After the Federal Reserve System was founded in 1913, the new Reserve Banks needed a way to effectively communicate with the banks in their districts. The primary form of communication they used, for most of the Fed’s history, was mailed bulletins and circular letters. These correspondences contained important information on banking supervision and regulation, discount rates, and general community development, as well as instructions in response to various financial and social events in the United States.
FRASER has a large collection of these materials available for research, and in this blog post we look at corresponding communications and historical gems from the Federal Reserve Bank of Chicago Bulletins and Circular Letters, District Notices of the Federal Reserve Bank of Dallas, and the Federal Reserve Bank of New York Circulars. These collections give some insight into how Reserve Banks discussed and responded to various historical and financial events.
Transporting the new small size currency: Officers use armored trucks to move new money from the Bureau of Engraving and Printing to the Treasury Department. Image courtesy of the Library of Congress.
Small Size Currency
Paper currency was not always the same size as the cash in your wallet today. Before 1929, paper money was slightly larger than its current dimensions of 6 5/16th inches by 2 11/16th inches. On July 10, 1929, the Secretary of the Treasury Andrew W. Mellon issued this new, smaller size US currency featuring new designs, which rendered the older, larger currency unfit for use. The Federal Reserve Banks needed to communicate this information so banks in their respective districts could order sufficient amounts of the new currency and know how to exchange and decommission the old currency.
Collection of Coins for Use in War Production
During World War II, Congress passed a bill to conserve metals used in war production. The Treasury requested that banks ship excess coins, specifically nickels and pennies, so the metal from these coins could be melted down and repurposed to manufacture war materials. The Federal Reserve Banks were responsible for collecting excess coinage from banks in their respective districts and gave instructions on how to ship the coins.
United States Currency—Hawaiian Series
Before Hawaii became the 50th state, it was a territory of the United States and had its own currency. This currency was initially intended for use only in Hawaii, and United States currency was not to be used in Hawaii. This restricted flow of the two currencies between the Territory of Hawaii and the United States and was difficult to maintain when U.S. military personnel returned from Hawaii to the continental U.S. In 1944, the Treasury Department lifted restrictions on the interchangeable use of these two currencies, and the Reserve Banks instructed financial institutions to freely accept and exchange Hawaiian currency for U.S. currency.[1]
Civil Rights March on Washington, D.C., August 28, 1963. Image courtesy of the National Archives and Records Administration, Records of the U.S. Information Agency.
Civil Rights Act of 1968
The Civil Rights Act of 1968, also known as the Fair Housing Act, prohibited discrimination in housing financing, making it illegal to deny someone a loan based on their race, religion, or sex, along with other protected statuses.[2] The Department of Housing and Urban Development (HUD) was tasked with the responsibility of overseeing financial institutions’ adherence to this law. The Federal Reserve Banks distributed HUD questionnaires to banks in their districts to facilitate the important work of the HUD in enforcing the Fair Housing Act. The Federal Reserve System also required all commercial banks to display the “Equal Housing Lender” sign in their lobby to signal their acceptance of all mortgage housing applicants. The system also established the Consumer Affairs and Civil Rights Compliance Program, which is “an examination and education program to achieve compliance by member banks with consumer protection and civil rights laws and regulations,” to further ensure that banks in the system were abiding by this law, and the Board expanded this program in the late 70s.
Postal Strike of 1970
On March 18, 1970, postal workers in New York City went on strike to seek improved wages. This strike halted mail services within the city and eventually spread to other cities across the nation. The interruption of mail services throughout the country caused great problems for the Federal Reserve System because the Reserve Banks and commercial banks could not send cash and other payment items to be processed. As a result, the Reserve Banks had to communicate the possibility of check processing delays and give instructions to commercial banks on how to credit items during this time. Further, because this strike lasted almost two weeks, the Federal Reserve System implemented an inter-Federal Reserve city carrier service, which transported checks and other items to and from the reserve cities and their branch cities, so banking business could resume. After the strike ended, the Fed discontinued the use of the inter-Reserve carrier service and began using the U.S. Postal Service to ship payment items again. Because the strike began in New York City, the Federal Reserve Bank of New York was without mail services for the longest period of time, which led this Reserve Bank to implement a contingency plan in their district in the event of another postal strike.
A Federal Reserve Bank’s circulars are primary source documents that detail how a Reserve Bank communicated vital news and instructions to commercial banks in their respective districts. These circulars give us a better understanding of how the central banking system was affected by and responded to historical events as they were happening in real time. The circulars discussed in this blog post highlight just a few moments in banking, financial, and social history of the United States. With over 27,000 digitized circulars on FRASER, there is much more to explore.
[1] Hawaii was granted statehood on August 21, 1959, and joined the Twelfth Federal Reserve District.
[2] Find out more about how the 1968 Fair Housing Act outlawed racially motivated redlining in this Federal Reserve History essay.
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