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4/19/2018

2011 Annual Report - Federal Reserve Bank of Atlanta

PUBLICATIONS

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

https://www.frbatlanta.org/about/publications/annual-reports/2011.aspx

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

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4/19/2018

Letter from the President--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Letter from the President
As I write my yearly letter to introduce the Federal Reserve Bank of
Atlanta's annual report, I have just completed five years at the helm of
the Bank.

MILESTONES
& MORE

RELATED LINKS
ATLANTA FED'S FINANCIAL STATEMENT
(LINKS OFFSITE)
ADJUSTMENT & ADAPTATION:

THE LABOR MARKET:

They have been a challenging five years. We have been through, among other
things, recession, bank failures, frozen credit markets, economic turmoil, and the
impact of historically low interest rates. And the recovery continues to be a
multiyear process that is proceeding at a modest and uneven pace. This annual
report focuses on factors that shaped economic performance in 2011.

VIEW

VIDEO
VIEW VIDEO

WIDESPREAD UNCERTAINTY:

VIEW

VIDEO
MONETARY POLICY:

VIEW VIDEO

The report marks the first time the Federal Reserve Bank of Atlanta has produced
a solely electronic version. We have developed an interactive, multimedia report,
complete with dynamic infographics. We created these features to help us paint a
picture of the 2011 economic year and the forces that shaped it. Major milestones
for the Bank's overall work during the year are also included in the report.
Embedded in this letter and throughout the accompanying economic commentary are short video segments that enrich the text. I
encourage you to watch the videos.
In the commentary, we describe four major forces that helped to shape the economy in 2011, a year marked by modest growth at
an uneven pace and by similar experience with regard to unemployment. This unevenness also characterized inflation over the
year, but by year's end, broad price pressures had subsided.
This annual report will look at these four forces individually and examine how they influenced the economy in 2011 and also
positioned the economy for 2012. The first force felt throughout the year was a continuing process of economic adjustment and
adaptation, including "deleveraging." Banks worked on their portfolios to reduce their exposure to real estate, households
reduced their debt, and government entities adjusted their finances. As the year wore on, it became more apparent to me that
adjusting, adapting, and deleveraging are particularly apt words for what was happening in the economy. For more on this force,
watch the video.
Video
The second force was certain dynamics in the labor market. The Federal Reserve Bank of Atlanta was particularly interested in
the way that these labor dynamics played out in our region. I explain this in the video.
Video
The third force was a pervasive atmosphere of uncertainty. The year saw a number of developments that worked to slow
economic growth nationally and globally. Concerns regarding regulation, fiscal policy, taxes, and health care costs on the national
front and concerns regarding the ongoing sovereign debt crisis in Europe created widespread uncertainty. Shocks related to
natural disasters and severe weather such as the Japanese tsunami and nuclear plant meltdown exacerbated this uncertainty. In
the face of uncertainties, business became more reluctant to borrow and invest, and consumers became more reluctant to
spend. All of this created a drag on the economy. While hard to define, it is clear that uncertainty was a major force in 2011, as I
explain in the video.
Video
The last force was monetary policy. The Federal Open Market Committee (FOMC) held to the accommodative low-interest rate
stance of the previous year. And the FOMC undertook some additional actions in 2011, including efforts to enhance
communication around policy. More on this in the video.
Video
In 2011, all these influences were at work in a year of slow progress towards full economic recovery. While uncertainty and
factors in the labor market were largely negative, adjustment and adaptation along with monetary policy were forces working to
bolster growth, especially in the longer run. Recoveries are never straight-line situations. There are ups and downs, twists and
turns. The economic commentary throughout this annual report will shed some light on these dominant issues.

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Letter from the President--2011 Annual Report - Federal Reserve Bank of Atlanta

Finally, I want to thank all the members of our boards of directors and our advisory councils for their wise input and for their
service to the Federal Reserve Bank of Atlanta.

Dennis P. Lockhart

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Four Forces--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Four forces
The nation's economic performance in 2011 was disappointing. The Federal Reserve Bank of Atlanta's 2011 Annual Report aims
to explain some of the reasons why economic performance was not better.
Entering the year, many people expected a more vigorous expansion than the 1.7 percent growth in gross domestic product
(GDP) that the nation actually experienced for 2011. Annual GDP growth for 2010 was 3 percent, near the nation's postwar
average, and indicators of production and household spending had strengthened late in the year. At the same time, the labor
market was slightly better on balance, in line with expectations. These and other factors set the stage for an optimistic outlook
regarding economic performance in 2011.
However, numerous forces conspired to slow the recovery. This commentary is not intended to be an exhaustive study of all the
factors that influenced the nation's economy last year. Rather, it is an attempt to illuminate four basic forces that played a key role
in shaping the economic year.

MILESTONES
& MORE

RELATED LINKS
THE BEA'S GDP PERCENT CHANGE

Monetary policy was
intended to mitigate the
negative effects of the
other forces, especially
uncertainty.

Three of these forces were significant impediments to stronger near-term economic performance:
Businesses, households, and the public sector worked on repairing balance sheets, in ongoing efforts to adjust and adapt to an
altered economic environment.
Labor market dynamics dampened progress in reducing unemployment.
Pervasive global uncertainty inhibited investing, hiring, and spending.
The fourth was a counterweight designed to strengthen the recovery:
Monetary policy was intended to mitigate the negative effects of the other forces, especially uncertainty.
These forces are interrelated, and are not discrete influences on the U.S. economy. They both overlay and interact with one
another. By focusing on adjustment and adaptation in several sectors, labor market dynamics, uncertainty, and monetary policy,
we hope to provide insight into the performance of the nation's and the Southeast's economies in 2011.

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4/19/2018

Adjustment & Adaptation--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Adjustment & adaptation
The length and depth of the recent recession and the severity of the financial crisis that preceded it made a broad rebalancing among various sectors of the macroeconomy
such as housing and financial services a necessary clean-up phase.
Within the various sectors, a similar process of adjustment and adaptation was going on, much of it entailing deleveraging. Balance sheet repair occurred in four primary
areas. Households focused on paying down credit card and other debt while boosting savings. Large businesses advanced in strengthening balance sheets and solidifying
cash reserves. Financial institutions continued to improve their balance sheets while also adjusting to regulatory reforms and adapting their business models. Finally,
governments at all levels grappled with revenue shortfalls and fiscal imbalances.
Read More

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A Period of Adjusting and Adapting--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

A period of adjusting and adapting

MILESTONES
& MORE

RELATED LINKS
ATLANTA FED PRESIDENT LOCKHART ON
DELEVERAGING
FLOW OF FUNDS ACCOUNTS OF THE
UNITED STATES REPORTS ON DEBT AS A
PERCENTAGE OF GDP

The collective efforts of consumers, businesses, financial institutions, and governments to repair balance sheets were a major
force shaping the economy's performance in 2011. The nation was experiencing something different from a typical cyclical
recovery because of the length and depth of the recent recession and the severity of the financial crisis that preceded it. A broad
rebalancing among various sectors of the macroeconomy such as housing and financial services was a necessary clean-up
phase following the so-called "Great Recession."

Governments at all
levels grappled with
revenue shortfalls and
fiscal imbalances.

Within these sectors, a similar process of adjustment and adaptation was going on, much of it entailing deleveraging. In 2009, at
the end of the recession, the total domestic debt of nonfinancial components of the U.S. economy (households, nonfinancial
businesses, and governments) reached 248 percent of gross domestic product (GDP). That figure was an increase of nearly 75
percentage points over the debt-to-GDP ratio a decade earlier.
Balance sheet repair occurred in four primary areas. Households focused on paying down credit card and other debt while
boosting savings. Large businesses advanced significantly in strengthening balance sheets and solidifying cash reserves.
Meanwhile, financial institutions continued to improve their balance sheets while also adjusting to regulatory reforms and trying to
adapt their business models. Finally, governments at all levels grappled with revenue shortfalls and fiscal imbalances.
The deleveraging that was undertaken in these four areas was a necessary step toward regaining balance between assets and
debts and heading toward recovery. But it also likely suppressed demand and inhibited investing and lending, which could partly
explain why progress was so fitful in 2011.

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Household Deleveraging Steadily Progressed--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Household deleveraging steadily progressed

MILESTONES
& MORE

RELATED LINKS
HOUSEHOLD DEBT SERVICE AND
FINANCIAL OBLIGATIONS RATIOS
THE BEA'S PERSONAL INCOME AND
OUTLAYS

This save-more-spendless process likely
contributed to the slower
rate of growth overall.
Household finances improved somewhat in 2011 as consumers continued to pay down debt. Federal Reserve measures of
household financial obligations ratios (FOR) reached their lowest levels since the mid-1980s. See the chart.
Personal income barely grew until the end of the year, so the primary way consumers lowered their debt was through saving
more and spending less than they had in previous years.

Sidebar: Region's households followed the nation's

–

The behavior of southeastern consumers largely followed the same pattern as the rest of the nation's
consumers, as gauged by sales tax collections. As a broad measure of retail activity, sales tax collections in
the southeastern states rose in 2011. Georgia and Tennessee reported particularly strong year-over-year
gains in sales tax collections late in 2011. However, the pace of growth in most states in the region was slower in the
second half of the year. See the chart.
Related Links
Beige Book, Sixth District
Atlanta Fed's REIN data digests for sales tax statistics

Because consumer spending typically accounts for nearly 70 percent of the U.S. economy's total demand, this save-more-spendless process likely contributed to the slower rate of growth overall. Consumer spending merely inched forward for the year, as
real personal consumption expenditures rose just 2.2 percent from 2010, according to the U.S. Bureau of Economic Analysis.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/southeastern-sales-tax-revenues.aspx
Southeastern Sales Tax Revenues

Alabama

Florida

Georgia

Tennessee

Mississippi

Southeast

Louisiana

-10

-20

-30
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Note: Data are through December 2011.
Source: State departments of revenue
Click and drag your cursor over a date range to zoom in on a line. A double-click on the chart will reset the zoom. Click on a state or region name in the legend box to
toggle corresponding chart lines off and on.

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Business Balance Sheets Showed a Mixed Picture--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Business balance sheets showed a mixed picture

MILESTONES
& MORE

RELATED LINKS
THE BEA'S CORPORATE PROFITS
REPORT
ATLANTA FED'S Q3 2011 SMALL
BUSINESS SURVEY
JANUARY 2012 SENIOR LOAN OFFICER
OPINION SURVEY

Large and small businesses were on different tracks in 2011. Balance sheets of larger companies were mostly liquid because
they had already accomplished considerable deleveraging. And they were generating cash because of cost-cutting efforts and
productivity enhancements. By the end of the year, nonfinancial corporations held a record $672 billion in cash assets, according
to the Federal Reserve Board.

Even amid modest
overall demand growth,
large businesses were
profitable and positioned
to stay that way.

One reason for this liquidity is that larger businesses worked hard to increase productivity and cut costs. As a result, even amid
modest overall demand growth, large businesses were profitable and positioned to stay that way by continuing to focus
investments. In the fourth quarter of 2011, corporate profits from current production reached an all-time high of nearly $2 trillion.
See the chart.
Business investment grew at a reasonably strong pace during much of 2011. However, based on anecdotal information from
Atlanta Fed business contacts, that spending continued to be focused mostly on productivity enhancements rather than on
expansion or hiring.
The experience of small firms throughout much of 2011 differed from that of the larger businesses. Smaller firms continued to
struggle with sluggish sales. Demand for credit by small firms increased considerably in the fourth quarter of the year, which
suggests that the year ended on a more promising note for small companies. However, according to the Federal Reserve's 2012
Senior Loan Officer Opinion Survey on Bank Lending Practices, lending standards remained essentially unchanged.
With regard to balance sheet strength, liquidity, and financial position, it was better to be bigger in 2011.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/corporate-profits.aspx
Corporate Profits with IVA and CCAdj

2,000

1,750

1,500

1,250

1,000

750
2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Notes: Data are seasonally adjusted, annual rate, and are through fourth-quarter December 2011. Data value inventory at current cost ("IVA"), and estimate economic
depreciation at current cost ("CCAdj").
Source: U.S. Bureau of Economic Analysis
Click and drag your cursor over a date range to zoom in on a line. A double-click on the chart will reset the zoom.

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Banks, Financial System Adjusted to Postcrisis Realities--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Banks, financial system adjusted to postcrisis realities

MILESTONES
& MORE

RELATED LINKS
: BERNANKE'S SPEECH ON
MACROPRUDENTIAL
REGULATIONFINANCIAL UPDATE
: THE LIVING WILL RULEFINANCIAL
UPDATE
: NATIONAL BANKING TRENDSFINANCIAL
UPDATE
"THE U.S. HOUSING MARKET: CURRENT
CONDITIONS AND POLICY
CONSIDERATIONS"
FHFA'S 2011 FORECLOSURE
PREVENTION & REFINANCE REPORT, Q4
2011

The financial system made significant progress in general in 2011 but has yet to recover completely. As the year ended, the
housing sector was still weak and posed a significant hindrance to the health of the financial system. For the year as a whole,
sales of new homes were at their lowest level since the federal government began keeping records in 1963. Homes in
foreclosure continued to clog the market and exert downward pressure on house prices.
Policymakers have developed several programs to try to restore the health of the housing market since the mortgage crisis
began. So far, these housing relief programs have had limited success. For example, in 2009, the Federal Housing Finance
Agency (FHFA) introduced the Home Affordable Refinance Program (HARP). This program was intended to allow qualified
borrowers with mortgages owned or backed by one of the government-sponsored enterprises to refinance, even if these
borrowers would not qualify for a traditional refinance. The FHFA hoped that HARP would reach 5 million homeowners. However,
by the end of 2011, only about 1 million mortgages had been refinanced through HARP. Housing experts suggest the relatively
low participation rate can be partly attributed to lender worries about GSE putback risks. The Home Affordable Modification
Program (HAMP) is a federal program created to help financially struggling borrowers lower their monthly payments rather than
refinance their mortgages. HAMP also has had only moderate success. Policymakers continue to debate and discuss relief
programs that could bolster the housing market and spur economic growth.
Some bright spots appeared last year despite the generally depressed state of the housing market. At the end of December, the
national inventory of homes for sale stood at just over a six-month supply, down from a high of 11 months in the third quarter of
2010, according to the National Association of Realtors. Such a decline must occur before the housing market can improve. A
supply of about six months is generally considered the market's equilibrium. See the chart.

Sidebar: The Southeast housing market reflected lasting effects of boom-bust

FED GOVERNOR ELIZABETH DUKE ON
THE HOUSING MARKET
FED GOVERNOR DANIEL TARULLO'S
TESTIMONY ON DODD-FRANK ACT

Atlanta Fed Senior
Vice President Mike
Johnson talks about
banking conditions in
the Southeast.

Policymakers have
developed several
programs to try to
restore the health of the
housing market.

–

The continued drag of housing on the economic recovery in 2011 was a national story. But the critical role of
housing may have been even more pronounced in the Southeast—and especially so in the region's oncebooming housing markets, including metropolitan Atlanta.
Fueled by dynamic in-migration, home construction in turn powered strong economic growth in Atlanta before the recession.
From 2000 to 2006, no metro area in the country issued more residential building permits than Atlanta. During those years,
builders took out more than 68,000 residential permits on average each year, compared to fewer than 9,000 in 2011. See
the chart. Furthermore, Atlanta saw the nation's biggest decline in single-family home prices between November 2010 and
November 2011, according to the S&P/Case-Shiller Index.
Atlanta's long-standing reliance on population growth and the housing industry served to restrain the area's economic
recovery. At the end of 2011, metro Atlanta's unemployment rate was 9.3 percent, compared to 8.5 percent nationally.

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Banks, Financial System Adjusted to Postcrisis Realities--2011 Annual Report - Federal Reserve Bank of Atlanta

Other once-booming housing markets in the Southeast, including Miami and Tampa, also suffered unemployment rates
higher than the national average as 2011 ended. The year-end jobless rate in the Miami-Fort Lauderdale-Pompano Beach
metropolitan area was 9.5 percent, and in Tampa-St. Petersburg-Clearwater, it was 10.1 percent.
Related Links
BLS's Economy at a Glance (metro Atlanta)
BLS's Economy at a Glance (metro Miami)
BLS's Economy at a Glance (Tampa-St. Pete-Clearwater)
National Association of Realtors housing stats
SouthPoint housing posts

Banks' efforts to repair their balance sheets took place in a challenging environment. Consolidation in the industry continued
throughout 2011. At year's end, the Federal Deposit Insurance Corporation (FDIC) was insuring some 7,400 institutions—about
300 fewer than it had insured a year earlier. Some banks failed outright. Others merged—the FDIC listed almost 200 bank
mergers during the year, about a 15 percent increase from the number that occurred in 2010.
Banks were also adapting to the first full year of regulatory reform after Congress enacted the Dodd-Frank Wall Street Reform
and Consumer Protection Act in 2010. Key elements of this large and complex legislation were intended to enhance financial
stability; reduce taxpayer exposure to losses from failing financial institutions, including preventing "too big to fail" occurrences;
strengthen consumer protection; and strengthen investor protection.
The Federal Reserve and other federal financial regulators were in the early stages of formulating and implementing regulations
under the act. Striking the right regulatory balance was and continues to be critical, said Michael Johnson, senior vice president
and head of the Atlanta Fed's Supervision and Regulation Division. See the video. The Fed, along with the other regulatory
agencies, worked to ensure as much as possible the safety and soundness of the financial system without crippling the ability of
financial institutions to make a profit.
As Federal Reserve Governor Daniel Tarullo explained in testimony before the Senate in December 2011, such efforts mean
"implementing the [Dodd-Frank] statute faithfully, in a manner that maximizes financial stability and other social benefits at the
least cost to credit availability and economic growth." To that end, Federal Reserve teams of supervisors, legal staff, economists,
and other specialists worked to develop practical rules and to avoid unintended consequences of regulation. In particular, the
Federal Reserve tried to minimize the regulatory burden on smaller financial institutions.
"It's a multiyear process," Johnson said of implementing a new regulatory regime. "It's still very much in the early stages."
Finally, smaller banks especially were trying to adjust their business models by reducing their reliance on lending secured by real
estate. As small banks worked to diversify away from real estate lending, they faced a new challenge, as the demand for loans
from businesses and consumers was not strong in 2011.

Sidebar: Southeast banks worked to lower real estate concentrations

–

During 2011, total assets at Southeast banks declined by 8 percent from the prior year, more than double the
decline at banks outside the region. Meanwhile, southeastern banks were working to change the composition
of their loan portfolios. Most notably, they sought to reduce exposure to real estate. Banks had some success
with regard to commercial real estate (CRE). Between 2001 and 2007, CRE loans had risen from about 33 percent to 55
percent as a share of total loans at Southeast banks with less than $10 billion in assets. By the end of 2011, CRE
concentration for these smaller southeastern banks had declined to 49 percent of total loans.
But reducing concentrations in residential real estate proved to be a protracted process. Banks faced the reality that the
backlog of homes for sale had to shrink before banking conditions could substantially improve. In addition, soft new loan
volume made it hard to counterbalance existing real estate assets. Without strong demand, banks found it difficult to
increase lending—particularly community banks that traditionally relied heavily on real estate lending.
On a brighter note, the latter half of 2011 saw southeastern banks' capital positions, nonperforming loans, and even
earnings improve. Asset quality in the region was significantly better. Charge-offs fell late in 2011 to their lowest level since
the worst of the financial crisis in 2008. See the chart. These improvements allowed banks to reduce their provisions to
cover loan losses, which in turn helped boost profits. Still, in all these areas, banks in the Southeast improved less than their
peers did nationally.
The residential mortgage market in the Southeast also somewhat improved on a year-over-year basis in every major
mortgage delinquency and foreclosure category. For example, total past due first mortgages fell from 17.2 percent in
December 2010 to 16.3 percent in December 2011. Seriously delinquent loans dropped slightly, as did foreclosures. See
the chart.
Related Links
Atlanta Fed conference on Impediments to a Real Estate Recovery

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Banks, Financial System Adjusted to Postcrisis Realities--2011 Annual Report - Federal Reserve Bank of Atlanta

Podcast on commercial real estate credit
on the state of the Sixth Federal Reserve DistrictFinancial Update
"Southeast Mortgage Performance Continued to Improve in the Fourth Quarter"

In the fourth quarter of the year, annualized loan growth for all commercial banks was 7.8 percent. However, the loan volume of
smaller banks had shrunk by about 1.7 percent while larger banks had experienced annualized growth of 10.4 percent, according
to data compiled from bank call reports filed with regulatory agencies.
Meanwhile, issuance of consumer asset-backed securities (ABS) was relatively unchanged from 2010 See the chart. New auto
ABS continued to experience issuance close to precrisis levels, increasing from about $58 billion in 2010 to about $68 billion in
2011. Credit card and student loan securitizations remained subdued. The slow pace of credit card ABS issuance is consistent
with the broader trend of consumers paring down their debts. (See the section on household deleveraging.)
The financial system generally—and the banking sector particularly—made progress on balance sheet repair during 2011, but did
not return to full strength.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/existing-home-market-closings.aspx
Existing Home Market Closings and Inventory Trends (Annualized)

4,500

12
11

4,000

10
10

3,500

11
10
9

9
8

3,000

Existing home inventory
Months' supply

8
8

2,500

6
6

2,000

1,500

1,000
2
500

0
2007

2008

2009

2010

2011

Source: National Association of Realtors

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/annual-single-family-home-permits.aspx
Annual Single-Family Home Permits in the Southeast

100

250
Alabama

Florida
Georgia

200

Tennessee
Mississippi

Louisiana

150

50
40

100

30
20

10
0
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0
2011

Note: Data are through 2011.
Source: U.S. Census Bureau
Click and drag your cursor over a date range to zoom in on a line. A double-click on the chart will reset the zoom. Click on a state or region name in the legend box to
toggle corresponding chart lines off and on.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/southeast-net-chargeoffs.aspx
Southeast Net Charge-offs

0
2004

2005

2006

2007

2008

2009

2010

2011

Source: Bank call reports

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/mortgage-performance-in-southeast.aspx

Mortgage Performance in the Southeast

20
18

December 2010
December 2011

17.2
16.3

16
14
11.8

11.4

10
7.5

7.3

6
4

3.8

4.3
3.5

4.1

2
0
30 days delinquent

90+ days delinquent

Foreclosure

Seriously delinquent
(90+ days delinquent
and foreclosure)

Total past due

Source: LPS (Lender Processing Services Inc.) Applied Analytics

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/consumer-asset-backed-securities-issuance.aspx
Consumer Asset-Backed Securities Issuance

60
Student loans
Credit cards

Auto
50

14.3959

6.0947
8.3098

40
35

16.9887

20.5032

22.5562
25

28.7717

1.7151500000000002
5.735600000000001
5.97271 4.27958
5.6347

15
10

21.344900000000003
9.784600000000001

5
0

6.36559
4.45707

9.4908
2.9665

3.56465
3.1917199999999997
1.8856199999999999
3.72356
7.37784
1.8586500000000001

1.2965499999999999
3.5496
3.09165
3.00974
1.9558
24.706
1.32999
3
19.31999
18.827939999999998
17.00607
16.90602
16.049799999999998
15.28515
14.91351
13.172799999999999
13.12642
10.61746
8.8194

0
2.362

2008 Q12008 Q22008 Q32008 Q42009 Q12009 Q22009 Q32009 Q42010 Q12010 Q22010 Q32010 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4

Source: Securities Industry and Financial Markets Association

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The Public Sector Began to Address Imbalances--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

The public sector began to address imbalances

MILESTONES
& MORE

RELATED LINKS
NELSON A. ROCKEFELLER INSTITUTE OF
GOVERNMENT REPORT ON STATE
REVENUES
U.S. DEPARTMENT OF THE TREASURY
WEBSITE ON TOTAL PUBLIC DEBT
OUTSTANDING

The trend in the ratio of public sector debt, most notably federal debt, to gross domestic product (GDP) remained a serious
economic concern. The overall debt position of the economy, despite the deleveraging in other sectors, had barely declined since
it peaked in 2009. The reason was that federal government debt continued to grow.

Finances generally
remained stressed
across all levels of
government throughout
the year.

The amount of federal government debt has increased sharply in recent years—from about 50 percent of GDP before the
recession to around 80 percent early in 2011. Some of that additional debt resulted from spending on programs designed to
boost a faltering economy, including the $787 billion American Recovery and Reinvestment Act of 2009.
Also, finances generally remained stressed across all levels of government throughout the year. During and immediately after the
recession, high unemployment reduced personal income tax revenues and slow consumption growth affected sales tax
collections. Meanwhile, falling home values reduced property tax receipts, the primary source of revenue for many local
governments. And many states and cities did not begin to address serious longer-term challenges related to pension obligations.

Sidebar: Governments, especially local, cut jobs

–

Southeastern state and local government payrolls demonstrated how progress was achieved by a combination of cost
cutting followed by gradual revenue increases. After tax revenues declined in most jurisdictions from 2008 through 2010,
state and local governments across the Southeast made painful cuts in services and payrolls. And teachers, firefighters,
police officers, and other public employees in many southeastern states continued to experience furloughs and layoffs.
Overall government employment in the Southeast declined by 55,400 jobs in 2011, according to the U.S. Bureau of Labor
Statistics (BLS). Over the past three years, government employment in the region declined by 70,400 jobs. Local
governments accounted for 84 percent of those cuts.
On the revenue front, after three consecutive years of declines, southeastern states' aggregate tax collections increased.
Related Links
Atlanta Fed's REIN data digests, for state tax statistics
BLS data on state and metro area employment, for hours and earnings statistics

On a positive note, the revenue situation for states improved across the nation. The inflation-adjusted state tax collections
increased an average of 5.4 percent during 2011, compared to a 2.9 percent average increase during 2010 and a 12.2 percent
average decline in 2009, according to the Rockefeller Institute.

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The Labor Market--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Labor markets grew only fitfully
Several factors combined to constrain labor market conditions in 2011. Slow growth in the nation's gross domestic product was probably the most significant factor in slow
growth of jobs. Atlanta Fed economists generally felt that skills mismatch in the labor force contributed somewhat to slow jobs growth but was not a primary cause. Overall,
unemployment, weak demand generally, and even the deleveraging process combined to hinder improvements in the labor market.
Read More

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4/19/2018

Labor Markets Grew Only Fitfully--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Labor markets grew only fitfully

MILESTONES
& MORE

RELATED LINKS
THIS TIME IS DIFFERENT: EIGHT
CENTURIES OF FINANCIAL FOLLY, BY
REINHART AND ROGOFF
MACROBLOG ON STRUCTURAL
UNEMPLOYMENT
MACROBLOG ON JOB CREATION
"THE POLARIZATION OF JOB
OPPORTUNITIES IN THE U.S. LABOR
MARKET," BY DAVID AUTOR
NFIB'S SMALL BUSINESS ECONOMIC
TRENDS

The unemployment rate remained high in 2011, and payrolls were still well below prerecession levels. See the chart. With
unemployment persistently high, it was hard to argue that the country's economy performed well. Several dynamics appear to
have shaped the labor market in 2011 and contributed to the slow progress in bringing down the rate of unemployment. But the
dominant factor continued to be the relatively slow pace of the expansion of economic activity.

Sidebar: Region's labor market lagged the nation's

–

Employment in the Southeast remained below prerecession levels. During 2011, the region's total nonfarm
employment increased by 1.3 percent, compared to a national gain of 1.4 percent. At the end of the year, the
Southeast's job count was just under 19 million, more than a million jobs below the level of December 2007.
The region's unemployment rate was 9.3 percent. This rate was significantly less than the 10.5 percent the region
experienced a year earlier but still considerably higher than the national jobless rate of 8.5 percent. See the chart.
For several years before the recession, the Southeast outpaced the nation in job growth, largely spurred by population
gains. In-migration likewise boosted real estate development. In 2010 and 2011, however, the region's population growth
slowed to match the pace of the rest of the country.
That slowdown helped explain why improvement in the Southeast's economy, and in turn its labor market, has lagged the
nation's for the past couple of years.

"THE TREND IS THE CYCLE: JOB
POLARIZATION AND JOBLESS
RECOVERIES," BY JAIMOVICH AND SIU
BLS'S FLORIDA ECONOMY AT A GLANCE
(LOST CONSTRUCTION JOBS)

Atlanta Fed Vice
President and Senior
Economist John
Robertson discusses
the role of skills
mismatches in slow employment growth
and other issues in the labor market.

Job destruction in all of
the past three recessions
were heavily
concentrated in jobs that
required completing fairly
repetitive tasks.

Related Links
EconSouth, "Southeast Struggles to Recover"
EconSouth Now podcast, "Surveying the National Economy"
REIN Data Digests, for individual state economic analyses
SouthPoint, "Employment data point to continued regional recovery"
SouthPoint, "Revised data paint brighter employment picture in the Southeast"
BLS's Economy at a Glance, for Southeast job data

Financial crises usually result in slow economic recoveries
For the most part, the same fundamental force—weak expansion of economic activity—continued to restrain job growth
nationally and regionally as in 2010. Real gross domestic product (GDP), the broadest measure of economic performance,
increased in 2011, but not by much. GDP expanded at a modest 1.7 percent pace. This kind of subpar growth was consistent
with the research by economists Carmen Reinhart and Kenneth Rogoff, who have documented that recessions associated with

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Labor Markets Grew Only Fitfully--2011 Annual Report - Federal Reserve Bank of Atlanta

debt-related financial crises are typically followed by below-normal recoveries. These economists identified a pattern in which the
process of deleveraging, or paying down debt, restrains the overall demand for goods and services. That deleveraging process
can take several years to complete.

Sidebar: Fewer start-ups meant fewer new jobs

–

Young businesses, particularly those that grow quickly, are among the nationï¿½s most significant sources of
jobs. About 40 percent of new jobs in any given year come from the fastest-growing 1 percent of businesses,
according to a 2010 study by the Kauffman Foundation, which researches and promotes entrepreneurship.
Three-quarters of those high-growth businesses are five years old or younger.
In the past, economic downturns had very little impact on the rate of business formation. Businesses started at a fairly
steady rate in both good times and bad. However, the flow of new businesses slowed dramatically during the last recession.
The pace picked up somewhat in 2011, but it remained relatively subdued. The reduction in the number of new businesses
negatively affected overall job creation in the economy. See the chart.
The relatively weak economic expansion, elevated uncertainty, and depressed housing market greatly complicated both
operating a small business and starting a business in 2011. For instance, before the recession, home equity loans were a
major source of financing for start-up businesses. But the decline in house values over the last few years seriously
diminished this pool of funding for new entrepreneurs.
Related Links
EconSouth, "Fed @ Issue"
Federal Reserve Board FAQ: What's the Fed doing to help small businesses get credit?
Federal Reserve Board conference, "Small Business and Entrepreneurship during an
Economic Recovery"
macroblog on job creation by small firms

Skill shortages not a primary cause of high unemployment
Some analysts have argued that, in addition to the slow pace of growth in GDP, certain labor market impediments may also have
contributed to the relatively slow employment recovery. Anecdotally, mismatches between the skills that job seekers possess and
the skills that employers need were frequently cited as an example of such impediments.
The general consensus among Atlanta Fed economists was that skills mismatch accounted for some of the slowness but was not
a primary cause of high unemployment. See the video. Shortages of workers with certain skills and in certain industries have
always existed, and this problem did not appear to be more widespread in 2011 than it was before the recession. In 2011, 32
percent of businesses reporting in a National Federation of Independent Business survey indicated they had few or no qualified
applicants for job openings. This figure is significantly lower than the 43 percent that responded this way in 2007.

Other longer-term factors may have played a role
A slow rebound in employment after a recession is not a new phenomenon. The recoveries from the past three recessions have
all been described as jobless recoveries. This consistency suggests that there may be longer-term structural changes in the
economy that influenced labor market performance after the end of the last recession.
Specifically, job destruction in all of the past three recessions were heavily concentrated in jobs that required completing fairly
repetitive tasks following a defined set of procedures. These included certain assembly-line tasks in manufacturing, as well as
many clerical and retail-sales-related jobs. Likewise, during the postrecession expansions of the 1990s and the early 2000s,
employment growth in routine-type jobs lagged growth in nonroutine occupations that were less easily automated.
The last recession was by far the most severe, but this pattern seems to have played out again against this more troubled
backdrop. In 2011, total employment in occupations involving routine tasks was essentially flat, while employment in nonroutine
occupations increased by almost 2 percent. Reports from Atlanta Fed business contacts suggested that firms in 2011 continued
to invest in technology that boosted efficiency, which in turn lessened demand for workers to do some routine tasks.

Combined forces constrained labor markets
To sum up, improvement in labor market conditions in 2011 was apparently constrained by a combination of forces. Of these,
slow growth in GDP remained a primary constraint holding back improvement in the labor market. Skill shortages were a factor,
but not a dominant one, while broad shifts in the demand for certain types of jobs and tasks may also have played a role.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/us-payroll-employment-and-unemployment-rate.aspx
U.S. Payroll Employment and Unemployment Rate, 2011

300

10.0
Payroll employment (left axis)
Unemployment rate (right axis)
246

250

9.8

251
223

2, 220220
202

9.6
9.4

200
9.1

9.1
9.0

150

9.0

9.1

9.2

9.1

9.0

157

9.0

8.9

9.0

8.9
112

110
96

100

8.8

8.7

8.5
54

8.6
8.4

50
8.2
0

8.0
Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Source: U.S. Bureau of Labor Statistics

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/southeastern-unemployment-rates.aspx
Southeastern Unemployment Rates

14
AL (8%)
FL (9.9%)
12

GA (9.4%)
TN (8.5%)
MS (10.4%)

LA (7%)
US (8.5%)

2
2007

2008

2009

2010

2011

2012

Source: U.S. Bureau of Labor Statistics
Click and drag your cursor over a date range to zoom in on a line. A double-click on the chart will reset the zoom. Click on a state or region name in the legend box to
toggle corresponding chart lines off and on.

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/numbers-of-new-establishments-and-jobs.aspx
Numbers of New Establishments and Jobs (Quarterly)

250

1,600

1,400
200
1,200

1,000

150

800
100

600

400
50
200

Number of new establishments
Number of jobs at new establishments
0
1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

0
2011

Note: Data are quarterly and are through third-quarter 2011.
Source: U.S. Bureau of Labor Statistics
Click and drag your cursor over a date range to zoom in on a line. A double-click on the chart will reset the zoom. Click on a state or region name in the legend box to
toggle corresponding chart lines off and on.

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4/19/2018

Widespread Uncertainty--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Uncertainty shadowed the economy
Natural disasters, U.S. fiscal policy, European sovereign debt, and other factors contributed to widespread uncertainty throughout the year. Economic uncertainty undermined
the expectations and performance of consumers and businesses. Consumer aggregate demand remained soft, and businesses were reluctant to spend, invest, and hire.
Read More

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Uncertainty Shadowed the Economy--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Uncertainty shadowed the economy

MILESTONES
& MORE

RELATED LINKS
ATLANTA FED CONFERENCE,
"SOVEREIGN DEBT AND DEFAULT AFTER
THE FINANCIAL CRISIS"
ATLANTA FED PRESIDENT LOCKHART ON
"EXPECTATIONS AND THE ECONOMY"
ECONSOUTH, "SHOCKS UNBALANCE THE
GLOBAL ECONOMY"
INTERNATIONAL MONETARY FUND,
WORLD ECONOMIC OUTLOOK REPORTS
NOTES FROM THE VAULT, "SOVEREIGN
DEBT AND DEFAULT"
MACROBLOG ON "UNCERTAINTY ABOUT
UNCERTAINTY"

Several factors contributed to economic uncertainty throughout 2011. These factors included the ongoing European sovereign
debt crisis, political turmoil in the Middle East, and questions about the direction of U.S. fiscal policy. The difficult and unresolved
debates in Washington over the debt ceiling and concerns about regulation, taxes, and health care costs contributed to policyrelated uncertainty.
Several shocks, especially in the earlier months of the year, exacerbated the uncertainty. Severe weather and natural disasters
such as the Japanese tsunami slowed economic growth substantially during the first half of the year.
The uncertainty that slowed economic growth was both a result and a cause of other factors constraining the recovery. Numerous
surveys, including some from the Atlanta Fed, indicated that uncertainty—about economic performance, government policy and
regulation, and geopolitical disruptions—caused many businesses to delay or forego investments and hiring.

"MEASURING ECONOMIC POLICY
UNCERTAINTY," BY BAKER, BLOOM, AND
DAVIS

Cheryl Venable,
Senior Vice
President of the
Fed's Retail
Payments Office,
speaks about innovation and change in
the nation's payments system. (See the
sidebar on payments.)

Definitely a factor, but hard to measure
Measuring the effects of widespread uncertainty on the economy in 2011 is difficult. For example, according to Atlanta Fed
research economist John Robertson, it was unclear how much uncertainty as opposed to general economic weakness
constrained hiring. Overall uncertainty was not as measurable an economic force as changes in business balance sheets or bank
lending, for example. Nonetheless, it clearly affected the behavior of consumers and businesses, according to numerous
anecdotal comments the Atlanta Fed gathered. A typical comment included this one from a small business owner in the real
estate industry: "There is too much uncertainty in the marketplace, and we...are working closely with our owners, tenants, clients,
and vendors to stay the course until consumers return to the market."

The uncertainty that
slowed economic growth
was both a result and a
cause of other factors
constraining the
recovery.

Economists at Stanford University and the University of Chicago created an index last year to measure a specific type of
uncertainty related to policy. This index showed that 2011 had the highest level. Indeed, research by the index's creators
—Scott R. Baker, Nicholas Bloom, and Steven J. Davis—has indicated a connection between businesses' concerns about
regulation, tax issues, and the unresolved debt ceiling and restrained corporate investment. See the chart.
In the late summer, the potential for the federal government to default on its debts arose as talks on the debt ceiling reached a
stalemate. Then, Standard & Poor's downgraded the U.S. government's credit rating. Lawmakers eventually reached a
temporary agreement to raise the debt ceiling. But as the year ended, the debt talks had not achieved a true consensus. Rather,
political disagreement surrounded the critical task of lowering the federal government's debt burden. (See the section on
adjustment and adaptation in the public sector.)

Other factors contributed to uncertainty
Political unrest in the Middle East contributed to rising oil prices. Popular revolutions in certain countries, violent crackdowns on
some citizens in the Middle East, and ongoing concerns about proliferation of nuclear weapons contributed to a rise in global oil
prices. Throughout 2011, oil prices were roughly 25 to 30 percent higher than they were in the middle of 2010.

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Uncertainty Shadowed the Economy--2011 Annual Report - Federal Reserve Bank of Atlanta

The lingering European debt crisis was arguably the most serious uncertainty influencing the economic recovery in 2011. U.S.
financial institutions worked to protect themselves by reducing their overall exposure to European banks and sovereigns. But a
weakened European economy reduced demand for U.S. exports. And the potential of sovereign debt default threatened the
stability of financial markets, causing some turbulence when default appeared likely. The year ended without major dramatic
developments, but the debt crisis in the euro zone undermined the confidence of consumers and businesspeople in the United
States. Furthermore, many economists believed Europe could be entering a recession.

Sidebar: Southern states vulnerable to euro troubles

–

Southeastern exports were relatively insulated from troubles in Europe. According to the U.S. International
Trade Administration, only a small share of the region's exports was shipped to the euro area in 2011.
However, some states, including Alabama, had larger portions of that share. Nearly 20 percent of Alabama's
merchandise exports were shipped to the euro area. About half of those exports, mainly automobiles, went to Germany.
See the chart for southeastern states' exports to three world regions.
Germany appeared to be one of the more resilient European economies, along with the Netherlands, Belgium, and France
—the other large euro area markets for southeastern exporters. The economically weakest countries in the euro area—
Greece, Ireland, and Portugal—accounted for only a small fraction of the region's exports.
For Florida, the euro troubles brought another concern. Among the southeastern states, the Sunshine State's exporters
appeared to be least exposed to the euro area. But firms in Florida's large tourism industry feared that fewer Europeans
might visit. Europeans also comprised a significant market for Florida real estate. For example, in the Miami-Fort
Lauderdale-Miami Beach market, Germans accounted for nearly a quarter of all nonresident foreign buyers in the 12
months ending in June 2011, according to the National Association of Realtors.
Related Links
SouthPoint on Trade connections between Europe and the Southeast
SouthPoint on the southeast's exposure to Europe

Shocks hit economy especially hard early in the year
Oil and commodity price shocks early in the year along with severe weather events helped explain why the nation's economy
underperformed expectations in the first quarter. Moreover, the March earthquake and tsunami devastated parts of Japan and
caused major loss of life. The Japanese tragedy disrupted industrial supply chains, particularly in the automotive industry. That
impact was felt in the middle of the year. The International Monetary Fund wrote in its September 2011 World Economic Outlook
that, according to some estimates, the number of cars manufactured worldwide may have declined by up to 30 percent in the two
months after the Japanese earthquake and tsunami.
Several severe weather events in the first half of the year also affected the nation's economic performance. As early as June, the
National Oceanic and Atmospheric Administration declared that 2011, with eight disasters costing more than $1 billion each, was
already among the most extreme weather years in history.
All these factors constrained economic growth in 2011.

Sidebar: Change marked the payments system

–

The Federal Reserve plays a key role in the nation's payments system. As a provider of payments services,
the Fed must remain competitive and recover its costs, in accordance with its legal mandates. It must also
remain flexible, as the ways that people and businesses pay for goods and services, and how those
payments are processed, are rapidly evolving.
Three factors continued to push steady change in the payments world throughout 2011: technology, regulation, and
globalization, said Cheryl Venable, Atlanta Fed senior vice president and retail payments product manager for the Federal
Reserve's national Retail Payments Office (RPO). See the video.
Changes in technology
Just as currency replaced barter, and credit cards replaced some cash payments, new technologies continued to spawn
new ways to pay for things. Rapid growth in electronic payments has been fueled by the growth of the Internet, the
proliferation of powerful mobile computing devices such as smartphones, and more secure and robust means of
electronically exchanging financial data. According to a Federal Reserve payments study released last year, the number of
electronic payments made in 2009 was 84.5 billion, nearly double the number made in 2003.
Changes in regulation

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Uncertainty Shadowed the Economy--2011 Annual Report - Federal Reserve Bank of Atlanta

The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) affected payments as well as banking.
In particular, the "Durbin Amendment," a provision of the act that took effect in October 2011, capped the fees that debit
card issuers can charge merchants whenever a consumer uses a debit card. The Durbin Amendment stirred debate about
who would ultimately bear the costs—banks, merchants, or customers. Some large banks—smaller financial institutions
were exempted from the cap—imposed monthly fees for debit card users in an attempt to recover costs. In some cases,
banks quickly withdrew those fees when customers protested.
Changes due to globalization
Last year, the RPO participated in efforts to bring efficient payments services to more people in Latin America. For years,
the sender of a cross-border wire transfer or check had to pay additional charges at various stops the payment made along
its way. In addition, complexities in country rules, laws, and payment formats and standards slowed transformations. These
complexities have made the cross-border payment process relatively inefficient and costly. At the regional Payments Week
(Semana de Pagos) meeting in Paraguay, FedGlobal ACH helped the Western Hemisphere Payments Initiative work toward
establishing a regional payments hub to link all of the payments systems in the Americas, thereby improving efficiency.
The Atlanta Fed as convener
The Federal Reserve Bank of Atlanta played an important role in bringing industry participants together in 2011 to address
the uncertainty that arises from rapid innovation and changes in regulation. Throughout the year, the RPO assembled
payments providers, regulators, law enforcement, and other industry players to explore ways to make the payments system
as efficient, safe, and accessible as possible.
In addition to the RPO, the Fed's Atlanta-based Retail Payments Risk Forum served as a hub of research and collaboration
on issues affecting the security of payments. For example, in November, the forum assembled regulators, legal
professionals, and law enforcement representatives to explore the role of federal and state governments in the payments
industry. Conference papers are available.
Related Links
2010 Federal Reserve Payments Study
Atlanta Fed conference summary, "The Role of Government in Payments Risk and Fraud"
Atlanta Fed First Vice President on change and risk in the U.S. Payments System
Atlanta Fed's Retail Payments Risk Forum

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/economic-policy-uncertainty-index.aspx
Economic Policy Uncertainty Index

300

250

200

150

100

Jan 2000

Jan 2001

Jan 2002

Jan 2003

Jan 2004

Jan 2005

Jan 2006

Jan 2007

Jan 2008

Jan 2009

Jan 2010

Jan 2011

Jan 2012

Source: "Measuring Economic Policy Uncertainty" by Scott Baker, Nicholas Bloom, and Steven J. Davis, November 2011, all data at policyuncertainty.com

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https://www.frbatlanta.org/about/publications/annual-reports/2011/charts/southeast-exports-to-europe.aspx
Southeast Exports to the Euro Area

25%

20%

19.9

14.3

15%

13.6

13.2

12.8

10.2
10%
8.0

0%
Alabama

Louisiana

Tennessee

United States

Georgia

Mississippi

Florida

Source: U.S. International Trade Administration

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Monetary Policy--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Monetary policymakers sought to support a challenging economy
Monetary policy was a significant force influencing the economy in 2011. However, monetary policy differs from the other forces examined in this commentary. It was a force
designed to mitigate negative effects of other forces. During the year, the Federal Reserve enacted monetary policy measures aimed at boosting economic activity, facilitating
credit flows, and guarding against shocks to the nation's financial system.
Read More

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Monetary Policymakers Sought to Support a Challenging Economy--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

Monetary policymakers sought to support a
challenging economy

MILESTONES
& MORE

RELATED LINKS
FED CHAIR BERNANKE ON THE GREAT
RECESSION AND THE CENTRAL BANK
ECONSOUTH ON CURRENCY SWAPS
FOMC CALENDARS, STATEMENTS, AND
MINUTES
FOMC ECONOMIC PROJECTIONS
FOMC POLICY ON EXTERNAL
COMMUNICATIONS OF COMMITTEE
PARTICIPANTS
FOMC STATEMENT ON "OPERATION
TWIST"

The fourth force influencing the U.S. economy in 2011 was monetary policy. This force is different from the other three discussed
in this annual report. Specifically, it was applied in an effort to mitigate the negative effects of other forces that worked on the
economy and support the multiyear recovery by keeping interest rates low.

Atlanta Fed
Executive Vice
President Dave Altig
discusses what
"agency" means
relating to government backers of
mortgage loans.

Early in the year, the Federal Open Market Committee (FOMC) considered the potentially competing concerns of rising inflation
and stubbornly high unemployment. However, the FOMC expected that inflation would fall to a level consistent with the Fed's
then-informal target of 2 percent. The committee therefore maintained its accommodative policy to support growth and greater
employment. In fact, inflation stabilized as the effects of the shocks that raised commodity prices earlier in the year faded during
the latter half of the year. See the video.

Sidebar: Inflation Project "opened up our notebooks"

–

Inflation means more than what's happening to the price of a loaf of bread or a gallon of gas. An Atlanta Fed
initiative in 2011 set out to provide relevant, timely information that puts inflation into context. The project
called for enhancing web pages for the Inflation Project, with more information and more features, including
interactive information graphics.
The enhanced Inflation Project offers a video tutorial with Atlanta Fed senior economic policy specialist Laurel Graefe
explains two of the new features: a monthly business inflation expectations survey and an inflation dashboard. See the
video.
Early in the year, the Atlanta Fed Research Department began polling more than 300 people who set prices for large and
small businesses based in the Southeast. This business inflation expectations survey became the nation's only broad
measure of companies' inflation expectations and pricing plans.
The inflation dashboard allows users to view and interact with graphics to visualize recent statistics within the context of
longer-term trends. Visitors to the site sort through six broad categories of data, including retail prices, labor costs, and
producer prices. They can click through to find increasingly detailed information.
"We are in a sense opening up our notebooks to the public," Graefe said. "This is information we have been using to
prepare President Lockhart for FOMC deliberations, and now the public can access it."
The Atlanta Fed initiated another project in 2011. The Fed Explained is a new feature designed to make the work of the Fed
and information on key economic issues available to the general public. The new feature includes a video series, the first of
which explains inflation.

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Monetary Policymakers Sought to Support a Challenging Economy--2011 Annual Report - Federal Reserve Bank of Atlanta

Related Links
The Inflation Project

Federal Reserve policymakers faced a quandary early in the year. The Federal Open Market Committee (FOMC) had to respond
to competing concerns, as rising inflation and stubbornly high unemployment made a rare joint appearance. On the one hand,
maintaining an accommodative monetary policy stance could risk a further rise in inflation. On the other hand, tightening policy
could restrain hiring and the already slow economic recovery.
The FOMC's decision early in the year—whether to immediately confront rising inflation or persistently high unemployment—was
typical of the challenges presented by an unpredictable economy. While balancing appropriate responses to competing forces,
Fed policymakers also had to consider different policy prescriptions appropriate to near- and longer-term needs. In the near term,
these policymakers aimed to bolster the cyclical economic recovery through low interest rates and ample liquidity.
Policymakers had to strike a delicate balance
While balancing appropriate responses to competing forces, Fed policymakers also had to consider different policy prescriptions
appropriate to near- and longer-term needs. In the near term, these policymakers aimed to bolster the cyclical economic recovery
through low interest rates and ample liquidity.
Slow growth, low inflation led to more accommodation
During the year, the FOMC expanded the accommodative policy it had maintained since 2008. Many policymakers viewed low
economic growth combined with modest inflation as justification for further accommodation.
The FOMC kept the federal funds rate at zero to 0.25 percent. To support mortgage markets, the FOMC chose to invest principal
payments it received from holdings of agency securities into agency mortgage-backed securities. The FOMC also initiated a
program to sell shorter-term agency securities and purchase an equal amount of longer-term agency securities. The maturity
extension program—more popularly known as "Operation Twist"—was aimed at exerting downward pressure on longer-term
interest rates.
European sovereign debt crisis led to further steps
The FOMC also moved to protect the U.S. financial system against potential damage from global financial turmoil, particularly the
European sovereign debt crisis. It did this by extending currency swap arrangements with other central banks. These currency
swaps made U.S. dollars available to foreign central banks so they could lend them to their commercial financial institutions,
whose customers needed dollars rather than their domestic currencies.
Ensuring dollar liquidity around the world lessened the chances of repeating the global dollar shortages that crippled credit
markets and exacerbated the 2008 financial crisis. In general, swap lines, by providing liquidity to the financial system in times of
stress, help shield the U.S. economy from the effects of financial instability, regardless of its source.
Communication became another policy tool
Last year, the FOMC decided to provide more specific information about its expectations for the future path of the federal funds
rate and expanded its commitment to transparency. Clear communication became not only an important adjunct to policy, but it
also was in some ways a policy tool in itself. The FOMC based its steps toward more transparency on considerable evidence
indicating that central bank transparency increases the effectiveness of monetary policy and enables households and businesses
to make better-informed decisions. The idea behind clarifying expectations during 2011 was to stimulate borrowing, investment,
and hiring—"to get people off the sidelines." So early in the year, the FOMC announced that Federal Reserve Chairman Ben
Bernanke would hold quarterly news conferences to discuss monetary policy decisions and the economy.
Then in August, the FOMC changed the language it used to signal policy direction to the public. Rather than indicating that
interest rates were likely to remain exceptionally low for "an extended period," the committee announced that the benchmark
federal funds rate would likely remain at or near its current low level through at least the middle of 2013. (Subsequently, the
FOMC extended this projection to late 2014.) In addition, the FOMC accelerated the release of each member's economic
projections. (Those projections were initially made public in 2010 along with meeting minutes.)
The FOMC aimed to instill in the marketplace a greater sense of certainty about the direction of monetary policy by clearly stating
its intentions and methods. For central banks with policy rates near the zero lower bound—as has been the case for the Fed
since late 2008—influencing the public's expectations about future policy actions became a critical tool, Bernanke said in an
October 2011 speech.
"The commitment to a policy framework that is transparent about objectives and forecasts was helpful, in many instances, in
managing [public] expectations and thus in making monetary policy both more predictable and more effective during the past few
years than it might otherwise have been," Bernanke said.

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Sixth Federal Reserve District Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Sixth Federal Reserve District Directors
Federal Reserve Banks each have a board of nine directors. Directors provide economic information, have broad oversight responsibility for their bank's operations, and, with
the Board of Governors approval, appoint the bank's president and first vice president.
Six directors—three class A, representing the banking industry, and three class B—are elected by banks that are members of the Federal Reserve System. Three class C
directors (including the chair and deputy chair) are appointed by the Board of Governors. Class B and C directors represent agriculture, commerce, industry, labor, and
consumers in the district; they cannot be officers, directors, or employees of a bank; class C directors cannot be bank stockholders.
Fed branch office boards have five or seven directors; the majority are appointed by head-office directors and the rest by the Board of Governors.

https://www.frbatlanta.org/about/publications/annual-reports/2011/boards-of-directors.aspx

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Atlanta Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Atlanta Board of Directors

Mouse over director for more information. Left to right:
Humphries, Tomé, Anderson, Otis, Schupp, Suquet, Wells, Barkin, Glover. Not shown: Byrd

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-atlanta.aspx

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Atlanta Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

consumers in the district; they cannot be officers, directors, or employees of a bank; class C directors cannot be bank stockholders.
Fed branch office boards have five or seven directors; the majority are appointed by head-office directors and the rest by the Board of Governors.

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-atlanta.aspx

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Birmingham Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Birmingham Board of Directors

Mouse over director for more information. Left to right:
Mauldin, Moore, Nicholson, Stanton, Reilly. Not shown: Langloh, Lyons

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-birmingham.aspx

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Jacksonville Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Jacksonville Board of Directors

Mouse over director for more information. Left to right:
Fennell, Jones, Dailey, Horton, Weatherman. Not shown: Jenkins, Stovall

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-jacksonville.aspx

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Miami Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Miami Board of Directors

Mouse over director for more information. Left to right:
Abess, Estes, Padrón, Shea, Jackson. Not shown: Banks, Tice

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-miami.aspx

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Nashville Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Nashville Board of Directors

Mouse over director for more information. Left to right:
Hogan, Ford, Calligan, Carroll, Krueger, Banner. Not shown: Harrington

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-nashville.aspx

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New Orleans Board of Directors--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

New Orleans Board of Directors

Mouse over director for more information. Left to right:
Robinson, Host, Stuller, Boh, Sterling, Milling. Not shown: Conley

https://www.frbatlanta.org/about/publications/annual-reports/2011/directors-new-orleans.aspx

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Management Committee - 2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Management Committee

Mouse over director for more information. Left to right:
Berthaume, Gooding, Lockhart, Jones, Venable, Anderson, Debeer, Johnson, Altig, Davenport. Not shown: Barron, Brown, Oliver

https://www.frbatlanta.org/about/publications/annual-reports/2011/management-committee.aspx

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4/19/2018

Other Officers--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Other Officers
Scott H. Dake

Bobbie McCrackin

Amelia L. Johnson

Senior Vice President

Vice President

Assistant Vice President

Brian D. Egan

Christopher Oakley

Evette H. Jones

Senior Vice President

Vice President and Regional Executive
Jacksonville

Assistant Vice President

James M. McKee
Senior Vice President

John A. Kolb Jr.
Cynthia L. Rasche

Assistant Vice President

Vice President

Robert J. Musso

Stephen A. Levy

Senior Vice President and Regional Executive
New Orleans

John C. Robertson

William J. Tignanelli

Juan C. Sanchez

Senior Vice President

Vice President

Julius Weyman

Robert M. Schenck

Senior Vice President

Vice President

W. Brian Bowling

David E. Tatum

Vice President

John S. Branigin

Paula A. Tkac

Vice President

Michael F. Bryan

Stephen W. Wise

Vice President

Joan H. Buchanan

Christopher N. Alexander

Vice President, OMWI

Assistant Vice President

Annella D. Campbell-Drake

S. Dwight Blackwood

Vice President

Assistant Vice President and
Assistant General Counsel

Assistant Vice President

Vice President

Duncan B. Lyons
Assistant Vice President

Margaret Darlene Martin
Assistant Vice President

Daniel A. Maslaney
Assistant Vice President

Lantanya N. Mauriello
Assistant Vice President

Huston McKinney
Assistant Vice President

Elizabeth McQuerry
Assistant Vice President

D. Pierce Nelson

Suzanna J. Costello
Vice President

Assistant Vice President and
Public Information Officer

J. Elaine Phifer
Kim Blythe

Assistant Vice President

Thomas J. Cunningham

Doris Quiros

Vice President and Regional Executive
Atlanta

Michael J. Chriszt
Assistant Vice President

Assistant Vice President and
Assistant General Auditor

Juan del Busto

Karen W. Clayton

Jeffrey F. Schiele

Vice President and Regional Executive
Miami

Assistant Vice President

Chapelle D. Davis

Adrienne L. Slack

Assistant Vice President

Assistant Vice President and
Branch Operations Officer
New Orleans

William J. Devine
Vice President

Angela H. Dirr
Richard M. Fraher

Assistant Vice President and Corporate Secretary

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Vice President and Counsel

Other Officers--2011 Annual Report - Federal Reserve Bank of Atlanta

Patrick E. Dyer

Maria Smith

Assistant Vice President

Gregory S. Fuller

Timothy R. Smith

Assistant Vice President

Jennifer L. Gibilterra

Clifford S. Stanford

Assistant Vice President

Richard B. Gilbert

Allen D. Stanley

Assistant Vice President

Paul W. Graham

Jeffrey W. Thomas

Assistant Vice President and
Branch Operations Officer
Miami

Assistant Vice President

Amy S. Goodman
Vice President

Cynthia C. Goodwin
Vice President

Todd H. Greene
Vice President

Lee C. Jones
Vice President and Regional Executive
Nashville

Mary M. Kepler
Executive Director

Joel E. Warren
Assistant Vice President

Robert D. Hawkins
Jacquelyn Lee

Assistant Vice President

Vice President

Charles L. Weems
Assistant Vice President

Carolyn Ann Healy
Robert A. Love

Assistant Vice President

Vice President

Kenneth Wilcox
Assistant Vice President

Kathryn G. Hinton
Mary M. Mandel

Assistant Vice President

Christina M. Wilson

Susan Hoy

Assistant Vice President and
Branch Operations Officer
Jacksonville

Vice President

Lesley A. McClure
Vice President and Regional Executive
Birmingham

Assistant Vice President and
Assistant General Counsel

Torion L. Wright
Assistant Vice President

https://www.frbatlanta.org/about/publications/annual-reports/2011/other-officers.aspx

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Advisory Councils--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Federal Reserve Bank of Atlanta Advisory Councils
Regional Economic Information Network (REIN) Advisory Councils
Agriculture
KEVIN BERKEN

JOHN ESTES JR.

WILLIAM POWELL

Owner
KMB Properties LLC

Vice President
J.E. Estes Wood Company

Executive Vice President
Alabama Cattlemen's Association

WILLIAM T. BOONE

DAVID KAHN

JAMES SANFORD

Entrepreneur Outreach Specialist
University of Georgia
Small Business Development Center

President and Chief Executive Officer
Yogurt Mountain

Chairman of the Board
HOME Place Farms

GAYLON LAWRENCE JR.

GILBERT SELLERS

Partner
The Lawrence Group

President
Sellers Inc.

LARKIN MARTIN

JILL STUCKEY

Managing Partner
Martin Farms

Director of Alternative Fuels
Georgia Environmental Facilities Authority

THOMAS PAULK

ROBERT THOMAS

President and Chief Executive Officer
Alabama Farmers Cooperative Inc.

President
Two Rivers Ranch Inc.

W. PAUL BOWERS

CHARLES GOODSON

DELOY MILLER

President and Chief Executive Officer
Georgia Power Company

Chief Executive Officer
PetroQuest Energy

Chairman and Chief Executive Officer
Miller Petroleum

KERRY CHAUVIN

LEE LAMPTON

EARL SHIPP

Chairman of the Board and Chief Executive Officer
Gulf Island Fabrication Inc.

President
Ergon Inc.

Vice President
Dow Texas Operations

BRIAN FERRAIOLI

MARK MAISTO

STEPHEN TOUPS

Executive Vice President and Chief Financial Officer
Shaw Group

President Commodities and Retail Markets
Florida Power and Light

Corporate Vice President
Turner Industries

DONALD T. BOLLINGER

CLARENCE GOODEN

CHRIS MANGOS

Chairman, President and Chief Executive Officer
Bollinger Shipyards Inc.

Executive Vice President
CSX Corporation

Director, Marketing Division
Miami-Dade Aviation Department
Miami International Airport

DOUGLAS BOURNIQUE
Executive Vice President and General Manager
Indian River Citrus League

ARNOLD CLEGHORN
Vice President of Operations, Retired
Agrium Inc.

JUDSON EDWARDS
Dean
Center for International Business and
Economic Development
Troy University

Energy

Trade and Transportaion

https://www.frbatlanta.org/about/publications/annual-reports/2011/advisory-councils.aspx

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Advisory Councils--2011 Annual Report - Federal Reserve Bank of Atlanta

REID DOVE

MYRON GRAY

SCOTT MCWILLIAMS

President and COO
AAA Cooper Transportation

President, U.S. Operations
United Parcel Service of America Inc.

Executive Chairman of the Board
Ozburn-Hessey Logistics

RICK FERRIN

JOHN HOURIHAN

PATRICK QUINN

Vice President
TranSystems' Maritime Group

Senior Vice President and General Manager
Latin America Services
Crowley Maritime Corporation

Co-Chairman and President
U.S. Xpress Enterprises

JOHN GILES
President and Chief Executive Officer
RailAmerica

MARIE ROBERTS
GARY LAGRANGE
President and Chief Executive Officer
Port of New Orleans

Chief Financial Officer
Georgia Ports Authoritys

Travel and Tourism
DAVID BERNSTEIN

NICKI GROSSMAN

WILLIAM D. TALBERT III

Senior Vice President, Chief Financial Officer
Carnival Cruise Lines

President and Chief Executive Officer
Greater Ft. Lauderdale Convention and
Visitors Bureau

President and Chief Executive Officer
Greater Miami Convention and Visitors Bureau

ROBERT DEARDEN
Chief Operating Officer
The Florida Restaurant and Lodging Association

CHRIS THOMPSON
DAVID KLOEPPEL
President
Gaylord Entertainment Company

PATRICIA DENECHAUD
President and Chief Executive Officer
Crescent City Consultants

Executive Director, President/Chief Executive Officer
VISIT FLORIDA

MARK VAUGHN
TONY QUINTERO

CYNTHIA FLOWERS

Associate Aviation Director, Government Affairs
Miami-Dade Aviation
Miami International Airport

Executive Manager
Alabama Bureau of Tourism and Travel

BRIAN RICE

Executive Vice President, Chief Sales and
Marketing Officer
Atlanta Convention and Visitors Bureau

Executive Vice President and Chief Financial Officer
Royal Caribbean Cruises Ltd.

Other Advisory Councils
Americas Center Advisory Council
CATALINA AMUEDO-DORANTES

MARTIN EICHENBAUM

SUSAN KAUFMAN PURCELL

Professor
Department of Economics
San Diego State University

Ethel and John Lindgren Professor of Economics
Northwestern University

Director
Center for Hemispheric Policy
University of Miami

JEFFRY FRIEDEN
KENNETH COATES
Economist

Stanfield Professor of International Peace
Department of Government
Harvard University

Center for Quantitative Economic Research Advisory Group
LAWRENCE CHRISTIANO

SERGIO REBELO

THOMAS SARGENT

Department of Economics
Northwestern University

Department of Economics
Kellogg School of Management
Northwestern University

Department of Economics
New York University

MARTIN EICHENBAUM
Department of Economics
Northwestern University

CHRIS SIMS
RICHARD ROGERSON
Department of Economics and Public Affairs
Woodrow Wilson School of Public and
International Affairs
Princeton University

Department of Economics
Princeton University

Community Depository Institution Advisory Council
AUSTIN H. ADKINS

FRED MILLER

AGUSTIN VELASCO

Chief Executive Officer
First National Bank, Hamilton, AL

President and Chief Executive Officer
Bank of Anguilla, Anguilla, MS

President
InterAmerican Bank, FSB, Miami, FL

https://www.frbatlanta.org/about/publications/annual-reports/2011/advisory-councils.aspx

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Advisory Councils--2011 Annual Report - Federal Reserve Bank of Atlanta

EARL O. BRADLEY III

JOSEPH F. QUINLAN III

DOUGLAS L. WILLIAMS

Chief Executive Officer
First Federal Savings Bank, Clarksville, TN

President and Chief Executive Officer
First National Bankers Bank, Baton Rouge, LA

President and Chief Executive Officer
Atlantic Capital Bank, Atlanta, GA

THOMAS A. BROUGHTON III

MARK E. ROSA

JAMES WOODWARD

President and Chief Executive Officer
ServisFirst Bank, Birmingham, AL

President and Chief Executive Officer
Jefferson Financial Credit Union, Metairie, LA

President and Chief Executive Officer
SunState Federal Credit Union, Gainesville, FL

CALVIN L. CEARLEY

CLAIRE W. TUCKER (Chair)

Owner
Palm Beach Community Bank, Boynton Beach, FL

President and Chief Executive Officer
CapStar Bank, Nashville, TN

Labor, Education, and Health Advisory Council
JAY BERKELHAMER

SUSAN KROHN

ROLANDO MONTOYA

Past President
American Academy of Pediatrics

Chief Executive Officer
Brooke Companies

Provost
Miami Dade College

NEAL BERTE

LINDSAY (JERRY) LEE

STEPHEN NEWMAN

President Emeritus
Birmingham-Southern College

Past President
Tennessee AFL-Chief Information Officer

Chief Operating Officer
Tenet Healthcare Corporation

STEPHEN DOLINGER

DENISE MCLEOD

LES RANGE

President
Georgia Partnership for Excellence in Education

Vice President and Chief Operating Officer
Landrum Staffing Services

Deputy Executive Director
Mississippi Department of Employment Security

JEFF HUBBARD

RHONDA MEDOWS

WAYNE RILEY

Past President
Georgia Association of Educators

President and Chief Executive Officer
Meharry Medical College

JAMES D. KING

Former Commissioner
Georgia Dept of Community Health
Chief Medical Officer and Executive Vice President
UnitedHealth Group: Public Sector Programs

Vice Chancellor
Tennessee Technology Centers

HARVE MOGUL
President and Chief Executive Officer
United Way of Miami-Dade

Real Estate Advisory Council
THOMAS BELL JR.

FREDERICK GRUBBE

HUGH ROWDEN

Chairman
SecurAmerica LLC

Chief Executive Officer
Appraisal Institute

Senior Vice President, Regional Servicing Director
Wells Fargo Home Mortgage Servicing

SAM CHANDAN

KEITH HOROWITZ

DON SCHLAGENHAUF

President and Chief Economist
Chandan Economics

Managing Director
Citi Investment Research

Professor
Florida State University

RAYMOND CHRISTMAN

KEN MCINTYRE

IVY ZELMAN

Retired Consultant

Managing Director
MetLife Inc.

Managing Director and Chief Executive Officer
Zelman and Associates

RENEE GLOVER
President and Chief Executive Officer
Atlanta Housing Authority

EGBERT PERRY
Chairman and Chief Executive Officer
The Integral Group

SALLY GORDON
Managing Director
BlackRock Inc.

RICHARD ROSAN
President
Urban Land Institute

Retail Payments Risk Forum Advisory Council
MARK BUDNITZ

LAURA KAPLAN

ROSSANA SALARIS

Professor of Law
Georgia State University College of Law

Deputy Attorney General
State of California

Senior Vice President
EPN Business Manager
The Clearinghouse

J. REILLY DOLAN

JANE LARRIMER
WOODY TYNER

https://www.frbatlanta.org/about/publications/annual-reports/2011/advisory-councils.aspx

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Advisory Councils--2011 Annual Report - Federal Reserve Bank of Atlanta

Assistant Director
Division of Financial Practices
Federal Trade Commission

Executive Vice President
ACH Network Services and General Counsel
NACHA—The Electronic Payments Association

Senior Vice President and Manager
Payment Strategist Group
BB&T Corporation

KIM DUNCAN

JAY LERNER

SAM VALLANDINGHAM

First Vice President
Fraud Loss Prevention
SunTrust Banks

Assistant Chief for Strategy and Policy
Fraud Section, Criminal Division
Department of Justice

Chief Information Officer/Vice President
The First State Bank

MARY GILMEISTER

RICH OLIVER

President
WACHA

Executive Vice President and
Retail Payments Product Manager
The Federal Reserve Bank of Atlanta

TINA GIORGIO
Senior Vice President
Sandy Springs Bank

SHARON PETREY
Corporate Director Treasury
Coca-Cola Enterprises Inc.

https://www.frbatlanta.org/about/publications/annual-reports/2011/advisory-councils.aspx

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4/19/2018

Milestones--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Milestones
SCROLL DOWN TO VIEW EACH SECTION

Research, monetary policy
Fed policy actions in 2011 included implementing a second round
of quantitative easing (QE2), launching "Operation Twist,"
announcing that it was keeping the fed funds rate at 0 percent to
0.25 percent through mid-2013, maintaining the size of its balance
sheet.
The Atlanta Fed built and launched the Inflation Dashboard and
the Business Inflation Expectations survey. Inflation was a
significant research focus in 2011.
The Regional Economic Information Network continued to expand
grassroots information gathering. In particular, regional executives
established relationships with leaders of the top 50 employers in
their zones and began regular roundtable meetings with bankers.
The Federal Reserve Board selected the Atlanta and Cleveland
Feds to lead the State and Local Government Financial Monitoring
Team (Muni-FMT) for the Financial Stability Oversight Council. The
Muni-FMT identifies trends in state and local fiscal conditions,
borrowing, and pensions that could destabilize the financial
system.
The Atlanta Census Research Data Center (U.S. Census Bureau
entity), one of only 10 in the country, opened at the Atlanta Fed.
The Atlanta Fed held eight major policy/research conferences
exploring timely topics including entrepreneurship during recovery,
employment and education, innovation, the new financial
landscape, and green development and finance.

Supervision and
regulation
The Dodd-Frank Wall Street Reform and
Consumer Protection Act (or the Dodd-Frank
Act) took effect in July 2011. An early,
significant effect of the act for the Atlanta Fed
was its added supervisory duties for 46 thrift
holding companies, the largest of which is St.
Petersburg, Florida-based Raymond James,
with $15 billion in assets.
The Supervision and Regulation Division
continued restructuring its department. It

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4/19/2018

Milestones--2011 Annual Report - Federal Reserve Bank of Atlanta

instituted forward-looking examinations and
general macroprudential regulation and
added staff in areas of need.
The Office of Minority and Women Inclusion
was established at the Atlanta Fed and
staffed, as required by the Dodd-Frank Act.

Retail Payments Office /
Payments
The payments industry continued its migration toward
the electronic. The 2010 Federal Reserve Payments
Study, released in 2011 for data through 2009, found
that more than three-quarters of all U.S. noncash
payments in 2009 were electronic. By contrast, the 2007
payments study revealed that roughly two-thirds of
noncash payments were electronic.
Industry innovation continued to explode—for example,
big banks formed a joint venture to compete with
PayPal. As a result of dynamic innovation, the Retail
Payments Office (RPO) continued to track and gauge
the effects of rapid change.
To keep abreast of industry changes, the RPO
undertook major initiatives to upgrade efficiency and
relevance.
The Nashville cash operation moved to a third-party
depot arrangement. The Nashville Branch cash
operations closed at the end of July. A small staff
focused on gathering economic intelligence and
providing economic education outreach remains.
The Atlanta-based RPO achieved cost recovery for both
check and FedACH services, as required by the
Monetary Control Act.

Public outreach
Atlanta Fed President and Chief Executive Officer Dennis
Lockhart gave about two dozen speeches in 2011. Major
themes of the speeches included downward revisions in the
economic outlook, unemployment, vulnerability to shocks,
rebalancing (fiscal adjustments, deleveraging, public
pension reform), shoring up the financial system, inflation,
and general economic uncertainty.
Podcasts and videocasts covered such general economic
topics as community development and real estate, and
many others.
Other events presented by the Atlanta Fed included Public
Affairs Forums featuring distinguished speakers on the
economics of sports and retirement planning.
The Atlanta Fed launched its YouTube channel. The
channel has more than 70 videos or video segments that
range from Financial Markets Conference speeches and
interviews to videos with President Lockhart, and from
Public Affairs Forum interviews to Classroom Economist
videos.
The Financial Education group conducted 126 teacher
workshops for teachers from 768 high schools. The group
also made 123 presentations to local, state, and national
teacher conferences, reaching 4,359 teachers who in turn
reach 327,000 students.

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Milestones--2011 Annual Report - Federal Reserve Bank of Atlanta

Corporate citizenship
The renovated Check 21 work area at the main office in
Atlanta earned LEED designation, a prestigious green
building and design certification.
The Atlanta Fed celebrated 10 years at its 1000
Peachtree St. headquarters.
The employee volunteer program celebrated its 15th
anniversary.
The employee-founded and funded nonprofit, Charity
Parity, celebrated its 65th anniversary.
Charitable contributions to nonprofit organizations hit
the $4 million mark.

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Credits--2011 Annual Report - Federal Reserve Bank of Atlanta

FOUR FORCES THAT
SHAPED THE ECONOMY IN 2011
PRESIDENT'S LETTER
& INTRODUCTION

ADJUSTMENT
& ADAPTATION

THE LABOR
MARKET

WIDESPREAD
UNCERTAINTY

MONETARY
POLICY

BOARDS OF
DIRECTORS

MILESTONES
& MORE

Credits
About the Atlanta Fed
The Federal Reserve Bank of Atlanta is one of 12 regional Reserve Banks in the United States that, with the Board of Governors in Washington, DC, make up the Federal
Reserve System—the nation's central bank. Since its establishment by an act of Congress in 1913, the Federal Reserve System's primary role has been to foster a sound
financial system and a healthy economy.
To advance this goal, the Atlanta Fed helps formulate monetary policy, supervises banks and bank and financial holding companies, and provides payment services to
depository institutions and the federal government. Through its six offices in Atlanta, Birmingham, Jacksonville, Miami, Nashville, and New Orleans, the Federal Reserve
Bank of Atlanta serves the Sixth Federal Reserve District, which comprises Alabama, Florida, and Georgia, and parts of Louisiana, Mississippi, and Tennessee.

The 2011 Federal Reserve Bank of Atlanta Annual Report was created and produced by
the Public Affairs Department.

Atlanta Office
1000 Peachtree Street N.E.
Atlanta, Georgia 30309-4470

Bobbie H. McCrackin
Vice President and Public Affairs Officer

Pierce Nelson
Assistant Vice President and Public Information Officer

Lynne Anservitz
Strategic Publishing Director

Carole Starkey
Web Communications Director

Peter Hamilton
Darryl Kennedy
Odie Swanegan

Birmingham Branch
524 Liberty Parkway
Birmingham, Alabama 35242-7531
Jacksonville Branch
800 Water Street
Jacksonville, Florida 32204
Miami Branch
9100 N.W. 36th Street
Miami, Florida 33178-2425
Nashville Branch
301 Rosa L. Parks Avenue
Nashville, Tennessee 37203-4407

Graphic Designers

Charles Davidson
Writer

New Orleans Branch
525 St. Charles Avenue
New Orleans, Louisiana 70130-3480

Nancy Condon
Editor

Howard Fore
Momolu Sancea
Leslie Williams
Web Team

Flip Chalfant
Photographer

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The Federal Reserve
Bank of Atlanta
Financial Statements as of and for the Years Ended
December 31, 2011 and 2010 and
Independent Auditors' Report

THE FEDERAL RESERVE BANK OF ATLANTA
Table of Contents.

Management's Report on Internal Control over Financial Reporting
Independent Auditors' Report
Abbreviations

page

pages

2-3.

page

Financial Statements:
Statements of Condition as of December 31, 2011 and December 31, 2010

page

Statements of Income and Comprehensive Income for the years ended December 31,
2011 and December 31, 2010

page 6.

Statements of Changes in Capital for the years ended December 31, 2011 and
December 31, 2010

page 7.

Notes to Financial Statements

pages

8-35.

FEDERAL
RESERVE
BANK
of ATLANTA

March 20, 2012

1000 Peachtree Street N.E.
Atlanta, Georgia 30309-4470
404.498.8500
www.frbatlanta.org

To the Board of Directors of the Federal Reserve Bank of Atlanta:
The management of the Federal Reserve Bank of Atlanta (FRB Atlanta) is responsible for the preparation and
fair presentation of the Statements of Condition as of December 31, 2011 and 2010, and the Statements of
Income and Comprehensive Income, and Statements of Changes in Capital for the years then ended (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 as set
forth in the Financial Accounting Manual for Federal Reserve Banks (FAM), and, as such, include some
amounts that are based on management judgments and estimates. 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 FAM and include all disclosures necessary for such fair presentation.
The management of the FRB Atlanta is responsible for establishing and maintaining effective internal control
over financial reporting as it relates to the financial statements. FRB Atlanta's internal control over financial
reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external reporting purposes in accordance with the FAM. The FRB
Atlanta's internal control over financial reporting includes those policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions
of the FRB Atlanta's assets; (ii) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with FAM, and that the FRB Atlanta's receipts and
expenditures are being made only in accordance with authorizations of its management and directors; and (iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of the FRB Atlanta's assets that could have a material effect on its financial statements.
Even effective internal control, 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. Also, projections of any evaluation of effectiveness to future periods are subject to the
risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
The management of the FRB Atlanta assessed its internal control over financial reporting based upon the
criteria established in the "Internal Control - Integrated Framework" issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on this assessment, we believe that the FRB Atlanta
maintained effective internal control over financial reporting.

Federal Reserve Bank of Atlanta

[signed] Dennis P. Lockhart, President and Chief Executive Officer

[signed] Marie C. Gooding, First Vice President and Chief Operating Officer

[signed] Anne M. DeBeer, Senior Vice President and Chief Financial Officer

Deloitte & Touche LLP
191 Peachtree Street NE
Suite 2000
Atlanta, GA 30303-1749
USA
Tel: +1 404 220 1500
Fax: +1 404 220 1583
www.deloitte.com

INDEPENDENT AUDITORS' REPORT
To the Board of Governors of the Federal Reserve System
and the Board of Directors of the Federal Reserve Bank of Atlanta:

We have audited the accompanying Statements of Condition of the Federal Reserve Bank of Atlanta
("FRB Atlanta") as of December 31, 2011 and 2010, and the related Statements of Income and
Comprehensive Income, and of Changes in Capital for the years then ended, which have been prepared
in conformity with accounting principles established by the Board of Governors of the Federal Reserve
System. We also have audited the internal control over financial reporting of the FRB Atlanta as of
December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission. The FRB Atlanta's
management is responsible for these Financial Statements, for maintaining effective internal control
over financial reporting, and for its assertion of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Report on Internal Control Over Financial
Reporting. Our responsibility is to express an opinion on these Financial Statements and an opinion
on the FRB Atlanta's internal control over financial reporting based on our audits.
We conducted our audits in accordance with generally accepted auditing standards as established by
the Auditing Standards Board (United States) and in accordance with the auditing standards of the
Public Company Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the Financial Statements are free
of material misstatement and whether effective internal control over financial reporting was
maintained in all material respects. Our audits of the Financial Statements included examining, on a
test basis, evidence supporting the amounts and disclosures in the Financial Statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our audit of internal control over financial reporting included
obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, and testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk. Our audits also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audits provide a reasonable basis for
our opinions.
The FRB Atlanta's internal control over financial reporting is a process designed by, or under the
supervision of, the FRB Atlanta's principal executive and principal financial officers, or persons
performing similar functions, and effected by the FRB Atlanta's board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the
preparation of Financial Statements for external purposes in accordance with the accounting principles
established by the Board of Governors of the Federal Reserve System. The FRB Atlanta's internal
control over financial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the FRB Atlanta; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of Financial Statements in accordance with the accounting

M e m b e r of
Deloitte Touche T o h m a t s u Limited

principles established by the Board of Governors of the Federal Reserve System, and that receipts and
expenditures of the FRB Atlanta are being made only in accordance with authorizations of
management and directors of the FRB Atlanta; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the FRB Atlanta's
assets that could have a material effect on the Financial Statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility
of collusion or improper management override of controls, material misstatements due to error or
fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the
effectiveness of the internal control over financial reporting to future periods are subject to the risk that
the controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
As described in Note 4 to the Financial Statements, the FRB Atlanta has prepared these Financial
Statements in conformity with accounting principles established by the Board of Governors of the
Federal Reserve System, as set forth in the Financial Accounting Manual for Federal Reserve Banks,
which is a comprehensive basis of accounting other than accounting principles generally accepted in
the United States of America. The effects on such Financial Statements of the differences between the
accounting principles established by the Board of Governors of the Federal Reserve System and
accounting principles generally accepted in the United States of America are also described in Note 4.
In our opinion, such Financial Statements present fairly, in all material respects, the financial position
of the FRB Atlanta as of December 31, 2011 and 2010, and the results of its operations for the years
then ended, on the basis of accounting described in Note 4. Also, in our opinion, the FRB Atlanta
maintained, in all material respects, effective internal control over financial reporting as of December
31, 2011, based on the criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

[signed] Deloitte & Touche LLP

March 20, 2012

FEDERAL RESERVE BANK OF ATLANTA
Abbreviations:

ACH
AMLF

Automated clearinghouse
Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

ASU
BEP

Accounting Standards Update
Benefit Equalization Retirement Plan

Bureau
FAM

Bureau of Consumer Financial Protection
Financial Accounting Manual for Federal Reserve Banks

FASB
Fannie Mae
Freddie Mac
FOMC

Financial Accounting Standards Board
Federal National Mortgage Association
Federal Home Loan Mortgage Corporation
Federal Open Market Committee

FRBC
FRBNY
GAAP

Federal Reserve Bank of Chicago
Federal Reserve Bank of New York
Accounting principles generally accepted in the United States of America

GSE
IMF

Government-sponsored enterprise
International Monetary Fund

MBS
OEB
OFR

Mortgage-backed securities
Office of Employee Benefits of the Federal Reserve System
Office of Financial Research

SDR
SERP
SOMA
STRIP
TAF
TBA
TDF

Special drawing rights
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks
System Open Market Account
Separate Trading of Registered Interest and Principal of Securities
Term Auction Facility
To be announced
Term Deposit Facility

TIPS
TOP
TSLF

Treasury Inflation-Protected Securities
Term Securities Lending Facility Options Program
Term Securities Lending Facility

FEDERAL RESERVE BANK OF ATLANTA
STATEMENTS OF CONDITION
As of December 31, 2011 and December 31, 2010
(in millions)
2011

2010

ASSETS
Gold certificates

1,394

1,385

Special drawing rights certificates

654

Coin

205

188

Loans to depository institutions

System Open Market Account:
Treasury securities, net

130,120

100,963

8,016

14,475

SystemOpenMarketAccount:Government-sponsored enterprise debt securities, net

SystemOpenMarketAccount:Federal agency and government-sponsored enterprise mortgage-backed
63,062
securities,
95,072
net
SystemOpenMarketAccount:Foreign currency denominated assets, net

1,487

1,606

SystemOpenMarketAccount:Central bank liquidity swaps

5,720

1,465

1,346

240

248

149

Accrued interest receivable
Bank premises and equipment, net
Items in process of collection
Other assets
Total assets

81
212,475

78
216,183

116,694

121,807

LIABILITIES AND CAPITAL
Federal Reserve notes outstanding, net
System Open Market Account:
Securities sold under agreements to repurchase

7,427

5,650

102

40,223

37,040

deposits

Interest payable to depository institutions

160

141

SystemOpenMarketAccount:Otherliabilities
Deposits:
Depository institutions
Deposits:Other

Accrued benefit costs
Deferred credit items

171

248

44,538

48,131

Accrued interest on Federal Reserve notes
Interdistrict settlement account
Other liabilities
Total liabilities

209,399

213,143

1,538

1,520

Capital paid-in
Surplus (including accumulated other comprehensive loss of $26 and $14 at
December 31, 2011 and 2010, respectively)
Total capital
Total liabilities and capital

1,538

1,520

3,076
212,475

3,040
216,183

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

FEDERAL RESERVE BANK OF ATLANTA
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31, 2011 and December 31, 2010
(in millions)
2011
INTEREST INCOME

2010

System Open Market Account:

Treasury securities, net

3,349
System
247

2,690
Open

359 Market

System
3,083

Open
4,579

System14

Open14

System 2

Open 1

6,695

7,643

Total interest income

INTEREST EXPENSE
System Open Market Account:
Securities sold under agreements to repurchase
Deposits:
Depository institutions
Total interest expense
Net interest income

109

113

108

6,582

7,535

NON-INTEREST INCOME
System Open Market Account:
Treasury securities gains, net

168
System

Open

Market

1 Account:

Federal
83
agency and

System

Open

Market

9 Account:

Foreign
34
currency gai

Income from services
Reimbursable services to government agencies
Other
Total non-interest income

327

420

527

562

OPERATING EXPENSES
193

195

Occupancy

Salaries and benefits

Equipment

158

193

Compensation paid for service costs incurred
Assessments:
Board of Governors operating expenses and currency costs
Assessments:
Assessments:

122

117

Bureau of Consumer
2
Financial

Other

Office of Financial
1

112

611

657

Net income prior to distribution

6,498

7,440

Change in actuarial (losses) gains and prior service costs related to benefit plans
Comprehensive income prior to distribution

(12)
6,486

5
7,445

Total operating expenses

Distribution of comprehensive income:
Dividends paid to member banks

90
Distribution
Distribution

Total distribution

of
of

comprehensive
comprehensive

income:

Transferred
18
to (from) surplus
(61) and change in a
income: 6,378Payments to Treasury
7,412
as interest on Fede
6,486
7,445

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

FEDERAL RESERVE BANK OF ATLANTA
STATEMENTS OF CHANGES IN CAPITAL
For the years ended December 31, 2011 and December 31, 2010
(in millions, except share data)

Surplus

Capital paid-in
Balance at January 1, 2010
(31,621,302 shares)
Net change in capital stock redeemed
(1,221,975 shares)

1,581

Net income
retained

1,600

(61)

Transferred from surplus and change
in accumulated other comprehensive
loss

Accumulated
other
comprehensive
loss

Total surplus

(19)

1,581

3,162

(61)

(66)

Total capital

(61)

Balance at December 31, 2010
1,520

(30,399,327 shares)
Net change in capital stock issued
(362,196 shares)

1,534

Transferred to surplus and change in
accumulated other comprehensive
loss

(14)

1,520

3,040

(12)

1,564

(26)

1,538

3,076

Balance at December 31, 2011
(30,761,523 shares)

1,538

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

FEDERAL RESERVE BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS

STRUCTURE

The Federal Reserve Bank of Atlanta (Bank) is part of the Federal Reserve System (System) and is one of the 12
Federal 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 serves the Sixth Federal Reserve District, which includes Georgia, Florida, Alabama, and portions of
Louisiana, Tennessee, and Mississippi.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of
directors. 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 of the Federal Reserve
System (Board of Governors) to represent the public, 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. 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.
In addition to the 12 Reserve Banks, the System also consists, in part, of the 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.
2.

OPERATIONS AND SERVICES

The Reserve Banks perform a variety of services and operations. These functions include participating in
formulating and conducting monetary policy; participating in the payment system, including large-dollar
transfers of funds, automated clearinghouse (ACH) operations, and check collection; distributing coin and
currency; performing fiscal agency functions for the U.S. Department of the Treasury (Treasury), certain
federal agencies, and other entities; serving as the federal government's bank; providing short-term loans to
depository institutions; providing loans to participants in programs or facilities with broad-based eligibility in
unusual and exigent circumstances; serving consumers and communities by providing educational materials
and information regarding financial consumer protection rights and laws and information on community
development programs and activities; and supervising bank holding companies, state member banks, savings
and loan holding companies, and U.S. offices of foreign banking organizations pursuant to authority delegated
by the Board of Governors. Certain services are provided to foreign and international monetary authorities,
primarily by the FRBNY.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act), which was signed
into law and became effective on July 21, 2010, changed the scope of some services performed by the Reserve
Banks. Among other things, the Dodd-Frank Act established a Bureau of Consumer Financial Protection
(Bureau) as an independent bureau within the System that has supervisory authority over some institutions
previously supervised by the Reserve Banks under delegated authority from the Board of Governors in
connection with those institutions' compliance with consumer protection statutes; limited the Reserve Banks'
authority to provide loans in unusual and exigent circumstances to lending programs or facilities with broadbased eligibility or to designated financial market utilities; and vested the Board of Governors with all
supervisory and rule-writing authority for savings and loan holding companies.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations,
oversees these operations, and issues authorizations and directives to the FRBNY to execute transactions. The

FOMC authorizes and directs the FRBNY to conduct operations in domestic markets, including the direct
purchase and sale of Treasury securities, government-sponsored enterprise (GSE) debt securities, federal
agency and GSE mortgage-backed securities (MBS), the purchase of these securities under agreements to
resell, and the sale of these securities under agreements to repurchase. The FRBNY holds the resulting
securities and agreements in a portfolio known as the System Open Market Account (SOMA). The FRBNY is
authorized to lend the Treasury securities and federal agency and GSE debt securities that are held in the
SOMA.
In addition to authorizing and directing operations in the domestic securities market, the FOMC authorizes the
FRBNY to conduct operations in foreign markets in order to counter disorderly conditions in exchange
markets or to meet other needs specified by the FOMC to carry out the System's central bank responsibilities.
Specifically, the FOMC authorizes and directs the FRBNY to hold balances of, and to execute spot and
forward foreign exchange and securities contracts for, 14 foreign currencies and to invest such foreign
currency holdings, while maintaining adequate liquidity. The FRBNY is authorized and directed by the
FOMC to maintain reciprocal currency arrangements with the Bank of Canada and the Bank of Mexico in the
maximum amounts of $2 billion and $3 billion, respectively, and to warehouse foreign currencies for the
Treasury and the Exchange Stabilization Fund.
Although the Reserve Banks are separate legal entities, they collaborate on the delivery of certain services to
achieve greater efficiency and effectiveness. This collaboration takes the form of centralized operations and
product or function 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 Banks. In some cases, costs incurred by a Reserve Bank for services provided to other
Reserve Banks are not shared; in other cases, the Reserve Banks are reimbursed for costs incurred in providing
services to other Reserve Banks. Major services provided by the Bank on behalf of the System and for which
the costs were not reimbursed by the other Reserve Banks include the Retail Payments Office and Central
Billing Services.
3.

FINANCIAL STABILITY ACTIVITIES

The Reserve Banks have implemented the following programs that support the liquidity of financial institutions
and foster improved conditions in financial markets.
Large-Scale Asset Purchase Programs and Reinvestment of Principal Payments
On March 18, 2009, the FOMC authorized and directed the FRBNY to purchase $300 billion of longer-term
Treasury securities to help improve conditions in private credit markets. The FRBNY began the purchases of
these Treasury securities in March 2009 and completed them in October 2009. On August 10, 2010, the
FOMC announced that the Federal Reserve would maintain the level of domestic securities holdings in the
SOMA portfolio by reinvesting principal payments from GSE debt securities and federal agency and GSE
MBS in longer-term Treasury securities. On November 3, 2010, the FOMC announced its intention to expand
the SOMA portfolio holdings of longer-term Treasury securities by an additional $600 billion and completed
these purchases in June 2011. On June 22, 2011, the FOMC announced that the Federal Reserve would
maintain its existing policy of reinvesting principal payments from all domestic securities in Treasury
securities. On September 21, 2011, the FOMC announced that the Federal Reserve intends to purchase, by the
end of June 2012, $400 billion par value of Treasury securities with remaining maturities of 6 years to 30 years
and to sell an equal amount of Treasury securities with remaining maturities of 3 years or less, of which $133
billion has been purchased and $134 billion sold as of December 31, 2011. In addition, the FOMC announced
that it will maintain its existing policy of rolling over maturing Treasury securities at auction and, rather than
reinvesting principal payments from GSE debt securities and federal agency and GSE MBS in Treasury
securities, such payments will be reinvested in federal agency and GSE MBS.
The FOMC authorized and directed the FRBNY to purchase GSE debt securities and federal agency and GSE
MBS, with a goal to provide support to mortgage and housing markets and to foster improved conditions in
financial markets more generally. The FRBNY was authorized to purchase up to $175 billion in fixed-rate,

non-callable GSE debt securities and $1.25 trillion in fixed-rate federal agency and GSE MBS. Purchases of
GSE debt securities began in November 2008, and purchases of federal agency and GSE MBS began in
January 2009. The FRBNY completed the purchases of GSE debt securities and federal agency and GSE MBS
in March 2010. The settlement of all federal agency and GSE MBS transactions was completed by August
2010. As discussed above, on September 21, 2011, the FOMC announced that the Federal Reserve will begin
to reinvest principal payments from its holdings of GSE debt securities and federal agency and GSE MBS in
federal agency and GSE MBS.
Central Bank Liquidity Swaps
The FOMC authorized and directed the FRBNY to establish central bank liquidity swap arrangements, which could
be structured as either U.S. dollar liquidity or foreign currency liquidity swap arrangements.
In May 2010, U.S. dollar liquidity swap arrangements were re-authorized with the Bank of Canada, the Bank of
England, the European Central Bank, the Bank of Japan, and the Swiss National Bank through January 2011.
Subsequently, these arrangements were extended through February 1, 2013. There is no specified limit to the
amount that may be drawn by the Bank of England, the European Central Bank, the Bank of Japan, and the
Swiss National Bank under these swap arrangements; the Bank of Canada may draw up to $30 billion under
the swap arrangement with the FRBNY. In addition to the central bank liquidity swap arrangements, the
FOMC has authorized reciprocal currency arrangements with the Bank of Canada and the Bank of Mexico, as
discussed in Note 2.
Foreign currency liquidity swap arrangements were authorized with 4 foreign central banks and provided the
Reserve Banks with the capacity to offer foreign currency liquidity to U.S. depository institutions. The
authorization for these swap arrangements expired on February 1, 2010. In November 2011, as a contingency
measure, the FOMC agreed to establish temporary bilateral liquidity swap arrangements with the Bank of
Canada, the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss National Bank so
that liquidity can be provided in any of their currencies if necessary. The swap lines are authorized until
February 1, 2013.
Lending to Depository Institutions
The Term Auction Facility (TAF) promoted the efficient dissemination of liquidity by providing term funds to
depository institutions. The last TAF auction was conducted on March 8, 2010, and the related loans matured
on April 8, 2010.
Lending to Primary Dealers
The Term Securities Lending Facility (TSLF) promoted liquidity in the financing markets for Treasury securities.
Under the TSLF, the FRBNY could lend up to an aggregate amount of $200 billion of Treasury securities held
in the SOMA to primary dealers on a secured basis for a term of 28 days. The authorization for the TSLF
expired on February 1, 2010.
The Term Securities Lending Facility Options Program (TOP) offered primary dealers the opportunity to purchase
an option to draw upon short-term, fixed-rate TSLF loans in exchange for eligible collateral. The program was
suspended effective with the maturity of the June 2009 TOP options, and authorization for the program expired
on February 1, 2010.
Other Lending Facilities
The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) provided funding to
depository institutions and bank holding companies to finance the purchase of eligible high-quality assetbacked commercial paper from money market mutual funds. The Federal Reserve Bank of Boston
administered the AMLF and was authorized to extend these loans to eligible borrowers on behalf of the other
Reserve Banks. The authorization for the AMLF expired on February 1, 2010.

SIGNIFICANT ACCOUNTING POLICIES

Accounting principles for entities with the unique powers and responsibilities of a nation's central bank have not
been formulated by accounting standard-setting bodies. The Board of Governors has developed specialized
accounting principles and practices that it considers to be appropriate for the nature and function of a central
bank. These accounting principles and practices are documented in the Financial Accounting Manual for
Federal Reserve Banks (FAM), which is issued by the Board of Governors. The Reserve Banks are required to
adopt and apply accounting policies and practices that are consistent with the FAM and the financial
statements have been prepared in accordance with the FAM.
Limited differences exist between the accounting principles and practices in the FAM and accounting principles
generally accepted in the United States of America (GAAP), due to the unique nature of the Bank's powers
and responsibilities as part of the nation's central bank and given the System's unique responsibility to conduct
monetary policy. The primary differences are the presentation of all SOMA securities holdings at amortized
cost and the recording of SOMA securities on a settlement-date basis. Amortized cost, rather than the fair
value presentation, more appropriately reflects the Bank's securities holdings given the System's unique
responsibility to conduct monetary policy. Although the application of fair value measurements to the
securities holdings may result in values substantially greater or less than their carrying values, these unrealized
changes in value have no direct effect 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 before maturity.
Decisions regarding securities and foreign currency transactions, including their purchase and sale, are
motivated by monetary policy objectives rather than profit. Accordingly, fair values, earnings, and gains or
losses resulting from the sale of such securities and currencies are incidental to open market operations and do
not motivate decisions related to policy or open market activities. Accounting for these securities on a
settlement-date basis, rather than the trade-date basis required by GAAP, better reflects the timing of the
transaction's effect on the quantity of reserves in the banking system. The cost bases of Treasury securities,
GSE debt securities, and foreign government debt instruments are adjusted for amortization of premiums or
accretion of discounts on a straight-line basis, rather than using the interest method required by GAAP.
In addition, the Bank does not present a Statement of Cash Flows as required by GAAP because the liquidity and
cash position of the Bank are not a primary concern given the Reserve Banks' unique powers and
responsibilities as a central bank. Other information regarding the Bank's activities is provided in, or may be
derived from, the Statements of Condition, Income and Comprehensive Income, and Changes in Capital, and
the accompanying notes to the financial statements. There are no other significant differences, other than those
described above, between the policies outlined in the FAM and GAAP.
Preparing the financial statements in conformity with the FAM 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. Consolidation
The Dodd-Frank Act established the Bureau as an independent bureau within the System, and section 1017 of
the Dodd-Frank Act provides that the financial statements of the Bureau are not to be consolidated with
those of the Board of Governors or the System. Section 152 of the Dodd-Frank Act established the Office
of Financial Research (OFR) within the Treasury. The Board of Governors funds the Bureau and OFR
through assessments on the Reserve Banks as required by the Dodd-Frank Act. The Reserve Banks
reviewed the law and evaluated the design of and their relationships to the Bureau and the OFR and
determined that neither should be consolidated in the Bank's financial statements.

b. Gold and Special Drawing Rights Certificates
The Secretary of the Treasury is authorized to issue gold and special drawing rights (SDR) certificates to the
Reserve Banks. Upon authorization, the Reserve Banks acquire gold certificates by crediting equivalent
amounts in dollars to the account established for the Treasury. The gold certificates held by the Reserve
Banks are required to be backed by the gold owned by the Treasury. The Treasury may reacquire the gold
certificates at any time and the Reserve Banks must deliver them to the Treasury. At such time, the
Treasury's account is charged, and the Reserve Banks' gold certificate accounts are reduced. The value of
gold for purposes of backing the gold certificates is set by law at $42 2/9 per fine troy ounce. The Board
of Governors allocates the gold certificates among the Reserve Banks once a year based on the average
Federal Reserve notes outstanding at each Reserve Bank.
SDR certificates are issued by the International Monetary Fund (IMF) to its members in proportion to each
member's quota in the IMF at the time of issuance. SDR certificates serve as a supplement to
international monetary reserves and may be transferred from one national monetary authority to another.
Under the law providing for U.S. participation in the SDR system, the Secretary of the Treasury is
authorized to issue SDR certificates to the Reserve Banks. When SDR certificates are issued to the
Reserve Banks, equivalent amounts in U.S. dollars are credited to the account established for the Treasury
and the Reserve Banks' SDR certificate accounts are increased. The Reserve Banks are required to
purchase SDR certificates, at the direction of the 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 the Reserve Banks based upon each Reserve
Bank's Federal Reserve notes outstanding at the end of the preceding year. SDRs are recorded by the
Bank at original cost. There were no SDR transactions during the years ended December 31, 2011 and
2010.
c. Coin
The amount reported as coin in the Statements of Condition represents the face value of all United States coin
held by the Bank. The Bank buys coin at face value from the U.S. Mint in order to fill depository
institution orders.
d. Loans
Loans to depository institutions are reported at their outstanding principal balances, and interest income is
recognized on an accrual basis.
Loans are impaired when current information and events indicate that it is probable that the Bank will not
receive the principal and interest that are due in accordance with the contractual terms of the loan
agreement. Impaired loans are evaluated to determine whether an allowance for loan loss is required. The
Bank has developed procedures for assessing the adequacy of any allowance for loan losses using all
available information to identify incurred losses. This assessment includes monitoring information
obtained from banking supervisors, borrowers, and other sources to assess the credit condition of the
borrowers and, as appropriate, evaluating collateral values. Generally, the Bank would discontinue
recognizing interest income on impaired loans until the borrower's repayment performance demonstrates
principal and interest would be received in accordance with the terms of the loan agreement. If the Bank
discontinues recording interest on an impaired loan, cash payments are first applied to principal until the
loan balance is reduced to zero; subsequent payments are applied as recoveries of amounts previously
deemed uncollectible, if any, and then as interest income.
e. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and
Securities Lending
The FRBNY may engage in purchases of securities with primary dealers under agreements to resell
(repurchase transactions). These repurchase transactions are settled through a triparty arrangement. In a

triparty arrangement, two commercial custodial banks manage the collateral clearing, settlement, pricing,
and pledging, and provide cash and securities custodial services for and on behalf of the Bank and
counterparty. The collateral pledged must exceed the principal amount of the transaction by a margin
determined by the FRBNY for each class and maturity of acceptable collateral. Collateral designated by
the FRBNY as acceptable under repurchase transactions primarily includes Treasury securities (including
TIPS and STRIP Treasury securities); direct obligations of several federal and GSE-related agencies,
including Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage
Corporation (Freddie Mac); and pass-through MBS of Fannie Mae, Freddie Mac, and Government
National Mortgage Association. The repurchase transactions are accounted for as financing transactions
with the associated interest income recognized over the life of the transaction.
The FRBNY may engage in sales of securities under agreements to repurchase (reverse repurchase
transactions) with primary dealers and, beginning August 2010, with selected money market funds. The
list of eligible counterparties was subsequently expanded to include GSEs, effective in May 2011, and
bank and savings institutions, effective in July 2011. These reverse repurchase transactions may be
executed through a triparty arrangement as an open market operation, similar to repurchase transactions.
Reverse repurchase transactions may also be executed with foreign official and international account
holders as part of a service offering. Reverse repurchase agreements are collateralized by a pledge of an
amount of Treasury securities, GSE debt securities, and federal agency and GSE MBS that are held in the
SOMA. Reverse repurchase transactions are accounted for as financing transactions, and the associated
interest expense is recognized over the life of the transaction. These transactions are reported at their
contractual amounts as "System Open Market Account: Securities sold under agreements to repurchase"
and the related accrued interest payable is reported as a component of "Other liabilities" in the Statements
of Condition.
Treasury securities and GSE debt securities held in the SOMA may be lent to primary dealers to facilitate the
effective functioning of the domestic securities markets. The amortized cost basis of securities lent
continues to be reported as "Treasury securities, net" or "Government-sponsored enterprise debt
securities, net," as appropriate, in the Statements of Condition. Overnight securities lending transactions
are fully collateralized by Treasury securities that have fair values in excess of the securities lent. The
FRBNY charges the primary dealer a fee for borrowing securities, and these fees are reported as a
component of "Non-interest income: Other" in the Statements of Income and Comprehensive Income.
Activity related to securities purchased under agreements to resell, securities sold under agreements to
repurchase, and securities lending is allocated to each of the Reserve Banks on a percentage basis derived
from an annual settlement of the interdistrict settlement account that occurs in the second quarter of each
year.
f. Treasury Securities; Government-Sponsored Enterprise Debt Securities; Federal Agency and GovernmentSponsored Enterprise Mortgage-Backed Securities; Foreign Currency Denominated Assets; and
Warehousing Agreements
Interest income on Treasury securities, GSE debt securities, and foreign currency denominated assets
comprising the SOMA is accrued on a straight-line basis. Interest income on federal agency and GSE
MBS is accrued using the interest method and includes amortization of premiums, accretion of discounts,
and gains or losses associated with principal paydowns. Premiums and discounts related to federal agency
and GSE MBS are amortized over the term of the security to stated maturity, and the amortization of
premiums and accretion of discounts are accelerated when principal payments are received. Gains and
losses resulting from sales of securities are determined by specific issue based on average cost. Treasury
securities, GSE debt securities, and federal agency and GSE MBS are reported net of premiums and
discounts in the Statements of Condition and interest income on those securities is reported net of the
amortization of premiums and accretion of discounts in the Statements of Income and Comprehensive
Income.

In addition to outright purchases of federal agency and GSE MBS that are held in the SOMA, the FRBNY
enters into dollar roll transactions (dollar rolls), which primarily involve an initial transaction to purchase
or sell "to be announced" (TBA) MBS for delivery in the current month combined with a simultaneous
agreement to sell or purchase TBA MBS on a specified future date. In 2010, the FRBNY also executed a
limited number of TBA MBS coupon swap transactions, which involve a simultaneous sale of a TBA
MBS and purchase of another TBA MBS of a different coupon rate. During the year-ended December 31,
2010, the FRBNY's participation in the dollar roll and coupon swap markets furthered the MBS purchase
program goals of providing support to the mortgage and housing markets and of fostering improved
conditions in financial markets more generally. During the year-ended December 31, 2011, the FRBNY
executed dollar rolls primarily to facilitate settlement.
The FRBNY accounts for outstanding
commitments under dollar roll and coupon swaps as purchases or sales on a settlement-date basis. Net
gains resulting from dollar roll and coupon swap transactions are reported as "Non-interest income:
System Open Market Account: Federal agency and government-sponsored enterprise mortgage-backed
securities gains, net" in the Statements of Income and Comprehensive Income.
Foreign currency denominated assets, which can include foreign currency deposits, securities purchased under
agreements to resell, and government debt instruments, 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 foreign currency denominated assets are reported as "Non-interest income: System Open Market
Account: Foreign currency gains, net" in the Statements of Income and Comprehensive Income.
Activity related to Treasury securities, GSE debt securities, and federal agency and GSE MBS, including the
premiums, discounts, and realized gains and losses, is allocated to each Reserve Bank on a percentage
basis derived from an annual settlement of the interdistrict settlement account that occurs in the second
quarter of each year. Activity related to foreign currency denominated assets, including the premiums,
discounts, and realized and unrealized gains and losses, is allocated to each Reserve Bank based on the
ratio of each Reserve Bank's capital and surplus to the Reserve Banks' aggregate capital and surplus at the
preceding December 31.
Warehousing is an arrangement under which the FOMC has approved the exchange, at the request of the
Treasury, of U.S. dollars for foreign currencies held by the Treasury over a limited period. The purpose of
the warehousing facility is to supplement the U.S. dollar resources of the Treasury for financing purchases
of foreign currencies and related international operations. Warehousing agreements are designated as
held-for-trading purposes and are valued daily at current market exchange rates. Activity related to these
agreements is allocated to each Reserve Bank based on the ratio of each Reserve Bank's capital and
surplus to the Reserve Banks' aggregate capital and surplus at the preceding December 31.
g. Central Bank Liquidity Swaps
Central bank liquidity swaps, which are transacted between the FRBNY and a foreign central bank, can be
structured as either U.S. dollar liquidity or foreign currency liquidity swap arrangements.
Central bank liquidity swaps activity, including the related income and expense, is allocated to each Reserve
Bank based on the ratio of each Reserve Bank's capital and surplus to the Reserve Banks' aggregate
capital and surplus at the preceding December 31. The foreign currency amounts associated with these
central bank liquidity swap arrangements are revalued daily at current foreign currency market exchange
rates.
U.S. dollar liquidity swaps
At the initiation of each U.S. dollar liquidity swap transaction, the foreign central bank transfers a specified
amount of its currency to a restricted account for the FRBNY in exchange for U.S. dollars at the
prevailing market exchange rate. Concurrent with this transaction, the FRBNY and the foreign central
bank agree to a second transaction that obligates the foreign central bank to return the U.S. dollars and the
FRBNY to return the foreign currency on a specified future date at the same exchange rate as the initial

transaction. The Bank's allocated portion of the foreign currency amounts that the FRBNY acquires are
reported as "System Open Market Account: Central bank liquidity swaps" in the Statements of Condition.
Because the swap transaction will be unwound at the same U.S. dollar amount and exchange rate that were
used in the initial transaction, the recorded value of the foreign currency amounts is not affected by
changes in the market exchange rate.
The foreign central bank compensates the FRBNY based on the foreign currency amounts it holds for the
FRBNY. The Bank's allocated portion of the amount of compensation received during the term of the
swap transaction is reported as "Interest income: System Open Market Account: Central bank liquidity
swaps" in the Statements of Income and Comprehensive Income.
Foreign currency liquidity swaps
The structure of foreign currency liquidity swap transactions involves the transfer by the FRBNY, at the
prevailing market exchange rate, of a specified amount of U.S. dollars to an account for the foreign central
bank in exchange for its currency. The foreign currency amount received would be reported as a liability
by the Bank.
h. Bank Premises, Equipment, and Software
Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a
straight-line basis over the estimated useful lives of the assets, which range from 2 to 50 years. Major
alterations, renovations, and improvements are capitalized at cost as additions to the asset accounts and are
depreciated over the remaining useful life of the asset or, if appropriate, over the unique useful life of the
alteration, renovation, or improvement. Maintenance, repairs, and minor replacements are charged to
operating expense in the year incurred.
Costs incurred for software during the application development stage, whether developed internally or
acquired for internal use, are capitalized based on the purchase cost and the cost of direct services and
materials associated with designing, coding, installing, and testing the software. Capitalized software
costs are amortized on a straight-line basis over the estimated useful lives of the software applications,
which generally range from two to five years. Maintenance costs related to software are charged to
operating expense in the year incurred.
Capitalized assets, including software, buildings, leasehold improvements, furniture, and equipment, are
impaired and an adjustment is recorded when events or changes in circumstances indicate that the carrying
amount of assets or asset groups is not recoverable and significantly exceeds the assets' fair value.
i. Interdistrict Settlement Account
At the close of business each day, each Reserve Bank aggregates the payments due to or from other Reserve
Banks. These payments result from transactions between the Reserve Banks and transactions that involve
depository institution accounts held by other Reserve Banks, such as Fedwire funds and securities
transfers and check and ACH transactions. The cumulative net amount due to or from the other Reserve
Banks is reflected in the "Interdistrict settlement account" in the Statements of Condition.
j. Federal Reserve Notes
Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as
issued to a specific Reserve Bank, must be fully collateralized. All of the Bank's assets are eligible to be
pledged as collateral. The collateral value is equal to the book value of the collateral tendered with the
exception of securities, for which the collateral value is equal to the par value of the securities tendered.
The par value of securities sold under agreements to repurchase is deducted from the eligible collateral
value.

The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately
collateralize outstanding 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 issued
to 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,
Federal Reserve notes are obligations of the United States government.
"Federal Reserve notes outstanding, net" in the Statements of Condition represents the Bank's Federal Reserve
notes outstanding, reduced by the Bank's currency holdings of $29,109 million and $20,851 million at
December 31, 2011 and 2010, respectively.
At December 31, 2011 and 2010, all Federal Reserve notes issued to the Reserve Banks were fully
collateralized. At December 31, 2011, all gold certificates, all special drawing right certificates, and
$1,018 billion of domestic securities held in the SOMA were pledged as collateral. At December 31,
2011, no investments denominated in foreign currencies were pledged as collateral.
k. Deposits
Depository Institutions
Depository institutions' deposits represent the reserve and service-related balances, such as required clearing
balances, in the accounts that depository institutions hold at the Bank. The interest rates paid on required
reserve balances and excess balances are determined by the Board of Governors, based on an FOMCestablished target range for the federal funds rate. Interest payable is reported as "Interest payable to
depository institutions" in the Statements of Condition.
The Term Deposit Facility (TDF) consists of deposits with specific maturities held by eligible institutions at
the Reserve Banks. The Reserve Banks pay interest on these deposits at interest rates determined by
auction. Interest payable is reported as "Interest payable to depository institutions" in the Statements of
Condition. There were no deposits held by the Bank under the TDF at December 31, 2011 and 2010.
Other
Other deposits include foreign central bank and foreign government deposits held at the FRBNY that are
allocated to the Bank.
l. Items in Process of Collection and Deferred Credit Items
"Items in process of collection" primarily represents amounts attributable to checks that have been deposited
for collection and that, as of the balance sheet date, have not yet been presented to the paying bank.
"Deferred credit items" is the counterpart liability to items in process of collection. The amounts in this
account arise from deferring credit for deposited items until the amounts are collected. The balances in
both accounts can vary significantly.
m. 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. A member bank is liable for Reserve Bank
liabilities up to twice the par value of stock subscribed by it.

By law, each Reserve Bank is required to pay each member bank an annual dividend of 6 percent on the paidin capital stock. This cumulative dividend is paid semiannually. To meet the Federal Reserve Act
requirement that annual dividends be deducted from net earnings, dividends are presented as a distribution
of comprehensive income in the Statements of Income and Comprehensive Income.
n. Surplus
The Board of Governors requires the Reserve Banks to maintain a surplus equal to the amount of capital paidin. On a daily basis, surplus is adjusted to equate the balance to capital paid-in. Accumulated other
comprehensive income is reported as a component of "Surplus" in the Statements of Condition and the
Statements of Changes in Capital. Additional information regarding the classifications of accumulated
other comprehensive income is provided in Notes 12 and 13.
o. Interest on Federal Reserve Notes
The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on
Federal Reserve notes after providing for the costs of operations, payment of dividends, and reservation of
an amount necessary to equate surplus with capital paid-in. This amount is reported as "Payments to
Treasury as interest on Federal Reserve notes" in the Statements of Income and Comprehensive Income.
The amount due to the Treasury is reported as "Accrued interest on Federal Reserve notes" in the
Statements of Condition.
If earnings during the year are not sufficient to provide for the costs of operations, payment of dividends, and
equating surplus and capital paid-in, payments to the Treasury are suspended. A deferred asset is recorded
that represents the amount of net earnings a Reserve Bank will need to realize before remittances to the
Treasury resume. This deferred asset is periodically reviewed for impairment.
p. Income and Costs Related to Treasury Services
When directed by the Secretary of the Treasury, the Bank is required by the Federal Reserve Act to serve as
fiscal agent and depositary of the United States Government. By statute, the Treasury has appropriations
to pay for these services. During the years ended December 31, 2011 and 2010, the Bank was reimbursed
for all services provided to the Treasury as its fiscal agent.
q. Compensation Received for Service Costs Provided and Compensation Paid for Service Costs Incurred
The Bank has overall responsibility for managing the Reserve Banks' provision of check and ACH services to
depository institutions and, as a result, recognizes total System revenue for these services in its Statements
of Income and Comprehensive Income. The FRBNY manages the Reserve Banks' provision of Fedwire
funds and securities services and recognizes total System revenue for these services in its Consolidated
Statements of Income and Comprehensive Income. Similarly, the Federal Reserve Bank of Chicago
(FRBC) has overall responsibility for managing the Reserve Banks' provision of electronic access services
to depository institutions and, as a result, recognizes total System revenue for these services in its
Statements of Income and Comprehensive Income. The Bank, the FRBNY, and the FRBC compensate
the applicable Reserve Banks for the costs incurred to provide these services. Compensation received by
the Bank for providing Fedwire funds, securities and electronic access services is reported as "Noninterest income: Other" in the Statements of Income and Comprehensive Income. Compensation paid by
the Bank for check and ACH services is reported as "Operating expenses: Compensation paid for service
costs incurred" in the Statements of Income and Comprehensive Income.
r. Assessments
The Board of Governors assesses the Reserve Banks to fund its operations, the operations of the Bureau and,
for a two-year period following the July 21, 2010 effective date of the Dodd-Frank Act, the OFR. These
assessments are allocated to each Reserve Bank based on each Reserve Bank's capital and surplus

balances as of December 31 of the prior year for the Board of Governors' operations and as of the most
recent quarter for the Bureau and OFR operations. The Board of Governors also assesses each Reserve
Bank for the expenses incurred by the Treasury to produce 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 prior year.
During the period prior to the Bureau transfer date of July 21, 2011, there was no limit on the funding provided
to the Bureau and assessed to the Reserve Banks; the Board of Governors was required to provide the
amount estimated by the Secretary of the Treasury needed to carry out the authorities granted to the
Bureau under the Dodd-Frank Act and other federal law. The Dodd-Frank Act requires that, after the
transfer date, the Board of Governors fund the Bureau in an amount not to exceed a fixed percentage of
the total operating expenses of the System as reported in the Board of Governors' 2009 annual report,
which totaled $4.98 billion. The fixed percentage of total 2009 operating expenses of the System is 10
percent ($498.0 million) for 2011, 11 percent ($547.8 million) for 2012, and 12 percent ($597.6 million)
for 2013. After 2013, the amount will be adjusted in accordance with the provisions of the Dodd-Frank
Act. The Bank's assessment for Bureau funding is reported as "Assessments: Bureau of Consumer
Financial Protection" in the Statements of Income and Comprehensive Income.
The Board of Governors assesses the Reserve Banks to fund the operations of the OFR for the two-year period
following enactment of the Dodd-Frank Act; thereafter, the OFR will be funded by fees assessed on bank
holding companies and nonbank financial companies that meet the criteria specified in the Dodd-Frank
Act.
s. 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 $3 million for each of the years ended December 31, 2011 and 2010, and
are reported as a component of "Operating expenses: Occupancy" in the Statements of Income and
Comprehensive Income.
t. Restructuring Charges
The Reserve Banks recognize restructuring charges for exit or disposal costs incurred as part of the closure of
business activities in a particular location, the relocation of business activities from one location to
another, or a fundamental reorganization that affects the nature of operations. Restructuring charges may
include costs associated with employee separations, contract terminations, and asset impairments.
Expenses are recognized in the period in which the Bank commits to a formalized restructuring plan or
executes the specific actions contemplated in the plan and all criteria for financial statement recognition
have been met.
Note 14 describes the Bank's restructuring initiatives and provides information about the costs and liabilities
associated with employee separations. The costs associated with the impairment of certain Bank assets
are discussed in Note 9. Costs and liabilities associated with enhanced pension benefits in connection
with the restructuring activities for all of the Reserve Banks are recorded on the books of the FRBNY.
Costs and liabilities associated with enhanced postretirement benefits are discussed in Note 12.
u. Recently Issued Accounting Standards
In July 2010, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU)
2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the
Allowance for Credit Losses, which requires additional disclosures about the allowance for credit losses
and the credit quality of loan portfolios. The additional disclosures include a rollforward of the allowance
for credit losses on a disaggregated basis and more information, by type of receivable, on credit quality
indicators, including the amount of certain past-due receivables and troubled debt restructurings and

significant purchases and sales. The adoption of this update is effective for the Bank for the year ended
December 31, 2011, and did not have a material effect on the Bank's financial statements.
In April 2011, the FASB issued ASU 2011-02, Receivables (Topic 310): A Creditor's Determination of
Whether a Restructuring Is a Troubled Debt Restructuring, which clarifies accounting for troubled debt
restructurings, specifically clarifying creditor concessions and financial difficulties experienced by
borrowers. This update is effective for the Bank for the year ended December 31, 2012, and is not
expected to have a material effect on the Bank's financial statements.
In April 2011, the FASB issued ASU 2011-03, Transfers and Servicing (Topic 860): Reconsideration of
Effective Control for Repurchase Agreements, which reconsidered the effective control for repurchase
agreements. This update prescribes when the Bank may or may not recognize a sale upon the transfer of
financial assets subject to repurchase agreements. This determination is based, in part, on whether the
Bank has maintained effective control over the transferred financial assets. This update is effective for the
Bank for the year ended December 31, 2012, and is not expected to have a material effect on the Bank's
financial statements.
In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of
Comprehensive Income, which requires a reporting entity to present the total of comprehensive income,
the components of net income and the components of other comprehensive income either in a single
continuous statement of comprehensive income or in two separate but consecutive statements. This
update eliminates the option to present the components of other comprehensive income as part of the
statement of shareholders' equity. The update is intended to improve the comparability, consistency, and
transparency of financial reporting and to increase the prominence of items by presenting the components
reported in other comprehensive income. The Bank has adopted the update in this ASU effective for the
year ended December 31, 2011, and the required presentation is reflected in the Bank's financial
statements.
In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting
Assets and Liabilities. This update will require a reporting entity to present enhanced disclosures for
financial instruments and derivative instruments that are offset or subject to master netting agreements or
similar such agreements. This update is effective for the Bank for the year ended December 31, 2013, and
is not expected to have a material effect on the Bank's financial statements.
In December 2011, the FASB issued ASU 2011-12, Comprehensive Income (Topic 220): Deferral of the
Effective Date for Amendments to the Presentation of Reclassifications of Items out of Accumulated Other
Comprehensive Income in Accounting Standards Update No. 2011-05. This update indefinitely defers the
requirements of ASU 2011-05 related to presentation of reclassification adjustments.
5.

LOANS

Loans outstanding at December 31, 2011 and 2010 were as follows (in millions):

Loans to depository institutions

2011:

2010:

Loans to Depository Institutions
The Bank offers primary, secondary, and seasonal loans to eligible borrowers, and each program has its own
interest rate. Interest is accrued using the applicable interest rate established at least every 14 days by the
Bank's board of directors, subject to review and determination by the Board of Governors. Primary and

secondary loans are extended on a short-term basis, typically overnight, whereas seasonal loans may be
extended for a period of up to nine months.
Primary, secondary, and seasonal loans are collateralized to the satisfaction of the Bank to reduce credit risk.
Assets eligible to collateralize these loans include consumer, business, and real estate loans; Treasury
securities; GSE debt securities; foreign sovereign debt; municipal, corporate, and state and local government
obligations; asset-backed securities; corporate bonds; commercial paper; and bank-issued assets, such as
certificates of deposit, bank notes, and deposit notes. Collateral is assigned a lending value that is deemed
appropriate by the Bank, which is typically fair value reduced by a margin. Loans to depository institutions
are monitored daily to ensure that borrowers continue to meet eligibility requirements for these programs. The
financial condition of borrowers is monitored by the Bank and, if a borrower no longer qualifies for these
programs, the Bank will generally request full repayment of the outstanding loan or, for primary or seasonal
loans, may convert the loan to a secondary credit loan. Collateral levels are reviewed daily against outstanding
obligations and borrowers that no longer have sufficient collateral to support outstanding loans are required to
provide additional collateral or to make partial or full repayment.
Allowance for Loan Loss
At December 31, 2011 and 2010, the Bank did not have any impaired loans and no allowance for loan losses was
required. There were no impaired loans during the years ended December 31, 2011 and 2010.
6.

TREASURY SECURITIES; GOVERNMENT-SPONSORED ENTERPRISE DEBT SECURITIES; FEDERAL AGENCY AND
GOVERNMENT-SPONSORED ENTERPRISE MORTGAGE-BACKED SECURITIES; SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL; 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 7.434 percent and 9.463 percent at December
31, 2011 and 2010, respectively.

The Bank's allocated share of Treasury securities, GSE debt securities, and federal agency and GSE MBS, net,
excluding accrued interest, held in the SOMA at December 31 was as follows (in millions):

1,370
95,630
26,665

1,993
4,560

(92)
(6)

Total amortized
cost
1,370
97,531
31,219

123,665

6,553

(98)

130,120

142,481

7,731

286

(1)

8,016

8,493

62,275

864

(77)

63,062

66,573

Fair value
1,743
76,147
27,419
105,309

Par
Bills
Notes
Bonds
Total Treasury securities

2011
Unaccreted
discounts

Unamortized
premiums

GSE debt securities
Federal agency and GSE MBS

2010
Unaccreted
discounts

Unamortized
premiums

Fair value
1,370
103,294
37,817

Bills
Notes
Bonds
Total Treasury securities

1,743
73,174
21,744
96,661

1,330
3,098
4,428

(54)
(126)

Total amortized
cost
1,743
74,432
24,788
100,963

GSE debt securities

13,954

523

(2)

14,475

14,836

Federal agency and GSE MBS

93,884

1,335

(147)

95,072

97,088

Par

(72)

The total of the Treasury securities, GSE debt securities, and federal agency and GSE MBS, net, excluding accrued
interest, held in the SOMA at December 31 was as follows (in millions):

18,423

18,422

Notes

Bills

1,311,917

1,389,429

786,575

804,703

Bonds

419,937

508,694

261,955

289,757

1,750,277

1,916,546

1,066,952

1,112,882

GSE debt securities

107,828

114,238

152,972

156,780

Federal agency and GSE MBS

848,258

895,495

1,004,695

1,026,003

Total Treasury securities

The fair value amounts in the above tables are presented solely for informational purposes. Although the fair value
of security holdings can be substantially greater than or less than the recorded value at any point in time, these
unrealized gains or losses have no effect on the ability of the Reserve Banks, as the central bank, to meet their
financial obligations and responsibilities. The fair value of federal agency and GSE MBS was determined
using a model-based approach that considers observable inputs for similar securities; fair value for all other
SOMA security holdings was determined by reference to quoted prices for identical securities.
The fair value of the fixed-rate Treasury securities, GSE debt securities, and federal agency and GSE MBS in the
SOMA's holdings is subject to market risk, arising from movements in market variables, such as interest rates
and securities prices. The fair value of federal agency and GSE MBS is also affected by the expected rate of
prepayments of mortgage loans underlying the securities.

The following table provides additional information on the amortized cost and fair values of the federal agency and
GSE MBS portfolio at December 31 (in millions):
Distribution of MBS
holdings b y coupon rate
Allocated to the Bank:
3.0%

2011
2011

98
1,443
12,005
30,218
13,567
4,966
680
85
$

Total SOMA:
3.0%

2010
2010

Amortized cost

63,062

Fair value

Amortized cost

99
AllocatedtotheBank:
1,4623.5%
Allocatedtothe12,620
Bank:4.0%
Allocatedtothe32,054
Bank:4.5%
Allocatedtothe14,323
Bank:5.0%
AllocatedtotheBank:
5,2095.5%
Allocatedtothe
715 Bank:6.0%
AllocatedtotheBank:
916.5%
$ Allocatedtothe
66,573
Bank:Total
$

Fair value

32
15,867
47,093
21,899

33
15,936
48,146
22,478

8,812
1,222
147

9,072
1,266
157

95,072

97,088

1,313
19,415
161,481
406,465
182,497
66,795
9,152
1,140

1,336
TotalSOMA:3.5%
19,660
TotalSOMA:4.0%
169,763
TotalSOMA:4.5%
431,171
TotalSOMA:5.0%
192,664
TotalSOMA:5.5%
70,064
TotalSOMA:6.0%
9,616
TotalSOMA:6.5%
1,221

341
167,675
497,672
231,420
93,119
12,910
1,558

352
168,403
508,798
237,545
95,873
13,376
1,656

848,258

TotalSOMA:
895,495
Total

1,004,695

1,026,003

There were no transactions related to securities purchased under agreements to resell during the years ended
December 31, 2011 and 2010. Financial information related to securities sold under agreements to repurchase
for the years ended December 31 was as follows (in millions):
2011

2010

Allocated to the Bank:
Contract amount outstanding, end of year

7,427

5,650

Average daily amount outstanding, during the year

5,705

5,964

Maximum balance outstanding, during the year

9,257

9,366

Securities pledged (par value), end of year

6,400

4,130

Securities pledged (market value), end of year

7,427

5,650

Contract amount outstanding, end of year

99,900

59,703

Average daily amount outstanding, during the year

72,227

58,476

124,512

77,732

Total SOMA:

Maximum balance outstanding, during the year
Securities pledged (par value), end of year

86,089

43,642

Securities pledged (market value), end of year

99,900

59,703

The contract amounts for securities sold under agreements to repurchase approximate fair value. FRBNY executes
transactions for the purchase of securities under agreements to resell primarily to temporarily add reserve
balances to the banking system. Conversely, transactions to sell securities under agreements to repurchase are
executed to temporarily drain reserve balances from the banking system and as part of a service offering to
foreign official and international account holders.

The remaining maturity distribution of Treasury securities, GSE debt securities, federal agency and GSE MBS
bought outright, and securities sold under agreements to repurchase that were allocated to the Bank at
December 31, 2011, was as follows (in millions):
Within 15
days
Treasury securities
(par value)
GSE debt securities
(par value)
Federal agency and GSE
MBS (parvalue)[seefootnote]1
Securities sold under
agreements to repurchase
(contract amount)
[footnote] 1

16 days to
90 days

91 days to 1
year

Over 1 year
to 5 years

Over 5 years
to 10 years

1,208

$ 2,015

186

373

6,684
1,464

48,300

48,316

Over 10
years
$

17,142

Total
$

123,665

4,505

1,028

- 175 --

7,731

62,272 --

62,275

7,427

The par amount shown for Federal agency and GSE MBS is the remaining principal balance of the underlyingmortgages.[endoffootnote1]

Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average
life of these securities at December 31, 2011, which differs from the stated maturity primarily because it
factors in scheduled payments and prepayment assumptions, is approximately 2.4 years.
The amortized cost and par value of Treasury securities and GSE debt securities that were loaned from the SOMA
at December 31 was as follows (in millions):
Allocated to the Bank
Amortized cost cost
2011

2010

Par Par
value
value
2011

2010

Treasury securities

1,124

2,141

1,039

2,089

GSE debt securities

160

152

Total SOMA
Amortized cost
2011

Par value Par value

2010
2011

2010

Treasury securities

15,121

22,627

13,978

22,081

GSE debt securities

1,276

1,686

1,216

1,610

The FRBNY enters into commitments to buy Treasury and GSE debt securities and records the related securities on
a settlement-date basis. As of December 31, 2011, the total purchase price of the Treasury securities under
outstanding commitments was $3,200 million. The total purchase price of outstanding commitments allocated
to the Bank was $238 million. These commitments had contractual settlement dates extending through
January 3, 2012. As of December 31, 2011, the fair value of Treasury securities under outstanding purchase
commitments was $3,208 million, of which $238 million was allocated to the Bank.
The FRBNY enters into commitments to buy and sell federal agency and GSE MBS and records the related
securities on a settlement-date basis. As of December 31, 2011, the total purchase price of the federal agency
and GSE MBS under outstanding purchase commitments was $41,503 million, of which $513 million was
related to dollar roll transactions. The total purchase price of outstanding purchase commitments allocated to
the Bank was $3,085 million, of which $38 million was related to dollar roll transactions. As of December 31,
2011, the total sales price of the federal agency and GSE MBS under outstanding sales commitments was

$4,430 million, all of which was related to dollar roll transactions. The total sales price of outstanding sales
commitments allocated to the Bank was $329 million, all of which was related to dollar roll transactions.
These commitments, which had contractual settlement dates extending through February 2012, are for the
purchase and sale of TBA MBS for which the number and identity of the pools that will be delivered to fulfill
the commitment are unknown at the time of the trade. As of December 31, 2011, the fair value of federal
agency and GSE MBS purchases and sales, net under outstanding commitments was $41,873 million and
$4,473 million, respectively, of which $3,113 million and $333 million, respectively, was allocated to the
Bank. These commitments are subject to varying degrees of off-balance-sheet market risk and counterparty
credit risk that result from their future settlement. The FRBNY requires the posting of cash collateral for
commitments as part of the risk management practices used to mitigate the counterparty credit risk.
Other liabilities, which are related to federal agency and GSE MBS purchases and sales, includes the FRBNY's
obligation to return cash margin posted by counterparties as collateral under commitments to purchase and sell
federal agency and GSE MBS. In addition, other liabilities includes obligations that arise from the failure of a
seller to deliver securities to the FRBNY on the settlement date. Although the FRBNY has ownership of and
records its investments in the MBS as of the contractual settlement date, it is not obligated to make payment
until the securities are delivered, and the amount included in other liabilities represents the FRBNY's
obligation to pay for the securities when delivered. The amount of other liabilities allocated to the Bank and
held in the SOMA at December 31 was as follows (in millions):
Total SOMA
Total SOMA Allocated

A l l o c a t e dtothebank

2010

2011
Cash margin
Obligations from
MBS transaction
fails
Total

2011
-

1,271

1,368

7
102

2010

97
-

During the years ended December 31, 2011 and 2010, the Reserve Banks recorded net gains from federal agency
and GSE MBS transactions of $10 million and $782 million, respectively, of which $1 million and $83
million, respectively, were allocated to the Bank. These net gains are reported as "Non-interest income:
Federal agency and government-sponsored enterprise mortgage-backed securities gains, net" in the Statements
of Income and Comprehensive Income.

Information about transactions related to Treasury securities, GSE debt securities, and federal agency and GSE
MBS during the year ended December 31, 2011, is summarized as follows (in millions):
Allocated to the Bank
Total

Federal
GSE debt
securities

agency and

100,963

14,475

95,072

Treasury
Bills
Balance December 31, 2010
Purchases

Notes

1,743

[see footnote]1

19,171

Sales[see footnote]1

Realized gains,net [seefootnote]2

Principal payments and maturities

Bonds

74,432

24,788

61,195

13,034

(10,239)
168

(19,172)

(5,330)

(350)

102

Amortization of premiums and discounts
Inflation adjustment on inflation-indexed securities
Annual reallocationadjustment [seefootnote]3

(373)

Balance December 31, 2011

1,370

securities

GSE MBS

93,400

3,133

(10,239)

168

(24,502)

(3,567)

(15,643)

(744)

(137)

(256)

(395)
86

188

(22,447)

(6,294)

(29,114)

(2,755)

(19,244)

97,531

31,219

130,120

8,016

63,062

89,328

3,045

Supplemental information - par value of transactions:
Purchases
19,172
59,834
10,322
Supplemental information - par value of transactions:
Proceeds from sales
(10,024)
-

(10,024)

Total SOMA

Bills
Balance December 31, 2010
Purchases [see footnote]1

Notes

18,422
239,487

Sales[see footnote]1

Realized gains,net [seefootnote]2

Principal payments and maturities

Bonds

GSE debt
securities

Federal
agency and
GSE MBS

786,575

261,955

1,066,952

152,972

1,004,695

731,252

161,876

1,132,615

42,145

(137,734)

(137,734)
2,258

(239,494)

Total
Treasury
securities

2,258
(306,767)

(43,466)

(195,413)

Amortization of premiums and discounts

(4,445)

(4,985)

(9,422)

(1,678)

(3,169)

Inflation adjustment on inflation-indexed securities

1,284

1,091

2,375

18,423

1,311,917

419,937

1,750,277

107,828

848,258

713,878
(134,829)

127,802

1,081,174
(134,829)

40,955

Balance December 31, 2011

(67,273)

Supplemental information - par value of transactions:
Purchases
Proceeds from sales
[footnote]1

239,494
-

Purchases and sales are reported on a settlement-date basis and include payments and receipts related to principal, premiums, discounts, and

inflation compensation included in the basis of inflation-indexed securities. The amount reported as sales also includes realized gains,net.[endoffootnote1]
[footnote]2

Adjustments for realized gains, net is required because these amounts do not affect the reported amount of the related securities. Excludes gains

and losses that result from net settled MBS TBAtransactions.[endoffootnote2]
[footnote]3

Reflects the annual adjustment to the Bank's allocated portion of the related SOMA securities that results from the annual settlement of the
interdistrict settlement account, as discussed in Note4f.[endoffootnote3]

FOREIGN CURRENCY DENOMINATED ASSETS

The FRBNY holds foreign currency deposits with foreign central banks and the Bank for International Settlements
and invests in foreign government debt instruments of Germany, France, and Japan. These foreign

government debt instruments are guaranteed as to principal and interest by the issuing foreign governments. In
addition, the FRBNY enters into transactions to purchase Euro-denominated government debt securities under
agreements to resell for which the accepted collateral is the debt instruments issued by the governments of
Belgium, France, Germany, Italy, the Netherlands, and Spain.
The Bank's allocated share of foreign currency denominated assets was approximately 5.731 percent and 6.166
percent at December 31, 2011 and 2010, respectively.
The Bank's allocated share of foreign currency denominated assets, including accrued interest, valued at amortized
cost and foreign currency market exchange rates at December 31 was as follows (in millions):
2011
Euro:
Foreign currency deposits
Euro:
Euro:
Euro:

2010

537

435

108
151

152

Securities purchased under ag

114
170

German government debt
French government debt

Japanese yen:
Foreign currency deposits
Total allocated to the Bank

228

239

Japanese 463
1,487

yen:496
1,606

Japanese government debt

At December 31, 2011 and 2010, the fair value of foreign currency denominated assets, including accrued interest,
allocated to the Bank was $1,497 million and $1,616 million, respectively. The fair value of government debt
instruments was determined by reference to quoted prices for identical securities. The cost basis of foreign
currency deposits and securities purchased under agreements to resell, adjusted for accrued interest,
approximates fair value. Similar to Treasury securities, GSE debt securities, and federal agency and GSE
MBS discussed in Note 6, unrealized gains or losses have no effect on the ability of a Reserve Bank, as the
central bank, to meet its financial obligations and responsibilities. The fair value is presented solely for
informational purposes.
Total Reserve Bank foreign currency denominated assets were $25,950 million and $26,049 million at December
31, 2011 and 2010, respectively. At December 31, 2011 and 2010, the fair value of the total Reserve Bank
foreign currency denominated assets, including accrued interest, was $26,116 million and $26,213 million,
respectively.
The remaining maturity distribution of foreign currency denominated assets that were allocated to the Bank at
December 31, 2011, was as follows (in millions):

Euro
Japanese yen
Total

Within 15
days
307
239
546

16 days to
90 days
168
38
206

91 days to 1
year
121
180
301

Over 1 year
to 5 years
200
234
434

Total
796
691
1,487

At December 31, 2011 and 2010, the authorized warehousing facility was $5 billion, with no balance outstanding.
There were no transactions related to the authorized reciprocal currency arrangements with the Bank of Canada and
the Bank of Mexico during the years ended December 31, 2011 and 2010.

There were no foreign exchange contracts related to open market operations outstanding as of December 31, 2011.
The FRBNY enters into commitments to buy foreign government debt instruments and records the related
securities on a settlement-date basis. As of December 31, 2011, there were $216 million of outstanding
commitments to purchase Euro-denominated government debt instruments, of which $12 million was allocated
to the Bank. These securities settled on January 4, 2012, and replaced Euro-denominated government debt
instruments held in the SOMA that matured on that date. As of December 31, 2011, the fair value of Eurodenominated government debt instruments under outstanding commitments was $216 million, of which $12
million was allocated to the Bank.
In connection with its foreign currency activities, the FRBNY may enter into transactions that are subject to
varying degrees of off-balance-sheet market risk and counterparty credit risk that result from their future
settlement. The FRBNY controls these risks by obtaining credit approvals, establishing transaction limits,
receiving collateral in some cases, and performing daily monitoring procedures.
8.

CENTRAL BANK LIQUIDITY SWAPS

U.S. Dollar Liquidity Swaps
The Bank's allocated share of U.S. dollar liquidity swaps was approximately 5.731 percent and 6.166 percent at
December 31, 2011 and 2010, respectively.
The total foreign currency held under U.S. dollar liquidity swaps in the SOMA at December 31, 2011 and 2010,
was $99,823 million and $75 million, respectively, of which $5,720 million and $5 million, respectively, was
allocated to the Bank.
The remaining maturity distribution of U.S. dollar liquidity swaps that were allocated to the Bank at December 31
was as follows (in millions):
2011:
16 d a y s to
90 d a y s
Euro

Japanese y e n
Swiss franc
Total

1,969

2,927

2010:
2010:
Within 15 2011: Within
15
days
Total
$

4,896

518

284

802

2,505

3,215

5,720

5
5

Foreign Currency Liquidity Swaps
There were no transactions related to the foreign currency liquidity swaps during the years ended December 31,
2011 and 2010.

BANK PREMISES, EQUIPMENT, AND SOFTWARE

Bank premises and equipment at December 31 were as follows (in millions):
2011
Bank premises and equipment:
Land and land improvements

2010

38
39
233
231
Bankpremisesandequipment:B u i l d i n g m a c h i n e39
r y a n d e q u i p m e n t 39
Bankpremisesandequipment:Construction in2
progress
2
Bankpremisesandequipment:Furniture and 85
equipment
90
397
401
Bankpremisesandequipment:Buildings

Accumulated depreciation
Bank premises and equipment, net
Depreciation expense, for the years ended December 31

(157)

(153)

240

248

The Bank leases space to outside tenants with remaining lease terms ranging from one to ten years. Rental income
from such leases was $3 million and $4 million for the years ended December 31, 2011 and 2010, respectively,
and is reported as a component of "Non-interest income: Other" in the Statements of Income and
Comprehensive Income. Future minimum lease payments that the Bank will receive under noncancelable
lease agreements in existence at December 31, 2011, are as follows (in thousands):
2012
2013
2014
2015
2016
Thereafter
Total

1,392
849
802
720
474
609
4,846

The Bank had capitalized software assets, net of amortization, of $8 million and $5 million at December 31, 2011
and 2010, respectively. Amortization expense was $2 million and $1 million for the years ended December
31, 2011 and 2010, respectively. Capitalized software assets are reported as a component of "Other assets" in
the Statements of Condition and the related amortization is reported as a component of "Operating expenses:
Othef' in the Statements of Income and Comprehensive Income.
Assets impaired as a result of the Bank's restructuring plan, as discussed in Note 14, include cash processing
equipment. Asset impairment losses of $1 million for the year ended December 31, 2011 were determined
using fair values based on quoted fair values or other valuation techniques and are reported as a component of
"Operating expenses: Equipment" in the Statements of Income and Comprehensive Income. The Bank had no
impairment losses in 2010.
10. COMMITMENTS AND CONTINGENCIES

Conducting its operations, the Bank enters into contractual commitments, normally with fixed expiration dates or
termination provisions, at specific rates and for specific purposes.

At December 31, 2011, the Bank was obligated under noncancelable leases for premises and equipment with
remaining terms ranging from one to approximately four years. These leases provide for increased rental
payments based upon increases in real estate taxes and operating costs.
Rental expense under operating leases for certain operating facilities, warehouses, and office equipment (including
taxes, insurance, and maintenance when included in rent), net of sublease rentals, was $1 million for each of
the years ended December 31, 2011 and 2010.
Future minimum rental payments under noncancelable operating leases, net of sublease rentals, with remaining
terms of one year or more, at December 31, 2011, are as follows (in thousands):
2012
2013
2014
2015
Future minimum rental payments

263
254
198
92
0
7

At December 31, 2011, there were no material unrecorded unconditional purchase commitments or obligations in
excess of one year.
Under the Insurance Agreement of the Reserve Banks, each of the Reserve Banks has agreed to bear, on a per
incident basis, a share of certain losses in excess of 1 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 of a
Reserve Bank's capital paid-in 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 the agreement at December 31, 2011 and
2010.
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 legal actions and claims will be resolved without material adverse effect on the financial position
or results of operations of the Bank.
11. 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 employees of the Reserve Banks, Board of Governors, and
Office of Employee Benefits of the Federal Reserve System (OEB) participate in the Retirement Plan for
Employees of the Federal Reserve System (System Plan). Under the Dodd-Frank Act, newly hired Bureau
employees are eligible to participate in the System Plan and transferees from other governmental organizations
can elect to participate in the System Plan. In addition, employees at certain compensation levels participate in
the Benefit Equalization Retirement Plan (BEP) and certain Reserve Bank officers participate in the
Supplemental Retirement Plan for Select Officers of the Federal Reserve Banks (SERP).
The System Plan provides retirement benefits to employees of the Reserve Banks, Board of Governors, OEB, and
certain employees of the Bureau. The FRBNY, on behalf of the System, recognizes the net asset or net
liability and costs associated with the System Plan in its consolidated financial statements. During the year
ended December 31, 2011, certain costs associated with the System Plan were reimbursed by the Bureau.
During the year ended December 31, 2010, costs associated with the System Plan were not reimbursed by
other participating employers.

The Bank's projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at
December 31, 2011 and 2010, and for the years then ended, were not material.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve
System (Thrift Plan). The Bank matches 100 percent of the first 6 percent of employee contributions from the
date of hire and provides an automatic employer contribution of 1 percent of eligible pay. The Bank's Thrift
Plan contributions totaled $8 million for each of the years ended December 31, 2011 and 2010, and are
reported as a component of "Operating expenses: Salaries and benefits" in the Statements of Income and
Comprehensive Income.
12. POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS

Postretirement Benefits Other Than Retirement Plans
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 the beginning and ending balances of the benefit obligation (in millions):
2011

2010
124.2

122.9

Service c o s t benefits earned during t h e period

4.4

4.5

Interest c o s t o n accumulated benefit obligation

6.5

7.1

Accumulated postretirement benefit obligation at January 1

Net actuarial loss (gain)

11.7

(5.2)

Special termination benefits loss

0.2

0.1

Contributions by plan participants

2.0

1.7

(7.3)

0.4

142.1

124.2

Benefits paid
Medicare Part D subsidies
Accumulated postretirement benefit obligation at December 31

At December 31, 2011 and 2010, the weighted-average discount rate assumptions used in developing the
postretirement benefit obligation were 4.50 percent and 5.25 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.

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):
2010

2011
Fair value of plan assets at January 1

Contributions by the employer

4.9

5.2

Contributions by plan participants

2.0

1.7

(7.3)

0.4

142.1

124.2

Benefits paid
Medicare Part D subsidies
Fair value of plan assets at December 31
Unfunded obligation and accrued postretirement benefit cost

Amounts included in accumulated other comprehensive loss are shown below:
Prior service cost
Net actuarial loss

2011:
2011:

Total accumulated other comprehensive loss

2011:

0.8

2010:

0.7

(26.4)

2010:

(14.7)

(25.6)

2010:

(14.0)

Accrued postretirement benefit costs are reported as a component of "Accrued benefit costs" in the Statements of
Condition.
For measurement purposes, the assumed health-care cost trend rates at December 31 are as follows:
2011

2010

Health-care cost trend rate assumed for next year

7.50%

8.00%

Rate to which the cost trend rate is assumed to decline (the
ultimate trend rate)
Year that the rate reaches the ultimate trend rate

5.00%

2017

Assumed health-care cost trend rates have a significant effect on the amounts reported for health-care plans. A 1
percentage point change in assumed health-care cost trend rates would have the following effects for the year
ended December 31, 2011 (in millions):

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

1 percentage

point increase

point decrease

2.0

(1.6)

20.9

(17.1)

The following is a summary of the components of net periodic postretirement benefit expense for the years ended
December 31 (in millions):
2011

2010

Service cost-benefits earned during the period

4.4

4.5

Interest cost on accumulated benefit obligation

6.5

7.1

Amortization of prior service cost

0.1

(1.1)

Amortization of net actuarial loss
Total periodic expense
Special termination benefits loss
Net periodic postretirement benefit expense

1.2
11.0

11.7

0.2

0.1

11.2

11.8

Estimated amounts that will be amortized from accumulated other comprehensive loss into
net periodic postretirement benefit expense in 2012 are shown below:
Prior service cost

Net actuarial los s

1.5

Total

1.5

Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1,
2011 and 2010, the weighted-average discount rate assumptions used to determine net periodic postretirement
benefit costs were 5.25 percent and 5.75 percent, respectively.
Net periodic postretirement benefit expense is reported as a component of "Operating expenses: Salaries and
benefits" in the Statements of Income and Comprehensive Income.
The recognition of special termination benefit losses is primarily the result of enhanced retirement benefits
provided to employees during the restructuring described in Note 14.
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 under
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 are reflected in actuarial loss in the accumulated
postretirement benefit obligation and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $320 thousand and $345 thousand in the years ended December 31,
2011 and 2010, respectively. Expected receipts in 2012, related to benefits paid in the years ended December
31, 2011 and 2010, are $213 thousand.

Following is a summary of expected postretirement benefit payments (in millions):

2012
2013
2014
2015
2016
2017 - 2021
Total

Without subsidy
6.6
7.0
7.4
7.7
8.1
47.1

With subsidy
6.2
6.5
6.8
7.1
7.4
42.4

83.9

76.4

Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially
determined using a December 31 measurement date and include the cost of medical and dental insurance,
survivor income, disability benefits, and self-insured workers' compensation expenses. The accrued
postemployment benefit costs recognized by the Bank at December 31, 2011 and 2010 were $10 million and
$11 million, respectively. This cost is included as a component of "Accrued benefit costs" in the Statements of
Condition. A net periodic postemployment benefit credit of $222 thousand and a net periodic postemployment
benefit expense of $102 thousand were included in 2011 and 2010 operating expenses, respectively, and are
recorded as a component of "Operating expenses: Salaries and benefits" in the Statements of Income and
Comprehensive Income.

FEDERAL RESERVE BANK OF ATLANTA
NOTES TO FINANCIAL STATEMENTS
13. ACCUMULATED OTHER COMPREHENSIVE INCOME A N D OTHER COMPREHENSIVE INCOME

Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss (in
millions):

Balance at January 1, 2010
Change in funded status of benefit plans:
Amortization of prior service cost
Change in prior service costs related to benefit plans
Net actuarial gain arising during the year
Amortization of net actuarial loss
Change in actuarial gain related to benefit plans
Change in funded status of benefit plans - other
comprehensive loss
Balance at December 31, 2010

Amount related to
postretirement
benefits other
than retirement
plans
(19 3)
(1.1)
(1.1)
5.2
1.2
6.4

5.3
_ ( 1 4 . 0 )

Change in funded status of benefit plans:
Amortization of prior service cost
Change in prior service costs related to benefit plans

0.1
0.1

Net actuarial loss arising during the year
Change in actuarial losses related to benefit plans

(11.7)
(11.7)

Change in funded status of benefit plans - other
comprehensive loss

(11.6)

Balance at December 31, 2011

(25.6)

Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 12.
14. BUSINESS RESTRUCTURING CHARGES

The Bank had no business restructuring charges in 2011.
In 2010, the Reserve Banks announced the consolidation of some of their currency processing operations. As a
result of this initiative, currency processing operations performed in Nashville were consolidated into Atlanta.
Before 2010, the Reserve Banks announced the acceleration of their check restructuring initiatives to align the
check processing infrastructure and operations with declining check processing volumes. The new
infrastructure consolidated operations into two regional Reserve Bank processing sites; one in Cleveland, for
paper check processing, and one in Atlanta, for electronic check processing. Additional announcements prior
to 2009 included restructuring plans associated with the consolidation of Check Adjustments to FRB
Cleveland.

Following is a summary of financial information related to the restructuring plans (in millions):

2010
restructuring
plans

2009 and
prior
restructuring
plans

Total

Information related to restructuring plans as of
December 31, 2011:
Total expected costs related to restructuring activity
Expected completion date

1.1
2011

5.7
2010

6.8

Reconciliation of liability balances:
Balance at January 1, 2010
Employee separation costs
Adjustments
Payments
Balance at December 31, 2010
Adjustments
Payments
Balance at December 31, 2011

1.3
1.3
(0.2)
(1.0)
0.1

4.6
(0.2)

4.6
1.3
(0.2)

2.4
(0.2)
(0.6)
1.6

3.7
(0.4)
(1.6)
1.7

Employee separation costs are primarily severance costs for identified staff reductions associated with the
announced restructuring plans. Separation costs that are provided under terms of ongoing benefit
arrangements are recorded based on the accumulated benefit earned by the employee. Separation costs that are
provided under the terms of one-time benefit arrangements are generally measured based on the expected
benefit as of the termination date and recorded ratably over the period to termination. Restructuring costs
related to employee separations are reported as a component of "Operating expenses: Salaries and benefits" in
the Statements of Income and Comprehensive Income.
Adjustments to the accrued liability are primarily due to changes in the estimated restructuring costs and are shown
as a component of the appropriate expense category in the Statements of Income and Comprehensive Income.
Restructuring costs associated with the impairment of certain Bank assets, including equipment, are discussed in
Note 9. Costs associated with enhanced pension benefits for all Reserve Banks are recorded on the books of
the FRBNY as discussed in Note 11. Costs associated with enhanced postretirement benefits are disclosed in
Note 12.
15. SUBSEQUENT EVENTS

There were no subsequent events that require adjustments to or disclosures in the financial statements as of
December 31, 2011. Subsequent events were evaluated through March 20, 2012, which is the date that the
Bank issued the financial statements.

n.a.

Full text of Annual Report of the Federal Reserve Bank of Atlanta : 2011 Annual Report : Four Forces that Shaped the Economy in 2011

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