretty famous case yes but you took the credit like you always do you mean like when you represented Mariah Reynolds in our in her divorce of James following our situation that's the PG PG version of that and you were also Monroe's second in a dual challenge when I asked him to believe my version of the Reynolds affair well at least I didn't write a pamphlet about her and you you made your bed so to speak that affair only lasted five hundred twenty-five thousand six hundred minutes wrong musical bro I just don't believe you're good for the country no offense you have a peculiar talent for saying things improper and offensive and have been constantly I have been constantly deceived and it became impossible for me to forbear and the last straw well it goes something like this Charles Cooper was at a party when you slammed me saying that the Federalists should not support me for New York governor said and then Cooper told your father-in-law that you expressed a despicable opinion about me you know this sounds so high school yeah maybe but while we can have policy differences personal affronts are a big deal duel worthy even let's hear it for Joel man Wow Aaron bird serve well you probably know the rest of the story Byrne Hamilton along with their seconds in a physician a few others rode across the Hudson to weehawk in New Jersey the night before Hamilton writes a letter to Liza to be delivered one day after his death remarkably his letter in his last will and testament or actually published a week after his death in the New York newspapers so the whole letters between Burr and Hamilton are published wherever and all over the place and Hamilton really establishes his position about what happened what what he was trying to do during the book they're doing the dirt doing that during the duel rather Hamilton and burr didn't Mark out their ten paces and the duel took place at this almost the exact spot in Weehawken where Hamilton's son Philip had died just three years earlier Hamilton told a second that he intended to satisfy both as religious principles and honor by not firing similar advice that he told Philip the first hands that count disagree a bit about when the two shots were fired well it appears as though Hamilton fires a shot intentionally above burr burr takes only one shot hits Hamilton and the just above his waist and Hamilton then says you know hey it basically throws away a shot as a result of that about his position Hamilton knew it's a mortal wound he's rode back across the Hudson back to his home spends about 30 days there 30 hours there rather and dies so
e dies on July 12th 1804 at age 49 there's an outpouring of remorse at his tie at the time and of course because of Hamilton's visionary thinking America at the time as the highest credit weight rating in the world his wife Eliza is very focused on Hamilton's position his standing in history and really spends the rest of her time in addition to founding a key Orphanage in New York City really maintaining Hamilton's Liggett legacy and moving it forward want to close with a couple comments about the fact that we think that Hamilton's legacy is really present in today's Federal Reserve as you hopefully heard tonight so in the core attributes of the way Hamilton's Bank the Bank United States began some of the key principles are today if President the Federal Reserve System made better through the Federal Reserve Bank of Minneapolis and through the Federal Reserve System more broadly formed through legislation that goes back signed by Woodrow Wilson back in 1913 in his legacy of public service still stands today in the employees in the directors and officers of the Federal Reserve Hamilton found his calling in public service these attributes are still instilled here in the Federal Reserve and yes bold ideas like Hamilton had still live here in the Fed if you want to learn more about some of those bold ideas go to Federal Reserve Minneapolis Fed org we can read about if you haven't already some of our too-big-to-fail plan Center for Indian country the opportunity for industry its inclusive growth and others I want to close there with a few words of appreciation my research for this talk was supported by people in our research department or research library especially Sarah brand L also thanks to genting song one of our law clerks that was here over the summer from the University of Minnesota and finally Pat Hillman who's right here did a lot of the work on the presentation so I want to express them particularly thanks to Pat I want to also thank all of you for coming and hopefully learning a little bit more about Hamilton and I hope you those of you took the tour enjoyed it if those are interested in taking a tour feel free to take my card and send me an O it and I'd be happy to help work to set one up I want to close with something from Hamilton's play in the immortal words of King George the third and Hamilton Moran is Hamilton on behalf of the Federal Reserve we hope that you will be back all right I left just a few minutes for questions and I'd be oh my goodness thank you please so we do have we have a microphone so Carmy when the federal government assumed the deaths of the states and other deaths I assume some of those deaths were two soldiers who had served in the Continental Army and never been compensated that's at that time were those deaths trading at par and who were the benefit who were the holders of those deaths yeah no it's interesting there was basically a set of script that would be passing around that the debts were in some ways monetized so someone could take their debts in and sell them to somebody else and I think when there was serious questions about whether those debts would be paid as you might expect there's a lot of variation in what those prices were as a became more clear that the debts would be paid those were sold closer to par your other point is a good one and about the like an in in any war in a military service taking care of those that that gave their lives to their country and many who suffered injury there was also an effort to try to provide compensation to soldiers during those periods of time and people could make basically make their case of the government those following a Revolutionary War which Hamilton's wife did Hamilton was not paid what he should have been for his war service neither was burr so each of their spouses made claims for payments on behalf of their of their husbands so just a certain point there's another question thank you Bob sure did Hamilton draw on any models from the past or was all of this catch-as-catch-can yeah thank you Bob they're the probably the closest model was the bank the Central Bank of England and so there was an intent to and so many aspects of Hamilton's Bank in fact some of the words of the bylaws of Hamilton's Bank were drawn fairly directly from the Bank of England but there were some key differences as well and in particular this in that's where Hamilton the Bank of England did not have this concept of branches so Hamilton was thinking we should we should have more power concentrated in the hole back to the main office so the director is really focused on the branch idea and that's something that carried forward to the Federal Reserve System I didn't want to have power concentrated in Washington the idea that we have reserve banks we have contributions to the monetary policy process that takes place in the regional Reserve Banks so I guess the closest model would be the Bank of England and there have been other central banks that have been around for a while as well yeah other questions well I'm gonna stick around for a bit happy to take others thank you so much for coming the Federal Reserve banking [Applause]
