An amazing speech by Richard Fisher, Head of Dallas Fed. He speaks on the history of Dallas Fed and how Dallas became a place for one of the regional Feds amidst stiff competition.
In 1913 when Fed was formed, talks began on which cities will become regional Fed members:
After Congress passed the Federal Reserve Act in December 1913 and President Wilson signed it, cities around the nation immediately started competing to be the home of a Federal Reserve Bank. The act established a Reserve Bank Organization Committee to select “not less than eight nor more than twelve” cities to host a Reserve Bank. The secretary of the treasury, comptroller of the currency and secretary of agriculture were designated to serve on that committee.
Dallas, Fort Worth and Houston all expressed interest in a Reserve Bank, as did New Orleans. Across the nation, more than 40 cities wanted a Federal Reserve Bank.
Among Texas cities, Dallas was the odds-on favorite. Fort Worth made a pretty good effort, despite having only 73,312 residents—some 5,000 less than Houston and well short of the 131,278 of the population of Dallas. However, Fort Worth’s representative may have been tripped up by being a tad parochial: He noted that they had 13 rail connections. Asked by a member of the Reserve Bank Organization Committee if one of those connections was to Dallas, the spokesman replied, “Yes, but we seldom use it.”
But no Texas city had the inside lead held by New Orleans: At the time, it was the 15th-largest city in America, had a population over three times larger than Dallas and had an active financial community centered on Mississippi River commerce. Besides, any official worth his salt would have rather been wined and dined at Galatoire’s or Antoine’s than at any eatery in what was then Little—rather than Big—“D”.
What tilted it in Dallas’s favor? Vision and leadership:
Dallas, however, had something that New Orleans did not have—a force of nature named George Dealey. Mr. Dealey was the publisher of the Dallas Morning News. In manner and character, he was quite the polar opposite of New Orleans’ “laissez les bon temps rouler”ethic. Dealey lived by the dictum that “men who exist get overrun by men who act.” When he learned of the potential of hosting a Federal Reserve Bank, he enacted a no-holds-barred action plan to secure the franchise for Dallas.
The story of how a train ride where key Dallas officials convinced that Dallas was the place to be:
Dealey organized a pro-Dallas rally in Washington. He encouraged studies to make the case for our city. He lobbied the Reserve Bank Organization Committee. These were the visible parts of his campaign. He applied his most effective techniques sub-rosa: He adroitly harvested his friendship with an influential member of the Wilson administration—Postmaster General Albert Burleson—with an eye to ultimately convince the secretary of the treasury, William McAdoo.
Burleson was a native Texan, with whom Dealey often corresponded through coded telegrams, using names like “Mercury” and “Tacitus”—the Dallas Historical Society has those original telegrams, along with other artifacts relating to our founding, on hand tonight. Thanks to a man named Otto Prager—the postmaster of Washington and a loyal former Dealey employee—Mr. Dealey heard that Burleson would be traveling by train from St. Louis to Dallas. So he dispatched Dallas Morning News reporter Tom Finty and Dallas Clearing House executive Howard Ardrey to St. Louis. There, they boarded the train and “accidentally” ran into Postmaster General Burleson. By the time the train arrived in Dallas, Burleson was convinced that our city deserved a Federal Reserve Bank.
At Dealey’s urging, Burleson contacted Treasury Secretary McAdoo and argued the merits of selecting Dallas, backed up by this document here, pulled together by the Dallas Chamber, the Dallas Clearing House and the Dallas Cotton Exchange.
Superb tale of accidental meetings..
The document pitching for Dallas was superbly written. It used stats and numbers in best possible ways:
Perusing this document, one gets a glimpse into Texas bravado and the art of promotion: As I mentioned, there were only 131,278 people residing in Dallas versus 339,075 in New Orleans. But, the document noted, Dallas had grown by 116 percent between 1900 and 1910 and by 41.7 percent in just the four years from 1904 to 1909—versus a measly growth rate of 18 percent for New Orleans in the decade and a decline of 3.6 percent during the same four-year period. “Within 100 miles of Dallas,” the document claimed, “there are 1,486,041 people which is 24,582 more than there are within 100 miles of Kansas City.” Kansas City and St. Louis were both considered shoo-ins for hosting Federal Reserve Banks, so the document went on to note that “Dallas has the largest telephone development per capita of any city in the United States” and “leads the world in the manufacture of cotton gin machinery and in the manufacture of harness and saddlery” and “sells more goods … than either St. Louis or Kansas City, and particularly surpasses them … in automobiles, cement, drugs and groceries … hats and caps, machinery, paper, petroleum products [and] paints and oils.”
Our own Bob Strauss could not have contrived a more aggressive sales pitch. Ebby Halliday could not have packaged it and sold it more skillfully. And even Lyndon Johnson couldn’t have more adroitly harbored and then played the trump card that Dealey and Burleson held deep in their pockets: Treasury Secretary McAdoo. They knew his preferences and style and honed their message to him, so much so that when the hearings were over, McAdoo remarked privately that, “Whoever prepared this brief did a damn good job and knew what the word ‘brief’ means.” Secretary McAdoo was not only a key player on the Reserve Bank Organization Committee, he was married to Woodrow Wilson’s daughter. He decided for Dallas and, voilà, we were selected as the headquarters for the 11th of 12 Federal Reserve Districts.
Some primer on US Fed currency notes:
You will notice the “11-K” that is printed on its face. The letter “K” is the 11th letter in the English alphabet; hence, this is a “Dallas” or “Eleventh District dollar.” To this day, dollar bills ordered and circulated by the Dallas Fed feature prominently the letter “K” on their face, surrounded by two concentric circles. The outer circle says “Federal Reserve” and “Texas,” and the inner circle says “Bank of” and Dallas.”
He points to this interesting case when the Dallas Fed intervened to stem a bank run. This is quite similar to the recent crisis as well:
In 1920–21, the nation experienced a brief depression. One of my favorite stories of the period occurred in May 1921 at the Security National Bank, not too far from where we are dining this evening. A rumor spread that the bank was in trouble, and it suddenly was being overrun by panicked customers withdrawing their money. They called the Dallas Fed for help. Just in the nick of time, the chairman of the Dallas Fed, W.F. Ramsey, showed up in an armored car with guards and hauled a quarter-million dollars into the lobby where everyone could see it. Ramsey jumped on a desk and shouted across the crowded lobby that there was $30 million more sitting in the Fed’s vault down the street, so they could quit panicking. That ended the bank run.
I tell that story to our current chairman, Herb Kelleher, and his eyes sparkle. I can just see him doing the same thing, except he would more likely have declared that there were 30 million bottles of Wild Turkey down the street, so they should quit fretting and join him for a drink!
In a sense, what Ramsey did at that bank in 1921 is pretty much what the Federal Reserve did in 2008–09 to prevent a collapse of the financial system. Rather than having Ben Bernanke or me and my counterparts in the 11 other Fed banks running in to banks and jumping up on desks, the Fed created lending facilities such as the term auction facility, the primary dealer credit facility and the term securities lending facility, to stem the fear and panic that threatened global economic collapse. Those actions were a little more sophisticated than what W.F. Ramsey did in 1921, but the concept is pretty much the same. Money and banking, in the end, is a confidence game, and our job at the Federal Reserve is to preserve confidence.
He closes comparing Dallas Fed then and now. he even shows how Texas has outpaced US and Other Regional Fed states> it even has higher growth rates than other resource rich countries.
Superb stuff from Fisher..