The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
~
istributing coin and
currency is one of the key
responsibilities of the 12
regional Federal Reserve
Banks . As part of this
process. worn or muti lated notes are removed
from circulation and
destroyed . But that ' s not
the end of the story.
Through a collaborative
effort by the Federal Re serve Bank of Cleveland
and a national paper
company, roughly 1 , 500
pounds of shredded bills
once destined for landfills
each day are now being
recycled into attractive
paper products . The cover
stock for this
year ~s
2
President's Forevvord
4
Governments and Money
11
Officers and Consultants
12
Directors
14
Comparative Financial Statement
annual report contains 70
percent recycled currency
-
8
fitting treatment to
highlight our essay on the
history of governments
and money.
16
Business Advisory Council and
Community Bank Advisory Council
+
~-::;?/o r~\IV~l!'d
ineteen ninety-five was a year of solid progress for both
On the national scene, the economy expanded amid a climate of
the Federal Reserve Bank of Cleveland and the Fourth Federal
restrained price increases. Through December, the Consumer
Reserve District. Although regional economic growth did not
Price Index was up 2.6 percent over the previous year, with few
match the high levels of 1994, activity remained strong: Capital
signs of higher inflation on the horizon. Significantly, consumers
goods producers operated at or near capacity, and our financial
reported a steady decline in their expectations of future inflation
and agricultural industries also turned in a solid performance.
-perhaps signaling that the public is becoming aware of the
Financial institutions in the region continued to benefit from
link between low inflation and economic growth.
sound management and a strong asset base. Earnings, asset
The President's recent reappointment of Alan Greenspan to
quality, and capital levels were all above national averages, and
another four-year term as Federal Reserve Chairman bespeaks
loan losses remained at or close to their low 1994 levels.
confidence in the stewardship of the central bank over the past
several years. Both Main Street and Wall Street understand
that curbing inflation - protecting the purchasing power of the
dollar-is in everyone's best interest. Even Congress is joining
the fold: The Economic Growth and Price Stability Act of 1995,
proposed by Senator Connie Mack, would make price stability
the primary long-term goal of U.S. monetary policy. But such
legislative restraint will be effective only if government abides by
its restrictions. The essay that begins on page four of this report
details the history of attempts to protect the value of money
and makes the case that fostering competition among currencies
may be the best way to generate economic growth through
price stability.
Internally, 1995 was a year of significant accomplishment for
the Federal Reserve Bank of Cleveland. We maintained our
focus on technology, quality, and employee involvement to
further our goal of providing high-quality, value-added services
to our customers. Our Cincinnati and Pittsburgh offices installed
a new generation of cash-sorting equipment, enabling them
to sort higher volumes of currency more quickly and accurately
than before. At the same time, Cleveland's Check Collection
Department began offering check imaging services to District
financial institutions, which in turn can provide the benefits of
A. William Reynolds, chairman; .Jerry L . .Jordan,
president; Sandra Pianalto, first vice president;
and G . Watts Humphrey, .Jr., deputy chairman .
~ two
imaging to their individual and corporate customers.
We also conducted a comprehensive survey of our customers to
Construction of our new Operations Center continued in 1995,
determine how they evaluate our services and personnel. The
and the building remains on schedule to be occupied in early
results have given us a better understanding of our strengths, as
1997. Renovation of our historic main building will begin shortly
well as a base for assessing those areas requiring improvement.
thereafter. During October and November 1996, those employees
We institutionalized our commitment to continuous quality
not moving to the Operations Center will relocate to a nearby
improvement by appointing a full-time quality officer and estab-
site in downtown Cleveland.
lishing a separate Quality Depattment. Partly as a result of these
and similar initiatives, we saw volume increa es in virtually all
of our priced services.
All of the past year's successes have been guided by the 23
directors of OUI Cincinnati, Cleveland, and Pittsburgh offices,
as well as by the members of our Business and Community
During the year we established a home page on the Internet's
Bank advisory councils. I thank them for their hard work
World Wide Web, allowing individuals around the globe to
and expert counsel. I would particularly like to acknowledge
view Bank publications, data, and other printed materials
those directors who completed their terms of service in 1995:
on-line. This project was conceived and executed by a team
Ed Brandon (retired chairman and chief executive officer,
comprising individuals from various departments and functions,
National City Corporation) for his service on the Cleveland
and is an example of the open, cooperative culture we seek to
Board; Jerry W. Carey (president and chief executive officer,
foster among our employees.
Union National Bank and Trust Company) and Eleanor Hicks
The Cleveland Residential Housing and Mortgage Credit
Project, launched in 1993, continued to bring together representatives of the residential real estate and mortgage credit industries to seek ways of eliminating potential discrimination in the
home-buying process. Plans are under way to launch a similar
initiative in the Cincinnati area in 1996.
The past year saw the Cleveland Bank selected as the site for a
group undertaking important research on behalf of the Federal
Reserve System. The Financial Services Research Group is
exploring issues pertaining to the future of the nation's payments system, the impact of technology on the financial services
industry, and the Federal Reserve System's role in the evolving
payments system.
The group's work supports the Financial Services Policy Committee, which is part of the Federal Reserve System's new management structure for financial services. This new approach is
designed to allow the System to respond quickly and creatively
(president, M.I.N.D.S. International), who served on the
Cincinnati Board; and Robert P. Bozzone (vice chairman,
Allegheny Ludlum Corporation) and Helen J. Clark (chairman,
president, and chief executive officer, Apollo Trust Company)
for their service on the Pittsburgh Board.
I also extend my gratitude and best wishes to two officers who
left the Bank in 1995: Jill Goubeaux Clark, senior vice president
and general counsel, and Elena McCall, vice president and head
of the Bank's Human Resources DepaJUl1ent. They were valued
members of our management team, and their contributions will
be missed. We will also miss Jack Wixted, senior vice president,
who recently joined the Federal Reserve Bank of Chicago to
direct its banking supervision and regulation function.
Finally, I want to express appreciation to the officers and
employees of the Fourth District for their creativity and hard
work. Their efforts made 1995 a successful year and will enable
us to meet the challenges of 1996 and beyond.
to the needs of the financial services marketplace.
President
~ t"ree
Governments and Money
e do not pretend, that a National Bank can establish and maintain a sound and uniform state of
curren cy i n th e country, in spite of the National Government; but we do say that it has established and
ma intained such a c urrency, and can do so again, by the aid of that Government; and we further say that
no duty is more imperative on that Government, than the duty it owes the
people, of furnishing them a sound and uniform currency. "
[emphasis added]
braham Lincoln spoke these words, affirming the government's ability and obligation to provide a stable currency, in an
1839 speech before the lIIinois legislature. I Even though most
prominent U.S. thinkers have clearly recognized the importance
of a sound currency, the means to ensure that governments
actually provide it have proven elusive. Convincing evidence can
be found in the somewhat dubious experience of the Greenback
period, initiated in 1861 and lasting until 1879, when paper
money issued by the government during the Civil War was made
convertible into gold.
Today, more than 150 years after Lincoln's admonition, we
find ourselves still wrestling with this same issue: [s government
the solution or the problem when it comes to protecting the
purchasing power of money? History is replete with examples
of what governments will do when their power of mintage is
unfettered. The hyperinflations of Germany in the 1920s and
of Bolivia, Argentina, and Brazil in the 1980s are sobering
reminders of the effects of excessive money creation. What can
be done to ensure that governments and their central banks
deliver on their responsibility of protecting money's value?
The combination of historical experience and the near-universal
evolution to fiat money systems-monetary standards that are
not supported by convertibility into intrinsically valued commodities, such as gold or silver-has created a widespread
recognition that national monetary authorities will not deliver
price stability unless careful attention is given to the incentive
structures under which they operate.
Nobel Prize winning economist Friedrich von Hayek put it this
way: "History is largely a history of inflation, and usually of
inflations engineered by governments and for the gain of governments.,,2 What remains uncertain is the mechanism that will
prevent such history from repeating itself. More directly, the
~ rOll r
challenge remains to devise sustainable institutional monetary
arrangements that can protect the public from debasement of
the value of its money.
In recent years, several nations have taken up this challenge by
legislating price stability as tile sole, or dominant, objective of
tlleir central banks. Such legislation has already been passed in
New Zealand, Canada, the United Kingdom, and Sweden.
In the United States, a bill to replace central-bank responsibility
for both low inflation and low unemployment with accountability strictly for long-term price stability has been proposed by
Senator Connie Mack and others.
While these new initiatives are laudable, it is too soon to tell
whether they will be sufficient to ensure that governments and
their central banks consistently deliver price stability. Such
legislation is but one of many environmental factors that may
contribute to the protection of a nation's currency. Furthermore, legislative restraint on the behavior of monetary policy
operates only so long as a government chooses to live under
its restrictions.
The history of money over the past two centuries shows nations
groping for lasting institutional structures that provide incentives to limit their own governments' temptation to debase their
currency in order to satisfy shortsighted political objectives.
The approaches used in the past have stemmed directly from
both the nature of money prevailing at the time and societies'
views about the proper role of government.
This essay traces some historical attempts to rein in sovereign
nations' appetite for excessive money growth. We contend that
competitive market forces can provide a strong incentive mechanism to encourage countries to maintain the quality, or value, of
their money in much the same way that competition leads companies to maintain the quality of their products.
First issued to help
Ln other words, perhaps the most innovative and lasting way
countries can achieve stable purchasing power for their monetary
assets is by competing against each other in the provision of
money. Nations that excel at providing a superior standard of
value may find citizens in other countries who prefer to import
their currency. Facing such competition, the providers of domestic currencies will have to improve their own products, erect
"trade barriers," or abandon the market.
or most of recorded history, government have taken some
role in providing money to the economy. Ln early times, that role
was limited to "authentication"The Gold 3taodard
verifying that coins contained
the indicated metals. Even in this limited role, however, the
authorities occasionally violated the public trUSt concerning the
oundness of money. Citizens' dual reliance on and distrust of
government with regard to the value of money is an age-old
phenomenon.
(and thus vvere liabilities
in the Civil War, green -
of) individual national
backs, named after the
banks. These notes vvere
cheap green ink used t.o
printed by the U.S . gov-
manufacture the notes,
ernment, however, and
gave their name to the era
vvere backed 111 percent
that lasted until 1879.
by government bonds
vvhen the U .S. resumed
held on deposit at the
the gold standard . Both
Treasury.
the money itself and the
era had notable features .
Specie-backed currency - that is, currency convertible into a
standardized unit of a nonmonetary commodity-took money
out of immediate government control. For example, if the dollar
were defined as equal to 1120 of an ounce of gold, then the
number of dollars the United States could issue would be constrained by its holdings of gold reserves. Moreover, if Britain
then defined its currency, the pound, as equal to 5/20 of an
ounce of gold-as it did before World War I-the dollar/pound
exchange rate would be fixed at $5 per pound. If either government issued more money than would be consistent with maintaining its va lue in gold-say, to finance a budget deficit-it
would lose gold reserves to the country with the more stable
currency. In this way, the discipline exerted by the potential loss
of reserves strengthened a government's covenant with the
public not to erode the purchasing power of its money.
One problem with a specie standard was that the value of
money was only as stable as clle value of the specie backing it.
When gold production was low in the 1870s and 1880s, the
money supply across the world grew slowly, leading to a general
The economy of the time
shovved a surprising
Greenbacks. as a fiat
combination of vigorous
standard, represented a
grovvth and declining
hugo break vvith the past:
prices. The price level \Nas
The government would
cut in half over the period,
not convert these notes
and despite the long
into gold on demand. and
recession of 1873-1879,
it made greenbacks legal
output rose . The popula -
tender for private as well
tion increased by one -
as public debts. These
third. vvhile the output of
innovations led to severe
pig iron , coal , and copper
constitutional challenges
more than doubled .
about vvhether the government could authorize
legal tender that vvas not
"lawful money," such as
gold or silver. and vvheth er greenbacks consti-
The conviction that, despite all contrary assurances, governments
will eventually abuse their powers led countries to develop institutions aimed at limiting a government's ability to print additional money. One such method was the gold and silver standards
followed (on and off) by most countries from 1821 to 1973.
notes vvere issued by
finance the North's effort
tuted legal tender for
debts contracted before
they were issued.
The combination of
grovvth and declining
prices is intriguing . With
freely floating exchange
rates and an open econ-
omy. the U . S . money supply vvas determined by
people's demand for
money (expressed mainly
Greenbacks may have
in bank notes). The suc -
hogged the headlines. but
cess of fiat money during
they were by no means
this period vvas largely
the dominant money in
due to the competition of
circulation. Gold and
national bank notes .
national bank notes also
Along with the govern-
circulated. National bank
ment's ability to get its
fiscal house in order, this
enabled the nation to
deflation. This situation
changed dramatically, however, with the discovery of gold
in Alaska and South Africa in
the 1890s. The result was
rapid money gro\V1h and inflation up until World War I.
maintain enough credibil-
ity to commit to the gold
standard again . The
Greenback Era established
that despite the high cost
in human terms, the Civil
War did not bankrupt the
nation financially.
Furthermore, linking currencies to gold (or sometimes silrer) did
not completely restrain governments from manipulating the
value of their currencies. First, in order to finance expenditure,
by printing money, governments would frequently suspend the
gold standard during times of war. Second, even without officially abandoning gold, ome nations periodically redefined the
value of their currencies in terms of gold. Instead of allowing
gold or foreign re erves to consistently drain from [heir coffers,
they would choose instead to devalue their currencies .
.
--
I {"'r
+
d "he Bre.tton
The Full Employm.nt
and aalanced Growth
Act of 1878-popularly
known •• the HumphreY""
H.wklna l.gl.latlonIItIpulated that U.S.
eoonomlc policy be conducted to achl_ full
.mploym.nt" balanced
growth. a balanced fed.rel budg.t. .n Improved
trad. balenca. and reeaonabl. price _bllity. The
Federal R.....". R.form
Act of 1877 .paclflcally
targ.ted three goala:
m.xlmum .mployment"
_bl. prlca. . . nd mod ....
ate long-term InteNat
ret••• Sinca th..... the _ntlm.nt that _ I blink.
can reliably .ngln_r multlpl. objectlv_ ha. *-oll.n
Into dl_puta. Moat
eoonomlata now . - p t
the nation that the only
_Inablelong-term
obJectlv•• of monetary
policy are tho_ Involving
the purch•• lng pow.r
ofmon.y.
On Beptambar 21. 188••
_ _or Connie Mack
(R-Fla.) Introducad the
Economic Growth and
Prlc. Stability Act of
188•• which would r.peal
the 1878 law and atlpulat. prlc. _blllty a. the
primary long-term goal
of U.S. monetary policy.
S.nator M.ck·. bill Wa.
motivated by the finding
that -the multlpl. policy
goal. of [the central bank]
have created unc.rtalnty
about the aim. of mon.tary policy. which can add
to volatility In economic
eotlvlty and financial
marketa. coating workere Job. and harming
economic growth.-
Th. Economic Growth
and Prlc. Stability Act
would require that the
Federal R.....". -1)
lIeh an .xpllclt numerical
definition of the t.rm
·prlc• •tabllltY: and
2) maintain a monetary
policy that eft.ctlvaly
promotIB. long-t.rm price
atablllty.- Congr••• ha.
yat to act an S.nator
Mack'. propo_l.
_b-
At first glance, it might seem that gold standards imposed no
real discipline on government behavior, because countries could
devalue their currencies at will. However, discipline came from
the fact that countries actually could riot contemplate doing so
without suffering a cost.lf it was threatened that a country
would devalue its currency, massive speculative attacks would
ensue as investors attempted to shed themselves of that currency.
Such a country would eventually lose large amounts of reserves
(gold and foreign currencies).
In 1966 and 1967, for instance, Britain -whose currency was
tied to gold-backed U.S. dollars through the ]944 Bretton
Woods agreement-lost nearly 28 million ounces of its gold
reserves when confidence in the value of the pound plummeted.
On a single day (November 17, 1967), it lost reserves valued at
more than $1 billion.
Woods System
Under the Bretton Woods
The destabilizing effects
system, the International
of speculation and the
Monetary Fund (1M F)
persistent U . S . balance-
charter stipulated that
of-payments deficit were
the price of the U.S. dollar
seen as the immediate
was fixed in t:erms of gold
causes of the system's
(initially at $35 per ounce)
demise in 1973. Because
and that all other curren-
the U . S . dollar vvas the
cies were pegged to the
key reserve currency. the
U . S . dollar. Unless a
United States was reluc -
country developed a
tant to devalue despite
" fundamental disequilib-
persistent deficits . At the
rium" in its balance of
same time. surplus coun -
payments (usually inter-
tries chose to add to their
preted as a "large and
dollar holdings rather
persistent" deficit or sur-
than to revalue .
plus) and obtained IMF
approval to change the
pegged value of its currency~
the nation would
have to maintain the
exchange rate through
purchases or sales of U . S.
dollars. the reserve currency. The creation of the
The common wisdom is that the frequency and destabilizing
effects of such speculative attacks caused the Bretton Woods
system, and thus the last vestige of a gold standard, to be abandoned in 1973. While this is correct on a superficial level, the
underlying cause was that the ultimate anchor of the Bretton
Woods system was not gold, bur U.S. dollars. Although these
dollars were supposedly backed by U.S. gold reserves, nothing
in the system constrained the Federal Reserve from issuing fiat
money (money that is not backed by specie) as long as Congress
was willing to remove successively weaker statutory requirements
tying dollar issues of central-bank money to gold. Eventually,
the modified gold standard of Bretton Woods could be su tained
only if the United States actively pursued monetary policies consistent with price stabiliry, or if other governments were willing
to accept the inflation rates generated by the Federal Reserve. In
the end, neither condition was realized.
I
he worldwide inflation experiences of the 1970s and
1980s that followed the disintegration of the Bretton Woods
system ha ve left na tions
Alternative Monetary
groping for alternatives that
Arrangements
might return credibiliry to
their pursuit of a stable purchasing power of money. The dominant role of West Germany in the European Monetary System
(EMS), created in 1979, clearly reflects the fact that the mark
was widely considered to be (and in fact is) the most stable of
the participating countries' currencies.
. . , 5fX
World Bank and its affili ates to make longer-term
loans is also considered
part of the Bretton
Woods system . Shorterterm loans were available
from the IMF.
As U .S . deficits persisted.
the stock of U . S . dollars
held abroad ballooned
relative to the need for a
reserve currency. Some
countries viewed the United States as abusing its
privilege to issue reserve
currency and as forCing
other countries to finance
persistent U .S . deficits .
Eventual increases in the
dollar price of gold and
the refusal of Germany
and Japan to revalue
their currencies were the
final blows. However, the
fundamental flaw in the
system was that internaAlthough the discipline imtional liquidity considera posed by the EMS system of
tions encouraged foreign
fixed exchange rates was far
central banks to hold U . S .
from immediate or complete- dollars. but also hindered
other nations from reval several realignments of these
uing their currencies to
rates have occurred since its
eliminate their balanceof-payments surpluses.
inception - the dynamics of
Ultimately. confidence in
the process have led to an
the dollar as a reserve
ever-increasing integration
currency had to suffer.
of monetary policy across the
countries of the European
Economic Communiry. [f nations within the Community permit
pure "free trade" in the use of their currencies, a single European
central bank and currency could someday emerge. If one nation
does specialize in currency provision for the Community, it will
gain seigniorage (revenue from printing money) and the other
nations will achieve monetary stabiliry.
L--1he
European Monetary System and
European Monetary Union
Currency boards represent a similar institutional constraint
that can be adopted by countries that lack an established or
credible reputation for maintaining the purchasing power of
their money. The essence of a currency board arrangement is
that domestic money is issued against a foreign reserve currency
at a fixed exchange rate. Under a currency board, a country's
money stock behaves much as it would under a gold standard,
except that instead of contracting and expanding with gold
reserves, the money stock responds to the government's holdings
of a foreign reserve currency.
Arrangements such as currency unions and currency boards are,
ultimately, still fiat monetary systems, and as such rely on the
monetary performance of the governments involved. Currency
boards, for instance, are probably best described as small boats
that tie themselves to a large ship. As in the Brerron Woods
experience, there is not much to keep the smaller boats from
drifting if the large ships themselves are not firmly anchored.
Throughout its post-World
Implicitly, hovvever, the
War II drive for economic
arrangement required
integration, the European
each country to adopt
Community has consis-
a monetary policy similar
tently regarded monetary
to that of Germany, the
union as necessary in
member country vvith
order to realize the full
the most credible lovv-
benefits associated 'With
inflation policies .
free movement of goods,
capital, and labor within
its borders. In December
1978, the European
Community entered into
a series of agreementscollectively referred to as
the European Monetary
System (EMS)-to stabilize
European exchange rates
and minimize the signifi-
cance of the U . S . dollar in
European monetary deci-
sions. The EMS defined
central parity rates for
participating countries,
articulated rules for
defending a currency.
established institutions to
finance intervention. and
encouraged monetary
n the era of pure fiat monies, the primary approach to
keeping governments "honest" has been to remove the power to
inflate from those with the
Competing Currencies:
most incentive to do so.
Private Competition
This is achieved by building
in a high level of independence between the central bankwhich has the power to inflate-and the Treasury-which has
the incentive to inflate. Charging the central bank with independent responsibility for monetary policy is meant to serve as a way
for a government to commit to lower rates of inflation than
would be realized without the existence of a separate monetary
authority. This institutional structure is not a panacea, but has
proven especially useful: Studies have shown that, on average,
countries with more independent central banks have lower rates
of inflation. 3
Despite central-bank independence, the high-inflation era of the
1970s showed us what central banks can do when left to their
own devices, freed from fixed exchange rates and dollar convertibility into specie. An increasing number of countries are
now moving toward more explicit central-bank accountability
for protecting the purchasing power of money - witness the
previously mentioned price-stability mandates enacted in New
Zealand and other nations, as well as the Mack proposal in the
United States.
policy cooperation .
The centerpiece of the
program vvas the Exchange Rate Mechanism
(ERM), vvhich effectively
established a series of
exchange rates and
required each member
country to defend these
rates vvithin a 2 .25 percent band (6 percent in
some special cases) .
Betvveen 1978 and 1991,
the ERM was remarkably
successful . European
inflation rates converged
tovvard the lovv German
rate, and surprisingly
fevv official parity adjustments took place . In
1992 and 1993, hovvever,
a series of economic
shocks, including a reces-
sion in England and the
effects of German reunifi cation, forced countries
either to suspend their
participation or to adopt
largely irrelevant (15 percent) parity bands.
Encouraged by the rela tively early success of
the EMS, the European
Community agreed to
a monetary union at
Maastricht .. the Nether-
lands, in December 1991.
The European Monetary
Union (EMU) advocated
the adoption of a single
pan-European currency
issued by a single Euro-
pean central bank by the
end of the decade. With
an independent central
bank directed tovvard
maintaining price sta-
None of these developments,
bility, the EMU ideally
could lovver the costs
however, goes as far as the
of economic transactions
more radical mechanism for
in Europe.
price stability proposed by
Hayek, who suggested that
governments be removed altogether from the provision of
money.4 Although private issuers of fiat money also have an
incentive to finance expenditures by creating monetary liabilities-by collecting the seigniorage on their money creationHayek contended that as long as private monies were allowed
to circulate freely, competition would keep the value of these
currencies constant over time. If any issuer attempted to collect
too much seigniorage by inflating away the value of its money,
consumers would substitute into a competing money. Thus,
currency issuers would have an incentive to remain honest and
not devalue their product through excessive money creation.
~ selJetJ
Revenue
nting Money
A gDII'e,"m.nt oe"
ft _ _ 1t8 ependlng In
ttw.e ~I 1) through
bottowl.,.
. . . . . 2) bv
frotn the public.
or ., by
~. The
_nue ... Ieed thlaUgh
prtntlntl
the prlntI.,. of ~ I.
CMII. . . . . . ." __" . from the .....nc.. _reI
..",...,r• • ,..,. .1 lord.
In th. MIddI. Agee. the
lord 0""'" the .-U"'"
rttlht ... _In mo.,.y on hJe
menor.
'IbcIe,. tN. right
belo.... to
.--rtry".
--...1 gDII'efftment.
The.~to""""
mon.,
.11_the..--.~
mentto ...I. . ~
" - - . t h e coet of ptadualntlthe lItO1M\' ..... Ie
fer I_then the gIIIIIWItme"". _ _ _lid - .. . .
.....
puroheM of goode eiId
~
Hayek's proposal, written 20 years ago, has historical precedent.
So-called "free banking"-well-known examples being the
eighteenth and nineteenth century experiences of the United
States, Canada, and corland - tested the idea that money need
not be provided by the central government. s Under free banking
arrangement, private banks competed again t each other to
provide the public with currency (albeit under varying degrees
of government regulation).
Critics of traditional private money system have often cited
Gresham's law to argue that money must be provided by
governments and not by private banks. This famous dictum
states that bad money will always drive good money Out of
circulation- in effect, it argues that only monies with the worst
inflation rate would circulate. This led many to believe that a
government monopoly on printing money is necessary.
However, as Hayek poinred out, "Gresham' law will apply
ollly to different kinds of money between which a fixed
exchange rate i enforced by law. With variable exchange rate,
the inferior quality money would be valued at a lower rate and,
particularly if it threatened to fall further in value, people would
try to get rid of it as quickly as possible. The selection proce s
would go on towards whatever they regarded a the be t SOrt
of money among tho e i sued by the variou agencies [or countries[, and it would rapidly drive out money found inconvenient
or worthless. "6
With variable exchange rates, the exchange value of i uer liabilities will fall (depreciate) if an issuer attempts to print an
exce sive amount of money, because cautious consumers will
ub titute into a competitor's product with a more stable purchasing power. The offending monies, ceasing to circulate as
media of exchange, will be replaced by money that has more
stable value. Competing money issuers, who gain seigniorage
from the use of their liabilities, will have an incentive to protect
the purchasing power of their money.
De pite the po ibiliry that private companies and bank could
compete in the provision of money, it is not clear that such private arrangement are su tainable a a practical matter, given the
eigniorage opporrunities inherent in government-controlled
money or in any currency provided by a monopoly. 1n other
words, governments have powerful incentives ro tax private
money out of existence in order to become the sole provider of
legal tender.1ndeed, according to Hayek, "it might ... prove to be
nearly as impossible for a democratic government 1I0t to illterfere
with money as to regulate it ensibly" [emphasis addedl.-
eft unanswered in Hayek's proposal is what might make
governments less inclined to intervene now than in the pa t.
Furthermore, converribilCompeting Currencies;
itl' of private nore issues
Competition among
into specie was taken as a
Governments
given in all hi torical freebanking regimes. What incentives do governments have to forgo
the seigniorage opportunities inherent in their provision of fiat
money and rerum to the world of privately issued monies that
are ultimately redeemable in specie?
We argue that with the advent of flexible exchange rates,
Hayek's vision of competition among currencies that can effectively regulate the quantity of notes may become a reality.
Privately issued monies may not be allowed to compete, but
competition among different national currencies may serve the
arne purpo e. Even without allowing private companies and
banks to i sue their own money, such competition can also work
to keep government monetary authorities honest.
1nternational currencies are increasingly competing to become
the currency of choice. The rapid "dollarization" in Eastern
Europe, the former Soviet Union, and Latin America shows how
a foreign currency can become a legitimate substitute for a
domestic currency that has failed to maintain its value. Even in
currency-board countries like Argentina, individuals' ability to
hold dollar accounts encourages the government to maintain the
integrity of its monetary system.
Thus, the same seigniorage motives that have historically provided perverse incentives for governments to inflate make it desirable for them to circulate their domestic money as an international medium of exchange. However, the fact that such "market
share" is contestable-alternative currencies being readily available to supplant any currency that is losing value tOO rapidlyacts as a natural restraint on central-bank misbehavior.
f'
nce the United States and the rest of the world broke away
from the anchor provided by the gold standard, inflation rates
almost universally trended
Some Barriers to
upward and, in some cases,
International
spun rapidly out of control.
Competition in Money
Recently, the Federal Reserve
has made great progress in reining in inflation from the clearly
unacceptable experience of the 1970s and early 1980s. Unfortunately, our current commitment may seem fragile to many
market participants because there appears to be no clear institutional safeguard to prevent a return to the past.
Though a price stability mandate would help to shift the focus
of monetary policy away from short-term fine-tuning to longterm price stability, such legislation cannor be viewed as a
panacea in the absence of clear incentive structures thar remove
the government's tempration to violate rhe mandate. However,
in light of the increasing integrarion of world markets, we propose that the same competirive forces thar have served marker
economies so well may ultimately constrain the excessive money
creation that has been problematic for fiar money regimes in
the past.
/ -;'e
Free Banking Era
Until the Civil War, the
Between the charters
use of paper money in
of the First and Second
the United States largely
Banks of the United
developed outside the
States (1812-181S) and
direct control of the fed -
after the expiration of the
eral government. As
Second Bank's charter
banks vvera chartered by
(183S) , the natural con -
states and established
straint on bank- note iss ue
around the country, they
was tested . Banks wishing
began to issue their own
to take advantage of the
circulating liability notes
rules of the circulating
and deposits to their cus -
bank- note regime placed
tomers. These liabilities
themselves at long dis-
vvere implicitly backed by
tances from financial and
gold and silver held at the
commercial centers and
issuing bank and could
issued much larger vol -
be redeemed for such by
umes of notes than their
the bearer or depositor.
reserve of specie other-
Also, the First and
wise would have war-
Second Banks of the
ranted . However. when
United States issued cir-
bank notes and deposit
culating notes that were
liabilities circulated to
also receivable for federal
places far from their point
taxes at par, as long as
of issue. potential recipi -
they were redeemable at
ents often demanded dis-
par in gold or silver.
counts commensurate
vvith the difficulty of
State- chartered banks
vvere constrained by market forces in their a bility
to issue notes and depos-
its . The likelihood that the
demand liabilities would
Why might competition among sovereign nations in the provision of money prove to be sustainable where private competition
did not? The answer lies in the vety same seigniorage possibilities that induce governments to undermine private competition
in the first place. Unlike the case for the domestic economy,
individual countries have no power to legislate their own monetary monopoly in the global economy. Short of a war declaration,
the U.S. dollar will circulate as a medium of exchange in foreign
countries only if it is considered superior in value to other
national currencies. In other words, the United States, or any
counrry, will enjoy the benefits of seigniorage ourside irs borders
only if ir wins rhe comperitive bartle in rhe monetary marketplace. Furthermore, this battle will be won only by maintaining
a relatively stable purchasing power for the nation's money.
Why would a sovereign nation willingly give up its seigniorage
to a "competing" coumty? The answer comes from considering
rhe mutual advantage of trade, wherein narions benefir from
comparative advantage. A nation should be willing to import a
competing currency when it needs a stable payments medium to
undergird a developing market economy. If a nation's monetary
credibility is weak, importing a standard of value may enhance
wealth within the country, and thus tax receipts, by more than
the revenue gained from seigniorage.
sending the notes back
for redemption or of collecting a check . Market
forces, in effect. " priced "
the value of each bank's
note.
be redeemed at the bank
for specie - gold and
The U . S . banking system
silver coin - constrained
showed great promise in
a bank's ability to issue
its ability to formulate
notes . Under norma l cir-
private market solutions
cumstances a nd market
for the problems associ -
pressures. then, each
ated with a maturing
bank had to be careful to
financial system and
reserve an appropriate
economy. By the 1850s,
amount of specie in rela -
the banking system was
tion to its issue of bank
far from perfect, but it
notes - 8 tricky endeavor.
displayed enough stability and efficiency so that
there was no real political
impetus to change the
This competitive mechanism
system until the Civil War.
for protecting the value of
money can be enhanced by
changing existing protectionist laws to foster more effective
competition among currencies. We should heed Hayek's argument that countries around tile world should abolish "any kind
of exchange control or regulation of the movement of money
between countries ... " and provide "the full freedom to use any
of the currencies for contracts and accounting." Further, there
should be "... the opportunity for any bank located in these
countries to open branches in any other on the same terms as
established banks ... 8
lilli e
+
L
Specific U.S. laws could be changed. For example, federal law
currently states that "United States coins and currency (including
Federal Reserve notes ... ) are legal tender for all debts, public
charges, taxes, and dues. Foreign gold and silver coins are not
legal tender for debts. " 9 This law might be altered so that contracts written in terms of foreign or alternative domestic monetary units, including specie, could compete with those based
on dollars.
I...(
d~.
-Cash.
Plunging computer chip
form of a string of spa-
prices and advances in the
cially encrypted digits. In
esoteric science of cryp·
either case, buyers could
tography may novv permit
transmit their
affordable and secure
merchants on the Internet
forms of electronic currency~
or He - cash, " to
learly, important goals are within reach. Inflation is low, and
price stability is beginning to be recognized as the predominant
long-term monetary policy
A Market
objective of the Federal Reserve.
Approach to
Flexible exchange rates, coupled
Currency Provision
with more-open capital markets,
are enabling international currencies to compete with one
another. Central banks cannot be complacent, however, because
new challenges will surely arise. Just as fiat money replaced
specie-backed paper currencies, eleCtronically initiated debits
and credits are likely to become the dominant payment modes in
the future. The concept that money is like any other good and
that competition among issuers can best guarantee its value
should not be forgotten .
With the fall of communism, the lesson that market economies
can best provide a country's goods and services is being affirmed
around the world. That same wisdom may also be applied to
the provision of currency. A nation's economy does not fare as
well without competition in the marketplace. Similarly, the value
of a nation' currency may not be optimal without competition.
It is probably only with such competition that we may finall y
live up to Lincoln's challenge of fulfilling "the duty [government]
owes the people, of furnishing them a sound and uniform currency." Fo tering such competition may prove the sure t way
to guarantee that central banks meet their responsibility to
generate maximum sustainable growth through price stability.
in exchange for various
products . With products
that can be shipped elec-
ity. but a significant mar-
tronically, such as infor-
ket reality . E-cash offers
mation, consumers vvould
the prospect of added
benefit from rapid deliv-
convenience and security
ery and merchants vvould
in everyday. small - dollar-
receive good funds .
value transactions. Pera - cash could enable the
cybermarkets novv emerging on the Internet to
flourish.
A number of policy questions arise from the use
of
e~cash .
First, advances
in computer science or
cryptography could com promise even seemingly
Many different types of e -
impregnable systems.
cash have been proposed .
Security is a moving
For everyday transactions,
target, so care must be
smart cards (credit cards
taken to ensure that
vvith embedded computer
security practices are
chips) could be loaded
kept up to date. Second .
\Nith value by transferring
what laws should be in
funds using compatible
place to protect con-
ATM machines, tele -
sumers? Currently, Fed-
phones, or even " elec-
eral Reserve Regulation E
tronic wallets. " Once
gives consumers specific
loaded. the cards could
rights. but just hovv this
be used to make a variety
statute should be imple-
of purchases-provided
mented in this market
the merchant has com-
has not been determined .
patible equipment.
Finally, hO\N much privacy
should consumers be per-
In cyberspace, e-cash
could reside either on a
smart card placed in a
special reader or, as some
proposals envision, on the
user's hard disk in the
mitted? Currency offers
consumers near- complete
anonymity. Should its
electronic replacement
offer the same? All of
these issues require
careful consideration.
I
ndnotes
I. Abraham Lincoln, "Many Free Countnes Have Lost Their Liberty," ASpeech on the
Subtreasury, Springfield, lIIinois, December 26, 1839.
2. Friedrich A. von Hayek, DenallollollSlltioll of MOlley: An AnalySIS of the Theory alld
PractICe of Concllrrent umenctes, London: Institute of Economic Affairs, 1976, p. 27.
3. See Albeno Alesina and Lawrence H. Summers, "Central Bank Independence and
Macroeconomic Performance: Some Comparative Evidence," jOlmral of Money,
Credit, alld 8ankmg, vol. 25, no. 2 (May 1993), pp. 151-62.
4. See especially Hayek, DelratlOllalisatloll of MOlley, op. cit.
5. Free bankmg experiments are common throughout world hiStory. Countries With
banking systems exhibiting various degrees of private, competitive currency issue
include Bolivia (1835-5 1), Rhodesia (now Zimbabwe, 1892-1939), Thai)and (18881902), and many others. See Kurt Schuler and Lawrence H. White, "Free Banking:
History," In Peter ewman, Murray Milgate, and John Eatwell, cds., The New Palgrave
DICtiOlrary of Malley alld Flnallce, London: Macmil)an Press, 1992, pp. 198-99.
6. Hayek, DenatlOnalisallon of Malley, op. Cit., p. 35.
7. Ibid., p. 74.
8. Ibid., p. 17.
9.31 U.S.C§5i03 (1983).
~ te1J
to
become not just a curios-
haps more important,
Legislation requiring that the courts enforce "specific performance" would also increase the opportunity for currency competition. Currently in most countrie of the world, when there
is a dispute involving a contract that is stated in terms of a currency or unit other than the national currency (such as gold),
courts do not require performance in the stated unit, bur only
require an "equivalent payment" in the national currency, weakening the power of competition among national currencies.
e ~ cash
(! fficers and Co
suit
As of December 31.1995
.Jerry L
.Jordan
President & ChIef Executive Officer
Sandra pianalto
Fi~t
Vice President &
Chief Operating Officer
Charles A
Cerino
Senior Vice President
Cincinnati and Columbus Offices
.lill Goubeaux Clark
Senior Vice President & General Counsel
Corporate Communications &
Community Affai~
Samuel D
Smith
Sentor Vice President
Facilities, FinanCIal Management,
Protection, Informanon Security
David E
A1tig
Mark S
Sniderman
Andre\N.J Bazar
.James A
Vice President
Automation
Consultant
Automation
.Jake D
Breland
Vice President
Cash, SecuritieslFiscal, Custody Control
Andre\N C
p
R
Ware
Chris Moore
Raymond L
Brinkman
Assistant Vice President
Automation, Building, Cash, ProteCIlOn
Pittsburgh Office
Consultant
Automation
Michael F Bryan
.John
Consultant
Research
Consultant
Banking SupervIsIon and Regulation
William D
David ERich
P
Robins
Robert W
Price
Vice PresIdent
Check ColleCIlon, ACH, Funds Transfe~
Electronic Delivery ServICes
Ed\Nard E
Richardson
Vice President
Marketing
.John .J Wixted .Jr
Vice President & General Auditor
Susan G
.James B
Terrence J Both
Fosnig
Assistant Vice President &
Assistant General Counsel
AsSIstant Vice PresIdent
Marketing
Robert.J Gorius
Robert B
Assistant Vice President
General Services, Mail
Assistant Vice President
Accounting, General Services,
Fiscal, Securities
Pittsburgh Office
Eddie L
Hardy
Consultant
Banking SuperviSIon and Regulation
Senior Vice President
Check Collection, ACH, Funds Transfe~
Marketing, EleClrontc Delivery Services
Senior Vice President
Banking Supervision and Regulation,
Credit RIsk Management, Data Services
Bay
Assistant Vice President
Check ColleCIlOn, Marketing
Pittsburgh Office
.Joseph G
Schaub
William.J
Smith
Assistant Vice PreSIdent
Human Resources
Haubrich
Consultant
Research
Gregory L
Barbara H
Robert F
Kimberly L
Blake
Kalich
Vice President
Banking Supervision and Regulation,
Credit Risk Management, Data Services
Vice President
Quality
Vincel
Rako\Nsky
Assistant Vice PresIdent
Automation
La\Nrence Cuy
Vice PresIdent
Banking SupervISIon and Regulation
Harold.J SMlart
Donald G
.James W
Burkle .Jr
Vice President
Banking Supervision and Regulation
Senior Vice President
Pittsburgh Office
Senior Vice President
Automation, Cash, SeruritiesIFiscaJ,
Custody Control, EEO Officer
Bennett
Assistant Vice President
Cash
Rayford
Senior Vice PresIdent &
DireCIor of Research
Terry N
Vice President & Economist
Monetary Policy & Macroeconomics
Hertz
Assistant Vice PresIdent
Facility/Automation ServICes, CashlFiscal,
ProteCIion, Registered Mail
Cincinnati Office
Stefani
Consultant
Banking upervlslon and Regulation
Ed\Nard.J Stevens
Consulrant
Financl3l ServICes Research Group
Schueller
Thomson
Vice President & Economist
Financial Services Research Group
David P
Thorp
Vice President
Building
P
Vice President
Accounting, Budget, Expense,
Fmancial Planning, Purchasing
Assistant Vice President
Budget, Expense, Financial Planning
Collsllitants are IlIghly sktlled employees
who contribute to attammg the Bank,
gOdls through the" speClallUd professIOnal
or techmcal skIlls.
Andre\N W
Watts
Vice President & Regulatoty Counsel
Charles E Williams
Vice President
Automation, Check ColleCIion,
Marketing, Accounting
CinCinnati and Columbus Offices
Assistant Vice PresIdent
Check ColleCIion
Laura K
McGowan
Assistant Vice President & Corporate
Secretary, Community Affai~ Officer
Corporate Communications &
Community Affai~
Wilmer M
Wittrup
Assistant Vice President
Accounting, Billing
Kelley
William.J Major
Robert Van \lalkenburg
P Trolio
Assistant Vice President
Automation, Deputy EEO Officer
Darell A
Kevin
.Joseph C
Henry
.Jager
Assistant Vice President
ACH, Funds Transfer, EleClronic
Delivery Services
piper
Consultant
Automation
~ eleven
. I'
. rj irectors
As of D ecember 3 1. 1995
Chaimzalt & Federal Reserve Agellt
leveland
A. William Reynolds
Chief Executi~
Old Mill Group
Hudson, Ohio
Depllty Chain"""
G. Watts Humphrey. Jr.
I.N . Rendall Harper. Jr.
Edvvard B . Brandon
_ _ _ _---'......_~.k
Alfred C. Leist
David S. Dahhnann
"--'=--
Robert
v.
Farrington
Executive Secretary-Treasurer
Ohio State Building and Construction Trades Council
Ohio
President & CEO
American ~ticrographlC' Co., Inc.
Monroeville, Pennsylvania
--
Chainnan, President & CEO
The Apple Creek Banking Co.
Apple Creek. Ohio
Michele Tolela Myers
Prc.ident
Denison University
Granville, Ohio
Thomas M. Nies
President
Cincom Systems, Inc.
CinCInnati, Ohio
Federal Advisor), COlllleil Represelltatwe
Frank V. Cahouet
Chainnan, PresIdent & CEO
Mellon Bank, KA.
Pittsburgh, PennS)'h'ama
~ tll'elve
Incinnati
OJamnQII
John N. Taylor, Jr.
ChainNn & CEO
KIIIl-Kasch, Inc.
Dayton. Ohio
Jerry W. Carey
PrtSidcnr 8c CEO
Judith G. Clabes
Eleanor Hicks
Phillip R . Cox
Pmident
Cox FllllnciaI Corporation
CinciMati, Ohio
Ittsburgh
ChamllQ"
Robert P . Bozzone
Randall L.C. Russell
Pmidert 8c CEO
Ranbar Technology. Inc.
Glmshaw. PeruISVI,ania
Thomas J. O'Shane
John T. Ryan, III
Prnidmt 8c CEO
Firn Western Bancorp.lnc.
, 'tw (astir. PtMsylvaDia
<lainnan, Prosidmt & CEO
Mine SaRI)' Appliancrs Gmtpany
Pittsburgh, Ponnsylvania
Sandra L. Phillips
ExtCUhve Dineror
Pinshurgh Partmnbip for tighborhood DevdopmaIt
Pimhurgh, PeMsj'I"ania
Schack
!'.nnsylvania
til/rlull
1
,",!
'
I"
•
•
t-Yi omparative
_
•
~.
•
.'.
~. ~
•
:
I
I
Financial Statement
C /tatement of Condition
For years ended December 31
1994
1995
ASSETS
Gold certificate account
Special drawing rights certificate account
Coin
Loans and securities:
Loans to depository institutions
Federal agency obligations bought outright
U.S. government securities:
Bills
Notes
Bonds
Total U.S. government securities
Total loans and securities
Cash items in process of collection
Bank premises
Other assets
Interdistrict settlement account
TOTAL ASSETS
$
621,000,000
584,000,000
23,652,072
$
660,000,000
556,000,000
16,694,902
-0151,844,053
-0229,245,239
10,556,220,428
8,705,577,919
2,540,458,668
$ 21,802,257,015
.,..
..
$ 21,954,101,068
265,371,685
66,429,296
1,999,292,948
220,361,503
. ... ....
$ 25,734,208,572
11,181,316,977
9,086,293,278
2,710,415,171
$ 22,978,025,426
$ 23,207,270,665
268,936,471
45,580,606
1,977,994,674
-1,332,449,195
..
$ 25,400,028,123
$ 23,524,410,275
$ 22,542,394,720
1,161,144,879
10,000
9,858,331
39,750,755
$ 1,210,763,965
231,941,721
249,559,011
$ 25,216,674,972
1,813,652,367
- 09,266,587
40,656,808
$ 1,863,575,762
222,309,262
256,692,279
$ 24,884,972,023
258,766,800
258,766,800
$
517,533,600
$ 25,734,208,572
257,528,050
257,528,050
$
515,056,100
$ 25,400,028,123
,'
LIABILITIES
Federal Reserve notes
Deposits:
Depository institutions
Other Federal Reserve Banks
Foreign
Other deposits
Total deposits
Deferred availability cash items
Other liabilities
TOTAL LIABILITIES
CAPITAL ACCOUNTS
Capital paid in
Surplus
$
TOTAL CAPITAL ACCOUNTS
TOTAL LIABILITIES AND CAPITAL ACCOUNTS
9
(O llrt ee ll
$
frYn~~~~
an" E""cn
For years ended December 31
1995
1994
CURRENT INCOME
Interest on loans
Interest on government securities
Earnings on foreign currency
Income from services
All other income
Total current income
$
$
231,626
1,400,033,105
54,586,655
47,415,071
438,272
1,502,704,729
$
89,140,676
13,122,316
1,400,441,737
$
$
137,807
1,227,039,616
58,356,750
45,499,574
401,259
1,331,435,006
CURRENT EXPENSES
Current operating expenses
Cost of earnings credits
CURRENT NET INCOME
$
$
$
83,758,408
12,381,212
1,235,295,386
PROFIT AND LOSS
Additions to current net income
Profit on foreign exchange transactions
Profit on sales of government securities
All other addjtions
Total additions
Deductions from current net income
Loss on sales of government securities
Post-employment benefits-FAS 112
Compensated absences-FAS 43
All other deductions
Total deductions
Net additions or deductions
Cost of unreimbursable Treasury services
Assessments by Board of Governors
Expenditures
Federal.........
Reserve currency costs
Total assessments by Board of Governors
NET INCOME AVAILABLE FOR DISTRIBUTION
$
$
$
$
$
70,243,911
267,913
13,175
70,524,999
$
-02,890,248
1,192,327
8,270
4,090,845
$
66,434,154
2,183,009
$
$
$
11,216,100
21,874,736
159,216,132
-033,927
159,250,059
1,510,117
-0-05,063
1,515,180
157,734,879
1,964,554
$
33,090,836
$
9,693,400
21,583,556
31,276,956
$
1,431,602,046
$
1,359,788,755
$
15,514,258
$
14,283,474
$
1,414,849,038
1,238,750
1,431,602,046
$
1,311,506,031
33,999,250
1,359,788,755
DISTRIBUTION OF NET INCOME
Dividends paid
Payments to U.S. Treasury
(interest on Federal Reserve notes)
Transferred to surplus
Total distributed
. , fifteen
William H
Braun
James D
Kiggen
Gerald M
Miller
President
Custom Rubber Corporation
Cleveland, Ohio
Chairman, President & CEO
Xtek, Incorporated
Cincinnari, Ohio
Chairman & Managing Parmer
Miller-Valentine Group
Darron, Ohio
Margo E
Broehl
Norman Klass
Jeanette C
Owner
Brochl & Waldron Anomeys
Wooster, Ohio
President & Owner
Agri Supply Company, Inc.
Leipsic, Ohio
President & CEO
Day·Med Health Maintenance Plan, Inc.
Dayton, Ohio
Ronald B
Cheryl L
Steven C
Coben
Krueger
prear
Thomas
President & CEO
Cheryl & Company
Columbus, Ohio
President & CEO
Mulach Steel Corporation
Bridgeville. Pennsylvania
~~Jaraun~t
B.enjaDJin T Pugh
ebilip S
President & CEO
The Second National Bank of Warren
Warren. Ohio
CEO
Premier Financial Bancorp, Inc.
Vanceburg, Kentucky
President & CEO
Chippewa Valley Bank
Rinman, Ohio
Ronald L
Carlos E
Senior Pamler
Cohen & Company
Cleveland, Ohio
Glenn R
Jennings
Pre ident & CEO
Delta Narural Gas Company, Inc.
Winchester, Kentucky
__________
EdlNin P
c..cnt.e1r______
President
Commercial National Bank of
Westmoreland Coumy
L1trobe, Pennsylvania
J..ean R
Hale
President & CEO
Pikeville National Bank & Trust Company
Pikeville, Kentucky
,
sixteen
Solomon
S_ope
Watkins
President. Director & CEO
First We t Virginia Bancorp, Inc.
Wheeling, West Virg,"ia
President & CEO
First-Knox Bane Corp.
Mr. Vernon. Ohio
WilliaDl....C....s..nn.taa...Ptesident & CEO
Robert W
The First National Bank of Slippery Rock
Slippery Rock, Penns)'lvania
zaplL_ _ __
President & CEO
The Bank of Boone County, Inc.
Florence, Kentucky
~Ieveland
146
, Street
Cleveland, OH 44114
(216) 679 2000
~inCinnati
15
Cincinnati, OH 45202
(613) 721-4787
~ittsbUrgh
71
treat
Pittsburgh, PA 15219
(412) 261 7800
~OlurnbUS
9
rkway
Columbus, OH 43229
(614) 846-7494
,
This annual report was prepared by the Corporate Communications &
Community Affairs Department and the Research Department of the
Federal Reserve Bank of Cleveland .
For additional copies, contact the Corporate Communications &
Community Affairs Department, Federal Reserve Bank of Clevelend,
P.O . Box 6387, Cleveland, OH 44101, or call 1 -800-543- 3489 (OH, PA, WV)
or 216-579- 2001 .
The annual report essay is also available electronically through the Cleveland Fed's home page on the World Wida Wab: http:/ / www.c/ev. frb .org.
Design : Micheel Galka
Executive Portreit : Bill Peppes
@FedFRASER