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2020 Annual Report
President’s Letter

The economy entered 2020 on a solid footing, with growth near potential, low unemployment, and low but
firming inflation trends. The Covid-19 pandemic and the efforts taken to contain its spread quickly upended
this favorable setting, taking a heavy toll on the lives and livelihoods of many of our neighbors, friends and
Public health mandated shutdowns and individuals’ voluntary changes in behavior resulted in a sharp drop
in employment and economic activity last spring. The unemployment rate quickly soared to 14.8 percent in
April from 3.5 percent earlier in the year and gross domestic product (GDP) plunged almost 32 percent
(at an annual rate) in the second quarter. Large price decreases in some categories most directly affected by
social distancing contributed to a steep decline in consumer inflation in March and April.

With the support of fiscal and monetary policy, the economy rebounded strongly in the summer as the most
stringent restrictions were lifted, followed by more moderate growth in the fall as the snapback effect faded.
The economy ended 2020 far from the robust levels we had prior to the pandemic. The U.S. economy shrank
2.5 percent over the year, and in December the unemployment rate stood at 6.7 percent. At only 1.5 percent
for the 12 months ending in December, core inflation was far below our 2 percent objective, as it had been
for quite some time.
Monetary Policy

The Fed responded quickly to these major disruptions in the economy. In March, at the beginning of the
crisis, the Federal Open Market Committee (FOMC) reduced the target range for the federal funds rate, our
main policy rate, to 0 to 1/4 percent, which is effectively as low as it can be set. In addition, in order to address
distress in crucial financial markets, the Fed conducted repurchase agreements and purchased large quantities
of U.S. Treasury and agency mortgage-backed securities. We also activated special lending facilities to support
the flow of credit to businesses, households, nonprofits, and state and local governments. Although some of the
lending facilities have lapsed recently, we have kept the federal funds rate in the 0 to 1/4 percent range, and
since last spring we have maintained a steady pace of U.S. Treasury and agency mortgage-backed asset purchases.

Another important development occurred in August when, following a lengthy review, the FOMC announced
major revisions to its policy framework in its “2020 Statement on Longer-Run Goals and Monetary Policy Strategy.” With respect to maximum employment, the new statement emphasized the broad-based and inclusive nature
of this goal. With respect to price stability, we kept our previous inflation target of 2 percent, but we clarified its
meaning and adjusted our strategy for achieving it. On this point, we stated that “to anchor longer-term inflation
expectations at this level, the Committee seeks to achieve inflation that averages 2 percent over time, and therefore
judges that, following periods when inflation has been running persistently below 2 percent, appropriate monetary
policy will likely aim to achieve inflation moderately above 2 percent for some time.”
2020 Annual Report


Looking ahead, the path of the economy will depend significantly on the course of the virus, including
progress on vaccinations. I am optimistic that as the virus comes under control, we can return to the
more prosperous economic times we were experiencing before the pandemic. However, much remains
uncertain as there are a number of risks and opportunities that could lead to somewhat better or worse
economic performance. On balance, I expect continued support from monetary policy will be necessary
for quite some time in order to achieve our dual mandate objectives.
At the Federal Reserve Bank of Chicago (FRBC)

Across the Bank at every level, work accelerated and shifted focus as the Fed calibrated the ways it supports
the U.S. economy during this historic time. Despite the extraordinary conditions, Bank staff continued
their day-to-day work in addition to conducting research and creating new initiatives to understand the
stresses on our communities, support economic recovery efforts, and to maintain our financial services
operations across the Fed’s Seventh District.
I invite you to learn more about the Bank’s response to the pandemic in the following sections.
Charles L. Evans
President and Chief Executive Officer

Administrative Services: Ensuring Safety and Security

As Covid-19 swept our region, Administrative Services teams made major operational changes to support
the critical mission of the Federal Reserve. Facilities Management implemented extensive safety measures
to protect the health of on-site essential employees. Hospitality Services pivoted to support complex,
virtual-only events, including successfully shifting the 20th Annual Chicago Payments Symposium into
a new online format for 350 attendees across five continents. The Law Enforcement Unit kept the Bank
and on-site staff safe and secure while carefully observing Covid-19 precautions.

2020 Annual Report


Information Technology: Providing Connectivity

Information Technology (IT) provided essential connectivity for the Bank’s on-site services and remote
workforce. IT staff supported Bank employees’ increased use of collaboration tools, reconfigured networks
to increase bandwidth for higher network traffic, and debuted Ship2Me, providing remote employees with
the tools and technology they need to work from any location. Ship2Me fulfilled nearly 7,700 requests for
equipment or supplies in 2020.
IT also supported ongoing talent recruitment efforts by the Bank’s People & Culture Department with the
establishment of Enhanced Employee On-boarding to virtually welcome new employees to the organization
and support their engagement and productivity. IT co-sponsored the Future Leaders Conference, a virtual
event that aims to grow the information technology talent pipeline and increase awareness of employment
and internship opportunities available at the Bank.

District Cash Services and Central Bank Services:
Meeting Liquidity Demands

Cash Services essential workers responded to a significant surge in currency orders from Seventh District
banks bracing for the economic impacts of Covid-19 and seeking to meet liquidity demands. Working together to take in deposits, process currency, and recirculate fit currency into the economy, Cash Services met
three to four times our typical order demand while observing social distancing and other safety measures.
In response to the economic challenges of the Covid-19 crisis, the Board of Governors created the Paycheck
Protection Program Liquidity Facility (PPPLF) to facilitate lending by eligible borrowers to small businesses
under the Paycheck Protection Program of the CARES Act. The facility increased the effectiveness of the Small
Business Administration’s Paycheck Protection Program, which provided loans as direct incentives for small
businesses to keep workers on their payrolls. FRBC Central Bank Services organized a cross-functional team of
Bank staff that included Internal Audit, Finance, Research, Policy and Public Engagement (RPPE), and Supervision and Regulation (S&R) to ensure that Seventh District financial institutions would have the funds on hand
needed to extend loans to small businesses.
2020 Annual Report


Supervision and Regulation: Identifying Risks

The Supervision and Regulation department (S&R) focused on critical operations and reprioritized efforts
to ensure the safety and soundness of supervised institutions and related consumer financial protection. S&R
provided resources, input, and leadership to pandemic-related Federal Reserve programs and functions both
in the Bank and across the Federal Reserve System, including the Main Street Lending Program.
S&R also conducted elevated monitoring to understand the pandemic’s impact and associated market volatility
on small, regional, and large institutions’ financial condition. S&R led System efforts to determine how to
conduct bank supervision during the crisis and to plan for an eventual return to normal. Additionally, S&R
conducted multiple rounds of enhanced supervisory stress testing that included a heightened focus on model
performance testing and ongoing monitoring given rising credit stresses in the economic environment.

Customer Relations and Support Office –
Payments Systems: Supporting Services

As Federal Reserve financial services customers moved into their pandemic contingency arrangements, the
Customer Relations and Support Office (CRSO) pivoted its customer engagement model to support emerging
needs. CRSO staff provided contingency processes and reports to help customers manage their payments
businesses and communicated critical information about economic impact payments and coin circulation
The CRSO helped the industry and customers prepare for the next generation of payment services: the future
launch of the FedNowSM Service, a new instant payment service providing immediate settlement and funds
availability. CRSO staff implemented market readiness plans and designed processes and tools to enable a
seamless customer onboarding process. Additionally, the CRSO made significant progress toward evolving
its FedLine® network to provide more resilient, secure, highly available, and timely access to Federal Reserve
services, present and future.
2020 Annual Report


Research, Policy and Public Engagement:
Engaging Communities

FRBC launched Project Hometown, a major research and community engagement initiative bringing together
civic leaders, expert researchers, concerned residents, and Bank employees to examine how communities in
the Seventh District can recover from the pandemic, overcome longstanding inequities, grow stronger, and
provide all people with the opportunity to thrive.

Project Hometown convened 12 virtual public forums in Chicago, Detroit, Indianapolis, Milwaukee, Wisconsin
Rapids and the state of Iowa that featured researchers and nonprofit, civic and business leaders. Panelists offered wide-ranging perspectives on the immediate effects of the pandemic and how long-standing inequality
and racism were exacerbating these effects on our communities.

Economic Research: Responding to Challenges

The Chicago Fed’s Economic Research group contributed to Federal Reserve System initiatives responding to
the economic and financial stresses caused by the pandemic. Researchers supported the design and implementation of the Municipal Lending Facility and led a work group to stand up the Main Street Lending Facility
for nonprofits. They also worked with colleagues in Supervision and Regulation to conduct focus groups with
stakeholders regarding the Main Street Lending Program and contributed to the Federal Reserve Board’s Term
Asset-Backed Securities Loan Facility (TALF). This key Federal Reserve credit program restored normal f
unction to asset-backed securities markets disrupted by the pandemic.

FRBC economists and researchers generated blog posts, articles, webinars, and speeches for external audiences,
with a focus on the economic and financial impacts of the pandemic on various sectors of the economy. They
debuted the Chicago Fed’s first podcast, “LaSalle Street: Financial Markets Insights,” to engage with thought
leaders on topics such as what risk managers have learned from the Covid-19 crisis. The series quickly grew
an audience of thousands.

2020 Annual Report


Diversity and Inclusion: Continuing Commitment

In 2020 the Chicago Fed’s partnership efforts focused on responding to critical talent gaps for women and
minorities. Key partners included the Hispanic Alliance for Career Enhancement (HACE), the National
Historic Black Colleges and Universities (HBCU) Business Deans’ Roundtable, the Sadie Collective, Chicago
Scholars, Chicago United, and the workforce development program Year Up, among others.

The Bank continued its support of the Financial Services Pipeline (FSP) to advance African American and
Latinx talent in our local financial services industry. The Bank joined the Chicago United 5 Forward Program,
an initiative that seeks to focus business diversity efforts on creating jobs in communities of color and growing
Minority Business Enterprises.
The Bank’s Money Museum also launched free virtual programming for high school students, reaching out
to low- and moderate-income school districts to provide “Q&A with a Fed Ambassador” sessions and teacher
access to an online syllabus through its Fed in Your High School Classroom initiative.

Working Mother 100 Best
Companies Award

Working Mother 100 Best
Companies For Dads Award

Mark Hands

Human Rights Campaign
Corporate Equality Index 100% +
Designated as a Best Place to Work
for LGBTQ Equality

Supplier Diversity
Program Manager
Small Business Administration
MI District Director Award

Mike Keppler
Michael Keppler was promoted to
Senior Vice President of Cash and
Central Bank Services

2020 Annual Report


2020 Chicago Board of Directors
Susan M. Collins
Class B Director

Helene D. Gayle
Class C Director

David C. Habiger
Class B Director

Linda Jojo
Class B Director

Wright L. Lassiter III
Class C Director

Christopher J.
Murphy III
Class A Director

Michael O’Grady
Class A Director

E. Scott Santi
Class C Director

Susan Whitson
Class A Director

Joseph B. Anderson Jr.

Sandy K. Baruah

Ronald E. Hall

Linda Hubbard

James M. Nicholson

Sandra E. Pierce

2020 Detroit Board of Directors

Rip Rapson

2020 Annual Report


Financial Statements
Auditor Independence

The Federal Reserve Board engaged KPMG to audit the 2020 combined and individual financial statements
of the Reserve Banks and the financial statements of the five limited liability companies (LLCs) that are
associated with the Board of Governors’ actions to address the coronavirus pandemic, of which four LLCs
are consolidated in the statements of the Federal Reserve Bank of New York and one LLC is consolidated
in the statements of the Federal Reserve Bank of Boston.1
In 2020, KPMG also conducted audits of internal controls over financial reporting for each of the Reserve
Banks. Fees for KPMG services totaled $10.3 million, of which approximately $3.0 million were for the
audits of the LLCs.2 To ensure auditor independence, the Board of Governors requires that KPMG be
independent in all matters relating to the audits. Specifically, KPMG may not perform services for the
Reserve Banks or affiliated entities that would place it in a position of auditing its own work, making
management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In 2020, the Bank did not engage KPMG for any non-audit services.

Financial Statements: Federal Reserve Bank of Chicago--As of and for the Years Ended December 31, 2020
and 2019 and Independent Auditors’ Report
In addition, KPMG audited the Office of Employee Benefits of the Federal Reserve System (OEB), the Retirement Plan for
Employees of the Federal Reserve System (System Plan), and the Thrift Plan for Employees of the Federal Reserve System
(Thrift Plan). The System Plan and the Thrift Plan provide retirement benefits to employees of the Board, the Federal Reserve
Banks, the OEB, and the Consumer Financial Protection Bureau.

Each LLC will reimburse the Board of Governors for the fees related to the audit of its financial statements from the entity’s
available assets.

2020 Annual Report