Good Morning, everyone. And happy birthday, to everyone here, and to our colleagues on evenings, and nights, and in Windsor Locks, for whom we are taping this gathering.
Thank you all for helping the Bank to serve the public for 90 years, and to begin our ninety-first.
We share a rich history. I’d like to take a brief backward glance with you, to look at how we began, and how we’ve changed. And I’ll mention just a few important ways in which we have not changed.
Our origins were pretty humble. On that first day, November 16, 1914, the Bank had 17 employees.
We rented some office space, just two rooms, at 101 Milk Street.
For office equipment, we had two typewriters and one telephone.
There was a lot of doubt about whether the Federal Reserve System would succeed. And there was some resentment among the banks in New England that had to hold reserves with us, and had to purchase our stock.
One new member bank that purchased stock subsequently reported that stock in its financial statements as having no value.
For several years our operations were very small. Today our Cash Services Department processes over eight million pieces of currency each day, and recently has been exceeding nine million. We see the many armored trucks coming in and going out with cash all morning and into the afternoon. In the early years, we sent cash to the New England banks through the mail. Each night we were able to bring our entire day’s output to the Post Office in the back seat of a taxi.
In Check, Boston and Windsor Locks together handle close to three and a half million checks daily. The first day we collected checks, in 1915, we handled 226. By the end of the year we still handled fewer than 2,000. Our breakthrough came in the summer of 1916, when the banks in the Boston Clearing House asked us to take over their “Foreign Check” department. By “foreign” they meant checks drawn on New England banks outside of Boston.
Our volumes were low, and since each check had to be sorted by hand, we got to know our work rather personally. One woman saw a check for a million dollars, and took it home to show to her mother. We can imagine the consternation she encountered the next morning.
We started humbly, but things changed a lot as time passed. In fact, when you look at our history, you see continuous change.
We had two growth spurts brought about by World War I and World War II. To finance both wars, the U.S. Treasury had to issue unprecedented amounts of debt. This meant thousands of large-value securities, and millions of savings bonds and even savings stamps. For much of the required paperwork, record-keeping, and issuance and redemption of securities, the Treasury turned to the Federal Reserve. Our Bank, which started with 17 people, by 1919 had 219 just for Treasury work.
During World War II, the Bank had about as many employees as it has now. And more than 80 percent of them did Treasury-related work.
We can take two insights from this history. First, the Treasury has been very important to our Bank, as our principal customer, for as long as we have existed. Think today of how important the Stored Value Card and Internet Payment Platform programs are to us.
Second, we have managed to reinvent ourselves quite a bit over the years. As the Treasury’s needs changed, and technologies changed the work, we moved on to meet new needs, for the Treasury, for the banks, and for the public. A lot of old jobs went away over the years, and a lot of new jobs came into being. We are going through such transformation now, and our history shows that we have done it before.
The advent of computers in the 1950’s and 1960’s led to enormous changes, and our IT people continue to work with our business people to lead such changes. Today our Wholesale Payments Department supports half the banks in the country that use the Federal Reserve’s funds transfer and securities transfer services. We enable banks to move over 2 trillion dollars a day, with each transaction taking less than a second. Years ago, these were called “cable transfers”. We transferred funds by sending coded messages by telegraph.
We have changed in so many ways. Think of how the Internet, and email, have changed how we work, and how we communicate. When we opened in 1914, the world did not even have radio.
In 1922 an employee was excited to report on how he sent a message by radio from Boston to Salem, New Hampshire. His message was relayed from one amateur operator to another until it reached Nashua. From there, someone telephoned the recipient to complete the delivery. Now we send messages across the world in seconds, through the Internet infrastructure managed for the Federal Reserve System by Boston.
Banks used to be confined to doing business within state lines, even within county lines. Today’s banking structure is more and more national, even international. Banks and bank holding companies are engaged in lines of business that were unimaginable in our earlier days. As a result, our work in bank supervision, regulation, and credit has changed a great deal. Basel, Switzerland is a long way from Suffolk County, Massachusetts. However, much of what is important about the regulation of large financial institutions is being formulated under the auspices of the Bank for International Settlements in Basel. So, our people spend time in Basel, and in other countries, to learn, and to be leading contributors to the new regulatory regime.
Currently Property Management is developing a master plan for our use of the space in this building. It turns out that space planning has kept us busy for most of our 90 years. In fact, that office at 101 Milk Street where we started only lasted two months. In January 1915 we moved to 53 State Street, to get more room, but also to rent some vault space from the State Street Safe Deposit Company, a predecessor of today’s State Street Bank. So, the central bank’s vaults belonged to one of our member banks.
Soon we outgrew those quarters, had to rent space in three additional locations, and ultimately decided to build our own building. In 1922 we moved into 12 and 30 Pearl Street, now the Langham Hotel.
That building accommodated us for a good while, but the expansion that came with World War II again gave us capacity problems, and forced us into rented space in other locations.
After the war we committed to a new building, which was attached to 30 Pearl Street and opened in 1953. Now, surely, we had enough space for the long run.
Actually, no. Continued growth in paper processing in numerous areas, and the space required for the first generations of computers, which were very large, had us bursting at the seams again. So we began to plan for another new building, and we moved in here during 1977 and early 1978.
When you look at this history, you can understand why our predecessors built this building so large. And by building in this location they made a great contribution to Boston.
We’ve changed a lot across our 90 years. Meanwhile, some important things have not changed. I’d like to note three of them briefly.
First, the Bank always has served the public interest, especially in our New England region. In the 1950’s our Research Department played a central role in providing research and analysis to support the case for public and private initiatives to transform the local economy. We highlighted the need to move away from textiles, shoes, and other traditional industries, toward activities such as electronics, that were more likely to do well by leveraging the strengths of our academic resources and educated workforce.
In the 1970’s we provided analysis of Massachusetts state financial plans, that added credibility at a time when the state really needed it to be able to issue bonds.
Mayor Menino mentioned some of the more recent ways in which the Bank has tried to act as a good corporate citizen. And in 2005 we are launching a new research center on behavioral economics, and a New England Public Policy Center. These will be our newest ways to serve the public.
Second, we have been blessed with great people throughout our 90 years. We were not quite 5 years old when the Boston Police went on strike in September, 1919, and violence and vandalism took over the downtown streets. Fifty employees volunteered to join our protection force and stay in the Bank overnight, with weapons, to protect us.
In many difficult times since, we have made it through because we had terrific people, as we do in 2004. We’ll never take that for granted. Today is a nice occasion to say thanks.
And finally, the Bank has not been just another place to work. We have had more of a family feeling than most companies have.
In the autumn of 1944, an employee wrote to the Bank’s men and women overseas: “There has been a great deal of activity in the Mail Room this past month, due to the mailing of Christmas packages to Bank personnel in the service.... By now they are on their way, and each and every one of you will be getting one in time to enjoy it for Christmas. We get a kick out of sending them, and we hope you get a kick out of receiving them.”
This family spirit shows when one of us has a death or illness in the family, and our Bank family gives us support. It shows when the Federal Reserve Society, which began in 1918, brings us together for fun events. It shows when we hold the annual holiday luncheon for retirees, and people retired for 10 years, 20 years, even more, come back to be with their friends. It is not like this in most places. It’s wonderful that it is like this here. That’s another good reason to say, Thank you. And again, Happy Birthday!