Fed 'factory' keeps Baltimore, country in the money


Think of it as a money factory.

For at the heart of the Baltimore branch of the Federal Reserve Bank of Richmond, Va., is a system of financial processing that helps maintain both the city's and the nation's economy.

Although best known locally for issuing U.S. savings bonds and selling Treasury securities, the Fed in Baltimore actually works as a conduit between consumers and commercial banks.

Among its many duties is to process and clear business and personal checks, recirculate cash and coins and identify counterfeit currency for more than 600 banks, thrifts and credit unions.

The Fed branch, part of the Federal Reserve's Richmond-based 5th District that includes Maryland, Washington, Northern Virginia, West Virginia and North and South Carolina, also contributes information to the bank's board in Washington regarding potential fiscal and monetary policy changes.

Surrounded downtown by Oriole Park at Camden Yards to its north, the $150 million expansion of the Convention Center and townhomes to its south and west, the Baltimore branch at 502 S. Sharp St. has for years been shrouded in secrecy behind a black iron gate, a symbol of both its impenetrability and unwillingness to deal with the public.

But that may all be changing.

"We want to eliminate the mystery surrounding the Federal Reserve, and let people know what our role in the community is and how we contribute," said Jack Turnbull, the Fed branch's assistant vice president of business development.

To that end, the Fed branch has begun a series of lectures intended to better inform the public, and plans to become more accessible.

The banking industry's feverish consolidation has also played a role, since the Fed branch competes with large financial institutions for fees from services such as check clearing.

With fewer but more powerful financial institutions in its service area -- down more than 100 from a decade ago -- the Fed has had to work harder to compete for business with the remaining banks.

"Banks are telling us they want us to be more of an active participant in the future of the industry, and that's what we intend to do," Mr. Turnbull said. "In the past, at times we could be quite passive. The banking industry has undergone so much change, and we need to recognize that we need to change too."

It is also working to keep costs down. In April, the Fed branch completed an early retirement plan aimed at trimming its work force. Thirty-six of the branch's 420 workers took the government up on its offer, including the head of the branch, leading to the appointment of William J. Tignanelli as senior vice president and head of the branch.

Despite the cuts, the amount of processing done by the Fed branch is staggering. On a daily basis, the local bank's check assembly line processes 1.8 million checks -- roughly 40 percent of all checks written in the 5th District -- and 4 million bills valued at more than $200 million.

The branch processes the bills in order to relieve bank vaults and possibly serve as a deterrent to robbery. Financial institutions low on cash also order bills from the Fed branch.

During the processing, each bill is checked to determine if it is counterfeit. Of all the notes monitored, only about 20 bills per week turn out to be fake, Fed officials said.

The check processing allows withdrawals and payments to be made on an interstate basis, thanks to a steady stream of trucks and airplanes that ship paper to Fed bank branches throughout the United States on a nightly basis.

In practical terms, the Fed branch's speedy processing of a mortgage payment check from a local bank that is mailed to a lender in Iowa eliminates confusion over which party has access to the funds and allows for a multitude of transactions.

In Baltimore, the site of the Fed's first check-clearing operation in 1969, high-speed equipment provides the ability to process as many as 2.5 million checks on busy days.

Created by Woodrow Wilson in 1913 in the wake of a Wall Street panic that almost toppled the nation's banking system, the Fed's central banking system operates through 12 districts nationwide. It is overseen by a seven-member board of directors who attempt to regulate both growth and contraction in the economy through control of interest rates and other fiscal policy.

The local branch, established in March 1918 at the corner of Redwood and South streets, began with just 29 employees.

In 1928, the Fed branch took up residence at 114-120 E. Lexington St., in a six-story building complete with machine gun turrets for security. Today, the Lexington Street building -- expanded to 11 floors resulting from the Fed branch's growth -- serves as the headquarters of Provident Bank of Maryland.

Security is no less of an issue at the Fed branch's 260,000-square-foot Sharp Street building, with electronic key cards, locks, cameras and other devices augmenting armed guards.

The Fed branch moved to Sharp Street in 1982, forced to vacate Lexington Street because of growth and a surge in responsibilities.

And its responsibilities continue to evolve. Although in years past the Fed branch conducted fund transfers through electronic wires, issued savings bonds, accepted tax payments and sold Treasury securities, today only the latter is conducted in the Baltimore branch. Wire transfers, for instance, are now done in Richmond.

"The Federal Reserve as a system is re-engineering, downsizing, and becoming more efficient," said Vice President Margaret M. Murphy, a former Johns Hopkins University professor and economist.

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