1995 Annual Report: From the Boardroom
||From left, James A. Vohs, Deputy Chairman;
Patrick K. Barron, First Vice President; Robert
T. Parry, President; and Judith M. Runstad, Chairman.
This Annual Report traces the history of U.S. currency, drawing its photos
and graphics from our Bank's collection of currency, which dates from
the Civil War era. Our Bank is fortunate to have such a collection, and
in 1996, we will install a permanent historical exhibit in the lobby of
our San Francisco headquarters to display many extremely rare and interesting
The history of U.S. currency is a timely topic for this Report as the
Reserve Banks begin supplying financial institutions with the newly
designed Series 1996 Federal Reserve notes. This is the first major
design change in U.S. currency since 1928. Prior to that time, as this
Report shows, bills were redesigned frequently, often to commemorate historic
events, scientific advances, and national figures.
With the introduction of the Series 1996 notes by the U.S.
Treasury, the United States will continue to honor the older series
notes at full face value. However, as these older notes are returned to
Reserve Banks during the normal course of business, we will replace them
with the new series notes.
In establishing the Federal
Reserve System in 1913, Congress sought to accommodate fluctuations
in the demand for cash by the public and the banking system. Distributing
and replacing coin and currency is, in fact, one of the Reserve Bank's
key responsibilities, and one that has grown dramatically. For example,
the value of currency in circulation rose from $31.2 billion in 1955 to
more than $416 billion in 1995.
When commercial banks and other depository institutions need to replenish
their supply of currency and coin, they place an order with a Reserve
Bank or Branch in their area, and the face value of that cash is charged
to their accounts at the Federal Reserve. When the need for currency and
coin declines, banks return excess cash to their local Reserve Bank, which
in turn credits their accounts.
The Reserve Banks and the U.S. Treasury share responsibility for maintaining
the quality of paper currency. Each day, millions of dollars deposited
with Reserve Banks are carefully scrutinized. Currency in good condition
is stored for later distribution. Worn or mutilated notes are removed
from circulation and destroyed, and counterfeit notes are forwarded to
the U.S. Secret Service.
In addition to our role in supplying the nation's currency in circulation,
the Reserve Banks play a key role in the formulation
of monetary policy. It is in this regard, in particular, that we would
like to thank our Twelfth District directors for their invaluable counsel
during 1995. Their independent assessment of economic and financial conditions
throughout our nine western states is critical to the formulation of sound
In addition, we send our sincere appreciation to those directors who
completed their terms of service during 1995: on the San Francisco Head
Office Board, Carl J. Schmitt (Chairman, University Bank & Trust Company,
Palo Alto, CA) and E. Kay Stepp (Principal and Owner, Executive Solutions,
Portland, OR); on the Los Angeles Branch Board, Steven R. Sensenbach (President
and CEO, Vineyard National Bank, Rancho Cucamonga, CA); on the Salt Lake
City Branch Board, Daniel R. Nelson (Chairman and CEO, West One Bancorp,
Boise, ID); on the Seattle Branch Board, Emilie A. Adams (President and
CEO, Better Business Bureau Foundation, Seattle, WA); and, on the Federal
Advisory Council, Twelfth District Member Edward M. Carson (Chairman of
the Board (Retired), First Interstate Bancorp, Los Angeles, CA).
(Signed) Judith M. Runstad, Chairman, and
(Signed) Robert T. Parry, President