American Civilization

Well, in the midst of the current economic instability, I had a chance to visit the Federal Reserve Bank of San Francisco earlier this week. The Federal Reserve Bank is sometimes thought of as the government’s central bank.  And, no, it’s not where all of the money is made; that’s the Bureau of Engraving and Printing.

But, the Fed does get to destroy “damaged” money and we got to see the rooms where that occurs.  Needless to say, it’s all under very heavy guard.  When a couple of my colleagues put their hands in their pockets, the guard asked them to take their hands out of their pockets!  I’m not sure why that was such a big deal…

There are actually 12 federal reserve districts of this massive central bank.  And, San Francisco is the headquarters of the 12th district.  Included in the 12th district are nine states:  California, Oregon, Washington, Idaho, Nevade, Utah, Arizona, Alaska, and Hawaii.  Also included are the Northern Mariana Islands, Guam, and American Samoa.

The Federal Reserve is supposed to have 3 main functions.  First, it’s supposed to conduct monetary policy, specifically to promote maximum output plus employment and to promote stable prices.  Secondly, the Fed is supposed to supervise financial institutions.  Our guide admitted that perhaps the Fed might have been doing a bit of a better job with its regulatory role in the last decade or so. And, finally, it’s supposed to conduct the nation’s payment systems; that’s all of those checks and electronic transfers in circulation.    In these days, the Fed seems to have taken on a fourth duty:  to be the bank of the “last resort” for all of those financial institutions in trouble.

The Fed has been structured to an independent institution - that is, in theory separate from the realm of politics.  However, there is close coordination between the bank and the U.S. government.

I was surprised to learn that the Fed actually makes money and annually deposits that profit in the U.S. Treasury.

If you’d like to learn more about the Fed Reserve Bank in San Francisco, click here.