Magical Mystery Tour: The New York Federal Reserve

The New York Federal Reserve Building. Photo: Creative Commons license. by Ahsan Sayed, Colin Powell Center Fellow

My first thought when approaching the imposing limestone structure was Gringotts! The impenetrable fortress that houses all the gold of the witches and wizards in the world of Harry Potter could have very well drawn inspiration from the New York Federal Reserve building. Its interior is jealously hidden behind an edifice of thick brick, wrought-iron window grills, and a multitude of security guards, all of which make for an effective symbol of power.

I had joined other Colin Powell Center fellows and Coordinator Michael Busch for a special tour of the building, along with its vault, which is nestled five stories underground on top of Manhattan bedrock. The vault houses the world’s largest reserve of gold, worth nearly $360 billion. In addition to the sovereign gold bullion of nearly 60 nations, the building stores enough cash to run all of Manhattan for an entire week.

But there has been long-term speculation that all is not golden at the Federal Reserve. Various conspiracy theories about the central bank, a quasi-governmental agency, challenge the availability, as well as the validity, of the gold supply.

Germany, the world’s second largest owner of gold, recently called in its reserves of the precious metal, nearly 300 tons, with aims to have it returned by 2020. Meanwhile, after longstanding pressure from lawmakers, most notably by Libertarian Ron Paul, a former Congressman and presidential candidate who served on the House Banking Committee in the 1980s, the Treasury Department conducted an audit of the New York Federal Reserve's holdings in 2012. Completed last August, this audit included drilling into bars to test the purity of the gold. The Fed had refused all past attempts at audits, which leads to an obvious question: why? The speculation is that the Fed has used the gold as collateral for many other lenders. So it cannot yet give all the gold back. By calling in its gold, Germany may also be signaling its doubts that the U.S. dollar continues to be a trustworthy currency for reserves. Despite the hard Manhattan bedrock upon which the vault rests, it seems many continue to doubt the central bank's foundation is solid.

As we departed, I looked up at twin lamps affixed to the front entrance, each the size of an adult human being. Shrouded in so much secrecy, I couldn’t help feeling I had just toured a Kafkaesque castle, situated right in the center of New York City.