Federal Reserve Bank Tour
By S. Scott Seamands, CPA
Toward the end of November, our chapter arranged a private tour of the Federal Reserve Bank of San Francisco for our members. The tour was very educational and fun—particularly when we were in a room containing an amazing U.S. currency collection dating back to bills printed or engraved by Benjamin Franklin and Paul Revere. One interesting $5 bill was only in circulation for a few weeks during 1896 before it was removed because Lady Liberty was displayed partially undraped!
I’ll take this opportunity to provide some highlights of our morning with the Fed, since this was one example of the many benefits that CalCPA members enjoy when participating in our group activities.
We watched pallets of used bills being loaded onto counting machines and a sharp-eyed woman examining bills rejected by the machine as potentially counterfeit. More than $56 million in used bills are shredded each day. At the end of the tour, everyone received a bag of shredded currency.
Cynthia Course, a CPA and principal in the Division of Banking Supervision and Regulation, provided an overview of the Federal Reserve’s responsibilities in these areas. Banks elect to be supervised by either the Fed, the FDIC or by the Office of the Comptroller of the Currency. Although banks cannot disclose their rating, these three agencies publish a list of banks with severe problems that are under observation as a public service. The Fed also processes checks and electronic transfers for banks for a fee.
But the most high-profile job of the Federal Reserve is to adjust the supply of money let into the market, with the objectives of lowering both unemployment and inflation. The three ways they do this are through adjusting member banks’ reserve requirements, setting the federal funds interest rate and through purchase and sale of Treasury securities in the open market.
Evidently, the Herculean efforts of the workers we saw shredding bills are not enough to even justify mentioning in this list. Even the legal structure of the Fed is interesting: It’s formed as a nonprofit organization and not owned by the U.S. government, although any surplus remaining at year-end is given to the U.S. Treasury. Our local Federal Reserve district is one of 12 in the United States and, when it’s time to vote, Ben Bernanke has only one vote along with each of the other board members. We heard that whereas Alan Greenspan always voted first, Bernanke always votes last.
Our group consisted of CalCPA members in public practice and private industry. Many thanks to Cynthia Course and the team at the Federal Reserve Bank of San Francisco for arranging a great event for our members. I think everyone enjoyed our morning. I’m still working on my baggie of shredded bills with a glue gun.