Part III

READING

GOLD" – THE FEDERAL RESERVE BANK OF NEW YORK

Introducing the topic. Discuss these questions with another student, then with the class.

1. What is the Federal Reserve Bank? Fort Knox? Why do people enjoy visiting these places?

2. About how many dollars’ worth of gold is stored at the Federal Reserve in New York? Who owns the gold at the Federal Reserve Bank in New York? Why is it here?

3. How do you suppose security works at the Bank?

“GOLD” – THE FEDERAL RESERVE BANK OF NEW YORK

Fifteen years ago, we visited the main gold vault of the Federal Reserve Bank of New York, on Liberty Street, and were told that in twenty years the gold might be gone. We went back to check the other day, and we can report that the hoard is still there – a hundred and fifty-five billion dollars’ worth now, or an amount equal to the 1988 federal-budget deficit. It’s a rambling rampart of gold – eight hundred thousand bars, weighing eleven thousand tons, on bedrock eighty feet underground. And, surveying it, while armed guards surveyed us, we couldn't help thinking that if President Reagan had stood where we were standing he might have got a better handle on the problem of the deficit. The President can go into Fort Knox anytime he wants, but even Fort Knox doesn't have as much gold as the Federal Reserve Bank. The hoard was stacked behind bars, in a hundred and twenty-two cells, which filled an area the size of half a football field. The bricks were the size of bread loaves. Some had a pinkish cast, left by traces of copper in melted-down jewelry and coins, and some had a whitish tinge, from impurities. Most looked beat up, scratched, or nicked – not polished and sparkling, the way they look in cartoons. “Gold is exactly like a cake,” our guide told us. “After it’s poured into molds, it falls as it cools, and wrinkles. And those nicks aren’t from people scratching for gold dust – that only gets you broken fingernails. That’s where assayers cut off a corner to determine purity and quality. Later, the corners are melted into small ingots, nicknamed Hershey bars.”

None of this gold belongs to the United States. The Federal Reserve Bank of New York has been keeping gold for foreign governments since before the Second World War, we learned. “America is geographically isolated, it hasn’t been invaded recently, and it’s considered politically sta­ble,” our guide explained. “So eighty governments safeguard their reserves here. Actually, the Fed loses money on this vault – there’s no charge for storage. Any time Brazil buys kangaroos, say, from Australia and can’t pay in Australian or U.S. dollars, instead of sending a hundred million dollars in gold halfway around the globe on a plane it moves a hundred million dollars in gold a few feet, to Australia’s pile.”

He pointed to some workers pulling bullion on a pallet and being trailed by three men in business suits. “Those three fellows following are representa­tives of different divisions of the bank. Any time gold is transferred, they watch to make sure it gets where it’s going, and then unlock the door of the appropriate cell. Each man knows the combination of one of three locks on the door, so it takes all three to open a cell. When a country’s assets are frozen – remember Iran? – we put another padlock on the cell, and no gold goes in or out.”

The workers were wearing giant metal boots, and we asked why. “See all those dents in the concrete floor?” our guide said. “Those are from rows of gold bars toppling over. If a worker dropped a bar, he’d lose a foot without those boots. They’re made of magnesium – lightweight but strong.”

We were ushered into one of the cells, and our guide said, “Hold your breath – you’re going to be standing next to eight hundred million dollars.” In the cell was a stack six feet high, five feet wide, and twelve feet long. We figured that it could fit in a good-sized family van.

Leaving the main vault as we had entered it – the only access is a ninety ton cylindrical passageway that sinks slightly and rotates to barricade the gold at night – we peeked into an aux­iliary vault next door. This one was surreal – a bright, white room whose rear wall was gold, stacked fifteen feet high. This gold was more freshly smelted, and it shone.

What happens if a country has a coup, we asked. Could the new regime demand that its reserves be sent home?

“That’s up to the country’s central bank,” our guide said. “Theoretically, it could, but it has never actually happened.” He added, “In an emergency, the whole building can be shut down in twenty-five seconds. The elevators seal off and return to ground level, the stairways seal shut, hundreds of silent alarms light up, and the one-ton remote-controlled teakwood front doors, on Liberty Street, close automatically. The building has enough private police to protect a small city, and a target-practice room where they are tested once a month.”

The Federal Reserve also freshens up our banknote supply, we learned as, locked in a room on an upper floor, we watched millions of dollars disappear into machines that counted and sorted the bills and shredded any too far gone to recirculate. The shreds are sold for many things, among them bedding for thoroughbred horses.

Comprehension

In this reading from the New Yorker magazine, the writer describes a visit to the main gold vault of the Federal Reserve Bank of New York. This writer seems to visit about every 15 years.

Read through the questions. There is one per paragraph. Then, as you read the selection, take notes to answer the questions.