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FEDERAL
RESERVE
BANK
OfATLANTA
’

*

the Federal Reserve Bank of Atlanta is one of'twelve regional
.,

' Reserve Banks in the Unttk
'
,

ake up"the Federal Reserve

,

natiorl's Cenfrd bank. Since its establist-qmnt by an

'

Governors in, Washington,
System-the

!

.that, together with the Boyd of

.

act of Congress in 1913, Federal Reserve System's primary role
the

' 7 ,

has been to foster a sou

ystem and a healthy economy.
helps formhate monetary
ates banks and bank holdng compa" *

*

tries; and provides financial servkes to depository instjtutitk and .
I

the federal government.
a

*

I

.

0

.

-

I

Through its,six facilities in Atlanta, Birtningham, Jacksonville,
ashville, and Niw Orlei IS, the 'Federal Reser
rves the Sixth Federpl ieswve-District, whic
Alabama,. Florida, Georgia, and parts of Louisiana, Misissippi..
-and Tennessee.




,
~

I

',




Federal Reserve Bank of Atlanta

I

1999 Annual Report

CONTENTS

3

Message from the President

5

The Federal Reserve at Work

18

Directors

26

Officers

29

Financial Reports

2

JACK O W " , A M A FED PRESIDENl AND CEO (M), PAT BARRON, FIRSTVICE PRESIDENT AND CHIEF OPERAllNG OFFICER
AND




3

MESSAGE

FRPkIDENT
ES

By any measure, 1999 was an exceptional year for the Federal Reserve Bank of Atlanta.
We cleared more checks-3.1 billion-than any other Federal Reserve Bank.
We processed more cash-$62.2 billion-than ever before.
We helped implement the Year 2000 changeover at 1,100 depository institutions and
bank holding companies.
And we contributed to the policies that are helping make the economic expansion
that began in 1991 the longest in the post-World War I1 era.
As the nation’s central bank, the Federal Reserve System must act, above all, with
integrity and accountability.The year’s results indicate that the Atlanta Fed does both,
and we are proud of our accomplishments.
But more than that, we are proud of who we are. Because at the Federal Reserve
Bank of Atlanta, we defme who we are by how and whom we serve.
The Federal Reserve System operates payments systems, supervises banking institutions, and formulates economic policies. We share responsibility with other institutions
in each of these areas, but the Fed is the only U.S. institution with responsibility for
them all. It is this fact that makes the Federal Reserve central to the stability of the U.S.
economy and therefore makes us unique-in the United States and the world.
Perhaps most significant,though, is the source of our authority: the people of the
United States. Eighty-six years ago, an act of Congress created the Federal Reserve
System. And while the law provides us an unusual degree of independence from the
Congress that created us and from executive departments of the government, we must
never forget that we are, fundamentally, a servant of the people.
Because our work is a function of a complex economy, the how of our job changes
almost daily. But also, because our responsibilities have been entrusted to us by the
people, we know that the spirit in which we work-the values we bring to our jobsmust remain steadfast. The 1999 annual report of the Federal Reserve Bank of Atlanta
offers a closer look at the Atlanta Fed at work.




w
JACK G U Y ”




THE FEDERAL RESERVF




AT WORK

SECURIN
6




PUBLIC TRUST

r

POETN
RTCI
O

omcm ERIC

KIMBE

STANDS BY WHILE MICHELE
ARMAND (LEFT) AND CATHY
WILSON, CASH SERVICES, CHECK
RECORDS ON BUNDLES OF CASH
BEING BROUGHT INTO THE VAULl

7

AT THE JACKSONVILLE BRANCH.
WHILE ELECTRONIC TRANSAG

4




-

I
I

The vault at the Jacksonville Branch of the
Federal Reserve Bank of Atlanta is secured by
a hydraulically mounted, 21-ton door. Nearby,
behind a bulletproof glass partition, is a control
room from which access to the vault is granted
through a series of doors called “mantraps.”
High-resolutionvideo cameras, capable of reading the serial number of any piece of currency,
record every action in or near the vault. And
protection officers are always in sght, on
duty, en route, or maybe on their way to the
shooting range.
The American people have entrusted the
Federal Reserve with an unusual and unprecedented range of responsibilities. The millions of
routine transactions that are the lifeblood of the
economy cannot take place without a smoothly
functioning, widely accessible payments system.
Financial resources cannot be routed to their
most efficient uses without a safe and sound
banking system. And real economic growth cannot be sustained without effective monetary
policies. Economic stability-a Fed mandatel
l
requires that al of them exist, al the time.
The d e w quality of the Federal Reserve
System is stewardship-managing payments
systems, supervising financial institutions, and
conducting monetary policy. Even more fundamentally, however, stewardship requires that we
earn the public trust. In the absence of public
confidence, merchants wouldn’t trust the processing of their transactions; markets wouldn’t
trust our oversight of financial institutions;
and credibility-the sine qua non for effective
monetary policy making-wouldn’t exist at all.
Stewardship also requires that we hold ourselves to a higher standard. Above all, it
demands integrity: fairness in relationships,
soundness in judgment, and probity in appearances. And while maintaining integrity requires
a high level of scrutiny-credit checks, security
audits, and annual financial disclosures, among
other things-we know that such scrutiny is
worth it. Because ultimately, we can be only as
effective as we are trustworthy.

8

Four nights a week, between 8:OO P.M. and
6:OO A.M., a race against time begins at a
freight terminal at Atlanta's Hartsfield
International Airport. It's coordinated from
the fourth floor of the Atlanta Fed's headquarters, where Tom Vaughan, network manager
for the Check Relay office, monitors flight
conditions across the United States and
remains in contact with the 45 contract jets
that ferry 23 tons of checks across the country. Meanwhile, from the next workstation,
Transportation Coordinator Molly Kent supervises 27 cargo handlers on the ground.
The Federal Reserve System faces tight
deadlines for making funds available to
depositing institutions. Meeting those deadlines means getting checks from an initial Fed
processing center to their home Fed by early
morning the next day, usually no later than
8:00 A.M. Failure to do so causes float: dollars
credited to one bank but not yet debited from
the payor. Every night, then, hundreds of millions of dollars in float are at stake, subject to
the vagaries of weather and vicissitudes of the
nation's air transportation system. At the
Atlanta Fed, our job is to work around the
problems and get the checks where they
belong on time, no matter what.
Needless to say, it is challenging enough for
any Reserve Bank to handle its own check
transfers. Beginning in 1998, however, the
Atlanta Fed assumed Fed-to-Fed transportation responsibilities for the entire Federal
Reserve System.
Why the Atlanta Fed? The district has a
long-standing philosophy of providing leadership in financial services, historically in the
cash and electronic payments areas and
recently in overseeing the Fed's automated
clearinghouse and check businesses, of which
check relay is a pivotal part. In 1999 the
Atlanta Fed processed nearly one-sixth of all
checks cleared by the System. Still, we do not
forget that leadership is more than a matter
of numbers. Ultimately, it demands vision and
execution-and a commitment to both.



..




WHILE MOST OF US SLEEP, CHECK
RELAY DEPARTMENT STAFF (FROM
LEFT, FOREGROUND) KAWASKI
SMITH, ANTHONY BEALE, JOHN
WASHINGTON, (BACKGROUND)
TIM STALUNGS, BRYAN BARBER,

9

AND A NUMBER OF COWORKERS
NOT PICTURED WORK IN THE
WEE HOURS OF THE MORNING
TO KEEP CHECKS MOVING

BETWEEN FEDERAL RESERVE PRO
CESSING CENTERS ACROSS THE
COUNTRY. WITH MILLIONS OF
DOLLARS DEPENDING EVERY DAY
ON EVERYTHING RUNNING
SMOOTHLY THROUGHOUT THE
FINANCIAL SYSTEM, EFFICIENCY
IS NOT OPTIONAL.

/ l
- *

2

LlTY

STRIVING
1
0




I
J

I
- I
TAO ZHA (LEFT) AND JOHN

ROBERTSON, SENIOR ECONOMISTS
AND POLICY ADVISERS IN THE

RESEARCH DEPARTMENT, D I S

CUSS THE FINER POINTS OF A

PROMISING FORECASTING MODEL
BEING DEVELOPED AT THE

ATLANTA FED. BEING ABLE TO

b




11

Senior Economist Tao Zha’s dynamic multivariate model demonstrated remarkable
forecasting potential in 1999: its June 1998
GDP and CPI forecasts fell within 0.5 percent
and 0.05 percent, respectively, of the actual
results for 1999. And yet Tao, for one, remains
unimpressed. “Anybody can be right once,”
he says. “If the model’s going to be useful, it’s
got to be better.”
Tao’s model has been in development
since his arrival at the Atlanta Fed in 1995.
As one of a new class of forecasting tools,
it incorporates and predicts only a few economic essentials. Just as important for policymakers, it also self-assesses the probability
that its forecast is in error. With the help
of other Atlanta Fed economists, Tao has
continued to refme the model and interpret
the story it tells.
The Research Department’s economic
modeling and policy support initiatives are
just a few examples of the Atlanta Fed‘s
commitment to quality and innovation. Just
as our economists are dedicated to producing
research that informs the decisions of policymakers throughout the Federal Reserve
System, so our Financial Services and
Supervision and Regulation staff seek to be
creative in anticipating and responding to
financial system and banking needs. For
example, this year Supervision and Regulation developed a tool for monitoring ongoing
exposure in real estate lendmg, and the system has been used as a model for other
Federal Reserve districts.
At its most fundamental level, quality is the
standard for measuring whether we’re improving, how efficiently we’re adding value, and,
always, how effectively we serve. Whether and
how much we succeed at each of these things
requires openness to change and a commitment to practical results.

PEQGY HMDRIX (RKIHT) AND
CINDY UNHI OF THE SYSTEMS

-EM

aATHER THEIR

THOUWlS AT THE END OF
ANOTHER LONG DAY AS Y2K

DRAWS CLOSER. WORKIWO Wrm

12

For employees in the Atlanta Fed‘s Systems
Department, preparations for the year 2000
rollover were both extraordinary and routine.
Extraordinary because the Y2K problem was
utterly unprecedented. Routine because the
stakes-the sustained and seamless functioning of the U.S. payments systems-were the
same as they are every single day.
One of the Federal Reserve System’s primary areas of responsibiliw-along with
monetary policy and bank examination-is
the nation’s payments systems. From the purchase of a 50-cent newspaper to the closing
of a billion-dollar acquisition, trillions of
dollars change hands in the United States
each day, and no institution processes more
of those transactions than the Fed.
Through its check processing operations
and its various electronic funds transfer systems, the Fed provides settlement for the
nation’s businesses, consumers, borrowers,
lenders, and investors. It’s a job that’s as vital
as it is taken for granted. Without it, however-and without the confidence that every
single transaction will be completed every
single time-the U.S. economy would hardly
function.
At the Atlanta Fed, we never forget that the
stakes are just as kugh on the other 364 days
of the year as on January 1 of the Y2K rollover. Still, the behind-the-scenes work that
makes something as important as payments
systems routine enough to take for granted
requires extraordinary dedication and hard
work-not just in the Systems Department
and not just on special occasions. At the
Atlanta Fed it’s a level of dedication that’s put
forth routinely, every single day-and night.




’

THE URGE NUMBER OF FINANCIAL InsmUnONS IN THE
SOUTHEASTTO HELP ENSURE A
SMOOTH lRANSmON WAS A
MAIOR FOCW IN 1999. SUCH

ATTENTION TO THE MECHANICS
OF THE FINANCIAL SYSTEM IS AS

IMPORTANTFOR KEEPING THE
ECONOMY RUNNING SMOOTHLY
AS MONETARY POUCY ACTIONS

THAT MAKE THE NEWS.

L

PERFORMING
WITH

DEDICAT1ON
13

E




I

NANCY JAIMES (CENTER), A
SENIOR EXAMINER IN SUPERVISION
AND REGULATION IN THE MIAMI
BRANCH, WORKS ON A LAPTOP TO
MAKE THE MOST OF TIME SPENT
WAITING AT THE MIAMI INTER-

14

NATIONAL AIRPORT FOR HER

Fifty years ago, on Monday mornings-and
sometimes on Sunday afternoons, if the trip
was long-bank examiners loaded briefcases,
typewriters, and adding machines into bank
cars and headed out across the Southeast to
various Fed-supervised banks, some as far
away as New Orleans. Once there they pored
over ledgers and financial statements and
loan files until the job was done.
Like banking itself, bank supervision in
that era was relatively simple and straightforward. The financial services industry was
divided into rigid sectors, and competition
hardly existed. Safety and soundness meant
ensuring that banks were cautious, prudent,
and profitable.
In 1999 finance is a 24-hours-a-day business, with credit offered across state and
national and industry boundaries and real
competition for the accumulation of savings.
Today, industrial conglomerates make
consumer loans; brokerages offer interestbearing checlnng accounts; and the biggest,
most creditworthy customers raise funds
directly in the capital markets. As technology
has improved, the range of financial products
and the vehicles for bringing them to market
have proliferated as well.
And so have the sources of risk. For examiners, carrying out our responsibilities in this
new era of finance has meant rethow
we examine banks and bank holding companies. It has especially required flexibility in
the way that we conceive of and conduct our
jobs. And it has meant embracing duties that
take us not only outside the region but
beyond national borders.
It remains the task of bank supervision and
regulation to help contain sources of risk. To
do so effectively, the Atlanta Fed strives to
be both efficient and market-oriented, changing as the times demand but holding fr to
im
the seriousness of our charge to help ensure
a healthy financial system.

FUGHT TO BOOOTA, COLOMBIA.




FOR THE ATLANTA FED. GLOBALIZA-

TION HAS MEANT I N C R W E D
SUPERVISORY RESPONSIBIUTY FOR
CARIBBEAN AND LATIN AMERICAN
BANKSWITH U.S. o m c E s . IN
1999, THAT INCLUDED HELPING

THE BANKING SYSTEMS IN THOSE
REGIONS GET READY FOR Y2K.

1

I




15

L

'

c

1
.

SERVING
16




RHONDA HARRIS OF THE ASH
sERvlcESDEPARTMENT4 F THE
NABnnUE BRANCH IS 0 E OF
1

SEVERAL STAFF MEMBER WHO
PIRTlClPATEIN THE JUNll R
ACHIEVEMENT PROQRAM 4
T
JOOLTON ELEMENTARY S lo01
C
IN NASHVILLE. THE NASH' ILLE
BRANCH'S u)woSTANDIN i REUTIONSHIP Wrm THE SCH( )L

EXEMWFlES THE ATLAM

L

ADS

COMMITMENT TO MAKIN4 A MFFERMCE IN THE COMMU ITlES IN
WHICH WE LIVE AND WOI

c.




17

Working at the Federal Reserve generally
means minding “the aggregate.” We follow
national GDP and regional unemployment.
We process checks by the billions and transfer
electronic funds by the trillions. We guard
against risk spreadmg throughout the financial
system. We even refer to ourselves in the
aggregate: we work for the Fed.
To be sure, al this aggregation is essential.
l
We are, after all, a public institution-a system, no less-with responsibilities for the
national economy, and the Fed is far more
than just the sum of its thousands of employees. But we are also, as an institution and
as individuals, citizens. And at the Atlanta
Fed, we help our 2,600 employees throughout
the Southeast find opportunities to contribute
to their communities.
For more than ten years, employees at the
Atlanta Fed‘s Nashville Branch have volunteered at Nashville’s Joelton Elementary
School. In 1998, they helped start a Junior
Achievement program that reinforces classroom lessons on business and economics with
hands-on, entrepreneurial exercises. The program was launched schoolwide in 1999. Once
again, Nashville Branch employees were asked
to provide leadership.
At the Atlanta Fed, leadership includes very
different kinds of service. Much of it is institution to institution. At the same time, through
volunteer efforts our employees find channels
to help individuals in need in our local communities in a highly personal way.
Serving our communities is an important
part of being the kind of public organization
we want to be. It is, perhaps, the best way
we stay mindful that however much our
day-to-day work involves dollars and cents,
its ultimate importance is its connection
to the people affected every day by the
U S . economy.

18




Federal Reserve Banks each have a board of nine directors. Directors provide economic information, have broad
oversight responsibility for their Bank’s operations, and,
with Board of Governors approval, appoint the Bank’s
president and first vice president.
Six directors-three

class A, representing the banking

industry, and three class B-are

elected by banks that are

members of the Federal Reserve System. Three class C
directors (including the chairman and deputy chairman)
are appointed by the Board of Governors. Class B and C
directors represent agriculture, commerce, industry,
labor, and consumers in the District; they cannot be officers, directors, or employees of a bank; class C directors
cannot be bank stockholders.
Branch banks’ boards have five or seven directors; the
majority are appointed by head-office directors and the
rest by the Board of Governors.




1
9

20










MARK 1 SODDWS
.
Chafnnan

PRESIDENT
LAKEVIEW FARMS INC.
PAHOKEE. FLORIDA
GREGG BORGESON

PRESIDENT AND
CHIEF EXECUTIVEOFFICER
HELLMANN INTERNATIONAL
FORWARDERS INC.
MIAMI, FLORIDA

0. KEITH COBB
CHAIRMAN
LAUNDROMAX INC.
FORT LAUDERDALE, FLORIDA
ROBERT H. COORDS (RESIGNED)
CHAIRMAN AND
CHIEF EXECUTIVEOFFICER
SUNTRUST BANK,
SOUTH FLORIDA. NA
FORT LAUDERDALE, FLORIDA

CARLOS A. MIGOYA
REGIONAL PRESIDENT
DADE/MONROE COUNTIES
FIRST UNION NATIONAL BANK
OF FLORIDA
MIAMI, FLORIDA
JAMES W. MOORE

MANAGING PARTNER
RIVERSIDE CAPITAL, LLC
FORT MYERS, FLORIDA




PINEY FLATS, TENNESSEE
FRANCES F. MARCUM
MICHAEL E. B E N N m

PAST UAW MANUFACTURING
ADVISER
SATURN CORP
SPRING HILL, TENNESSEE

DIRECTOR
MICRO CRAFT INC
TULLAHOMA, TENNESSEE

LA. (ANDY) WALKER JR.
CHAIRMAN AND
CHIEF EXECUTIVE OFFICER

DALE W. POLLEY

I




HlEF EXECUTIVE 0..

.__..

IlSSlSSlPPl POWER CO.
8,

TERl 6. FOMENOT
PRESIDENT AND
HlEF EXECUnVE 0

26

SMALL BUSINESS, AGRICULTURE, AND LABOR ADVISORY COUNCIL




I

I

M
A
JMKotmm
c*u
(Ln
PRESIDENT AND

MIELBBBW

-0.

SENIOR VICE PRESIDENT
CORPORATE SERVICES DIVISION

SENIOR VICE PRESIDENT AN0

CHIEF MECLmvE OFFICER

GENERAL AUDITDR

A
MRICI[K.MRMM
vkrcwllra
FIRST W E PRESIDENT AND

R
.

SENIOR W E PRESIDENT AND

SENIOR MCE pRE!aENl
RTL PAYMENTS
EA
I
omrx

DIRECTOR OF RESEARCH
RESEARCH DMSION

wcllAllsR.ouvBl

CHIEF OPERATING OmCER
rmLuy I. mEs #I
)

W.WJIWlEcALBwBL
MECUIlVE W E PRESIDENT
CORPORATE SERVICES DMSlON




SENIOR VlCE PRESlDENT

SENIOR VlCE PRESIDENT

msTEM RETAIL P A W ORlCE

SUPERVISION AND
REGULATION DMSION

I
OTHER CORPORATE OFFICERS

27

SENIOR VICE PRESIDENTS
.
FRANK 1 CRAVEN JR.
HUMAN RESOURCES/
SERVlCE DEPARTMENTS

DONALD € NELSON
FINANCIALSERVICES CENlRAL

GENERAL COUNSEL
LEGAL DEPARTMENT

LOIS C. BERTHAUME
SUPERVISION AND
REGULATION DIVISION

CYMHlA C. GOODWIN
SUPERVISION AND
REGULATION DIVISION

B. FRANK KING
ASSOCIATE DIRECTOR OF
RESEARCH
RESEARCH DIVISION

.
SUZANNA 1 COSTULO
SUPERVISIONAND
REGULATION DIVISION

M E R. KaLEy
SUPERVISION AND
REGULATION DIVISION

THOMAS 1 CUNNINGHAM
.
RESEARCH DIVISION

JOHN R. KERR
DISTRICT BUlDlNG PROJECTS/
FACILITIESMANAGEMENT

VICE PRESIDENTS

.
GERALD P DWKR
RESEARCH DIVISION

,

BOBBIE H. MCCRACKIN
PUBLIC AFFAIRS OFFICER
PUBLIC AFFAIRS DEPARTMENT
JOHN D. PEUCK
SYSTEMS/INFORMATION
SECURITY/CRWTOGRAPHIC
DEVELOPMENTAND SUPPORT

MARY S.

ROSENBAUM
(RESIGNED)
RESEARCH DIVISION

.
LARRY 1 SCHUK
CHECK RELAY
ADRIENNE M. WaLS
SYSTEMRETAIL PAYMENTS omcx

RONALD N. ZIMMERMAN
SUPERVISION AND
REGULATION DIVISION

ASSISTANT VICE PRESIDENTS
VICKI A. ANDERSON
SYSTEM RETAIL PAYMENTS OFFICE
MIAMI OFFICE

SERVICE DEPARTMENT

1 STEPHEN FOLEY
.
SUPERVISIONAND
REGULATION DIVISION

MARY M. MCCORMICK

JAYNE FOX
CORPORATESECRETARY
CORPORATE RELATIONS
DEPARTMENT

MARIE E. M W Y
FACILITIESMANAGEMENT

PLANNING AND CONTROL
DEPARTMENT

DAVID W SMITH
.
SUPERVISIONAND
REGULATION DIVISION
TIM R. SMITH
COMMUNITY RELATIONS OFFICER
PUBLIC AFFAIRS DEPARTMENT

woim c. HEALY

ALVIN L P I W W N JR.
ASSISTANT GENERAL AUDEOR
AUDITING DEPARTMENT

ARUNA SRINNASAN
CREDlT AND RISK MANAGEMENT

JOHN S. BRANIGIN
SYSTEMS/INFORMATION SECURITY

SUPERVISIONAND
REGULATION DIVISION
MIAMI OFFICE

TED 6. REDDY 111
DISTRICT BUILDING PROJECTS

EUlS W TAUMAN
.
RESEARCH DIVISION

JAMES L BROWN
HUMAN RESOURCES DEPARTMENT

JANEl A. HERRING
ACCOUNnNG DEPARTMENT

MARION P RIVERS 111
.
SUPERVISION AND
REGULATION DIVISION

EDWINA M. TAYLOR

JOAN H. B U C H A "
SUPERVISION AND
REGULATION DIVISION

SUSAN HW
ASSISTANT GENERAL COUNSEL
LEGAL DEPARTMEN

m u m T.

ROBERDS
RESEARCH OFFICER
RESEARCH DIVISION

LARRY D. W A U
RESEARCH OFFICER
RESEARCH DIVISION

DAVID F CARR
.
HUMAN RESOURCES DEPARTMENT

MARYM. KEPLER
AUTOMATION OPERATIONS

SUSAN L ROBERTSON
SYSTEM RETAIL PAYMENTS OFFICE

JUUUS 0. WEYMAN
CHECK RELAY

ROBERTO 1 CHANG
.
RESEARCH OFFICER
RESEARCH DIVISION

JACQUELYN H. LEE
SYSTEMS DEPARTMENT

.
MELINDA 1 RUSHING
SYSTEM RETAIL PAYMENTS OFFICE

KIMBERLY K. WINSTEL
(RESIGNED)
COMMUNITY RELATIONS OFFICER
PUBLIC AFFAIRS DEPARTMENT

JOHN H. ATKINSON
SUPERVISION AND
REGULATION DIVISION

CHAPELLE D. DAVIS
SUPERVISIONAND
REGULATION DIVISION

1 COURTNEY DUFRIES
.
COMMUNITYAFFAIRS OFFICER
SUPERVISIONAN0
REGULATION DIVISION




ALBERT E. MARTIN 111
ASSISTANT GENERAL COUNSEL
LEGAL DEPARTMENT

DANIELA. MASIANEY
FINANCIALSERVICES
TECHNOLOGIESAND SUPPORT

ROBERT M SCHENCK
.
SUPERVISION AND
REGULATION DIVISION
ROBERT1 SEXTON
.
FINANCIALSERVICES SUPPORT

STATISTICAL REPORTS
DEPARTMENT

BRANCH OFFICERS
IACKSONVILLF

NASHVILLE

ROBERT1. SLACK
VICE PRESIDENT AND
BRANCH MANAGER

MELWN K. PURCEU
SENIOR VICE PRESIDENT AND
BRANCH MANAGER

CHRISTOPHER L OAKLEY

LEE C. JONES

4SSISTANT VICE PRESIDENT AND
4SSISTANT BRANCH MANAGER

VICE PRESIDENT AND
ASSISTANT BRANCH MANAGER

DARRlN G. F I N l n

LEIH L DAVENPORT
ASSISTANT VICE PRESIDENT

9SSISTANT VICE PRESIDENT

KATHLEEN Y. WUGHMAN
WISTANT VICE PRESIDEM

ANNITA T. MOORE

SHIRLEY 0. PYATI
4SSISTANT VICE PRESIDENT

Ion E. WARREN

MIAMI

NEW ORLEANS
ROBERT 1. MUSS0

BIRMINGHAM

JAMES T. CURRY 111
VICE PRESIDENT AND
SRANCH MANAGER

ANDRE T. ANDERSON

IUAN DEL BUST0

MY S. GOODMAN

VICE PRESIDENT AND
BRANCH MANAGER

ZSSISTANT VICE PRESIDENT AND
tSSISTANT BRANCH MANAGER

VICE PRESIDENT AND
RSSISTANT BRANCH MANAGER

MARGARErA.lH0MAs

FRED D. COX

ASSISTANT VICE PRESIDENT AND
ASSISTANT BRANCH MANAGER

\SSISTANr VICE PRESIDENT

W. JEFFREY D M N E
ASSISTANT VICE PRESIDEM

ROBERT A. DE UYAS

EDWARD B. HUQHES

ISSISTANTVICE PRESIDENT

4SSISTANT VICE PRESIDEM

ROBERT K. MORANDO

PATRICU D. VAN DE QRAAF

4SSISTANT VICE PRESIDENT

4SSISTANT VICE PRESlDENl

TREV B. BROWN
ASSISTANT VICE PRESIDENT
FREDRIC L FULLERTON

ASSISTANT VICE PRESIDENT

CHARLES W.

PRIME

ASSISTANT VICE PRESIDENT




ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

SENIOR VICE PRESIDENT AND
BRANCH MANAGER




30

MANAGEMENT'S ASSERTION

To the Board of Directors of the
Federal Reserve Bank of Atlanta
The management of the Federal Reserve Bank of Atlanta ('FRB Atlanta") is responsible for the preparation and fair
presentation of the statement of Financial Condition, Statement of Income, and Statement of Changes in Capital as
of December 31, 1999 (the "Financial statements"). The Financial Statements have been prepared in conformity
with the accounting principles, policies, and practices established by the Board of Governors of the Federal Reserve
System and as set forth in the Financial Accounting Manual for the Federal Reserve Banks, and as such, include
amounts, some of which are based on judgments and estimates of management.
The management of the FRB Atlanta is responsible for maintaining an effective process of internal controls over
financial reporting including the safeguarding of assets as they relate to the Financial Statements. Such internal
controls are designed to provide reasonable assurance to management and to the Board of Directors regarding
the preparation of reliable Financial Statements. This process of internal controls contains selfmonitoring
mechanisms, including, but not limited to, divisions of responsibility and a code of conduct. Once identified, any
material deficiencies in the process of internal controls are reported to management, and appropriate corrective
measures are implemented.
Even an effective process of internal controls, no matter how well designed, has inherent limitations, including the
possibility of human error, and therefore can provide only reasonable assurance with respect to the preparation of
reliable financial statements.
The management of the FRB Atlanta assessed its process of internal controls over financial reporting including the
safeguarding of assets reflected in the Financial Statements, based upon the criteria established in the 'Internal
Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this assessment, the management of the FRB Atlanta believes that the FRB Atlanta maintained an
effective process of internal controls over financial reporting including the safeguarding of assets as they relate to
the Financial Statements.

Federal Reserve Bank of Atlanta

U
Jack Guynn
President and Chief Executive Officer

Patrick K. Barron
First Vice President and Chief Operating Officer

Anne M. DeBeer
Senior Vice President

January 18, 2000




REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors of the
Federal Reserve Bank of Atlanta
We have examined management’s assertion that the Federal Reserve Bank of Atlanta (“FRB of Atlanta”) maintained
effective internal control over financial reporting and the safeguarding of assets as they relate to the Financial
Statements as of December 31, 1999, included in the accompanying Management’s Assertion.
Our examination was made in accordance with standards established by the American Institute of Certified Public
Accountants, and accordingly, included obtaining an understanding of the internal control over financial reporting,
testing, and evaluating the design and operating effectiveness of the internal control, and such other procedures as
we considered necessary in the circumstances. We believe that our examination provides a reasonable basis for our
opinion.
Because of inherent limitations in any internal control, misstatements due to error or fraud may occur and not be
detected. Also, projections of any evaluation of the internal control over financial reporting to future periods are
subject to the risk that the internal control may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
In our opinion, management’s assertion that the FRB of Atlanta maintained effective internal control over financial
reporting and over the safeguarding of assets as they relate to the Financial Statements as of December 31, 1999,
is fairly stated, in all material respects, based upon criteria described in “Internal Control-Integrated Framework”
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

PricewaterhouseCooDers LLP

March 3, 2000
Atlanta, Georgia




31

32

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Governors of
The Federal Reserve System and
The Board of Directors of
The Federal Reserve Bank of Atlanta
We have audited the accompanying statements of condition of the Federal Reserve Bank of Atlanta (the “Bank”) as
of December 31, 1999 and 1998, and the related statements of income and changes in capital for the years then
ended. These financial statements are the responsibility of the Bank’s management. Our responsibility is to express
an opinion on the financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 3, the financial statements were prepared in conformity with the accounting principles, policies,
and practices established by the Board of Governors of the Federal Reserve System. These principles, policies, and
practices, which were designed to meet the specialized accounting and reporting needs of the Federal Reserve
System, are set forth in the “Financial Accounting Manual for Federal Reserve Banks” and constitute a comprehensive basis of accounting other than accounting principles generally accepted in the United States.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position
of the Bank as of December 31, 1999 and 1998, and results of its operations for the years then ended, on the
basis of accounting described in Note 3.

PricewaterhouseCoopers LLP

March 3, 2000
Atlanta, Georgia




STATEMENTS OF CONDITION

(in millions)

Assets
Gold certificates
Special drawing rights certificates
Coin
Items in process of collection
Loans to depository institutions
U.S. government and federal agency securities, net
Investments denominated in foreign currencies
Accrued interest receivable
lnterdistrict settlement account
Bank premises and equipment, net
Other assets
Total assets
Liabilities and capital
Liabilities
Federal Reserve notes outstanding, net
Deposits
Depository institutions
Other deposits
Deferred credit items
Surplus transfer due U S . Treasury
Accrued benefit cost
Other liabilities
Total liabilities

33

As of December 31. 1999 As of December 31, 1998

$

724
450
20
603
14
29,455
1,134
297
13,643
200
40

$

717
602
44
1,050
4
27,779
1,295
262
4,780
137
41

$46,580

$36,711

$43,852

$33,103

899
4
772
34
82
17

1,769
16
821
75
78
13

$45,660

$35,875

Capital
Capital paid-in
Surplus

$

460
460

$

418
418

Total capital

$

920

$

836

Total liabilities and capital

$46,580

The accompanying notes are an integral part of these financial statements.




$36,711

24

STATEMENTS O F I N C O M E

(in millions)

Interest income
Interest on U.S. government and federal agency securities
Interest on foreign currencies
Interest on loans to depository institutions
Total interest income
Other operating income (loss)
Income from services
Reimbursable services to government agencies
Foreign currency (losses) gains, net
U S . government securities (losses) gains, net
Other income
Total other operating income
Operating expenses
Salaries and other benefits
Occupancy expense
Equipment expense
Assessments by Board of Governors
Other expenses
Total operating expenses
Net income Drior to distribution
Distribution of net income
Dividends paid to member banks
Transferred to surplus
Payments to U S . Treasury as interest on
Federal Reserve notes
Payments to U.S. Treasury as required by statute
Total distribution

The accompanying notes are an integral part of these financial statements.




For the years ended
December 31, 1999
December 31, 1998

$ 1,666
16
1

$ 1,657
29
1

$ 1,683

$ 1,687

$

153
15

$

108
18
122
3
2

$

253

(35)
(1)
5
$

137

-

$

142
16
24
48
92

$

128
15
22
39
68

$

322

$

272

$ 1.498

$

26
42
1,430
-

$ 1,498

$ 1,668

$

25
79
558
1,006

$ 1,668

STATEMENTS O F CHANGES I N CAPITAL

(in millions)

for the years ended December 31, 1999, and December 31, 1998

Capital Paid-In
Balance at January 1 1998
,
(7.2 million shares)

3.5

$

359

Surplus

$

Net income transferred to surplus

$

418

59

$

$

$

460

836
42

42

The accompanying notes are an integral part of these financial statements.




418
42

Net change in capital stock issued
(0.8 million shares)

698

79

59

Net income transferred to surplus

Balance at December 31,1999
(9.2 million shares)

$

79

Net change in capital stock issued
(1.2 million shares)
Balance at December 31,1998
(8.4 million shares)

339

Total Capital

42

$

460

$

920

N O T E S TO F I N A N C I A L S T A T E M E N T S

36

1. O R G A N I Z A T I O N
The Federal Reserve Bank of Atlanta (“Bank”) is part of the Federal Reserve System (“System”) created by Congress under
the Federal Reserve Act of 1913 (“Federal Reserve Act”) which established the central bank of the United States. The System
consists of the Board of Governors of the Federal Reserve System (“Board of Governors”) and twelve Federal Reserve Banks
(“Reserve Banks”). The Reserve Banks are chartered by the federal government and possess a unique set of governmental,
corporate, and central bank characteristics. Other major elements of the System are the Federal Open Market Committee
(“FOMC”) and the Federal Advisory Council. The FOMC is composed of members of the Board of Governors, the president of
the Federal Reserve Bank of New York (”FRBNY”) and, on a rotating basis, four other Reserve Bank presidents.
structure
The Bank and its branches in Birmingham, Alabama, Jacksonville, Florida, Nashville, Tennessee, New Orleans, Louisiana, and
Miami, Florida serve the Sixth Federal Reserve District, which includes Georgia, Florida, Alabama, and portions of Louisiana,
Tennessee, and Mississippi. In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a
board of directors. Banks that are members of the System include all national banks and any state chartered bank that applies
and is approved for membership in the System.
Board of Directors
The Federal Reserve Act specifies the composition of the board of directors for each of the Reserve Banks. Each board is composed of nine members serving threeyear terms: three directors, including those designated as Chairman and Deputy Chairman,
are appointed by the Board of Governors, and six directors are elected by member banks. Of the six elected by member banks,
three represent the public and three represent member banks. Member banks are divided into three classes according to size.
Member banks in each class elect one director representing member banks and one representing the public. In any election of
directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank stock it holds.

2. OPERATIONS AND SERVICES
The System performs a variety of services and operations. Functions include: formulating and conducting monetary policy; participating actively in the payments mechanism, including largedollar transfers of funds, automated clearinghouse operations and
check processing; distribution of coin and currency; fiscal agency functions for the U.S. Treasury and certain federal agencies;
serving as the federal government’s bank; providing short-term loans to depository institutions; serving the consumer and the
community by providing educational materials and information regarding consumer laws; supervising bank holding companies, and
state member banks; and administering other regulations of the Board of Governors. The Board of Governors’ operating costs are
funded through assessments on the Reserve Banks.
The FOMC establishes policy regarding open market operations, oversees these operations, and issues authorizations and directives to the FRBNY for its execution of transactions. Authorized transaction types include direct purchase and sale of securities,
matched salepurchase transactions, the purchase of securities under agreements to resell, and the lending of U.S. government
securities. Additionally, the FRBNY is authorized by the FOMC to hold balances of and to execute spot and forward foreign
exchange and securities contracts in fourteen foreign currencies, maintain reciprocal currency arrangements (“F/X swaps”) with
various central banks, and “warehouse” foreign currencies for the U.S. Treasury and Exchange Stabilization Fund (“ESF) through
the Reserve Banks.
3. SIGNIFICANT ACCOUNTING POLICIES
Accounting principles for entities with the unique powers and responsibilities of the nation’s central bank have not been formulated
by the Financial Accounting Standards Board. The Board of Governors has developed specialized accounting principles and practices that it believes are appropriate for the significantly different nature and function of a central bank as compared to the private
sector. These accounting principles and practices are documented in the “Financial Accounting Manual for Federal Reserve Banks”
(“Financial Accounting Manual”), which is issued by the Board of Governors. All Reserve Banks are required to adopt and apply
accounting policies and practices that are consistent with the Financial Accounting Manual.

The financial statements have been prepared in accordance with the Financial Accounting Manual. Differences exist between the
accounting principles and practices of the System and generally accepted accounting principles in the United States (“GAAP”).
The primary differences are the presentation of all security holdings at amortized cost, rather than at the fair value presentation
requirements of GAAP, and the accounting for matched salepurchase transactions as separate sales and purchases, rather than
secured borrowings with pledged collateral, as is required by GAAP. In addition, the Bank has elected not to present a Statement
of Cash Flows or a Statement of Comprehensive Income. The Statement of Cash Flows has not been included as the liquidity and
cash position of the Bank are not of primary concern to the users of these financial statements. The Statement of Comprehensive
Income, which comprises net income plus or minus certain adjustments, such as the fair value adjustment for securities, has not
been included because as stated above the securities are recorded at amortized cost and there are no other adjustments in the
determination of Comprehensive Income applicable to the Bank. Other information regarding the Bank’s activities is provided in, or
may be derived from, the Statements of Condition, Income, and Changes in Capital. Therefore, a Statement of Cash Flows or a
Statement of Comprehensive Income would not provide any additional useful information. There are no other significant differences
between the policies outlined in the Financial Accounting Manual and GAAP.
The preparation of the financial statements in conformity with the Financial Accounting Manual requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period.
Actual results could differ from those estimates. Unique accounts and significant accounting policies are explained below.




a. Gold Certificates
The Secretary of the Treasury is authorized to issue gold certificates to the Reserve Banks to monetize gold held by the U.S.
Treasury. Payment for the gold certificates by the Reserve Banks is made by crediting equivalent amounts in dollars into the
account established for the U.S. Treasury. These gold certificates held by the Reserve Banks are required to be backed by the
gold of the U.S. Treasury. The U.S. Treasury may reacquire the gold certificates at any time and the Reserve Banks must deliver
them to the U.S. Treasury. A t such time, the U.S. Treasury’s account is charged and the Reserve Banks’ gold certificate accounts
are lowered. The value of gold for purposes of backing the gold certificates is set by law at $42 2/9 a fine troy ounce. The Board
of Governors allocates the gold certificates among Reserve Banks once a year based upon Federal Reserve notes outstanding in
each District at the end of the preceding year.
b. Special Drawing Rights Certificates
Special drawing rights (“SDRs”) are issued by the International Monetary Fund (”Fund”) to its members in proportion to each
member’s quota in the Fund at the time of issuance. SDRs serve as a supplement to international monetary reserves and may
be transferred from one national monetary authority to another. Under the law providing for United States participation in the SDR
system, the Secretary of the U.S. Treasury is authorized to issue SDR certificates, somewhat like gold certificates, to the Reserve
Banks. A t such time, equivalent amounts in dollars are credited to the account established for the US. Treasury, and the Reserve
Banks’ SDR certificate accounts are increased. The Reserve Banks are required to purchase SDRs, at the direction of the U.S.
Treasury, for the purpose of financing SDR certificate acquisitions or for financing exchange stabilization operations. The Board of
Governors allocates each SDR transaction among Reserve Banks based upon Federal Reserve notes outstanding in each District
at the end of the preceding year.
c. Loans to Depository lnstitutions
The Depository Institutions Deregulation and Monetary Control Act of 1980 provides that all depository institutions that maintain
reservable transaction accounts or nonpersonal time deposits, as defined in Regulation D issued by the Board of Governors, have
borrowing privileges at the discretion of the Reserve Banks. Borrowers execute certain lending agreements and deposit sufficient
collateral before credit is extended. Loans are evaluated for collectibility, and currently all are considered collectible and fully
collateralized. If any loans were deemed to be uncollectible, an appropriate reserve would be established. Interest is recorded on
the accrual basis and is charged at the applicable discount rate established at least every fourteen days by the Board of Directors
of the Reserve Banks, subject to review by the Board of Governors. However, Reserve Banks retain the option to impose a
surcharge above the basic rate in certain circumstances.

The Board of Governors established a Special Liquidity Facility (SLF) to make discount window credit readily available to depository
,
institutions in sound financial condition around the century date change (October 1 1999, to April 7, 2000) in order to meet
unusual liquidity demands and to allow institutions to confidently commit to supplying loans to other institutions and businesses
during this period. Under the SLF, collateral requirements are unchanged from normal discount window activity and loans are made
at a rate of 150 basis points above FOMC’s target federal funds rate.
d. U.S. Government and Federal Agency Securities and lnvestments Denominated in Foreign Currencies
The FOMC has designated the FRBNY to execute open market transactions on its behalf and to hold the resulting securities in the
portfolio known as the System Open Market Account (“SOMA”). In addition to authorizing and directing operations in the domestic
securities market, the FOMC authorizes and directs the FRBNY to execute operations in foreign markets for major currencies
in order to counter disorderly conditions in exchange markets or other needs specified by the FOMC in carrying out the System’s
central bank responsibilities.

Purchases of securities under agreements to resell and matched sale-purchase transactions are accounted for as separate sale
and purchase transactions. Purchases under agreements to resell are transactions in which the FRBNY purchases a security and
sells it back at the rate specified at the commencement of the transaction. Matched sale-purchasetransactions are transactions
in which the FRBNY sells a security and buys it back at the rate specified at the commencement of the transaction.
Effective April 26, 1999, FRBNY was given the sole authorization by the FOMC to lend U.S. government securities held in the
SOMA to U.S. government securities dealers and to banks participating in U.S. government securities clearing arrangements,
in order to facilitate the effective functioning of the domestic securities market. These securities-lendingtransactions are fully
collateralized by other U.S. government securities. FOMC policy requires FRBNY to take possession of collateral in amounts in
excess of the market values of the securities loaned. The market values of the collateral and the securities loaned are monitored
by FRBNY on a daily basis, with additional collateral obtained as necessary. The securities loaned continue to be accounted for in
the SOMA. Prior to April 26, 1999, all Reserve Banks were authorized to engage in such lending activity.
Foreign exchange contracts are contractual agreements between two parties to exchange specified currencies, at a specified price,
on a specified date. Spot foreign contracts normally settle two days after the trade date, whereas the settlement date on forward
contracts is negotiated between the contracting parties, but will extend beyond two days from the trade date. The FRBNY generally
enters into spot contracts, with any forward contracts generally limited to the second leg of a swap/warehousing transaction.
The FRBNY, on behalf of the Reserve Banks, maintains renewable, short-term F/X swap arrangements with authorized foreign
central banks. The parties agree to exchange their currencies up to a prearranged maximum amount and for an agreed upon
period of time (up to twelve months), at an agreed upon interest rate. These arrangements give the FOMC temporary access to
foreign currencies that it may need for intervention operations to support the dollar and give the partner foreign central bank
temporary access to dollars it may need to support its own currency. Drawings under the F/X swap arrangements can be initiated
by either the FRBNY or the partner foreign central bank, and must be agreed to by the drawee. The F/X swaps are structured so
that the party initiating the transaction (the drawer) bears the exchange rate risk upon maturity. The FRBNY will generally invest
the foreign currency received under an F/X swap in interest-bearing instruments.




37

Warehousing is an arrangement under which the FOMC agrees to exchange, at the request of the Treasury, U.S. dollars for foreign
currencies held by the Treasury or ESF over a limited period of time. The purpose of the warehousing facility is to supplement the
U.S. dollar resources of the Treasury and ESF for financing purchases of foreign currencies and related international operations.

38

In connection with its foreign currency activities, the FRBNY, on behalf of the Reserve Banks, may enter into contracts which contain varying degrees of off-balance sheet market risk, because they represent contractual commitments involving future settlement, and counter-party credit risk. The FRBNY controls credit risk by obtaining credit approvals, establishing transaction limits,
and performing daily monitoring procedures.
While the application of current market prices to the securities currently held in the SOMA portfolio and investments denominated
in foreign currencies may result in values substantially above or below their carrying values, these unrealized changes in value
would have no direct effect on the quantity of reserves available to the banking system or on the prospects for future Reserve
Bank earnings or capital. Both the domestic and foreign components of the SOMA portfolio from time to time involve transactions that can result in gains or losses when holdings are sold prior to maturity. However, decisions regarding the securities and
foreign currencies transactions, including their purchase and sale, are motivated by monetary policy objectives rather than profit.
Accordingly, earnings and any gains or losses resulting from the sale of such currencies and securities are incidental to the open
market operations and do not motivate its activities or policy decisions.
U.S. government and federal agency securities and investments denominated in foreign currencies comprising the SOMA are
recorded at cost, on a settlement-date basis, and adjusted for amortization of premiums or accretion of discounts on a straightline basis. Interest income is accrued on a straight-line basis and is reported as “Interest on U.S. government and federal agency
securities” or “Interest on foreign currencies,” as appropriate. Income earned on securities lending transactions is reported as a
component of “Other income.” Gains and losses resulting from sales of securities are determined by specific issues based on
average cost. Gains and losses on the sales of U.S. government and federal agency securities are reported as “Government
securities (losses), net”. Foreign currency denominated assets are revalued monthly at current market exchange rates in order to
report these assets in U.S. dollars. Realized and unrealized gains and losses on investments denominated in foreign currencies
are reported as “Foreign currency (losses), net”. Foreign currencies held through F/X swaps, when initiated by the counter party,
and warehousing arrangements are revalued monthly, with the unrealized gain or loss reported by the FRBNY as a component of
“Other assets” or “Other liabilities,” as appropriate.
Balances of U.S. government and federal agencies securities bought outright, investments denominated in foreign currency,
interest income, amortization of premiums and discounts on securities bought outright, gains and losses on sales of securities,
and realized and unrealized gains and losses on investments denominated in foreign currencies, excluding those held under an
F/X swap arrangement, are allocated to each Reserve Bank. Effective April 26, 1999, income from securities lending transactions
undertaken by FRBNY was also allocated to each Reserve Bank. Securities purchased under agreements to resell and unrealized
gains and losses on the revaluation of foreign currency holdings under F/X swaps and warehousing arrangements are allocated to
the FRBNY and not to other Reserve Banks.
e. Bank Premises and Equipment
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis
over estimated useful lives of assets ranging from 2 to 50 years. New assets, major alterations, renovations and improvements
are capitalized at cost as additions to the asset accounts. Maintenance, repairs and minor replacements are charged to operations in the year incurred.

f. lnterdistrict Settlement Account
At the close of business each day, all Reserve Banks and branches assemble the payments due to or from other Reserve Banks
and branches as a result of transactions involving accounts residing in other Districts that occurred during the day’s operations.
Such transactions may include funds settlement, check clearing and automated clearinghouse (“ACH”) operations, and allocations
of shared expenses. The cumulative net amount due to or from other Reserve Banks is reported as the “lnterdistrict settlement
account.”

g. Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes are issued through the various Federal
Reserve agents to the Reserve Banks upon deposit with such Agents of certain classes of collateral security, typically U.S.
government securities. These notes are identified as issued to a specific Reserve Bank. The Federal Reserve Act provides that the
collateral security tendered by the Reserve Bank to the Federal Reserve Agent must be equal to the sum of the notes applied for
by such Reserve Bank. In accordance with the Federal Reserve Act, gold certificates, special drawing rights certificates, U.S.
government and agency securities, loans, and investments denominated in foreign currencies are pledged as collateral for net
Federal Reserve notes outstanding. The collateral value is equal to the book value of the collateral tendered, with the exception
of securities, whose collateral value is equal to the par value of the securities tendered. The Board of Governors may, at any time,
call upon a Reserve Bank for additional security to adequately collateralize the Federal Reserve notes. The Reserve Banks have
entered into an agreement which provides for certain assets of the Reserve Banks to be jointly pledged as collateral for the
Federal Reserve notes of all Reserve Banks in order to satisfy their obligation of providing sufficient collateral for outstanding
Federal Reserve notes. In the event that this collateral is insufficient, the Federal Reserve Act provides that Federal Reserve
notes become a first and paramount lien on all the assets of the Reserve Banks. Finally, as obligations of the United States,
Federal Reserve notes are backed by the full faith and credit of the United States government.
The “Federal Reserve notes outstanding, net” account represents Federal Reserve notes reduced by cash held in the vaults of
the Bank of $18,237 million, and $11,326 million at December 31, 1999 and 1998, respectively.




h. Capital Paid-In
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount
equal to 6% of the capital and surplus of the member bank. As a member bank’s capital and surplus changes, its holdings of
the Reserve Bank’s stock must be adjusted. Member banks are those statechartered banks that apply and are approved for
membership in the System and all national banks. Currently, only one-half of the subscription is paid-in and the remainder is
subject to call. These shares are nonvoting with a par value of $100. They may not be transferred or hypothecated. By law,
each member bank is entitled to receive an annual dividend of 6% on the paid-in capital stock. This cumulative dividend is paid
semiannually. A member bank is liable for Reserve Bank liabilities up to twice the par value of stock subscribed by it.
i.Surplus
The Board of Governors requires Reserve Banks to maintain a surplus equal to the amount of capital paid-in as of December 31.
This amount is intended to provide additional capital and reduce the possibility that the Reserve Banks would be required to call
on member banks for additional capital. Reserve Banks are required by the Board of Governors to transfer to the U S . Treasury
excess earnings, after providing for the costs of operations, payment of dividends, and reservation of an amount necessary to
equate surplus with capital paid-in.
The Omnibus Budget ReconciliationAct of 1993 (Public Law 10366, Section 3002) codified the existing Board surplus policies as
statutory surplus transfers, rather than as payments of interest on Federal Reserve notes, for federal government fiscal years
1998 and 1997 (which ended on September 30, 1998 and 1997, respectively). In addition, the legislation directed the Reserve
Banks to transfer to the U S . Treasury additional surplus funds of $107 million and $106 million during fiscal years 1998 and
1997, respectively. Reserve Banks were not permitted to replenish surplus for these amounts during this time. Payments to the
U S . Treasury made after September 30, 1998, represent payment of interest on Federal Reserve notes outstanding.
The Consolidated Appropriations Act of 1999 (Public Law 108113, Section 302) directed the Reserve Banks to transfer to the
U.S Treasury additional surplus funds of $3,752 million during the Federal Government’s 2000 fiscal year. The Reserve Banks
will make this payment prior to September 30, 2000.
In the event of losses, payments to the U S . Treasury are suspended until such losses are recovered through subsequent
earnings. Weekly payments to the U S . Treasury may vary significantly.
j. h o m e and Cost Related to Treasury Services
The Bank is required by the Federal Reserve Act to serve as fiscal agent and depository of the United States. By statute, the
Department of the Treasury is permitted, but not required, to pay for these services. The costs of providing fiscal agency and
depository services to the Treasury Department that have been billed but not paid are immaterial and included in “Other expenses.”
k. Taxes
The Reserve Banks are exempt from federal, state, and local taxes, except for taxes on real property, which are reported as a
component of “Occupancy expense.”

4. U . S . G O V E R N M E N T A N D FEDERAL AGENCY S E C U R I T I E S
Securities bought outright and held under agreements to resell are held in the SOMA at the FRBNY. An undivided interest in SOMA
activity, with the exception of securities held under agreements to resell and the related premiums, discounts and income, is allocated to each Reserve Bank on a percentage basis derived from an annual settlement of interdistrict clearings. The settlement,
performed in April of each year, equalizes Reserve Bank gold certificate holdings to Federal Reserve notes outstanding. The
Bank’s allocated share of SOMA balances was approximately 6.087% and 6.083% at December 31, 1999 and 1998, respectively.
The Bank’s allocated share of securities held in the SOMA at December 31, that were bought outright, were as follows
(in millions):

1999
Par value
Federal agency
US. government
Bills
Notes
Bonds

$

$

21

10,744
13,298
5,051

.
-

$

11,848
11,430
4,226

29,104
554
(203)

Total par value
Unamortized premiums
Unaccreted discounts
Total allocated to Bank

1
1

1998

27,525
449
(195)

29,455

$ -~
27,779

Total SOMA securities bought outright were $483,902 million and $456,667 million at December 31, 1999 and 1998, respectively.




39

The maturities of U.S. government and federal agency securities bought outright, which were allocated to the Bank at
December 31, 1999, were as follows (in millions):

Par value

40
Maturities of Securities Held

~~

Within 15 days
16 days to 90 days
91 days to 1year
Over 1year to 5 years
Over 5 years to 10 years
Over 10 years

$

Total

$
~~

Federal Agency
Obligations

U S . Government
Secunties

Total

~~~

282
5,595
8,513
7,558
3,111
4,034

$

29,093

$

-

$

282
5,597
8,514
7,559
3,118
4,034

$

29,104

2
1
1
7
11

~~

At December 31, 1999 and 1998, matched sale-purchasetransactions involving U S . government securities with par values of
$39,182 million and $20,927 million, respectively, were outstanding, of which $2,385 million and $1,273 million were allocated
to the Bank. Matched sale-purchasetransactions are generally overnight arrangements.
5. INVESTMENTS DENOMINATED I N FOREIGN CURRENCIES
The FRBNY, on behalf of the Reserve Banks, holds foreign currency deposits with foreign central banks and the Bank for
International Settlements and invests in foreign government debt instruments. Foreign government debt instruments held include
both securities bought outright and securities held under agreements to resell. These investments are guaranteed as to principal
and interest by the foreign governments.
Each Reserve Bank is allocated a share of foreigncurrency-denominated assets, the related interest income, and realized and
unrealized foreign currency gains and losses, with the exception of unrealized gains and losses on F/X swaps and warehousing
transactions. This allocation is based on the ratio of each Reserve Bank’s capital and surplus to aggregate capital and surplus at
the preceding December 31. The Bank’s allocated share of investments denominated in foreign currencies was approximately
7.027% and 6.545% at December 31, 1999 and 1998, respectively.
The Bank’s allocated share of investments denominated in foreign currencies, valued at current exchange rates at December 31,
were as follows (in millions):

1999

German Marks
Foreign currency deposits
Government debt instruments
including agreements to resell
European Union Euro
Foreign currency deposits
Government debt instruments
including agreements to resell
Japanese Y n
e
Foreign currency deposits
Government debt instruments
including agreements to resell
Accrued interest
Total

1998

$

684
155

305
178
23
625
3
$

44
406
6

1.134

$

1.295

Total investments denominated in foreign currencies were $16,140 million and $19,769 million at December 31, 1999 and 1998,
respectively. The 1998 balance includes $15 million in unearned interest collected on certain foreign currency holdings that is
allocated solely to the FRBNY.




The maturities of investments denominated in foreign currencies which were allocated to the Bank at December 31, 1999, were
as follows (in millions):

Maturities of InvestmentsDenominated in Foreign Currencies
Within 1year
Over 1year to 5 years
Over 5 years to 10 years
Total

$

1,059
35
40

$

41

1.134

At December 31, 1999 and 1998, there were no open foreign exchange contracts or outstanding F/X swaps.
At December 31, 1999 and 1998, the warehousing facility was $5,000 million, with nothing outstanding.

6. B A N K P R E M I S E S A N D E Q U I P M E N T
A summary of bank premises and equipment at December 31 is as follows (in millions):

1999
Bank premises and equipment
Land
Buildings
Building machinery and equipment
Construction in progress
Furniture and equipment

3

$

299
(99)

Accumulated depreciation

Bank premises and equipment, net

32
42
13
78
134

1998

$

200

32
41
1
1
17
128
229
(92)

$

137

Depreciation expense was $16 million and $14 million for the years ended December 31, 1999 and 1998, respectively.
The Bank is constructing new buildings to replace the head office in Atlanta and the branch in Birmingham. At December 31,
1999, the contractual obligation for this construction totals $144 million.
The Bank leases unused space to outside tenants. Those leases have terms ranging from 1 5 years. Rental income from
to
such leases were $ 1 million in each of the years ended December 31, 1999 and 1998. Future minimum lease payments under
agreements in existence at December 31, 1999, were (in thousands):

2000
2001
2002
2003
2004
Thereafter

$

249
135
100
83
83
0

$

650

7. C O M M I T M E N T S A N D C O N T I N G E N C I E S
At December 31, 1999, the Bank was obligated under noncancelable leases for premises and equipment with terms ranging from
1 approximately 10 years. These leases provide for increased rentals based upon increases in real estate taxes, operating
to
costs or selected mice indices.
Rental expense under operating leases for certain operating facilities, warehouses, and data processing and office equipment
(includingtaxes, insurance and maintenance when included in rent), net of sublease rentals, was $7 million for each of the years
ended December 31, 1999 and 1998. Certain of the Bank's leases have options to renew.




Future minimum rental payments under noncancelable operating leases and capital leases, net of sublease rentals, with terms of
one year or more, at December 31, 1999, were (in millions):

Operatin2

42
2000
2001
2002
2003
2004
Thereafter

$

4.4
3.6
0.5
0.3
0.3
1.4

$

10.5

A t December 31, 1999, other commitments and long-term obligations in excess of one year were $98 million.
Under the Insurance Agreement of the Federal Reserve Banks dated as of March 2, 1999, each of the Reserve Banks has agreed
to bear, on a per incident basis, a pro rata share of losses in excess of 1% of the capital paid-in of the claiming Reserve Bank, up
to 50%of the total capital paid-in of all Reserve Banks. Losses are borne in the ratio that a Reserve Bank’s capital paid-in bears
to the total capital paid-in of all Reserve Banks at the beginning of the calendar year in which the loss is shared. No claims were
outstanding under such agreement at December 31, 1999 or 1998.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is difficult to predict
the ultimate outcome of these actions, in management’s opinion, based on discussions with counsel, the aforementioned litigation
and claims will be resolved without material adverse effect on the financial position or results of operations of the Bank.
8. RETIREMENT AND THRIFT PLANS
Retirement Plans
The Bank currently offers two defined benefit retirement plans to its employees, based on length of service and level of compensation. Substantially all of the Bank’s employees participate in the Retirement Plan for Employees of the Federal Reserve System
(“System Plan”) and the Benefit Equalization Retirement Plan (“BEP”). The System Plan is a multiemployer plan with contributions
fully funded by participating employers. No separate accounting is maintained of assets contributed by the participating employers.
The Bank’s projected benefit obligation and net pension costs for the BEP at December 31, 1999 and 1998, and for the years
then ended, are not material.
Thrift Plan
Employees of the Bank may also participate in the defined contribution Thrift Plan for Employees of the Federal Reserve System
(”Thrift Plan”). The Bank’s Thrift Plan contributions totaled $4 million for each year ended December 31, 1999 and 1998, respectively, and are reported as a component of “Salaries and other benefits.”
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS A N D POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Pensions
In addition to the Bank’s retirement plans, employees who have met certain age and length of service requirements are eligible
for both medical benefits and life insurance coverage during retirement.

The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan assets.
Net postretirement benefit cost is actuarially determined using a January 1measurement date.
Following is a reconciliation of beginning and ending balances of the benefit obligation (in millions):

1999

1998

Accumulated postretirementbenefit obligation at January 1
Service cost-benefitsearned during the period
Interest cost of accumulated benefit obligation
Actuarial (gain)
Contributionsby plan participants
Benefits paid

$

71.8
2.1
4.1
(10.4)
0.3
(2.0)

$

66.3
1.7
4.2
1.8
0.4
(2.6)

Accumulated postretirementbenefit obligation at December 31

$

65.9

$

71.8




~

~

Following is a reconciliation of the beginning and ending balance of the plan assets, the unfunded postretirement benefit
obligation, and the accrued postretirement benefit cost (in millions):

1999

1998

Fair value of plan assets at January 1
Actual return on plan assets
Contributions by the employer
Contributions by plan participants
Benefits paid
Fair value of plan assets at December 31

$

-

$

-

Unfunded postretirement benefit obligation
Unrecognized prior selvice cost
Unrecognized net actuarial gain (loss)

$

65.9

$

71.8
5.4
(7.1)

Accrued postretirement benefit cost

$

$

70.1

5.0
3.3
74.2

Accrued postretirement benefit cost is reported as a component of “Accrued benefit cost.”
The weighted-average assumption used in developingthe postretirement benefit obligation as of December 31, 1999 and 1998
was 7.50% and 6.25%, respectively.
For measurement purposes, an 8.75% annual rate of increase in the cost of covered health care benefits was assumed for 2000.
Ultimately, the health care cost trend rate is expected to decrease gradually to 5.50% by 2006, and remain at that level thereafter.
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage
point change in assumed health care cost trend rates would have the following effects for the year ended December 31, 1999
(in millions):

1 Percentage
Point Increase
Effect on aggregate of selvice and interest cost components of
net periodic postretirement benefit cost
Effect on accumulated Dostretirementbenefit obligation

$

2.1
17.1

1 Percentage
Point Decrease

$

(1.6)
(13.0)

The following is a summary of the components of net periodic postretirement benefit cost for the years ended December 3 1
(in millions):

1999

1998

Sewice cost-benefitsearned during the period
Interest cost of accumulated benefit obligation
Amortization of prior sewice cost
Recognized net actuarial loss

$

2.1
4.1
(0.4)

$

1.7
4.2
(0.4)

Net periodic postretirement benefit cost

$

5.8

$

5.5

~~

Net periodic postretirement benefit cost is reported as a component of “Salaries and other benefits.”
Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially determined and include
the cost of medical and dental insurance, survivor income, and disability benefits, and self-insured workers’ compensation expenses. Costs were projected using the same discount rate and health care trend rates as were used for projecting postretirement
costs. The accrued postemployment benefit costs recognized by the Bank at December 31, 1999 and 1998, were $ 9 million and
$ 8 million, respectively. This cost is included as a component of “Accrued benefit cost.” Net periodic postemployment benefit
costs included in 1999 and 1998 operating expenses were $2 million in each year.




43

44

Design by Lucid Partners, Inc.
Photo of Jack Guynn and Pat Barron
by Kevin Rose. All other photography
by Flip Chalfant. Thanks to Miami
International Airport; Joelton
Elementary School, Nashville,
Tennessee; and AAA Parking,
Atlanta, Georgia, for allowing photography on their premises. Thanks for
additional help with photography
from Southern Nurseries, Nashville,
Tennessee, and the Metropolitan
Action Commission Head Start,
Nashville, Tennessee.










.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102