Anna Melo:

Welcome to Inside the Ice House. I am joined today by some folks from BNY. I'm joined today by Brooke McManus, the archivist at BNY. Thank you for joining us today.

Brooke McManus:

Thank you for having us.

Anna Melo:

And I am also joined by Jordan Romanoff, who is the senior director and senior managing counsel at BNY and the co-head of the Intellectual Property Artificial Intelligence and Innovation Legal Team.

Jordan Romanoff:

I know it's a mouthful, but thank you so much for having us and we're excited to be here.

Anna Melo:

So we are here to talk about the past, but I want to start by talking about the present. So tell me, who is BNY today and what do you guys do?

Jordan Romanoff:

Absolutely. So BNY enables the world's financial markets and nearly all of the world's leading financial institutions rely on our infrastructure. We're probably wealth well known for our custody business and we have approximately 60 trillion in assets under custody and/or administration. It's a big number. It's hard to think about and put that into reality, but 60 trillion. But we also are the primary trade settlement provider for the US Treasury market. We are the largest collateral manager and securities lender. We have leading payments and liquidity franchises and we provide investment management, wealth management, and foreign exchange services globally.

Anna Melo:

Oh, very diverse. A lot of plates spinning.

Jordan Romanoff:

When you've been around as long as we have, we have a number of different platforms and ways we serve our clients around the world and that all comes together under BNY. In addition, we're also here today to talk about some changes that we've had with you guys and with the New York Stock Exchange. And we are excited about the change to our stock ticker, which has been around for a very long time and we'll talk about that later from BK as the first ticker on the New York Stock Exchange representing Bank to BNY, which is our current global brand.

Anna Melo:

All right. Making big changes too.

Jordan Romanoff:

Making big changes.

Anna Melo:

Very cool. So as we already mentioned, we are here to not just talk about modern times, we're also here to talk about history. So both of our mutual stories began in the late 1700s. So let's go ahead and set the scene and talk a little bit about that time and about where BNY began, where it came from. So just putting it all out there, in 1784, America was a brand new nation with a struggling financial situation and New York City was a shell of its former self. What role did BNY's founding play in supporting the city and the nation as a whole?

Brooke McManus:

So as you mentioned, New York finance is not in great shape. There were several fires which distorted many buildings. They've been occupied by the British for a number of years and merchants were really frustrated. Situation was not going that well for them. So when BNY was founded, the point of the bank was really to support local merchants, New York merchants. So as they always did, a group of gentlemen met at the merchant's coffee house. They had put out a notice in the newspaper saying calling for gentlemen to discuss founding a bank. And so they met and they formed this bank. They elected 13 directors among them Alexander Hamilton and a president who was among 13 directors as well. And what was different about BNY is that it was a specie bank instead of a land bank. So we backed by specie. And at that time, there was not a lot of worthwhile paper money.

You've heard that phrase, not worth a continental, but there was also a specie shortage. So BNY's idea was to have a reserve of specie and then their notes would be backed by that so people could trust them. So that was their initial approach. And there's a number of reasons that they told the state legislature in their first petition for charter that they felt that a bank would be useful. First of all, it was for merchants. It was a reliable institution that you could count on the specie being there. They would assist with money negotiations, but also it could be the foundation of public and private credit and to lend to the government, which we'll talk about soon in times of crisis.

So that was really sort of the point of the bank starting. And Alexander Hamilton was never really anything but the director, but he also wrote the Constitution because we did not get a charter for another seven years because people were very suspicious of banks. They thought that they would serve a small elite, not serve the general population. So Hamilton wrote this constitution and he really had strict principles. They would be, the books would be balanced, dividends paid and importantly, no overdrafts. So that's how we started out. So the point was solvency, transparency, reliability.

Jordan Romanoff:

All themes which are true today and we'll continue to talk about this morning.

Anna Melo:

Yeah. So even starting out for new diverse. And there's just something auspicious about groups of gentlemen meeting in New York City in the late 1700s, isn't there?

Jordan Romanoff:

Yes.

Anna Melo:

So as the archivist, you work with the physical collection and I know that you work very closely with a lot of really exciting historical artifacts. And one of the ones that you mentioned to me earlier was your 1784 stockholder book. So what does that first stockholder book represent and what does it tell us about BNY's early investors?

Brooke McManus:

Well, BNY was capitalized with only gold and silver that was a specie bank. It's capitalized with $500,000, 1,000 shares, 500 each and-

Anna Melo:

Good deal.

Brooke McManus:

Most people owned one or two shares, but there were some merchants who were wealthy enough to own 10 shares. But it wasn't really that diverse. It was really merchants and lawyers. So this very powerful group of men in New York who were the early stockholders, really only men. But then eight years later, the New York Stock Exchange was founded and we, as you mentioned, were the only bank in New York, so articulate was BK. And by that time, the base contract had expanded. So you see early insurance companies, the chamber of commerce, charitable groups and women. So one woman I've mentioned a couple of times in our archives tours, which we give to clients is [inaudible 00:05:58], and she owned a tavern on Wall Street. So it started to be a little bit more diverse. And then by 1884, 40%, almost 40% of our stockholders were women. So women were represented starting in 1792. If you look through those stockbooks, there's a woman on every single page and then as it went on, sometimes women owned more than their husbands did. In 1922, Eleanor Roosevelt owned 10 shares and FDR only owned six.

Anna Melo:

Oh, wow.

Jordan Romanoff:

I know you and I talked about that briefly when we were preparing for this and that 40% number is really astounding. It's a very cool part of our history.

Anna Melo:

Yeah, that's very impressive, especially considering the time and the place.

Jordan Romanoff:

Exactly.

Anna Melo:

Yes, it took us a lot longer than that. But going back to your archives, because again, as the archivist, you're always working with these collections, you're always showing these collections. And something that we also have a lot of are minute books and minute books are so much more exciting than people seem to think because you can discover so much just looking through a book of minutes. And looking back at your early minute books, what kind of decisions was your board making and how did that impact the bank as it was evolving in its very earliest years?

Brooke McManus:

Well, the minutes start in 1791 when we finally received our charter. So those early minutes, sometimes it was just basic day-to-day stuff. The board got together and we're paying our dividend or they would elect new directors, but it also showed both the work with the government, those government loans and also loans to individuals. So that was part of as a retail bank, which we aren't today, part of what they were doing was lending, not just to the government but to small businesses. So a mill owner upstate who lost his mill in a fire, they would lend to him. So it would record those decisions, yes or no decisions. And they did not at that time, one of the reasons the bank was reliable and successful is that they did not issue long-term loans. It was their short-term loans only one to two months.

Anna Melo:

Smart.

Brooke McManus:

So that interest built up and that's why they always had money in the bank. So they would make loans like that, but also it just showed decisions when we were in times of crisis. So like mentioning government loans, the quasi-war in 1798, war of 1812, there was concerns during those conflicts that New York carbon might be burned or that there'd be an impact on the merchants. So that was the time when the Bank of New York would step in and provide loans. But as time goes on, technology evolves, the banking industry involves more banks started to arrive in the city. So you also see them working with other banks. In the 19th century, there was an informal committee of banks. So when financial panics would come along, they would decide as a group to suspend specie payments and they would decide what is good for us as a group in New York. So it showed them working with other banks so that they were loaned for a while and then started to move forward with other banks, but also HR stuff basically.

Anna Melo:

Go on.

Brooke McManus:

They would vote to give somebody a bonus for his years of service, or if someone died, they would vote to give money to the family. So things like that. I mean, it's the mundane but also major things as well, major decisions.

Anna Melo:

All hidden away in those books of minutes.

Brooke McManus:

All hidden in a way with no index. So you just have to look through and see what's going on.

Anna Melo:

I understand that. So you mentioned crisis and crises and the kind of inception, the very earliest years of the Bank of New York was in the midst of a crisis. And I want to talk about that crisis right now. So back when the young nation, young America was holding roughly $80 million in debt after the American Revolution, we were only taking in about $162,000 in tax revenue. So clearly there was an imbalance there. So what steps did BNY under Hamilton's vision take in order to turn the country's finances around?

Brooke McManus:

Well, so this is the time that what the markets envisioned, this part where they would give government loans and support the federal government. This is when that kicked in. So Hamilton negotiated, once he was sworn in as treasury secretary, one of his first acts of business was to negotiate a $200,000 loan from the Bank of New York. So that's 200,000. We always show warrant number one, which is one of our cornerstone documents of the collection and that is the first $20,000 ever loaned to the federal government and that came from BNY. And this loan really helped them meet their immediate financial obligations, but it also gave Hamilton some breathing room, bridge financing so that he could move forward with the other parts of his program, reforming the tariff system, creating a central bank, assuming state debts and improving our reputation abroad, making us seem more creditworthy to other nations. So that was really what that provided for.

Jordan Romanoff:

It's a very cool piece of our history. I've seen it.

Brooke McManus:

Yes.

Anna Melo:

Hamilton was talking to a lot of different parties and working with a lot of different parties during his tenure as secretary and your records show a lot of correspondence and collaboration between Hamilton and the Treasury. So what does that tell us about market building in the early and trust building in the earliest days of American finance?

Brooke McManus:

Sure. So BNY, as we mentioned, acted as a lender, but they also acted as an intermediary, which is a service that we still provide today. So they helped Hamilton in addition to the loans with fulfilling some of his other financial visions. So we talked about referring the tariff system. BNY was a depository for tariffs that were collected in New York and there are letters in our collection where he's giving these very specific instructions. As we've mentioned, it's all about transparency and reliability and integrity. So there's letters like that. He also relied on BNY for things like when he was trying to create the National Mint and his report on the National Mint, he asked banks to assay the metallic content of their vaults. So he was thinking about creating a biometallic currency standard for gold and silver. So we have a fun letter where he's asking William Seton to hire some goldsmiths and assay the contents and then send him the results.

And at the end of that letter, there's a little postscript where he asks him to give this French [inaudible 00:12:32], known [inaudible 00:12:33], sorry, no more than $100 for a project that Eliza was working on. So that's not something we would do today in our email, but a little bit of a personal-

Anna Melo:

She cut off.

Brooke McManus:

Yes. So you can see that it was a personal relationship with Seton, but I think more importantly, they helped during times of financial panics. So when the Bank of the United States was just Hamilton's baby was established, they had their IPO essentially and there was a real rush on the stock. People were really excited about it and that eventually led to speculation. Speculators got involved. And so that drove prices up. And then when the bubble burst, the bank stock prices dropped, but so did US debt security.

So we were going to be heading into a serious financial panic and that was in the late summer of 1791. So Hamilton had debt quickly. His idea was to have banks buy US debt securities on the open market. So there are letters in the collection, a number of letters in the collection where he's saying, "Can you advance $150,000 to buy debt securities?" And then it worked, market stabilized. And then of course a month later it started up again. Again, he asked for that and then it went again in 1792, which the panic of 1792 was a little bit better known. So again, he relied on the Bank of New York to buy US debt securities and shows how quickly he acted and he could rely on the Bank of New York.

Anna Melo:

So as much as I would love to spend this entire podcast in the mid to late 1700s, we do need to move it a little bit forward and talk more about the emergence of global markets, the kind of thing that we're seeing today. So I have often heard you say, "We keep money safe and route it through the market, often unseen, always essential." What are examples of that role in action?

Jordan Romanoff:

Sure. So we operate a number of different platforms that this kind of ties into. Let's talk about payments, for example. So like I mentioned at the beginning of this, we have a very large payment business where we are moving money around the world constantly. It's not generally retail consumers. It's not someone logging into an app on their phone necessarily and saying, "I'm moving money from me to you. Thank you for buying me dinner." But it's institutions that are moving money around the world and that kind of money movement is so important. It's what allows for payroll to happen at large corporations around the world. It's what allows for financial institutions to have the right levels of liquidity and it allows for governments and other institutions to make sure they can support their programs and their initiatives. So that is a really good description of us that we're moving money, we're safeguarding money and we're doing so in that transparent and responsible manner that Hamilton envisioned quite a long time ago.

Anna Melo:

So as a curator, I work with a lot of physical objects. So I'd like to talk about the power of physically present history. You mentioned that you do a lot of tours of the archive. And so I want to hear about how curated archival tours like exhibits in the New York City and DC offices, how do they help clients connect your heritage to the modern infrastructure?

Brooke McManus:

Well, so you mentioned our New York office, we have a brand new exhibit that showcases warrant number one and that correspondence I mentioned from the 1790s and that, we worked with the treasury today. So it's really great when you first walk in on the executive floor. If you're having a meeting with our CEO to be able to look at that older material and see, you can say we're the first lender and that's very abstract, but if you actually see warrant number one, then you can see the beginning of our history with the treasury. And Jordan mentioned payments. Another example is we do offsite exhibits for events. So payments is one recent example of an exhibit that I curated and it's hard because we were a retail bank and we are no longer a retail bank, so we're trying to find these connections.

So for payments, back in the day, interbank payments were very different. You have to get on your horse and go bank to bank and then that evolved into the New York Clearinghouse, which BNY was one of the founding members of. Clearinghouse also rented space from us in the mid 1800s. So this exhibit showed that movement from there to there. And then finally last year, I think we had the largest real-time payment ever of $10 million. So being able to link those past materials to the present I think is really important and fun for clients. Usually we have a few laughs talking about our debts and Hamilton. And so I think it's just a really good way to connect our heritage to the present.

Jordan Romanoff:

And it shows the breadth and depth of our history. And based on that history, we've seen financial crises, we've seen wars, we've seen other geopolitical issues around the world and we're still here. And that's one of the things that makes us unique among American banks around international banks is our legacy and our history and the fact that we're still providing some of the same services today that we did 240 years ago. In addition to many others.

Anna Melo:

Legacy history and longevity.

Jordan Romanoff:

And longevity.

Anna Melo:

No, there really is something powerful about physical objects, about the actual original object, being able to walk in and see that document that you put in that case and be like, "That's the document, that's the one." I always get a lot of people feeling that way about the Buttonwood agreement. And I know that you've definitely expressed that you sometimes have guests come in and ooh and ah. There's a physical power to it. And especially in the days of very seamless, you're talking about that enormous transfer, seamless communications, you don't really see the physical presence of it anymore. So linking it back to something that present, that physical is, I think, very powerful.

Brooke McManus:

Yes. And also it helps them envision just what humans were doing back then. Some of my favorite things are the dividend books because back in the day people would actually have to physically go to pick up their dividend and you have to sign for it. So we have all these dividend books with John Jay's signature, Horatio Gates' signature, the signature of women who were stockholders. So it's really amazing that every six months you would have to send yourself or your lawyer to go physically pick that up and bring it home or put it in the bank, I guess.

Anna Melo:

I think I'll probably appreciate my dividends more if I had to go and pick them up every single time.

Brooke McManus:

Yeah, it's a little bit more visual and it's not less abstract.

Anna Melo:

So that's moving into the modern era, but let's talk a little bit about the future. So what part does BNY play in the modern re-imagining of market infrastructure across tokenization, resilient books and records and data-driven operations?

Jordan Romanoff:

Absolutely. So we do and want to continue to connect the different parts of the financial ecosystem and make markets work better. So we do that today and we will continue to do so in the future by combining the fact that we move money, that we safeguard money right through our custody business and others and that we service money. And when I say money, I mean assets of all different types and we do that with new technology. We do that in a way that is data-driven with the goal of everything being connected, more transparent, efficient, and resilient. So you mentioned tokenization. So let's talk a little bit about digital assets and blockchain.

So we were the first US GSIB to offer digital asset custody. That shows that we've been on this roadmap of connecting the traditional and digital finance for a number of years. Tokenization is one part of that, but overall we believe that blockchain and digital assets can help increase efficiency, faster settlement, more transparency in the creation of a 24/7 market. So BNY is not in the place where tokenization digital assets are going to replace everything else in this world. It's a way of connecting the two to make sure we're serving our clients and meeting their needs in this new era.

Anna Melo:

It's diversifying the portfolio as it were.

Jordan Romanoff:

Absolutely.

Anna Melo:

All right. Very interesting. And going back into a little bit of the past, books and records have now become modern data caches and modern correspondence. So how do your books and records serve as a historical through line from the days of handwritten ledgers to modern, resilient data infrastructure, how does this enable faster, more certain settlement to have that through line?

Jordan Romanoff:

So the traditional, if you want to touch on what our books and records have looked like to today, obviously digitization is a part of who we are. We wouldn't be in the position we are today if we were still relying on paper records for everything. And taking that through to tomorrow is again, back to blockchain. So we are looking and exploring ways around having books and records on chain and by having books and records on chain that enables that transparency, it enables faster settlement in this 24/7 connected world. So there's almost traditional digitization and then that there's what we're moving to going forward and we haven't even started talking about AI.

Anna Melo:

What milestones should we be watching for next as digital market infrastructure matures?

Jordan Romanoff:

As regulatory frameworks have continued to evolve, we're seeing more industry participants and other financial institutions embrace blockchain and digital assets. And the more institutions and the greater that ecosystem is, the more it's going to play a role in the broader international financial market ecosystem. I know that's a lot of use of the word ecosystem, but it's important because the more players, the better, the bigger and the more that it's going to be utilized. So I think we see a lot of potential over the next several years now that again, we have some of that regulatory clarity and we're very excited to work with other financial institutions in this space and the clients to help them meet their digital asset needs.

Anna Melo:

So today AI is everywhere. So you knew you were going to get this question.

Jordan Romanoff:

I did.

Anna Melo:

What is BNY doing with AI?

Jordan Romanoff:

So BNY has been on an AI journey for many, many years before ChatGPT, before generative AI exploded. Machine learning, which is still important, particularly important in financial markets has been a part of our framework. But yes, of course, we are excited about generative AI. We believe in the potential of AI to transform financial services, financial markets. And because of that, we created our AI hub, which brought together engineers and data scientists and AI practitioners from around the bank into one core group that is transforming ideas into reality. We created a platform, a proprietary AI platform called Eliza named after famous philanthropist and wife of our founder, Alexander Hamilton, and use that to take ideas from prototype into production. It's our lens into our governance framework. It's how employees access AI every day. All employees have access to Eliza and they can use it to transform their day-to-day work to build their own agents and to learn about how to use AI in a way that's going to be productive for them and for BNY.

Brooke McManus:

Yeah. So you mentioned Eliza and I use Eliza a lot to turn archive speak into words that regular people can understand. I'm a user of Eliza.

Jordan Romanoff:

That's great.

Brooke McManus:

Even for rewriting emails.

Anna Melo:

She's at the store.

Brooke McManus:

Yes. So after Hamilton died, he was in debt. He did own quite a bit of land, but he was $60,000 in debt.

Anna Melo:

Which is impressive at the time.

Brooke McManus:

Yeah, that was impressive. How he managed to do that, I don't know. So his friends, his brother-in-law, John B. Church and friends got together and established what is thought to be the first family trust in the United States. And it was kept secret for 125 years, but all of his friends got together and bought up subscriptions for this trust. And so because of that, they didn't lose the Grange, Eliza and her children were able to stay in their home. So that's a good way to honor Eliza, I think.

Anna Melo:

Yeah, absolutely. And could still go to Hamilton Grange today?

Brooke McManus:

Exactly.

Jordan Romanoff:

Yeah. She's a part of our legacy and she has become a part of our future with AI. Our CEO has said many times, AI for everyone, everywhere and everything, that is a part of our mantra and we are all constantly exploring how to embed AI into our day-to-day and how do we use it with clients? How do we use it with part of the broader financials markets? We're really excited about it.

Anna Melo:

As much as I've loved this discussion, let's go ahead and wrap this up in a nice neat little bow. So across 241 years, BNY's ledgers record not just transactions but participation and trust. Can you give me a few examples illustrating that human dimension?

Brooke McManus:

Yeah. So in addition to business transactions, there are also a lot of meeting minutes regarding philanthropic transactions. So when Philadelphia had a really disastrous yellow fever outbreak in 1793, BNY loaned Richard Varick, then the mayor the money to give to Philadelphia to help the poor citizens who, I mean, everybody who could got out of there, but a lot of people couldn't. So they lent money and you see them, there are other natural disasters, fires, earthquakes in the 19th century, they would donate money to that. So I like seeing things like that in addition to just the regular business transactions. And you think there's national support, but there's also a little bit more of a civic angle to it.

Anna Melo:

Yeah, local support.

Jordan Romanoff:

And I'm going to take us back to AI again because trust, transparency, responsibility, that's a part of using AI in the modern world. And a couple of years ago, we published our commitment to the responsible and ethical use of AI. If we're going to embrace these new technologies, we have to do it in the right way. So that trust and that transparency and that responsibility lives on.

Anna Melo:

If you could leave listeners with one key takeaway about trust participation and the promise we carry forward, then what would it be?

Jordan Romanoff:

So those themes that Hamilton envisioned 241 years ago are what have brought us here today with you, with our clients to BNY's role in the larger financial ecosystem and it's what's going to carry us forward for another 241 years.

Anna Melo:

Amazing. Thank you guys so much for taking the time to join me here at the New York Stock Exchange today and talk a little bit about your history and a happy 241 years moving forward.

Jordan Romanoff:

Thank you so much. Thank you for having us.

Brooke McManus:

Thank you so much, Anna.

Speaker 4:

That's our conversation for this week. Remember to rate, review, and subscribe wherever you listen and follow us on X @ICEHousePodcast. From the New York Stock Exchange, we'll talk to you again next week inside The Ice House. Information contained in this podcast was obtained in part from publicly available sources and not independently verified. Neither ICE nor its affiliates make any representations or warranties express or implied as to the accuracy or completeness of the information and do not sponsor, approve, or endorse any of the content herein, all of which is presented solely for informational and educational purposes. Nothing herein constitutes an offer to sell, a solicitation of an offer to buy any security or a recommendation of any security or trading practice. Some portions of the proceeding conversation may have been edited for the purpose of length or clarity.