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fed [u c a t i o n ]
Federal Reserve Bank of St. Louis Annual Report 2005

How the
Federal Reserve
Bank of St. Louis’

economic
education
programs are
shaping
today’s
minds
and
tomorrow’s
economy

chairman’s[m e s s a g e ]
The Federal Reserve’s mission of conducting monetary policy and maintaining a stable
financial system depends upon the participation and support of an educated public.

[a message from the]chairman
Investing in Economic Education

I

am optimistic about the
economic future of our
nation. The prospects
are excellent for continuing
improvements in technology, increases in productivity,
and innovations in banking
and financial services—all
of which bode well for our
future standard of living. As
we move forward, however,
each and every American will
face the challenge of making
sound financial decisions in
this extraordinarily complex
economy. Sound financial
decisions are critical not only
to the prosperity and financial
security of individuals, but also
to the growth and efficiency of
our overall economy.
Meeting the challenge of
operating in today’s economy
is much easier if we have a
working knowledge of how
our economy functions and
how it affects us. That is why
economic education is such
a critical component of the
Federal Reserve’s mission, as
detailed in this 2005 annual

report of the Federal Reserve
Bank of St. Louis.
Economics affects every
aspect of our lives. Each
of us must understand how
economics affects the decisions our government makes
in order to participate fully
in our democratic system
as informed citizens and as
informed voters. We must
understand how economics affects the business
world—especially if we choose
careers in business and most
especially if we take that bold
step forward on our own as
entrepreneurs. Ultimately, the
most important reason to educate ourselves about economics and personal finance is to
ensure that we make the right
decisions to achieve financial
security for ourselves and our
loved ones.
The Federal Reserve’s mission of conducting monetary
policy and maintaining a stable
financial system depends
upon the participation and
support of an educated public.
Accomplishing this mission
involves trade-offs and tough
decisions. As the Fed pursues
the monetary policy objectives
that have been set out for us
by Congress—to pursue price

stability, maximum employment and moderate long-term
interest rates—it is essential
that the public understand our
objectives and our actions.
Educating the public about the
reasoning behind our decisions helps build confidence in
our economic system—another
critical factor in keeping our
economy running smoothly.
No matter what your age
or educational background—
whether you are a student, an
entrepreneur, a homemaker
or a professor—the Fed has
resources to help you learn
more about economics and
to help you participate in the
important national conversations we must have about
these issues. In the end, I
believe you will find that economic education is one
of the best investments you
can make for your own future
and for the future of your
family, your community and
our nation. ■

Ben Bernanke
Chairman
Board of Governors of the
Federal Reserve System

5

president’s[m e s s a g e ]
Today’s minds will shape tomorrow’s economy. Thus, education is
one of the Federal Reserve’s important missions.

[a message from the]president
Economic Education: Our Commitment

W

hen I left my
previous career in
higher education to
become president of the Federal Reserve Bank of St. Louis,
I moved into a job that carries
with it an enormous responsibility. But in many ways, I took
on just as much responsibility
during my 25-plus years as an
educator.
Teaching is about equipping
people to make a difference
in the world. The students
learning now to read and write
are the future authors and
journalists. Those who are
studying math and science
today may be headed toward
an engineering or biochemical
career in adulthood. Today’s
students, no matter what they
study, will be tomorrow’s leaders in business and government, often with influence and
responsibility that is worldwide in scope.
And what about teaching
our students economics?
Are we simply teaching a
classroom of young people to
debate the principles of supply and demand, or to analyze
the benefits of price stability?
In reality, there is a far greater
purpose that lies at the heart
of the St. Louis Fed’s commit-

ment to economic education,
the subject of our 2005
annual report.
Economics, in its purest
form, is about making decisions. Economics is the study
of how people make sound
choices. By studying how
markets work, our young
people also learn how to make
efficient choices in managing
their own scarce resources,
such as time and money.
As this generation heads
toward adulthood, the decisions people will have to
make are becoming increasingly complex and difficult.
As participants in a global
economy, they will need the

9

10

best tools we can provide to
them to truly make informed
choices. Given the Federal
Reserve’s own expertise, the
Fed can be particularly helpful
in fostering economic education to help people make
good choices among a seemingly infinite array of financial
services options, particularly
in the face of the rapid growth
of electronic payments. The
Fed can also help to address
the troublesome trends of
low personal savings and
increased accumulation of
credit-card debt.
Economic education benefits the Fed, as well as the
general public, by building
support for the monetary
policy actions we take. But
the Fed’s influence can only
go so far. The true power of
the free-market economy lies
in the ability of our nation’s
citizens to make their own economic choices. That means
teachers have enormous influence—and, therefore, responsibility—to provide young
people with the knowledge
they need to make informed,

intelligent decisions now and
in the future.
Throughout this annual
report, you will read about
the Fed’s economic education
programs, ranging from money
and banking courses for teachers to our nationwide Fed
Challenge competition that
allows teenagers to step into
the shoes of a monetary policymaker. Most important, you
will hear from the folks who
are on the front lines of this
effort: the economic education
experts who have devoted
themselves to promoting
this critical field of study; the
teachers who have taken
responsibility for shaping the
economic minds of the future;
and the students themselves
who will be making these lifechanging—and, in some cases,
world-changing—decisions.

My hope is that reading their
stories will not only entertain and inform you, but also
persuade you of the critical
importance of promoting economic education. In particular,
if you’re a parent or teacher
reading this report, I hope
you will be inspired to ask the
tough but necessary questions
of your educational institution: At what age are students
learning about economics?
How much economics is
being taught? Are students
really getting the economic
background they need now to
make the types of informed
financial decisions they will
face later in life?
Today’s minds will shape
tomorrow’s economy. Thus,
education is one of the Federal Reserve’s important missions. We invite you to partner
with us in continuing that mission in the years ahead.
No less than our nation’s
economic future is at stake. ■

William Poole
President and CEO
Federal Reserve Bank
of St. Louis

fed [u c a t i o n ]
How the Federal Reserve Bank of St. Louis’ economic education programs are
shaping today’s minds and tomorrow’s economy

S

o, you’re a
typical, wellinformed
citizen, right? Ask
yourself the following questions:

>> What does it

mean to say that gross
domestic product has
increased?

>> What is a federal
budget deficit?

>> What type of

investment has the
greatest risk of losing
value due to inflation?

The answers, respectively, are:

>> The amount of

final goods and services produced has
increased.

>> The federal gov-

ernment’s outlays for
a year are greater than
its revenue for that
year.

>> Keeping your savings hidden as cash.

And if you got one or
more answers wrong,
don’t feel bad. You
have something in
common with a majority of American adults,
at least according to
the National Council
on Economic Education (NCEE), which

asked these questions as part of a quiz
included in its 2005
Standards in Economics Survey, given to
3,512 adults and 2,242
students.
Based on the results
of the 20-question quiz,
adults got an average
grade of 70 (a C) for
their knowledge of
economics, while the
average score of students was 53—a failing
grade. In its executive
summary of the survey,
the NCEE remarked, “A
majority of high school
students do not understand basic concepts in
economics.”
Charles Wu, a senior
at Marquette High
School in west St. Louis
County, Mo., isn’t one
of them.

13

raise interest rates by
one-quarter of a point,
Wu and his classmates
needed to decide what
impact that action could
have on the recommen-

Taking the Fed

dation they would make if

Challenge

they were in the shoes of

On an unseasonably

a monetary policymaker.

warm afternoon in late

They would be wearing

January, while his class-

puters, scrolling through

those shoes in less than

mates headed outdoors

web pages of economic

six weeks while they

into the sunshine, Wu

data, while Wu and oth-

competed with other

huddled in a classroom

ers used markers to add

high school teams in the

with five other students

14

the students sat at com-

notes to an outline that

annual Fed Challenge

under the watchful eye

already took up several

event.

of economics teacher

pages of a giant flip pad.

Eva Johnston. News-

It was a big day: In the

paper clippings were

final meeting conducted

Fed and other Reserve

everywhere. Some of

by outgoing Fed Chair-

banks around the coun-

man Alan Greenspan,

try, allows high school

Fed Challenge, sponsored by the St. Louis

the Federal Open Market Committee (FOMC)
had just voted to again

CHARLES WU (CENTER) AND HIS
MARQUETTE TEAMMATES ATTEND
A FED CHALLENGE WORKSHOP
SPONSORED BY THE FEDERAL
RESERVE BANK OF ST. LOUIS.

�

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Four for four is nice,
but Wu is looking even

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further into his future as
he ponders his career
aspirations. “I’m planning to major in econom-

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students to take part in

ics,” he says. That’s a

a mock FOMC meeting.

far cry from how he felt

They make a 15-minute

when he first joined the

presentation to a panel

team as a freshman on

of judges and then spend

the recommendation of

an additional 15 minutes

his math teacher, whose

being questioned on

classroom is next door to

their findings and recom-

Johnston’s. “I really didn’t

mendations on monetary

know anything about

student like

policy.

economics,” Wu says.

Charles Wu,

“At the time, it was just

however, there

St. Louis district competi-

something to do. There

are many teen-

tion heads to the national

did come a point where I

agers who won’t

finals in Washington, D.C.,

asked myself, ‘What am I

learn enough about

where Wu doesn’t need

getting into?’ Eventually,

economics to gain

a tour guide. He and his

I built up my confidence.”

that confidence—or

The team that wins the

��
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�

For every

15

classmates made the

even to acquire the

finals in each of his four

knowledge they need to

years on the team,

become a savvy adult in

continuing Marquette’s

today’s complex financial

nine-year winning streak

world. That fear—and the

in the Eighth District

desire to make students

competition.

like Wu the rule, rather
than the exception—helps
continued on Page 18

EVA JOHNSTON

T

Eva Johnston, Wiseman got involved and

each year have a chance to experience the

found his economic knowledge transformed.

real-life world of monetary policymaking.

“I think Fed Challenge was the first step

he students who participate in the
Federal Reserve’s Fed Challenge event

Spurred on by Marquette economics teacher

For Eli Wiseman, this

toward the career that

experience became the

I ended up pursuing,”

springboard to a Federal

he says.
Since then, Wiseman

Reserve job.
Wiseman, who partici-

has found that his Fed

pated on Marquette High
School’s Fed Challenge

16

Challenge experience has
truly prepared him for

team during his senior

real-world economics.

year, is now a research

“The thing I noticed after

associate at the Federal

doing Fed Challenge

Reserve Bank of Kansas
City. He assists the Kansas City Fed’s director of

Eli Wiseman

>> Research

Associate, Federal Reserve
Bank of Kansas City

was that I could actually
understand some of these
banking and financial

research and its econo-

programs that are on

mists by gathering data,

the news or in the Wall

providing background

Street Journal,” he says.

information and helping to research mone-

“I think it’s good to be informed both

tary policy prior to the Federal Open Market

as a consumer and as someone in the busi-

Committee meetings.

ness world—to know what the Fed is doing

Before joining Fed Challenge, “I had no interest in economics,” Wiseman says. “I didn’t even
know what it was.”

on a regular basis and to understand why
they’re doing it.”

find it [here]

The St. Louis Fed offers a variety of economic education programs
and resources.

S

ome of the major economic education programs,
conferences and publications offered by the
Federal Reserve Bank of St. Louis include:

Annual Teachers Conference: Held at all
four District offices, this conference focuses each year
on a different topic that is of interest to teachers and
students—and applies economic concepts to these topics. Previous conferences have dealt with the economics of the Great Depression, the economics of sports,
and the issues surrounding the U.S. government’s
financial deficit and Social Security. The conference
features presentations from District education specialists and St. Louis Fed Research economists as well as
materials on how to share that topic in the classroom.
Professors Conference: This District-wide
conference for college and university faculty (pictured
above), held every February in St. Louis, has drawn
increased interest in recent years. The main focus of
each conference is the economic outlook, with faculty
learning more about how to find and use the St.
Louis Fed’s economic data sources. An additional
topic is covered each year, as well: The 2006 conference focused on economic relations between the United
States and China.
Making Sense of Money and Banking:
Elementary and secondary school teachers throughout
the Eighth District are invited to attend this annual
seven-day course in St. Louis to learn more about
money and banking concepts, such as the difference

between a stock and a bond, how the payments system
works, how a bank creates money and what happens
at an FOMC meeting. In addition to the lessons
themselves, each day features a “How Do We Teach
This?” segment, helping teachers apply the material
in their classrooms.
Inside the Vault: The St. Louis Fed publishes this
economic education newsletter twice a year, with the
content geared toward secondary school teachers and
students. Each issue features an article adapted from
one of the Fed’s economic publications, such as The
Regional Economist or Review. Also included
are a question-and-answer segment on an economic
topic and an “Economic Snapshot” explaining a
current economic statistic in plain and simple terms,
accompanied by a graphic.
Economic Education Essay Contest: Begun
in 2004, the Eighth District’s Essay Contest is open
to students in grades 9-12 in each of the four District regions—St. Louis, Little Rock, Louisville and
Memphis. The first-place student in each region wins a
$500 savings bond. Topics vary each year. Last year’s
contest, titled “The Economics of Looking Good,”
asked students to weigh the trade-offs involved in
spending money on new fashions and on enhancements
to their appearance. The 2006 contest topic, “Finding
Economics in Literature,” asks students to discuss the
economic principles and concepts they find in a novel of
their choice.

17

continued from Page 15

drive the passion of
Dawn Griffitts, a former
teacher who has managed the St. Louis Fed’s
economic education
programs for more than

included providing eco-

10 years.

nomic education curricuFed co-workers join with

lum and lesson plans and

edge and the means

economic education

instructing teachers in how

to teach others about

experts, teachers and

to use those materials.

economics, and we cer-

students to share their

tainly have a comparative

thoughts on Fed Chal-

the primary target audi-

advantage in teaching

lenge and the many other

ence for the Fed’s

about the role of the Fed

St. Louis Fed courses and

economic education

in the economy,” says

programs that promote

programs. “Having been

Griffitts. “If we don’t get

economic education—

a teacher, I know that

out and talk about eco-

and why shaping today’s

teachers teach what they

nomics and the Federal

young minds is so critical

know, and they don’t

Reserve, who will?”

to the Fed’s economic

teach what they don’t

mission of tomorrow.

know,” Griffitts says. “If

“The Fed has the knowl-

18

In this annual report,
Griffitts and her St. Louis

The Fed Enters
the Classroom
The Eighth District
has been a supporter of
economic education for
decades, hosting teacher
meetings and providing
expert speakers. That
role became more proactive in the mid-1990s
with the hiring of Griffitts,
who began shaping a
new direction for the program. The new direction

Today, teachers remain

they don’t understand
economics, and they
continued on Page 20

L

ast spring, when St. Louis Fed econo-

mittee (FOMC) meeting and make their own

mist Mike Pakko traveled to Washing-

monetary policy recommendations.

ton, D.C., for the weekend, he spent most

Pakko joined the Fed in 1993. He helped

of the time hunkered in a hotel room dis-

initiate the Eighth District’s Fed Challenge

cussing economic data.

program after he heard

He probably won’t get

about the New York Fed’s

much sightseeing done

involvement in the program.

when he returns to the

Fed Challenge isn’t the

nation’s capital this

only educational endeavor

spring, either.

on Pakko’s resume; he

But Pakko considers

teaches macroeconom-

that a small sacrifice

ics to college students at

compared with the hours

St. Louis University. The

of research and study-

high school students he

ing put in by his annual
traveling companions—
the winning team from

Mike Pakko

>> Research

Economist, Federal Reserve
Bank of St. Louis

the Eighth District Fed

their older counterparts,
“These kids are defi-

representing the
Since 1998, Pakko has served as a coach for

compare favorably with
he says.

Challenge competition,
St. Louis Fed in D.C. at the national finals.

coaches for Fed Challenge

nitely the cream of the
crop,” Pakko says. “And Fed Challenge is a
great experience for them. They’re getting

the Eighth District high school teachers and

practical insight into the world of econom-

students who participate in Fed Challenge, a

ics by learning about the Federal Reserve.

national competition in which students take

This isn’t learning from textbooks; this is

part in a mock Federal Open Market Com-

real life.”

19

The need for greater
public understanding of
continued from Page 18

don’t understand issues,
and they don’t understand topics like the
deficit and its impact on
the economy, they’re not
going to talk about those
subjects in the classroom.”
And what happens in
the classroom can have
a ripple effect in society
at large, as students grow
up to be adult decisionmakers, says St. Louis

economics in general and
the Fed’s monetary policy
mission in particular is
also apparent to economic education experts

about what the Fed is

in the Eighth District,

and what the Fed does,”

such as Mary Suiter, the

Suiter says. “Many

director of the University

believe the Fed is print-

of Missouri-St. Louis Cen-

ing money and giving it to

ter for Entrepreneurship

banks. What they hear

and Economic Education.

and read through the

“Both kids and adults
have misconceptions

media is sometimes inaccurate, too.”
Suiter often works in

Fed Public Affairs Officer

tandem with another

Joe Elstner.

economic education

“We have a democracy

specialist, Mary Anne

in which citizens make

20

Pettit, associate director

decisions, including eco-

of the Office of Economic

nomic decisions, based

Education and Business

on the information they

Research at Southern

have,” Elstner says. “But

Illinois University in

even people with plenty

Edwardsville. They serve

of education in the field

as advisers for Griffitts’

of economics often don’t
really know the intricacies of monetary policymaking. At the Fed, that’s
an important function
that we know the public
needs to understand
better.”

STUDENTS FROM BEAUMONT
HIGH SCHOOL IN ST. LOUIS ATTEND A
FED CHALLENGE WORKSHOP SPONSORED
BY THE FEDERAL RESERVE BANK.

voices[heard]

programs, helping her
to shape curriculum
and present material at
events such as the economic education conference held throughout the
District each fall and the
“Making Sense of Money
and Banking” course that
takes place in St. Louis
every summer.
“Society is not going to
support and protect the
Fed’s role and its independence if they don’t
understand it,” Pettit
says. “That won’t happen
if they look at the Fed as
a mysterious ivory tower.
Our system works best
if everyone understands
how the Fed works and
knows that they have a
stake in the outcome.”
continued on Page 23

The Fed’s teacher advisory boards provide
valuable input on economic education
programs.
Economics isn’t a state requirement where Sam Rego teaches, at
Butler Traditional High School in Louisville.
But the subject is an integral component of Rego’s accounting
classes—and by being a member of a St. Louis Fed teacher advisory
board, Rego is helping to make economics the foundation of education
in the Bluegrass State.
“It’s a tough battle balancing between what the teachers are
required to teach and what they want to teach,” says Rego, “but it’s
easier to do that working with the Fed through its advisory boards.”
Teacher advisory boards are a critical component of the Fed’s
economic education efforts, serving as the antennae for collecting input
and opinions from teachers throughout the Eighth District.
Each advisory board is composed of approximately a dozen educators. (Some have businesspersons, as well.) The board’s main function
is to tell Federal Reserve education specialists what educators need,
what works and what doesn’t, and how educators and the Fed can
better help each other.
Most board members are middle and high school teachers like Rego,
because the bulk of the Fed’s materials and assistance is geared toward
those students. But some boards include a few primary and higher
education teachers, such as Betty Evans, a second-grade teacher at
Monticello Elementary School in Monticello, Ark.
“I think these advisory boards are one of the best things that could
happen to spread the word to other educators that economics needs to
be in the schools at all levels,” says Evans. “It’s especially critical now.
With all the national emphasis on reading and math, we can’t neglect
the social studies, especially economics.”
David Ballard, the St. Louis Fed’s economic education specialist in
the Louisville Branch, agrees, adding, “We’d never want the advice of
these talented teachers to go to waste—they do this unpaid on their
own time, after all—so, we make sure that we’re doing everything we
possibly can to help them advance economic education.”

21

22

BILLY BRITT (TOP RIGHT) , ECONOMIC EDUCATION COORDINATOR AT THE ST. LOUIS FED’S
LITTLE ROCK BRANCH, POSES WITH STUDENTS
FROM LITTLE ROCK CATHOLIC HIGH SCHOOL
FOR BOYS, WHICH WON THE BRANCH’S FED
CHALLENGE AREA COMPETITION.

continued from Page 21

“A Tremendous
Resource for Teachers”
Coordinating a variety of publications and
conferences throughout
the year can be a tall
order, particularly as the
St. Louis Fed continues

raw knowledge we have

to add more economic

available at the Fed from

education programs

our economists,” Griffitts

each year. Fortunately,

from state councils and

says. “And our teacher

Griffitts and her fellow

centers on economic

advisory board members

economic education

education, such as Suiter

are wonderful in help-

coordinators at the Dis-

and Pettit. They also

ing us to get ideas and to

trict branches have help.

take advantage of the

stay current with what’s

For starters, they rely

expertise of the Fed’s

going on in the economic

heavily on the advice,

own Research econo-

education field.”

assistance and materials

mists. In addition, they

contributed by experts

get a big boost from the

grams and materials are

District’s teacher advi-

“a godsend” for teachers

sory boards—groups of

such as Peggy Pride of

teachers throughout the

St. Louis University High

District’s seven-state ter-

School. She teaches

ritory who meet with Fed

advanced placement

staff regularly to share

economics and relies

input on economic edu-

heavily on the Fed’s

cation programs.
“In all of our offices, we
have contacts who can
deliver hands-on activities that complement the

MARY ANNE PETTIT

The Fed’s courses, pro-

continued on Page 26

23

T

om Zehnder doesn’t go to many teacher

the PowerPoint and bringing it to a college

education workshops. They remind

classroom that evening—hot off the presses,

him of a bad trip to the dentist.
“Just about all of them are about as fun

so to speak.
“One of the great things is that you’re get-

as getting a root canal,”

ting the latest information

says Zehnder, a long-time

about international trade

economics and history

or monetary policy from

teacher at Trinity High

an expert,” Zehnder says.

School in Louisville and

“The textbooks just can’t

a part-time college pro-

do that.”

fessor. “They’re painful.
But the Fed workshops

24

Zehnder has attended
the conference for several

are different. I get so

years. He likes that the

much out of them that I

information he gets is

can use in the classroom.”
The St. Louis Fed’s
annual teachers conference takes place in late
summer or early fall.

Tom Zehnder

>> Economics

and history teacher and part-time
college professor at Trinity High
School, University of Louisville
and Bellarmine University,
Louisville

Teachers listen to Fed
economists talk about the latest economic

meaty enough not just for
middle and high school
students, but also for his
college students at the University of Louisville and
Bellarmine University.

Some lessons in economics, Zehnder con-

news. The economists encourage lots of dis-

fesses, can “bog down so much, it’d drive a

cussion, and they bring plenty of handouts.

saint mad.” The Fed conference is not like

One year, after a guest economist comple-

that, he says. The economists offer real-life

mented his talk with a PowerPoint presen-

examples, not a bunch of theory. “It’s prac-

tation, Zehnder remembers photo-copying

tical,” Zehnder says. “It’s really good stuff.”

Beyond the Classroom
The St. Louis Fed’s economic education specialists are
connecting with teachers and organizations across the
Eighth District.
St. Louis Fed Manager Dawn Griffitts has been sounding the charge for economic
education for the past 10 years. In 2004, when the branch offices began changing their
focus from financial services to public programs, Griffitts’ efforts got a boost, with each
branch hiring an economic education specialist: David Ballard in Louisville, Jeannette
Bennett in Memphis and Billy Britt in Little Rock. Griffitts still covers the St. Louis
zone and oversees the District’s economic education efforts, working with branches on
creating programs and contributing to the Federal Reserve System’s initiatives.
“Teachers don’t just stumble upon the Federal Reserve and our programs; we have to
find them,” Griffitts says. “Our three specialists are quite dedicated to that goal. Their
past histories as educators give them a lot of credibility, which is a terrific asset when
they meet with teachers.”
To fulfill their mission, the three specialists:
• support District programs such as the annual teachers
conference and the economic education essay contest;
• contribute to Inside the Vault, the District’s economic
education newsletter;
• host teacher economic education workshops;
• attend regional and national education conferences; and
• build contacts with teachers, organizations and
state councils throughout their areas of responsibility.
Success is measured in how well they reach teachers. Since the expansion of the
branch economic education programs in 2004, an increasing number of teachers have
been using the District’s resources, participating in workshops and signing up for the
economic education mailing list, Griffitts says. “It shows that the Fed is fulfilling a
need—and teachers are looking for what we’re providing,” she says.
To promote economic education—and to increase understanding of the Federal
Reserve itself—the three specialists build contacts with teachers and educational organizations throughout their zones. Spreading the word involves more than holding
workshops or passing out materials. It involves building contacts and relationships.
Ballard likes to get as creative as possible when talking to teachers, using such innovations as the Econ Café. Conceived as “the Starbucks of economic education,” the Econ
Café is a place where teachers can share resources and have meetings with Ballard. The
cafes are located off-site from the Louisville Branch. They are operated by the Kentucky
Council on Economic Education and funded by local businesses.
In the Memphis zone, Bennett plans to hold a third Mississippi statewide workshop
in conjunction with the Atlanta Fed. “We work with other Reserve banks because,
even though our boundaries cut through the middle of states, we’re still dealing with the
same situations as Chicago or Atlanta; so, it makes sense to pool resources with those
banks,” Bennett says.
The specialists also partner with as many state and teacher organizations as possible.
For example, this year Britt will be presenting state banking history at an Arkansas
history workshop in conjunction with the Arkansas Council on Economic Education.
“Most everyone who attends these workshops or uses the materials is thrilled,” Britt
says. “One teacher even wished a workshop had been a full week.”

Billy Britt, Little Rock

25

David Ballard, Louisville

Jeannette Bennett, Memphis

continued from Page 23

publications, data, web
sites and other materials.
“The Fed is a tremendous resource for teachers,” she says. “If you
are teaching any type or
amount of economics
in the classroom, there
is just no way you won’t

fusing line graphs. As a

benefit by relying on their

field of study, economics

materials.”

could use some PR help,
Suiter admits.

Teachers like Pride are

“In general, econom-

most grateful for not only
the information that the

ics gets a bad name,”

Fed presents at its events

26

also economics in general—a subject that, like

she says. “People think

and conferences, but also

the Fed itself, is often

of it as just supply and

for the materials that help

plagued by misunder-

demand charts. They ask

transform the subject

standing and misconcep-

us, ‘How can you teach

matter into a classroom

tions. With that bond

this to kids, and why do

lesson for kids. “We give

in common, the Fed has

they need to know it?’

them lessons that they

joined forces with edu-

My answer is that we’re

can literally take right

cators in a continuing

teaching kids how to

back to school and plug

campaign to persuade

make good decisions.

into their teaching, usu-

the public—and politi-

We’re teaching them that

ally with few changes,”

cians—of the critical role

scarcity exists and that

says Griffitts.

of economics in school

you can’t have every-

These events and
resources educate teachers about not only the
Fed and its mission, but

curriculums, even at the
elementary level.
Never Too Young
to Learn
Say the word “economics” to a group of
adults, and you’re likely
to inspire dreaded
flashbacks of overhead
projector slides and con-

continued on Page 29

27

S

orry kids, but…

provide lessons that you can’t have every-

There is only so much ice cream in the

world, and only so many factories that make it.
How to teach such lessons in scarcity to

thing you want. As the students get older,
the teachers talk about financial literacy,
decision-making, entrepreneurship, and sup-

students is part of what

ply and demand.”

teachers learn through

High school students

the Arkansas Council on
Economic Education,

Economics Challenge

which hosts one-week

and test their knowledge

workshops and other

of open markets, mon-

programs to help teachers

28

can compete in the

etary policy and similar

in grades K-12 explain

subjects. In the popular

the economy to their

Stock Market game,

students.

students in grades 4-12

About 350 teachers in
rural, urban and suburban school districts
attend the workshops

Donna Wright

>> Associate

Director, Arkansas Council
on Economic Education,
Little Rock

must make smart investment decisions as they
manage hypothetical
$100,000 portfolios.
“Students always want

every year at one of six
university-based Cen-

to know how they can

ters for Economic Education, says Donna

apply what they’re hearing in the class-

Wright, associate director of the Arkansas

room,” Wright says. “In economics, they are

Council.

learning financial literacy, how to keep a

“These are teachers who understand the

check record, the importance of investing and

value of teaching their students real-life

how to be a wise decision-maker today and

skills,” Wright says. “In kindergarten, you

tomorrow.”

“Do a Zoo” invites children to bring in stuffed
animals, classify them
(as a fish, reptile or
mammal) and choose
continued from Page 26

which animals to include

choose between scarce

thing you want. You have

in a zoo display that will

resources,” says Suiter.

to prioritize and make

be attended by their

“They also learn about

choices.

classmates.

capital resources when

“Economics provides

“In making choices,

they set up the display.”

a framework for mak-

they’re using economic

ing decisions. If more

decision-making and

school level—and even

kids and adults had that

learning about oppor-

when they’re a few years

framework, they would

tunity cost and how to

older—kids have a ten-

At the elementary

also make better political

dency to believe that

decisions and be more

they can have everything,

informed voters.”

Pettit says.

Most of the St. Louis

“I don’t think young

Fed’s programs are open

people understand that

to teachers at all levels,
including elementary,
middle and high school.
Suiter and her co-workers at the UM-St. Louis
center have developed
programs for kids at
every grade level, including a program for firstand second-graders
called “Do a Zoo.”

ST. LOUIS FED ECONOMIC EDUCATION
MANAGER DAWN GRIFFITTS
(FOREGROUND) LEADS A TEACHER
ADVISORY BOARD MEETING.

continued on Page 31

29

T

he chess club is great. Varsity foot-

Eighth District competition. So, the students

ball gets the glory. But being on the

better do their homework—and they do.

Fed Challenge team, well, that’s something
extra-special.

“We had one girl on our team, and this
was amazing, but Dr. Poole asked her a

“If you look at the

question from a speech

time, dedication and the

he had given earlier that

intellect that’s required,

week, and this girl recited

it beats any activity on

the speech almost verba-

campus,” says Camille

tim,” Collins says.

Collins, an economics

Many of Collins’

teacher at Germantown

30

students major in eco-

High School in suburban

nomics in college. They

Memphis and an advisor

certainly understand how

to the school’s Fed Challenge team.
The students study, they

Camille Collins

>> Economics

teacher, Germantown High School,
Memphis

important economics is in
everyday life.
“Learning economics is

do research and, then,

one way to learn how to

at the annual Fed Chal-

be a productive citizen,”

lenge competition in the

says Collins, who was

spring, they must answer

honored as Tennessee’s

complex questions about the economy.
A Fed economist asks the questions at

Economic Educator of the Year in 2001 by
the University of Memphis’ Department of

the regional Challenge. St. Louis Bank

Economics. “As for me, it helps me keep up

President Bill Poole quizzes students at the

with everything going on in the world.”

continued from Page 29

you have to trade off and
make choices,” she says.
“Studies show that kids
have already made a lot
of decisions by the time
they get to sixth grade,
such as what they’re
spending money on and
what they’re going to do.

ing in recent years. The

If you’re going to make an

U.S. government’s No

impression on kids and

Child Left Behind Act

their choices, you need

of 2001 holds schools

to get to them early.
Simple programs such

monetary policy to sec-

accountable for student

ond-graders, but you can

test scores in reading

as “Do a Zoo” can get that

teach opportunity cost.

and mathematics. Presi-

lesson across in a fun and

Taking economic con-

dent George W. Bush’s

painless manner, Pet-

cepts and making them

recently announced

tit says. “Sometimes we

simple is helpful for all of

American Competitive-

make things more com-

us. You’re opening minds

ness Initiative urges

plex than they are,” she

and turning lights on.”

schools to focus more on

says. “You can’t teach
Working Economics
into the Classroom
Even if teachers don’t
question the value of
economics for young students, squeezing it into
the curriculum presents
more of a challenge. The
old adage of “reading,
‘riting and ‘rithmetic” has
taken on a new mean-

math and science.
As a result, teachers are
forced to focus on those
areas at the expense of
continued on Page 33

31

TEENAGERS LEARN ABOUT MANAGING
PERSONAL FINANCES AT A ST. LOUIS
FED “YOUR PAYCHECK” WORKSHOP IN
QUINCY, ILL.

32

ness education, math and
even some language arts
teachers,” Griffitts says.
For example, the St. Louis

The annual Teach Chil-

Fed’s 2003 fall teach-

dren to Save Day event,

ers conference focused

in which volunteers from

on the economics of the

the Fed and community

Great Depression.

banks talk to elementary

“We had lots of history

school children about

other subjects—such as

teachers attend, many of

the importance of per-

economics, Suiter says.

whom had never heard

sonal savings, uses les-

“So, if we want econom-

the economic perspec-

sons based on children’s

ics to be taught, our best

tive on the Great Depres-

books. This approach

hope is to find a relevant

sion before,” Griffitts

merges economics with

way to integrate it into

says. “They had mostly

reading.

the rest of the school

heard only the histori-

curriculum.”

cal perspective. We

actually spice up other

gave them another way

subjects for kids—rather

and conferences, teach-

to think about it and to

than the other way

ers of economics-only

teach it.”

around, Suiter says. “Kids

continued from Page 31

At St. Louis Fed classes

In fact, economics can

usually find themselves in

are intrigued by money.

the minority, Griffitts says.

If you can hook them by

“We have social studies,
history, government, busi-

talking about money, you
can infuse a lot more
economics into the

33

encouraging signs for the
future, though. Illinois
and Kentucky already
require students to take
a personal finance course
prior to graduation. Mismaterial to improve their
knowledge.”
Integration of economics into other subjects is
likely to remain the rule
in American classrooms,
with only about one-third
of states requiring high
school students to take
economics. As a result,
there is less incentive for

sissippi and Arkansas
both require a course to
be offered. Missouri will
now require high school
students to earn a halfcredit in personal finance,

development experts,

starting in fall 2006.

as well. Whether adults

Saving Our Future:
Economics and
Personal Finance
These new require-

districts to make room

34

ments are part of a grow-

for pure economics

ing trend among not just

classes on the sched-

educators but community

ule. There are some

or children are the audience, educators are
concerned about the
lack of personal finance
knowledge and skills, as
evidenced by Americans’
low rate of saving and
high rate of credit-card
debt and bankruptcy.
The Federal Reserve
has taken a leading role
in the personal finance
education campaign,
sponsoring programs for
both adults and students
and taking part in events
such as Teach Children
continued on Page 37

ST. LOUIS FED RESEARCH DIRECTOR
BOB RASCHE TALKS ABOUT THE FED’S
ECONOMIC DATA SOURCES AT THE
2006 PROFESSORS CONFERENCE.

T

of economics and for any subject, whether

class at St. Louis University High School

it’s history, social studies or government,

already have a strong background in social

Pride says. “You can tie all kinds of eco-

he 105 high school seniors in Peggy
Pride’s advanced placement economics

The Fed’s materials work for any level

studies and history.

nomic concepts to articles

They’re ready to work

that appear in the Fed’s

hard and aim high in

publications.”
And her students won’t

setting goals for their
future—and to immerse

have to become econo-

themselves in the study of

mists to put those concepts

economics.

into practice, she says.

Pride has attended the

“My major goal is to

St. Louis Fed’s seminars

produce better citizens

and workshops and used
the Fed’s materials for
more than a decade.

Peggy Pride

>> Advanced place-

ment economics teacher, St. Louis
University High School, St. Louis

who are well-informed
and have good thinking
skills,” Pride says.

She is a member of the

“Economics does that

teacher advisory board

because it’s about deci-

for the Fed’s St. Louis

sion-making.

office, helping to give

“You become a better

feedback and make recommendations about

voter and a better citizen in terms of what

economic education programs.

decisions you’re making in the community,

In October 2005, the Global Association of
Teachers of Economics gave Pride its firstever John Morton Teacher of the Year award.

and you understand how your life is affected
by your own personal decisions.”

35

Life Lessons
As more adults struggle to manage their
money, personal financial education for kids
is a hot topic.

36

Balancing a checkbook, opening a savings account and
understanding a credit-card agreement are skills that are
critical to adult success—but can be learned at a young
age. These days, teachers are becoming more involved in
introducing children to the world of personal finance.
“We can’t assume that all children are taught practical
economic skills; so, the responsibility often falls to public
education to ensure kids learn those lessons,” says St. Louis
Fed Economic Education Manager Dawn Griffitts.
These days, unfortunately, the words of teachers might
be a better guide than the example of adults. With debt at
record-high levels and saving continuing to decline, personal
financial education has become a hot issue not just in
classrooms but also in communities. The Federal Reserve
System took a high-profile role starting in 2002 when
it rolled out “There’s a Lot to Learn about Money,” a
national initiative to promote financial literacy and encourage more programs in schools and neighborhoods.
Since then, the St. Louis Fed has stepped up its
involvement in personal financial education in its own
district, including efforts such as the following:
• The Fed joined the Teach Children to Save initiative,
in which volunteers from banks visit area classrooms
and talk with first-, second- and third-graders about
budgeting, the importance of saving, recognizing needs

and wants, and how interest makes money grow.
The St. Louis Fed participated for the first time in
2005, with 46 employees visiting schools to talk to
more than 2,300 kids, and will continue its involvement in 2006.
• St. Louis Fed employees helped to create and introduce the Your Paycheck program, a community
initiative in which college student volunteers teach a
two-hour course about managing personal finances
to working teenagers who, in many cases, are earning
their first regular paycheck. Fed employees created
and produced the Your Paycheck curriculum and
class materials and also trained college student
volunteers from Quincy University in Quincy, Ill.,
and Culver-Stockton College in Canton, Mo.
• The St. Louis Fed’s Community Affairs employees
have launched adult personal financial education programs in cities throughout the District, covering topics
ranging from getting out of debt to buying a home.
With financial services products and technology becoming more complex, the need for these programs will only
increase in the future, says St. Louis Fed Community
Affairs Officer Glenda Wilson.
“Our ultimate goal in supporting these programs,”
Wilson says, “is to ensure that kids and adults have the
real-life skills they need to be knowledgeable consumers,
responsible citizens and effective participants in the
global economy.”

�����������������
������
��������������������
��

continued from Page 34

to Save Day. “Personal
finance is an application
of economics,” Griffitts
says. “You have to make
choices, and every

future of others, but their

choice you make incurs

own economic outlook,

a cost. Clearly, that is

says Pettit. Your next job,

the foundation for making

your career, fulfilling

good personal financial

your lifelong dreams—

decisions.”

all can revolve around

Teaching children about

the economic decisions

saving money is taking

you make.

on added urgency now

“The negative saving rate

given the mistakes adults

is a wake-up call: We have

that they will be more

have made, Suiter says,

to help kids realize the

aware of the choices

noting that the U.S. sav-

importance of saving.”

they’re making and that

ing rate is now negative

Ultimately, the key to

“What we’re hoping is

life is a trade-off,” Pettit

(with consumers spending

successful economic

says. “I’m not saying you

$100.05 in 2005 for every

education is to help

have to have money to be

$100 they made) for the

students realize how it

happy, but with any path

first time since the Great

can improve not just the

you choose, it’s important

Depression.

to understand that you

“You can’t change the

are making a choice and

world in one day with

there is a cost. Economic

one lesson, but we want

education, done prop-

to draw attention to the

erly, makes that point.” ■

need to save,” she says.

For more information:
• on the St. Louis Fed’s economic education programs: Go to our economic
education web site at www.stlouisfed.org/education. Visit the “Teacher Resources” page to
sign up for our economic education mailing list.
• on the Federal Reserve System’s online economic education
resources: Visit our economic education portal, www.federalreserveeducation.org.
The site contains links to Fed publications, web sites and resources that can help educate
the public about the Federal Reserve, economics and financial education.
• on the Fed’s personal financial education resources: Visit our personal
financial education site at www.federalreserveeducation.org/pfed/.

37

boards [o f d i r e c t o r s ]

thank you [retiring board members]
We bid farewell and express our gratitude to those members of
the Eighth District boards of directors who retired in 2005.
Our appreciation and best wishes go out to the following:

Little Rock
David R. Estes
Scott T. Ford
Louisville
Marjorie Z. Soyugenc
Memphis
James A. England
St. Louis
Lunsford W. Bridges
Gayle P.W. Jackson

41

[little rock] Board of Directors

Stephen M. Erixon
CEO
Baxter Regional Medical Center
Mountain Home, Ark.

42

Sonja Yates Hubbard
Chairman
CEO
E-Z Mart Stores Inc.
Texarkana, Texas

Phillip N. Baldwin
President and CEO
Southern Bancorp
Arkadelphia, Ark.

Federal Reserve Bank of St. Louis | Little Rock Branch
Stephens Building | 111 Center St., Suite 1000 | Little Rock, AR 72201

43

Raymond E. Skelton
Little Rock

Robert A. Young III
Chairman
Arkansas Best Corp.
Fort Smith, Ark.

Sharon Priest
Executive Director
The Downtown Partnership
Little Rock

[louisville] Board of Directors
John L. Huber
President and CEO
Louisville Water Co.
Louisville

44

Gordon B. Guess
Cornelius A. Martin
Chairman
President and CEO
Martin Management Group
Bowling Green, Ky.

Chairman, President and CEO
The Peoples Bank
Marion, Ky.

Federal Reserve Bank of St. Louis | Louisville Branch
National City Tower | 101 S. Fifth St., Suite 1920 | Louisville, KY 40202

John Schroeder
President
Wabash Plastics Inc.
Evansville, Ind.

45

L. Clark Taylor Jr.
CEO
Ephraim McDowell Health
Danville, Ky.

Norman E. Pfau Jr.
President and CEO
Geo. Pfau’s Sons Co. Inc.
Jeffersonville, Ind.

Steven E. Trager
Chairman and CEO
Republic Bank & Trust Co.
Louisville

[memphis] Board of Directors

Levon Mathews
President
Regions Bank
Memphis

46
Meredith B. Allen
Vice President, Marketing
Staple Cotton Cooperative Association
Greenwood, Miss.

Russell Gwatney
Chairman
President
Gwatney Cos.
Memphis

Federal Reserve Bank of St. Louis | Memphis Branch
200 N. Main St. | Memphis, TN 38103

47

David P. Rumbarger Jr.
President and CEO
Community Development Foundation
Tupelo, Miss.

Hunter Simmons
President and CEO

First South Bank
Jackson, Tenn.

Thomas G. Miller
President
Southern Hardware Co. Inc.
West Helena, Ark.

[st. louis] Board of Directors

Paul T. Combs
President
Baker Implement Co.
Kennett, Mo.

48

Jay Fitzsimmons
Irl F. Engelhardt
Deputy Chairman

Walter L. Metcalfe Jr.

Chairman
Peabody Energy
St. Louis

Chairman
Partner
Bryan Cave LLP
St. Louis

Cynthia J. Brinkley
President
AT&T Missouri
St. Louis

Senior Vice President of Finance
and Treasurer
Wal-Mart Stores Inc.
Bentonville, Ark.

Federal Reserve Bank of St. Louis
One Federal Reserve Bank Plaza | Broadway and Locust Street | St. Louis, MO 63102

J. Thomas May

49

Chairman, President and CEO
Simmons First National Corp.
Pine Bluff, Ark.

David R. Pirsein
President and CEO
First National Bank in Pinckneyville
Pinckneyville, Ill.

A. Rogers Yarnell II
President

Yarnell Ice Cream Co. Inc.
Searcy, Ark.

Lewis F. Mallory Jr.
Chairman and CEO
NBC Capital Corp.
Starkville, Miss.

[st. louis] Management Committee
Karl Ashman
Senior Vice President

Judie Courtney
Senior Vice President

50

Dave Sapenaro
First Vice President
and COO

William Poole

President and CEO

Robert Rasche
Senior Vice President

51

Mary Karr
Senior Vice President

Julie Stackhouse
Senior Vice President

[a message from]management
first in the Federal Reserve
System to implement the
entire Check 21 product suite.
>> Successfully assumed volume from the Atlanta Treasury
Check site as part of a consolidation that is projected to
save the Treasury $600,000.

F

52

or the Federal Reserve
Bank of St. Louis, 2005
was a year marked by
maintaining a standard of
excellence in our day-to-day
operations while also moving
forward on some of the most
important initiatives that are
defining our present and our
future.
The Treasury Relations and
Support Office oversaw the
successful completion of 24 of
the Federal Reserve System’s
25 Treasury-related key objectives for the year. One of the
major success stories was the
TRSO’s launch of the national
Go Direct campaign, focused
on converting Social Security
recipients to direct deposit.
The District’s Branching
Out initiative maintained and
improved upon its 2004 success, with an increase in programs and attendance as the
District continued its focus on
community affairs, economic
education, regional research
and monetary policy in our
branch cities.
The St. Louis check operation performed well, and
significant progress was made
in stabilizing the Memphis
check operation after the

U.S. Treasury Support

office absorbed the Little Rock
check volume in late 2004.
The new Little Rock cash
depot performed extremely
well during its first full year
of operation. Our Memphis
office provided key contingency support to the New
Orleans office as a “buddy
branch” in the aftermath of
Hurricane Katrina, providing
paying and receiving services to the Sixth District via
extended hours and weekend
operations.
Our employees continued
to focus on four Bank-wide initiatives begun in 1999-2000 to
improve our performance and
build our capability to do more
in the future: risk management, customer service, staff
development and employee
communications. In addition,
the Bank launched an organizational initiative in 2005
to improve innovation, with
training and tools provided
to employees to encourage a
more innovative climate.
What follows are highlights
of the District’s 2005 accomplishments:
Financial Services

>> Exceeded its revenue
target by $3.6 million, or
10.7 percent.
>> Check 21 activity grew
significantly throughout the
year, and the District was the

>> Implemented 11 applica-

tion releases on the Treasury
Web Application Infrastructure (TWAI) and an additional
five releases on other platforms outside the TWAI.
>> The Treasury more than
doubled the amount of funds
invested through the Term
Investment Option program
over the previous fiscal year,
earning an additional $19.2
million over what would have
been earned had the funds
been invested in the Treasury
Tax and Loan program.
Public Affairs and
Community Affairs

>> Community Affairs conducted 34 sponsored meetings, which included the finale
of a community development
speaker series in Little Rock,
a Hispanic immigrant event in
Louisville, a summit on accessing community development
capital in St. Louis and a major
conference in Memphis on
entrepreneurship.

>> In economic education,
St. Louis and the other three
branch offices conducted or
participated significantly in 62
conferences, workshops, training courses, presentations and
other outreach events.
>> Conducted five economic
forums, allowing President Bill
Poole to interact with business and banking audiences
throughout the District.
>> Helped create the Your
Paycheck program to support
financial literacy efforts. The
program, delivered through a
two-hour class taught by college students, covers financial
information of interest to
working teens.
Research/Monetary Policy
Performance

>> The number of articles

published by Research staff (or
accepted for publication) was
58, up from 41 during 2004. In
addition, staff economists finished 75 new working papers,
up from 34 in 2004, with more
than 30 additional articles
revised from previous years.
>> Introduced the Archival
FRED System (ALFRED),
which helped contribute to a
40 percent increase in traffic
on the division’s web pages
compared with the previous
year. ALFRED provides historical data of series already
available in FRED (Federal
Reserve Economic Data).

significant leadership to a
strategic effort to better align
Supervision examiner training
with changing business needs.
Administrative Services

>> Completed construc-

>> The Business and Economic Research Group
(BERG) held its first meeting
in the spring. The papers from
the meeting were published in
a new web-only research journal titled Regional Economic
Development.
>> Held a conference on education finance, in conjunction
with the Weidenbaum Center
of Washington University.
Banking Supervision, Credit
and Center for Online
Learning

>> Successfully met all

examination and inspection
mandates and provided highly
effective supervision of District state member banks and
bank holding companies.
>> Consumer Affairs conducted all 36 mandated supervisory events in accordance
with System requirements.
All supervisory reports were
processed and communicated
to constituents in a timely
manner—33 percent faster
than System guidelines.
>> The Center for Online
Learning provided eLearning
consultation and development
services to numerous business
lines and also contributed

tion of the plaza and the new
screening vestibule at the
St. Louis office, as well as the
design for the building addition in the second phase of the
St. Louis remodeling project.
>> Constructed a new Protection command center.
>> Completed the renovation of the third floor of the
Memphis branch.
Organizational Initiatives

>> Completed the rollout of
the Enterprise Risk Management (ERM) initiative to nonfinancial reporting areas, with
eight business areas assessing
their risks using risk categories
defined by the System’s ERM
work group.
>> Continued efforts through
the Customer Service Program
Office to sustain a serviceoriented culture throughout
the District, with all divisions
exceeding customer service
targets.
>> Continued the focus on
leadership development by
implementing a mentoring
program and offering more
leadership training. ■

53

financial [statements]
For the years ended December 31, 2005 and 2004

56

The firm engaged by the Board of Governors for the audits of the individual and combined financial statements of the Reserve Banks for 2005
was PricewaterhouseCoopers LLP (PwC). Fees for these services totaled $4.6 million. To ensure auditor independence, the Board of Governors
requires that PwC be independent in all matters relating to the audit. Specifically, PwC may not perform services for the Reserve Banks or others
that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way
impairing its audit independence. In 2005, the Bank did not engage PwC for any material advisory services.

TO THE BOARD OF DIRECTORS:

March 2, 2006

The management of the Federal Reserve Bank of St. Louis (“the Bank”) 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, 2005 (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 (“Manual”), and as such, include
amounts, some of which are based on judgments and estimates of management. To our knowledge, the Financial Statements are, in all material
respects, fairly presented in conformity with the accounting principles, policies and practices documented in the Manual and include all disclosures necessary for such fair presentation. Also, we are not aware of any material fraud and any other fraud that, although not material, involves
management or other employees who have a significant role in the Bank’s internal control.
The management of the Bank 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 self-monitoring 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 Bank 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, we believe that the Bank 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 St. Louis

WILLIAM POOLE,

President and Chief Executive Officer

DAVID A. SAPENARO,

First Vice President and Chief Operating Officer

MARILYN K. CORONA,

Vice President, Chief Financial Officer

57

REPORT OF INDEPENDENT ACCOUNTANTS

TO THE BOARD OF DIRECTORS OF THE FEDERAL RESERVE BANK OF ST. LOUIS:

We have examined management’s assertion, included in the accompanying Management Assertion, that the Federal Reserve Bank of St. Louis
(“FRB St. Louis”) maintained effective internal control over financial reporting and the safeguarding of assets as of December 31, 2005, based on
criteria established in Internal Control–Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
FRB St. Louis’ management is responsible for maintaining effective internal control over financial reporting and safeguarding of assets. Our
responsibility is to express an opinion on management’s assertion based on our examination.
Our examination was conducted in accordance with attestation standards established by the American Institute of Certified Public Accountants
and, accordingly, included obtaining an understanding of internal control over financial reporting, testing and evaluating the design and operating
effectiveness of internal control, and performing 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 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 FRB St. Louis maintained effective internal control over financial reporting and over the safeguarding
of assets as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control–Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission.

58

This report is intended solely for the information and use of management and the Board of Directors and Audit Committee of FRB St. Louis, and
any organization with legally defined oversight responsibilities, and is not intended to be and should not be used by anyone other than these
specified parties.

March 8, 2006
St. Louis, Missouri

REPORT OF INDEPENDENT AUDITORS

TO THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM AND THE BOARD OF DIRECTORS OF THE FEDERAL
RESERVE BANK OF ST. LOUIS:

We have audited the accompanying statements of condition of the Federal Reserve Bank of St. Louis (the “Bank”) as of December 31, 2005 and
2004, and the related statements of income and changes in capital for the years then ended, which have been prepared in conformity with the
accounting principles, policies and practices established by the Board of Governors of the Federal Reserve System. These financial statements
are the responsibility of the Bank’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 described in Note 3, these 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 of America.
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,
2005 and 2004, and results of its operations for the years then ended, on the basis of accounting described in Note 3.

59
March 8, 2006
St. Louis, Missouri

FEDERAL RESERVE BANK OF ST. LOUIS

STATEMENTS OF CONDITION
(in millions)

As of December 31,
2005

2004

ASSETS
Gold certificates

$

327

$

325

Special drawing rights certificates

71

Coin

43

36

216

348

Loans to depository institutions

-

2

U.S. government securities, net

Items in process of collection

71

23,279

21,317

Investments denominated in foreign currencies

379

551

Accrued interest receivable

181

149

2,010

1,401

Bank premises and equipment, net

87

85

Other assets

54

Interdistrict settlement account

TOTAL ASSETS

41

$

26,647

$

24,326

$

24,602

$

22,187

LIABILITIES AND CAPITAL
Liabilities:
Federal Reserve notes outstanding, net
Securities sold under agreements to repurchase

947

904

482

479

Deposits:
Depository institutions
Other deposits

3

Deferred credit items

60

3
151

197

Interest on Federal Reserve notes due U.S. Treasury

106

21

57

54

Accrued benefit costs
Other liabilities

11

9

26,359

23,854

Capital paid-in

144

236

Surplus

144

236

288

472

TOTAL LIABILITIES
Capital:

TOTAL CAPITAL
TOTAL LIABILITIES AND CAPITAL
The accompanying notes are an integral part of these financial statements.

$

26,647

$

24,326

FEDERAL RESERVE BANK OF ST. LOUIS

STATEMENTS OF INCOME
(in millions)

As of December 31,
2005

2004

Interest income:
Interest on U.S. government securities

$

861

$

657

Interest on investments denominated in foreign currencies

6

Interest on loans to depository institutions

1

-

868

664

TOTAL INTEREST INCOME

7

Interest expense:
Interest expense on securities sold under agreements to repurchase

25

9

843

655

-

NET INTEREST INCOME

40

Other operating income:
Income from services
Compensation received for check services provided

22

91

(57)

Foreign currency (losses) gains, net

-

112

Reimbursable services to government agencies

31

Other income

3

2

80

164

Salaries and other benefits

89

82

Occupancy expense

10

9

Equipment expense

7

9

22

23

103

86

TOTAL OTHER OPERATING INCOME
Operating expenses:

Assessments by the Board of Governors
Other expenses
TOTAL OPERATING EXPENSES

231

Net income prior to distribution

209

$

692

$

610

$

16

$

13

Distribution of net income:
Dividends paid to member banks
Transferred (from)/to surplus

(92)

TOTAL DISTRIBUTION

$

8

768

Payments to U.S. Treasury as interest on Federal Reserve notes

589

692

$

610

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

FEDERAL RESERVE BANK OF ST. LOUIS

STATEMENTS OF CHANGES IN CAPITAL

for the years ended December 31, 2005, and December 31, 2004
(in millions)

CAPITAL PAID-IN

SURPLUS

TOTAL CAPITAL

Balance at January 1, 2004
(4.6 million shares)

$

228

$

Transferred to surplus

228

$

8

456
8

Net change in capital stock issued
(0.1 million shares)

8

8

Balance at December 31, 2004
(4.7 million shares)

$

236

$

Transferred from surplus

236

$

(92)

472
(92)

Net change in capital stock redeemed
(1.8 million shares)

(92)

(92)

Balance at December 31, 2005
(2.9 million shares)
The accompanying notes are an integral part of these financial statements.

$

144

$

144

$

288

61

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

NOTE 1

STRUCTURE

62

The Federal Reserve Bank of St. Louis (“Bank”) is part of the Federal
Reserve System (“System”) and one of the twelve Reserve Banks
(“Reserve Banks”) created by Congress under the Federal Reserve
Act of 1913 (“Federal Reserve Act”), which established the central
bank of the United States. The Reserve Banks are chartered by the
federal government and possess a unique set of governmental, corporate and central bank characteristics. The Bank and its branches in
Little Rock, Louisville and Memphis serve the Eighth Federal Reserve
District, which includes Arkansas, and portions of Illinois, Indiana,
Kentucky, Mississippi, Missouri and Tennessee.
In accordance with the Federal Reserve Act, supervision and
control of the Bank are exercised by a 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 three-year 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.
Banks that are members of the System include all national banks and
any state-chartered banks that apply and are approved for membership in the System. 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.
The System also consists, in part, of the Board of Governors of
the Federal Reserve System (“Board of Governors”) and the Federal
Open Market Committee (“FOMC”). The Board of Governors, an
independent federal agency, is charged by the Federal Reserve Act
with a number of specific duties, including general supervision over
the Reserve Banks. 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.
NOTE 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 system, including large-dollar transfers
of funds, automated clearinghouse (“ACH”) operations and check
processing; distributing coin and currency; performing 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, state member banks and
U.S. offices of foreign banking organizations; and administering other
regulations of the Board of Governors. The System also provides certain services to foreign central banks, governments and international
official institutions.
The FOMC, in the conduct of monetary policy, establishes policy
regarding domestic open market operations, oversees these operations, and annually issues authorizations and directives to the FRBNY
for its execution of transactions. FRBNY is authorized to conduct
operations in domestic markets, including direct purchase and sale
of U.S. government securities, the purchase of securities under
agreements to resell, the sale of securities under agreements to
repurchase, and the lending of U.S. government securities. FRBNY
executes these open market transactions and holds the resulting securities, with the exception of securities purchased under agreements
to resell, 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 FRBNY to

execute operations in foreign markets for major currencies in order to
counter disorderly conditions in exchange markets or to meet other
needs specified by the FOMC in carrying out the System’s central
bank responsibilities. The FRBNY is authorized by the FOMC to hold
balances of and to execute spot and forward foreign exchange (“F/X”)
and securities contracts for nine foreign currencies, and to invest such
foreign currency holdings, ensuring adequate liquidity is maintained. In
addition, FRBNY is authorized to maintain reciprocal currency arrangements (“F/X swaps”) with two central banks, and “warehouse” foreign
currencies for the U.S. Treasury and Exchange Stabilization Fund
(“ESF”) through the Reserve Banks. In connection with its foreign currency activities, FRBNY may enter into contracts that 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.
Although Reserve Banks are separate legal entities, in the interests
of greater efficiency and effectiveness, they collaborate in the delivery
of certain operations and services. The collaboration takes the form
of centralized competency centers, operations sites, and product
or service offices that have responsibility for the delivery of certain
services on behalf of the Reserve Banks. Various operational and
management models are used and are supported by service agreements between the Reserve Bank providing the service and the other
eleven Reserve Banks. In some cases, costs incurred by a Reserve
Bank for services provided to other Reserve Banks are not shared; in
other cases, Reserve Banks are billed for services provided to them
by another Reserve Bank.
Major services provided on behalf of the System by the Bank, for
which the costs were not redistributed to the other Reserve Banks,
include operation of the Treasury Relations and Support Office and the
Treasury Relations and Systems Support Department, which provide
services to the U.S. Treasury. These services include: relationship
management, strategic consulting, and oversight for fiscal and payments related projects for the Federal Reserve System; and operational support for the Treasury’s tax collection, cash management and
collateral monitoring.
Beginning in 2005, the Reserve Banks adopted a new management model for providing check services to depository institutions.
Under this new model, the Federal Reserve Bank of Atlanta (“FRBA”)
has the overall responsibility for managing the Reserve Banks’ provision of check services and recognizes total System check revenue
on its Statements of Income. FRBA compensates the other eleven
Banks for the costs incurred to provide check services. This compensation is reported as “Compensation received for check services
provided” in the Statements of Income. If the management model
had been in place in 2004, the Bank would have reported $28 million
as compensation received for check services provided, and $40 million in check revenue would have been reported by FRBA rather than
the Bank.
NOTE 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
various accounting standard-setting bodies. 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 with 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, and
the financial statements have been prepared in accordance with the
Financial Accounting Manual.

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

Differences exist between the accounting principles and practices
in the Financial Accounting Manual and those generally accepted in
the United States (“GAAP”), primarily due to the unique nature of the
Bank’s powers and responsibilities as part of the nation’s central bank.
The primary difference is the presentation of all security holdings at
amortized cost, rather than using the fair value presentation requirements in accordance with GAAP. Amortized cost more appropriately
reflects the Bank’s security holdings given its unique responsibility
to conduct monetary policy. While the application of current market
prices to the securities holdings may result in values substantially
above or below their carrying values, these unrealized changes in
value would have no direct affect on the quantity of reserves available
to the banking system or on the prospects for future Bank earnings
or capital. Both the domestic and foreign components of the SOMA
portfolio may involve transactions that result in gains or losses when
holdings are sold prior to maturity. Decisions regarding security and
foreign currency transactions, including their purchase and sale, are
motivated by monetary policy objectives rather than profit. Accordingly, market values, earnings, and any gains or losses resulting from
the sale of such securities and currencies are incidental to the open
market operations and do not motivate activities or policy decisions.
In addition, the Bank has elected not to present a Statement of
Cash Flows because the liquidity and cash position of the Bank are
not a primary concern, given the Bank’s unique powers and responsibilities. A Statement of Cash Flows, therefore, would not provide
any additional meaningful information. Other information regarding the Bank’s activities is provided in, or may be derived from, the
Statements of Condition, Income and Changes in Capital. 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, the 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 AND SPECIAL DRAWING RIGHTS CERTIFICATES

The Secretary of the U.S. Treasury is authorized to issue gold and
special drawing rights (“SDR”) certificates to the Reserve Banks.
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. At 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 on the average Federal Reserve notes
outstanding in each Reserve Bank.
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. At such time, equivalent
amounts in dollars are credited to the account established for the
U.S. Treasury, and the Reserve Banks’ SDR certificate accounts are
increased. The Reserve Banks are required to purchase SDR certificates, at the direction of the U.S. Treasury, for the purpose of financing SDR acquisitions or for financing exchange stabilization operations.
At the time SDR transactions occur, the Board of Governors allocates

SDR certificate transactions among Reserve Banks based upon
Federal Reserve notes outstanding in each District at the end of the
preceding year. There were no SDR transactions in 2005 or 2004.
B. LOANS TO DEPOSITORY INSTITUTIONS

All depository institutions that maintain reservable transaction accounts
or nonpersonal time deposits, as defined in regulations issued by the
Board of Governors, have borrowing privileges at the discretion of the
Reserve Bank. 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 loans were ever deemed to be uncollectible, an
appropriate reserve would be established. Interest is accrued using
the applicable discount rate established at least every fourteen days
by the Board of Directors of the Reserve Bank, subject to review by
the Board of Governors.
C. U.S. GOVERNMENT SECURITIES AND INVESTMENTS
DENOMINATED IN FOREIGN CURRENCIES

U.S. government 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 straight-line basis. Interest income is accrued
on a straight-line basis. Gains and losses resulting from sales of
securities are determined by specific issues based on average cost.
Foreign-currency-denominated assets are revalued daily at current
foreign currency 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) gains, net.”
Activity related to U.S. government securities, including the related
premiums, discounts, and realized and unrealized gains and losses,
is allocated to each Reserve Bank on a percentage basis derived
from an annual settlement of interdistrict clearings that occurs in April
of each year. The settlement equalizes Reserve Bank gold certificate
holdings to Federal Reserve notes outstanding in each District. Activity related to investments in foreign-currency-denominated assets is
allocated to each Reserve Bank based on the ratio of each Reserve
Bank’s capital and surplus to aggregate capital and surplus at the
preceding December 31.
D. U.S. GOVERNMENT SECURITIES SOLD UNDER AGREEMENTS TO
REPURCHASE AND SECURITIES LENDING

Securities sold under agreements to repurchase are accounted for
as financing transactions and the associated interest expense is
recognized over the life of the transaction. These transactions are
carried in the Statements of Condition at their contractual amounts
and the related accrued interest is reported as a component of “Other
liabilities.”
U.S. government securities held in the SOMA are lent 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. Securitieslending transactions are fully collateralized by other U.S. government
securities and the collateral taken is in excess of the market value of
the securities loaned. The FRBNY charges the dealer or bank a fee
for borrowing securities and the fees are reported as a component of
“Other Income” in the Statements of Income.
Activity related to U.S. government securities sold under agreements to repurchase and securities lending is allocated to each Reserve Bank on a percentage basis derived from the annual settlement
of interdistrict clearings. Securities purchased under agreements to
resell are allocated to FRBNY and not to the other Banks.
E. FOREIGN CURRENCY SWAPS AND WAREHOUSING

F/X swap arrangements are contractual agreements between two
parties to exchange specified currencies, at a specified price, on a

63

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

specified date. The parties agree to exchange their currencies up to
a pre-arranged 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 the foreign currencies it may need to intervene to support the dollar and give the counterparty temporary access to dollars it may need to support its own
currency. Drawings under the F/X swap arrangements can be initiated
by either FRBNY or the counterparty (the drawer) and must be agreed
to by the drawee. The F/X swaps are structured so that the party
initiating the transaction bears the exchange rate risk upon maturity.
FRBNY will generally invest the foreign currency received under an F/X
swap in interest-bearing instruments.
Warehousing is an arrangement under which the FOMC agrees to
exchange, at the request of the U.S. Treasury, U.S. dollars for foreign
currencies held by the U.S. 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 U.S. Treasury and ESF for financing purchases of foreign currencies and related international operations.
Foreign currency swaps and warehousing agreements are revalued
daily at current market exchange rates. Activity related to these agreements, with the exception of the unrealized gains and losses resulting
from the daily revaluation, is allocated to each Reserve Bank based
on the ratio of each Reserve Bank’s capital and surplus to aggregate
capital and surplus at the preceding December 31. Unrealized gains
and losses resulting from the daily revaluation are allocated to FRBNY
and not to the other Reserve Banks.
F. BANK PREMISES, EQUIPMENT AND SOFTWARE

64

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 one to fifty years. Major
alterations, renovations and improvements are capitalized at cost as
additions to the asset accounts and are amortized over the remaining
useful life of the asset. Maintenance, repairs and minor replacements
are charged to operating expense in the year incurred. Capitalized
assets including software, building, leasehold improvements, furniture
and equipment are impaired when it is determined that the net realizable value is significantly less than book value and is not recoverable.
Costs incurred for software, either developed internally or acquired
for internal use, during the application development stage are capitalized based on the cost of direct services and materials associated
with designing, coding, installing or testing software. Capitalized software costs are amortized on a straight-line basis over the estimated
useful lives of the software applications, which range from one to five
years.
G. INTERDISTRICT SETTLEMENT ACCOUNT

At the close of business each day, each Reserve Bank assembles the
payments due to or from other Reserve Banks as a result of the day’s
transactions that involve depository institution accounts held by other
Districts. Such transactions may include funds settlement, check
clearing and ACH operations. The cumulative net amount due to or
from the other Reserve Banks is reflected in the “Interdistrict settlement account” in the Statements of Condition.
H. FEDERAL RESERVE NOTES

Federal Reserve notes are the circulating currency of the United
States. These notes are issued through the various Federal Reserve
agents (the Chairman of the Board of Directors of each Reserve
Bank) 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.
Assets eligible to be pledged as collateral security include all Bank
assets. 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 par value of
securities pledged for securities sold under agreements to repurchase
is deducted.
The Board of Governors may, at any time, call upon a Reserve
Bank for additional security to adequately collateralize the Federal Reserve notes. To satisfy the obligation to provide sufficient collateral for
outstanding Federal Reserve notes, the Reserve Banks have entered
into an agreement that provides for certain assets of the Reserve
Banks to be jointly pledged as collateral for the Federal Reserve notes
of all Reserve Banks. 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 U.S. government.
The “Federal Reserve notes outstanding, net” account represents
the Bank’s Federal Reserve notes outstanding, reduced by the currency issued to the Bank but not in circulation, of $3,494 million and
$2,819 million at December 31, 2005 and 2004, respectively.
I. ITEMS IN PROCESS OF COLLECTION AND DEFERRED
CREDIT ITEMS

The balance in the “Items in process of collection” line in the Statements of Condition primarily represents amounts attributable to checks
that have been deposited for collection by the payee depository institution and, as of the balance sheet date, have not yet been collected
from the payor depository institution. Deferred credit items are the
counterpart liability to items in process of collection, and the amounts
in this account arise from deferring credit for deposited items until the
amounts are collected. The balances in both accounts can fluctuate
and vary significantly from day to day.
J. 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
percent of the capital and surplus of the member bank. These shares
are nonvoting with a par value of $100 and may not be transferred
or hypothecated. As a member bank’s capital and surplus changes,
its holdings of Reserve Bank stock must be adjusted. Currently, only
one-half of the subscription is paid-in and the remainder is subject
to call. By law, each Bank is required to pay each member bank
an annual dividend of 6 percent 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.
K. 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. Pursuant to Section 16 of the Federal
Reserve Act, Reserve Banks are required by the Board of Governors
to transfer to the U.S. Treasury as interest on Federal Reserve notes
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.
In the event of losses or an increase in capital paid-in at a Reserve
Bank, payments to the U.S. Treasury are suspended and earnings are
retained until the surplus is equal to the capital paid-in. Weekly payments to the U.S. Treasury may vary significantly.
In the event of a decrease in capital paid-in, the excess surplus, after equating capital paid-in and surplus at December 31, is distributed
to the U.S. Treasury in the following year. This amount is reported as
a component of “Payments to U.S. Treasury as interest on Federal
Reserve notes.”

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

L. INCOME AND COSTS RELATED TO U.S. 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.
M. ASSESSMENTS BY THE BOARD OF GOVERNORS

The Board of Governors assesses the Reserve Banks to fund its operations based on each Reserve Bank’s capital and surplus balances.
The Board of Governors also assesses each Reserve Bank for the
expenses incurred for the U.S. Treasury to issue and retire Federal
Reserve notes based on each Reserve Bank’s share of the number of
notes comprising the System’s net liability for Federal Reserve notes
on December 31 of the previous year.

At December 31, 2005 and 2004, the total contract amount of
securities sold under agreements to repurchase was $30,505 million
and $30,783 million, respectively, of which $947 million and $904
million were allocated to the Bank. The total par value of the SOMA
securities pledged for securities sold under agreements to repurchase
at December 31, 2005 and 2004, was $30,559 million and $30,808
million, respectively, of which $948 million and $905 million were
allocated to the Bank.
The maturity distribution of U.S. government securities bought outright and securities sold under agreements to repurchase, that were
allocated to the Bank at December 31, 2005, was as follows
(in millions):

U.S.
Government
Securities
(Par Value)

N. TAXES

The Reserve Banks are exempt from federal, state and local taxes,
except for taxes on real property. The Bank’s real property taxes were
$545 thousand and $477 thousand for the years ended December
31, 2005 and 2004, respectively, and are reported as a component of
“Occupancy expense.”

MATURITIES OF SECURITIES HELD

Within 15 days

$

1,273

In 2003, the System began the restructuring of several operations,
primarily check, cash and U.S. Treasury services. The restructuring included streamlining the management and support structures,
reducing staff, decreasing the number of processing locations, and
increasing processing capacity in the remaining locations. These
restructuring activities continued in 2004 and 2005.
Footnote 10 describes the restructuring and provides information about the Bank’s costs and liabilities associated with employee
separations and contract terminations. The costs associated with the
write-down of certain Bank assets are discussed in footnote 6. Costs
and liabilities associated with enhanced pension benefits in connection with the restructuring activities for all Reserve Banks are recorded
on the books of the FRBNY and those associated with enhanced
post-retirement benefits are discussed in footnote 9.
NOTE 4

U.S. GOVERNMENT SECURITIES, SECURITIES SOLD
UNDER AGREEMENTS TO REPURCHASE, AND SECURITIES
LENDING
The FRBNY, on behalf of the Reserve Banks, holds securities bought
outright in the SOMA. The Bank’s allocated share of SOMA balances
was approximately 3.103 percent and 2.938 percent at December
31, 2005 and 2004, respectively.
The Bank’s allocated share of U.S. government securities, net, held
in the SOMA at December 31, was as follows (in millions):

947

2005

2004

5,345

-

5,781

-

Over 1 year to 5 years

6,540

-

Over 5 years to 10 years

1,759

-

Over 10 years

2,396

TOTAL

$

-

23,094

$

947

At December 31, 2005 and 2004, U.S. government securities with
par values of $3,776 million and $6,609 million, respectively, were
loaned from the SOMA, of which $117 million and $194 million,
respectively, were allocated to the Bank.
NOTE 5

INVESTMENTS DENOMINATED IN 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 purchased under agreements to resell.
These investments are guaranteed as to principal and interest by the
foreign governments.
The Bank’s allocated share of investments denominated in foreign
currencies was approximately 2.002 percent and 2.580 percent at
December 31, 2005 and 2004, respectively.
The Bank’s allocated share of investments denominated in foreign
currencies, including accrued interest, valued at current foreign
currency market exchange rates at December 31, was as follows
(in millions):

PAR VALUE:

2005

U.S. government:
$

Notes

8,418
11,795

Bonds

$

7,726
10,601

2,881

2,762

23,094

21,089

Unamortized premiums

273

276

Unaccreted discounts

(88)

(48)

23,279

$ 21,317

TOTAL PAR VALUE

TOTAL ALLOCATED TO BANK

$

16 days to 90 days
91 days to 1 year

O. RESTRUCTURING CHARGES

Bills

Securities
Sold Under
Agreements to
Repurchase
(Contract Amount)

$

The total of the U.S. government securities, net held in the SOMA was
$750,202 million and $725,584 million at December 31, 2005 and
2004, respectively.

2004

European Union Euro:
Foreign currency deposits

$

109

$

157

Securities purchased
under agreements to resell

39

55

Government debt instruments

71

102

Japanese Yen:
Foreign currency deposits

52

TOTAL

$

40

108

Government debt instruments

197

379

$

551

65

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

Total System investments denominated in foreign currencies were
$18,928 million and $21,368 million at December 31, 2005 and
2004, respectively.
The maturity distribution of investments denominated in foreign currencies which were allocated to the Bank at December 31, 2005, was
as follows (in millions):

MATURITIES OF INVESTMENTS DENOMINATED IN FOREIGN CURRENCIES

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

European
Euro
$
68
52
42
57
$ 219

Japanese
Total
Yen
$ 52
$ 120
14
66
20
62
74
131
$ 160
$ 379

NOTE 6

A summary of bank premises and equipment at December 31 is as
follows (in millions):
Useful Life
Range
(in Years)

2005

N/A
1-50
1-20

$

11
67
17

N/A
1-19

7
46
$ 148
(61)

2004
$

$

8
66
20
10
48
152
(67)

BANK PREMISES AND
EQUIPMENT, NET

OPERATING

$

994
736
358
348
75
2,511

At December 31, 2005, there were no other material commitments
and long-term obligations in excess of one year.
Under the Insurance Agreement of the Federal Reserve Banks,
each Reserve Bank has agreed to bear, on a per-incident basis, a pro
rata share of losses in excess of one percent of the capital paid-in
of the claiming Reserve Bank, up to 50 percent 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, 2005 or 2004.
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.

NOTE 8

$

87

$

85

$

8

$

8

DEPRECIATION EXPENSE,
FOR THE YEARS ENDED

At December 31, 2005, the Bank was obligated under noncancelable
leases for premises and equipment with terms ranging from one to
approximately five years. These leases provide for increased rental
payments based upon increases in real estate taxes, operating costs
or selected price indices.
Rental expense under operating leases for certain operating facilities, warehouses, and data processing and office equipment (including taxes, insurance and maintenance when included in rent), net of
sublease rentals, was $2 million and $1 million for the years ended
December 31, 2005 and 2004, respectively. Certain of the Bank’s
leases have options to renew.
Future minimum rental payments under noncancelable operating
leases with terms of one year or more, at December 31, 2005, were
(in thousands):

$

BANK PREMISES, EQUIPMENT AND SOFTWARE

Bank premises and equipment:
Land
Buildings
Building machinery
and equipment
Construction in progress
Furniture and equipment
Subtotal
Accumulated depreciation

COMMITMENTS AND CONTINGENCIES

2006
2007
2008
2009
2010
Thereafter

At December 31, 2005 and 2004, there were no material open or
outstanding foreign exchange contracts.
At December 31, 2005 and 2004, the warehousing facility was
$5,000 million, with no balance outstanding.

66

NOTE 7

The Bank leases space to outside tenants with lease terms of less
than one year. Future minimum lease payments under agreements in
existence at December 31, 2005, were immaterial.
The Bank has capitalized software assets, net of amortization, of
$11 million and $5 million at December 31, 2005 and 2004, respectively. Amortization expense was $3 million and $1 million for the
years ended December 31, 2005 and 2004, respectively. Capitalized
software assets are reported as a component of “Other assets” and
related amortization is reported as a component of “Other expenses.”
The facilities in Louisville and Little Rock were vacated on January 18, 2005, and February 22, 2005, respectively, as a result of the
Bank’s restructuring plan, as discussed in footnote 10. The facility in
Louisville, including associated furnishings, was sold for $4 million on
January 31, 2005, and the facility in Little Rock is available for sale
and reported as a component of “Other assets.”

RETIREMENT AND THRIFT PLANS
RETIREMENT PLANS

The Bank currently offers three 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”).
Employees at certain compensation levels participate in the Benefit
Equalization Retirement Plan (“BEP”) and certain Bank officers participate in the Supplemental Employee Retirement Plan (“SERP”).
The System Plan is a multi-employer plan with contributions fully
funded by participating employers. Participating employers are
the Federal Reserve Banks, the Board of Governors of the Federal
Reserve System and the Office of Employee Benefits of the Federal
Reserve System. No separate accounting is maintained of assets
contributed by the participating employers. The FRBNY acts as a
sponsor of the System Plan and the costs associated with the Plan
are not redistributed to other participating employers. The Bank’s
benefit obligation and net pension costs for the BEP and the SERP at

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

December 31, 2005 and 2004, and for the years then ended, are not
material.

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

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 $3 million for each
of the years ended December 31, 2005 and 2004, respectively, and
are reported as a component of “Salaries and other benefits.” The
Bank matches employee contributions based on a specified formula.
For the years ended December 31, 2005 and 2004, the Bank
matched 80 percent on the first 6 percent of employee contributions
for employees with less than five years of service and 100 percent on
the first 6 percent of employee contributions for employees with five or
more years of service.

NOTE 9

POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND
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.
Following is a reconciliation of beginning and ending balances of
the benefit obligation (in millions):
2005

Accumulated postretirement
benefit obligation at January 1
Service cost-benefits earned
during the period
Interest cost of accumulated
benefit obligation
Actuarial loss (gain)
Special termination loss
Contributions by plan participants
Benefits paid
Plan amendments

2004

$

FAIR VALUE OF PLAN ASSETS AT DECEMBER 31

$

$

2.5
0.2
(2.7)
-

$

55.6
3.8
(11.2)
$ 48.2

For measurement purposes, the assumed health care cost trend rates
at December 31 are as follows:
2005

Health care cost trend rate assumed
for next year
Rate to which the cost trend rate
is assumed to decline
(the ultimate trend rate)
Year that the rate reaches the
ultimate trend rate

1.6

1.1

3.4
8.4
0.4
(3.2)
-

3.1
(2.2)
0.1
0.2
(2.7)
(2.5)

Effect on aggregate of service
and interest cost components of
net periodic postretirement
benefit costs

$ 55.6

Effect on accumulated
postretirement benefit obligation

At December 31, 2005 and 2004, the weighted-average discount rate
assumptions used in developing the postretirement benefit obligation
were 5.50 percent and 5.75 percent, respectively.
Discount rates reflect yields available on high quality corporate
bonds that would generate the cash flows necessary to pay the plan’s
benefits when due.

2004

$

Accrued postretirement benefit costs are reported as a component of
“Accrued benefit costs.”

$ 58.5

$ 66.2

2.8
0.4
(3.2)
-

Unfunded postretirement benefit obligation $ 66.2
Unrecognized prior service cost
3.3
Unrecognized net actuarial loss
(18.7)
ACCRUED POSTRETIREMENT BENEFIT COSTS $ 50.8

$ 55.6

ACCUMULATED POSTRETIREMENT
BENEFIT OBLIGATION AT DECEMBER 31

2005

Fair value of plan assets at January 1
Contributions by the employer
Contributions by plan participants
Benefits paid

2004

9.00 %

9.00 %

5.00 %

4.75 %

2011

2011

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, 2005 (in millions):
One Percentage

One Percentage

Point Increase

Point Decrease

$

0.8

$

(0.7)

8.9

(7.4)

The following is a summary of the components of net periodic postretirement benefit costs for the years ended December 31 (in millions):
2005

Service cost-benefits earned
during the period
Interest cost of accumulated
benefit obligation
Amortization of prior service cost
Recognized net actuarial loss
Total periodic expense
Curtailment gain
Special termination loss

$

$

1.6
3.4
(0.5)
0.9
5.4
-

2004

$

$

1.1
3.1
(0.7)
0.1
3.6
(6.3)
0.1

NET PERIODIC POSTRETIREMENT
BENEFIT COSTS (CREDIT)

$

5.4

$

(2.6)

67

FEDERAL RESERVE BANK OF ST. LOUIS

NOTES TO FINANCIAL STATEMENTS

Net postretirement benefit costs are actuarially determined using a
January 1 measurement date. At January 1, 2005 and 2004, the
weighted-average discount rate assumptions used to determine net
periodic postretirement benefit costs were 5.75 percent and 6.25
percent, respectively.
Net periodic postretirement benefit costs are reported as a component of “Salaries and other benefits.”
A plan amendment that modified the credited service period
eligibility requirements created curtailment gains. The recognition of
special termination losses is primarily the result of enhanced retirement
benefits provided to employees during the restructuring described
in footnote 10. The curtailment gain associated with restructuring
programs announced in 2003 was recognized when employees left
the Bank in 2004.
The Medicare Prescription Drug, Improvement and Modernization
Act of 2003 established a prescription drug benefit under Medicare
(“Medicare Part D”) and a federal subsidy to sponsors of retiree health
care benefit plans that provide benefits that are at least actuarially
equivalent to Medicare Part D. The benefits provided by the Bank’s
plan to certain participants are at least actuarially equivalent to the
Medicare Part D prescription drug benefit. The estimated effects of
the subsidy, retroactive to January 1, 2004, are reflected in actuarial
loss in the accumulated postretirement benefit obligation and net
periodic postretirement benefit costs.

68

Following is a summary of expected benefit payments (in millions):
Expected benefit payments:
Without Subsidy

2006
2007
2008
2009
2010
2011-2015
TOTAL

$

$

3.2
3.4
3.5
3.8
4.0
23.2
41.1

With Subsidy

$

$

2.9
3.1
3.2
3.3
3.5
20.4
36.4

POSTEMPLOYMENT BENEFITS

The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially determined using a December 31, 2005, measurement date and include the cost of medical
and dental insurance, survivor income, and disability benefits. The
accrued postemployment benefit costs recognized by the Bank at
December 31, 2005 and 2004, were $5 million and $6 million, respectively. This cost is included as a component of “Accrued benefit
costs.” Net periodic postemployment benefit costs included in 2005
and 2004 operating expenses were $1 million for each year and are
recorded as a component of “Salaries and other benefits.”

NOTE 10

BUSINESS RESTRUCTURING CHARGES
In 2003, the Bank announced plans for restructuring to streamline operations and reduce costs, including consolidation of check, check adjustment and cash operations and staff reductions in various functions of the Bank. In 2004, additional consolidation and restructuring initiatives were
announced in the marketing and check operations. These actions resulted in the following business restructuring charges (in millions):
Total
Estimated
Costs
Employee separation
Other
TOTAL

$
$

4.1
.4
4.5

Accrued
Liability
12/31/2004
$
$

1.0
1.0

Total
Charges
$
$

0.1
0.1

Total
Paid
$
$

(1.1)
(1.1)

Accrued
Liability
12/31/2005
$
$

-

Employee separation costs are primarily severance costs related to staff reductions of approximately 175, including 7 staff reductions related to
restructuring announced in 2004. These costs are reported as a component of “Salaries and other benefits.”
Restructuring costs associated with the write-downs of certain Bank assets, including software, buildings, leasehold improvements, furniture
and equipment are discussed in footnote 6. Costs associated with enhanced pension benefits for all Reserve Banks are recorded on the books
of the FRBNY as discussed in footnote 8. Costs associated with enhanced postretirement benefits are disclosed in footnote 9.
The Bank substantially completed its announced plans on March 31, 2005.

Federal Advisory
Council Member
J. Kenneth Glass
CHAIRMAN, PRESIDENT AND CEO
FIRST HORIZON NATIONAL CORP.
MEMPHIS

Susan F. Gerker

Paul M. Helmich

Joseph C. Elstner

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

PUBLIC AFFAIRS OFFICER

Roy A. Hendin

Edward A. Hopkins

Thomas A. Garrett

VICE PRESIDENT, DEPUTY GENERAL
COUNSEL AND ASSISTANT SECRETARY

ASSISTANT VICE PRESIDENT

RESEARCH OFFICER

James L. Huang

David J. Griffin

ASSISTANT VICE PRESIDENT

OPERATIONS OFFICER

Gary J. Juelich

Joel H. James

ASSISTANT VICE PRESIDENT

BANK RELATIONS OFFICER

Visweswara R. Kaza

Debra E. Johnson

ASSISTANT VICE PRESIDENT

HUMAN RESOURCES OFFICER

William D. Little

Carrie E. Keen

ASSISTANT VICE PRESIDENT

HUMAN RESOURCES OFFICER

Raymond McIntyre

Christopher J. Neely

ASSISTANT VICE PRESIDENT

RESEARCH OFFICER

John W. Mitchell

Glen M. Owens

ASSISTANT VICE PRESIDENT

OPERATIONS OFFICER

Edward M. Nelson

Yi Wen

ASSISTANT VICE PRESIDENT

RESEARCH OFFICER

Vicki L. Kosydor
VICE PRESIDENT

Bank Officers
ST. LOUIS OFFICE

William Poole

Jean M. Lovati
VICE PRESIDENT

Michael J. Mueller

PRESIDENT AND CEO

VICE PRESIDENT

David A. Sapenaro

Kim D. Nelson

FIRST VICE PRESIDENT AND COO

VICE PRESIDENT

Karl W. Ashman

Kathleen O’Neill Paese

SENIOR VICE PRESIDENT

VICE PRESIDENT

Judith A. Courtney

Todd J. Purdy

SENIOR VICE PRESIDENT

VICE PRESIDENT

Mary H. Karr

Steven N. Silvey

SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY

VICE PRESIDENT

Kathy R. Reckert
Randall C. Sumner
Daniel L. Thornton

LITTLE ROCK OFFICE

Robert A. Hopkins

VICE PRESIDENT

SENIOR VICE PRESIDENT AND
DIRECTOR OF RESEARCH

ASSISTANT VICE PRESIDENT

Kathy A. Schildknecht

Robert H. Rasche

ASSISTANT VICE PRESIDENT

SENIOR BRANCH EXECUTIVE

VICE PRESIDENT

Michael D. Renfro

Philip G. Schlueter

SENIOR VICE PRESIDENT AND
GENERAL AUDITOR

Carl K. Anderson

Julie L. Stackhouse

Barkley Bailey

SENIOR VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

LOUISVILLE OFFICE

Harriet Siering

Maria G. Hampton

ASSISTANT VICE PRESIDENT
ASSISTANT VICE PRESIDENT

SENIOR BRANCH EXECUTIVE

Diane A. Smith
Richard G. Anderson

Dennis W. Blase

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

John P. Baumgartner

Daniel P. Brennan

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT
AND ASSISTANT GENERAL AUDITOR

Timothy A. Bosch

Susan K. Curry

James E. Stephens

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

Timothy C. Brown

Hillary B. Debenport

Matthew W. Torbett

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

James B. Bullard

Michael W. DeClue

Howard J. Wall

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

Ronald L. Byrne

Michael J. Dueker

David C. Wheelock

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

Marilyn K. Corona

William M. Francis Jr.

Glenda J. Wilson

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT VICE PRESIDENT

Cletus C. Coughlin

Kathy A. Freeman

Jonathan C. Basden

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

LEARNING TECHNOLOGY OFFICER

William T. Gavin

Elizabeth A. Hayes

Diane B. Camerlo

VICE PRESIDENT

ASSISTANT VICE PRESIDENT

ASSISTANT COUNSEL

ASSISTANT VICE PRESIDENT

Leisa J. Spalding

MEMPHIS OFFICE

Martha Perine Beard
SENIOR BRANCH EXECUTIVE

James A. Price
ASSISTANT VICE PRESIDENT

69

FEDERAL RESERVE BANK OF ST. LOUIS

SUMMARY OF OPERATIONS

Summary of Key Operation Statistics for Services Provided to Depository Institutions and the U.S. Treasury (The following schedule is unaudited
and has been included as supplemental information.)
NUMBER OF ITEMS

DOLLAR AMOUNT (MILLIONS)

2005

2004

2005

Government Checks Processed

70,335,000

73,682,000

84,293

89,608

Postal Money Orders Processed

176,490,000

186,918,000

28,395

29,045(a)

Commercial Checks Processed

690,564,000

951,391,000

568,262

677,151

1,035,495,000

1,098,465,000

18,461

20,962

383

240

746

352

682,000

1,281,000

2

4

Currency Processed
Loans to Depository Institutions
Food Coupons Destroyed

(a) $4,928 less than what was reported in the 2004 annual report due to an adjustment.

70

2004

The Federal Reserve Bank of St. Louis is one of 12 regional Reserve banks which, together with the Board of
Governors, make up the nation’s central bank. The Fed carries out U.S. monetary policy, regulates certain depository institutions, provides wholesale-priced services to banks and acts as fiscal agent for the U.S. Treasury.
The St. Louis Fed serves the Eighth Federal Reserve District, which includes all of Arkansas, eastern Missouri,
southern Indiana, southern Illinois, western Kentucky, western Tennessee and northern Mississippi. Branch
offices are located in Little Rock, Louisville and Memphis.

FEDERAL RESERVE BANK OF ST. LOUIS
One Federal Reserve Bank Plaza
Broadway and Locust Street
St. Louis, Missouri 63102
(314) 444-8444

Author of Essay: Laura J. Hopper

LITTLE ROCK BRANCH
Stephens Building
111 Center Street, Suite 1000
Little Rock, Arkansas 72201
(501) 324-8300

Designer: Kathie Lauher

LOUISVILLE BRANCH
National City Tower
101 South Fifth Street, Suite 1920
Louisville, Kentucky 40202
(502) 568-9200
MEMPHIS BRANCH
200 North Main Street
Memphis, Tennessee 38103
(901) 523-7171

Contributing Writers: Scott Kelly and Glen Sparks
Editor: Stephen Greene

Production: Barb Passiglia
Photography: Steve Smith Studios
Mark Gilliland Photography
REFERENCES
www.federalreserveeducation.org
www.ncee.net
www.siue.edu/BUSINESS/cee
www.umsl.edu/~econed/
For additional print copies, contact:
Public Affairs Department
Federal Reserve Bank of St. Louis
Post Office Box 442
St. Louis, Missouri 63166
(314) 444-8809
www.stlouisfed.org

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