FEDERAL RESERVE BANK OF NEW YORK

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Liberty Street entrance to the Bank flanked by fixtures crafted by metalworker Samuel Yellin. Yellin was awarded a $300,000 commission by the Bank to complete the wrought iron decorative work in 1920. Today the ironwork is priceless. (2001)

The Fed's three-story high cash storage vault is the size of a football field. If filled with $100 bills, it can hold a total of $350 billion. The large cash vault is unmanned. Robots are used to transport cash. (1992)

GUARDIAN OF THE GOLD

The gold stored at the Federal Reserve Bank of New York is secured in a most unusual vault. It rests on the bedrock of Manhattan Island one of the few foundations considered adequate to support the weight of the vault, its door, and the gold inside 80 feet below street level and 50 feet below sea level.

In the middle of 1997, the Fed's vault contained roughly 269 million troy ounces of gold (1 troy oz. is 1.1 times as heavy as the avoirdupois ounce, with which we are more familiar), representing 25 to 30 percent of the world's official monetary gold reserves. At the time, the vault gold's value was $11 billion at the official U. S. Government price of $42.2222 per troy ounce, or about $86 billion at the market price of $319 an ounce. At the current official U. S. Government price, one of the vault's gold bars (approximately 27.4 pounds) is valued at about $17,000. At a $319 market price, the same bar is worth about $127,000.

Foreign governments and official international organizations store their gold at the Federal Reserve Bank of New York because of their confidence in its safety, the convenient services the Bank offers, and its location in one of the world's leading financial capitals.

Confidence results from the Bank's being part of the Federal Reserve System -- the nation's central bank and an independent governmental entity. The political stability and economic strength of the United States, as well as the physical security provided by the Bank's vault, also are important factors.

Convenience comes from the fact that the Federal Reserve Bank of New York, in addition to handling foreign financial transactions for the U. S. Department of the Treasury and the Federal Reserve System, executes many other financial transactions in the United States for foreign central banks.

The attractiveness of the Bank's geographic location is that gold deposited in the trade and financial capital of the world's largest economy enables countries to engage in transactions of all sizes easily, quickly, and inexpensively.

THE BANK STORES GOLD...

The Bank stores gold in the form of bars that resemble construction bricks and stacks them on wooden pallets like those used in warehouses. To reach the vault, the bullion- laden pallets must be loaded into one of the Bank's elevators and sent down five floors below street level to the vault floor. The elevator's movements are controlled by an operator who is in a distant room and communicates by intercom with the armed guards accompanying the shipment.

Once inside the vault, the gold bars become the responsibility of a control group consisting of representatives of three Bank divisions: Auditing, Vault Services, and Protection. A member of each division must be present whenever gold is moved or whenever anyone enters the vault.

All bars brought into the vault are inspected and weighed. These steps are critical, because the weight and purity of a bar determine its value and acceptability in International transactions. A modern electronic balance scale weighs each bar to the nearest 1/1000 of a troy ounce. The vault control group verifies the weight, serial number, and purity measure stamped on each bar against an accompanying manifest

AN INDISPENSABLE SECURITY SYSTEM

Storing almost $86 billion of gold makes extensive security measures mandatory at the New York Fed. An important measure is the background investigation required of all Bank employees. Continuous supervision by the vault control group also prevents problems from arising by ensuring that proper security procedures are followed.

The Bank and its vaults are guarded by the Bank's own uniformed protection force. Periodically, each guard must qualify with a revolver on the Bank's firing range. Although the minimum requirement is a marksman's score, most qualify as experts. In addition, the Bank's guards must be proficient with other weapons. Security also is provided by closed-circuit television monitors and by an electronic surveillance system that alerts the central guardroom when a vault door is opened or closed. The alarm system can signal guards to seal all security areas and Bank exits, which can be closed within seconds.

The gold also is secured by the vault's design, which is a masterpiece of protective engineering. The vault is actually the bottom floor of a three-story bunker of vaults arranged like strongboxes stacked on top of one another. The massive walls surrounding the vault are made of a steel-reinforced structural concrete.

There are no doors into the gold vault. Entry is through a narrow ten-foot passageway cut in a delicately balanced, nine-feet-tall, 90-ton steel cylinder that revolves vertically in a 140-ton, steel-and-concrete frame. The vault is opened and closed by rotating the cylinder 90 degrees. An airtight and watertight seal is achieved by lowering the slightly tapered cylinder three-eighths of an inch into the frame, which is similar to pushing a cork down into a bottle. The cylinder is secured in place when two levers insert large bolts, four recessed in each side of the frame, into the cylinder. By unlocking a series of time and combination locks, Bank personnel can open the vault the next business day. The locks are under "multiple control" no one individual has all the combinations necessary to open the vault.

The weight of the gold - just over 27 pounds per bar - makes it difficult to lift or carry and obviates the need to search vault employees and visitors before they leave the vault. Nor do they have to be checked for specks of gold. Gold is relatively soft, but not so soft that particles will stick to clothing or shoes, or can be scraped from the bars. The Bank's security arrangements are so trusted by depositors that few have ever asked to examine their gold.

ABOUT THE FEDERAL RESERVE BANK OF NEW YORK

The Federal Reserve Bank of New York, 11 other Reserve Banks, and the Board of Governors in Washington, D.C., make up the Federal Reserve System, the central bank of the United States. The Board of Governors, which serves as the System's governing body, consists of seven governors nominated by the President and confirmed by the Senate. One of the Governors is appointed by the President to be chairman, the highest post in the Federal Reserve. The chairman of the Board of Governors also is chairman of the Federal Open Market Committee (FOMC), the group of Federal Reserve officials who determine monetary policy.

The Federal Reserve Bank of New York serves the Second Federal Reserve District (each of the 12 Reserve Banks serves a geographic District in the United States). The Second District encompasses New York State, the 12 northern counties of New Jersey, and Fairfield County, Connecticut, as well as Puerto Rico and the Virgin Islands. The New York Fed and the other Reserve Banks supervise and regulate state-chartered banks that are members of the Federal Reserve System, and all bank holding companies and foreign bank branches and agencies based in their Districts. Each Reserve Bank provides services to depository institutions in its District and functions as a fiscal agent of the U. S. Government.

The Federal Reserve Bank of New York has several unique responsibilities within the Federal Reserve System. Besides conducting open market operations (the buying and selling of U. S. Government securities in order to influence bank reserves and the availability of credit in the economy) to implement monetary policy at the direction of the FOMC, the Bank performs important international central banking functions. For example, the New York Fed engages in foreign exchange intervention on behalf of the U. S. Treasury and the Federal Reserve System. It also maintains relations with, and provides financial services for, foreign central banks. It is in conjunction with this role that the Fed serves as custodian for the gold reserves of foreign official and international accounts. Additionally, it invests the dollar reserves of those foreign customers in marketable U. S. Treasury securities. As of mid-1997, it held in custody over $630 billion of such securities.

January 10, 2005 

On View for Public Coveting 

By GLENN COLLINS 

The 1933 $20 gold piece at the Federal Reserve Bank. 



Until last week, the world's most expensive coin was hidden in the world's most valuable gold vault. 

That is to say, in the brilliantly lighted blue-and-white stronghold of E Level, the deepest sanctuary of the Federal Reserve Bank of New York, the city's bank of banks. 

The coin was locked in a compartment at bedrock, 80 feet below Liberty Street in Lower Manhattan, surrounded by $90 billion worth of gold bars - some 550,000 of them - from 60 foreign institutions. That is more gold than at Fort Knox, and indeed, more than in any other repository. 

This exceedingly rare United States $20 gold piece, the $7.59 million 1933 double eagle, will be placed on public display today in the ground-floor exhibition space of the Fed's massive iron-barred neo-Florentine fortress of a building at 33 Liberty Street. 

For more than a year the double eagle had been on view there in a free exhibition, "Drachmas, Doubloons and Dollars: The History of Money." But in August the coin was spirited to the subbasement after a sudden Orange Alert from the Department of Homeland Security, which warned of "casing and surveillance activities" against major United States financial institutions. 

For the double eagle's return from the underworld, The New York Times was granted rare permission to enter the vault on a recent morning as the coin was transferred, after agreeing not to describe the bank's security arrangements or print the names of its subterranean guardians. 

Among those present were: three federal officers with automatic weapons. The archivist of the bank. A senior vice president of the bank. The head of the American Numismatic Society. The coin owner's representative. The coin's historian. A vault keeper. An auditor. A custodian. And yes, the two carpenters who actually did the work. 

This, then, was the retinue monitoring the transport of the double eagle, a 34-millimeter-wide, 0.96-ounce stamped disk that is 90 percent gold and 10 percent copper. The length of the journey was but five floors: from the vault to the street-level exhibition space. 

The coin-storage compartment - itself guarded by multiple locks - was adorned with a fragile paper seal, "just as I left it on Aug. 2," said Rosemary Lazenby, the bank's archivist. "Afterward, we kept it down here for the Republican convention, and then there was the election." 

The doors swung open. The coin winked smartly in the light, along with 11 other rare specimens from the exhibition that had been mounted on a plexiglass display panel. Immediately there were inspections by Ms. Lazenby, the auditors and David Redden, a vice chairman of Sotheby's, the auction house where the coin was sold for a record price on July 30, 2002. He represents the coin's still-anonymous owner whenever it is moved. 

Also scrutinizing the treasures was Ute Wartenberg Kagan, executive director of the American Numismatic Society, which is the co-sponsor of the exhibition, along with the Federal Reserve. 

Two carpenters, Cosimo Marolla and Joseph Palus, lifted the coin into a shiny rubber-wheeled steel cart and began trundling it along the dented vault floor. (The dents are from gold bars that were inadvertently dropped by vault wranglers in the decades since the building was completed in 1924. These days, handlers wear steel-toed shoes plus $500 magnesium shoe covers to protect feet from accidentally plummeting 27-pound ingots.) 

Soon, then, members of the coin posse began watching the double eagle (and each other) as it was transported in the vault elevator up to the bank's exhibition level. 

There, Mr. Marolla and Mr. Palus buffed the inch-thick mounting panel with Precision Glass Cleaner, and hoisted the coins into the hyper-secure centerpiece vitrine in the exhibition room. The total value of the 12 rare coins within - estimated from $15 million to $25 million - makes it, said Dr. Wartenberg Kagan, "without doubt the most valuable coin case in the world." 

An hour and a half after the vault seal was broken, the coin was reinstalled, to be displayed indefinitely. "It's good to see it returned to its home," Ms. Lazenby said of the double eagle, which is on long-term loan to the Fed. The $7.59 million price of the double eagle, which included a 15 percent commission to the auctioneers, "is the record for a United States coin," said Beth Deisher, editor of Coin World, the largest weekly coin publication, in a telephone interview from her office in Ohio. 

But the double eagle is on display not only because of its record price - twice the previous record for any coin - but also for its Maltese Falconesque history. 

The coin's story only recently came to light thanks to documents unearthed during a five-year legal battle over its ownership. At the suggestion of President Theodore Roosevelt, the sculptor Augustus Saint-Gaudens designed the coin, called a double eagle because its face value was twice that of a $10 gold piece bearing the depiction of an eagle. It was first minted in 1907. 

When the United States came off the gold standard in 1933, all the double eagles manufactured that year were ordered destroyed, save for two reserved for the Smithsonian Institution. None were declared legal currency. 

But presumably after being stolen by a mint employee, one of the 1933 coins was believed to have been conveyed to the legendary coin collection of King Farouk of Egypt - legally, thanks to a United States Treasury export license that had been mistakenly granted. Ultimately a 1933 double eagle came into the possession of a London dealer, who was arrested by Secret Service agents in a sting operation while trying to sell the coin in Manhattan in 1996. 

A bitter court battle - over whether the coin could be legally owned, thanks to the Treasury's export-license blunder - was at last resolved in a compromise when the mint declared the coin to be the only 1933 double eagle ever to be legally issued by the United States. The proceeds from its auction were then split between the dealer and the government. 

There may be other 1933 double eagles that have never come to light, said David Tripp, a rare-coin consultant who wrote the original Sotheby's exhibition catalogue as well as the definitive history of the coin, "Illegal Tender: Gold, Greed and the Mystery of the Lost 1933 Double Eagle" (Free Press, 2004). But the one on display at the Federal Reserve "is the only one that is legal to own," said Mr. Tripp, who was present at the bank during the unsealing. 

Coin-collecting gossips have ceaselessly speculated about the identity of the double eagle owner, nicknamed Mr. Big by auction buffs. 

"We know of no one in the coin world that the owner has talked with," said Ms. Deisher. "We have put out teasers to the owner that we'd love to interview him or her, but we haven't been contacted." 

By permitting the coin to be publicly displayed, Ms. Deisher said, "clearly the owner is generous and thoughtful, and has a sense of history and wants to share it with the public." But it is also smart of the owner to entrust the coin's security to the full might of the federal government, she said. The closest anyone has come to making off with gold from the New York Fed were the fictional villains in the 1995 action film "Die Hard With a Vengeance." They were, naturally, foiled by Bruce Willis. 

"If the double eagle is the Mona Lisa of coins," Ms. Deisher added, "then the analogy is public display in the Louvre. That keeps the painting before the public eye, and helps give it the value that it has."  

Copyright 2005 The New York Times Company 

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