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 notes.

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 policy.

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