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The Federal Reserve Bank of San Francisco

1995 Annual Report
From the Boardroom
A Brief History of Our Nation's Paper Money
Executive Committee, Officers, and Branch Operations
Highlights of 1995
Summary of Operations
Comparative Statement of Account
Earnings and Expenses
Boards of Directors
1996 Advisory Council on Small Business and Agriculture
Twelfth Federal Reserve District
The Federal Reserve Bank of San Francisco is one of twelve regional Reserve Banks which, together
with the Board of Governors in Washington, D.C., comprise the nation's central bank.
As the nation's central bank, the Federal Reserve is responsible for making and carrying out our
nation's monetary policy. It also is a bank regulatory agency, a provider of wholesale priced banking
services, and the fiscal agent for the United States Treasury.
The Federal Reserve Bank of San Francisco serves the Twelfth Federal Reserve District, which includes
the nine western states­­Alaska, Arizona, California, Hawaii, Idaho, Nevada, Oregon, Utah and
Washington­­Guam, American Samoa, and the Northern Mariana Islands.
To serve this expansive region, the San Francisco Reserve Bank has five offices: the headquarters in
San Francisco, and offices in Los Angeles, Portland, Salt Lake City, and Seattle. Each office provides
financial services to the public and banking institutions in its locale.

Previous Annual Reports:



This Report was written and produced by Karen Flamme. Highlights was written by Karen Flamme and Barbara Bennett. Design
and illustrations were created by William Rosenthal. Color photography by Paul Schulz.

The Federal Reserve Bank of San Francisco

1995 Annual Report: From the Boardroom

From left, James A. Vohs, Deputy Chairman; Patrick K. Barron, First Vice President; Robert T. Parry,
President; and Judith M. Runstad, Chairman.
This Annual Report traces the history of U.S. currency, drawing its photos and graphics from our Bank's collection of currency,
which dates from the Civil War era. Our Bank is fortunate to have such a collection, and in 1996, we will install a permanent
historical exhibit in the lobby of our San Francisco headquarters to display many extremely rare and interesting notes.
The history of U.S. currency is a timely topic for this Report as the Reserve Banks begin supplying financial institutions with the
newly designed Series 1996 Federal Reserve notes. This is the first major design change in U.S. currency since 1928. Prior to
that time, as this Report shows, bills were redesigned frequently, often to commemorate historic events, scientific advances,
and national figures.
With the introduction of the Series 1996 notes by the U.S. Treasury, the United States will continue to honor the older series
notes at full face value. However, as these older notes are returned to Reserve Banks during the normal course of business, we
will replace them with the new series notes.
In establishing the Federal Reserve System in 1913, Congress sought to accommodate fluctuations in the demand for cash by
the public and the banking system. Distributing and replacing coin and currency is, in fact, one of the Reserve Bank's key
responsibilities, and one that has grown dramatically. For example, the value of currency in circulation rose from $31.2 billion in
1955 to more than $416 billion in 1995.
When commercial banks and other depository institutions need to replenish their supply of currency and coin, they place an
order with a Reserve Bank or Branch in their area, and the face value of that cash is charged to their accounts at the Federal
Reserve. When the need for currency and coin declines, banks return excess cash to their local Reserve Bank, which in turn
credits their accounts.
The Reserve Banks and the U.S. Treasury share responsibility for maintaining the quality of paper currency. Each day, millions
of dollars deposited with Reserve Banks are carefully scrutinized. Currency in good condition is stored for later distribution.
Worn or mutilated notes are removed from circulation and destroyed, and counterfeit notes are forwarded to the U.S. Secret
In addition to our role in supplying the nation's currency in circulation, the Reserve Banks play a key role in the formulation of
monetary policy. It is in this regard, in particular, that we would like to thank our Twelfth District directors for their invaluable
counsel during 1995. Their independent assessment of economic and financial conditions throughout our nine western states is
critical to the formulation of sound policy.
In addition, we send our sincere appreciation to those directors who completed their terms of service during 1995: on the San
Francisco Head Office Board, Carl J. Schmitt (Chairman, University Bank & Trust Company, Palo Alto, CA) and E. Kay Stepp
(Principal and Owner, Executive Solutions, Portland, OR); on the Los Angeles Branch Board, Steven R. Sensenbach (President
and CEO, Vineyard National Bank, Rancho Cucamonga, CA); on the Salt Lake City Branch Board, Daniel R. Nelson (Chairman
and CEO, West One Bancorp, Boise, ID); on the Seattle Branch Board, Emilie A. Adams (President and CEO, Better Business
Bureau Foundation, Seattle, WA); and, on the Federal Advisory Council, Twelfth District Member Edward M. Carson (Chairman of
the Board (Retired), First Interstate Bancorp, Los Angeles, CA).
(Signed) Judith M. Runstad, Chairman, and
(Signed) Robert T. Parry, President

The Federal Reserve Bank of San Francisco

1995 Annual Report: A Brief History of Our Nation's Paper Money
Colonial and Continental Currency
Free Banking Era
Civil War
National Bank Act
Gold and Silver Certificates
Federal Reserve System
A New Look For Currency
The Future Of Currency
Did You Know?
See also:
The American Currency Exhibit
Fun Facts About Money
By Karen Flamme
In our society today, money's value is measured by what it can buy­­its purchasing power­­not by its
material worth, but it hasn't always been so. American currency has spanned centuries of evolution and
numerous transfigurations to reach the size and shape that we carry in our wallets today. It has been an
evolutionary process which often came about in times of crisis­­like the Civil War or Great Depression­­or to
respond to demand as society struggled to put into place a monetary system that would function smoothly
and inspire confidence. This development process is ongoing and continues even now as redesigned
currency is issued in 1996. But the legacy of the process is a rich heritage of United States currency that gives us a fascinating,
colorful, and reflective glimpse into the growth of our nation.
The Federal Reserve Bank has a special interest in this subject. As part of our role as the government's central bank we are
responsible for putting currency, as well as coin, into circulation. Indeed, the warehousing, shipping, processing, and handling of
currency are major functions of the regional Reserve banks.

Colonial and Continental Currency
The Massachusetts Bay Colony issued the first paper money in the colonies in 1690. Other
colonies soon followed suit to meet the high demand for money fueled by trade between the
colonies and the scarcity of coin (which was the common form of money up to this date). Some
of this early money was readily accepted, but some was not redeemed in gold or silver as
promised and thus depreciated rapidly. These currencies, however, set a precedent for the first
national currency which was issued during the War for Independence.
Extremely rare series of 1880
note with Lyons­Roberts
signatures and a small red
scalloped seal. The head is of
DeWitt Clinton, Governor of
New York, Mayor of New York
City, U.S. Senator. Seated
figure is Christopher

To finance the Revolutionary War, the Continental Congress in 1775 authorized the limited
issuance of paper currency. These notes, called Continentals, were denominated in dollars and
backed by the "anticipation" of future tax revenues, with no backing in silver or gold. They
could be redeemed only upon the independence of the colonies.
Continentals were an interesting expression of the new nation's sovereignty, as they did not
feature pictures of the crown or King of England. In fact, some were printed from plates
engraved by Paul Revere to read "The United Colonies" and bore pictures of colonial

Without solid backing and with rising inflation, the Continentals soon became worthless, thus
the expression "not worth a Continental." Or, as George Washington put it, "A wagonload of currency will hardly purchase a
wagonload of provisions."
In 1777 after the Declaration of Independence was signed, the first notes bearing the words "The United States" were issued
and signed by well­known revolutionary figures to give them credibility.
The remnant of this experience was a deep distrust of paper money which was not issued again
by the federal authorities until the Civil War when the Federal government first issued paper
money. The Continental was significant, however, in that it marked the first time that the worth
of U.S. currency lay in its purchasing power and not in its intrinsic value.

Free Banking Era
In 1791 the Bank of the United States received a charter to operate until 1811, followed by the
Second Bank of the United States from 1816 to 1836. These two banks, chartered by Congress
rather than a state, performed several central bank functions. Although privately owned, they
were authorized to issue paper bank notes and serve as the fiscal agent of the government.
Both banks, however, were unpopular with those wanting easy credit­­primarily the western,
agrarian interests­­and in 1832 Andrew Jackson vetoed the recharter of the Second Bank.
Thus followed the "Free Banking Era"­­a quarter century in which American banking was a
hodgepodge of state­chartered banks with no federal regulation or uniformity in operating laws.

First Charter Original series
note with Allison­Spinner
signatures and a small red
seal with rays. This was one
of the most popular Gold

hodgepodge of state­chartered banks with no federal regulation or uniformity in operating laws. of the most popular Gold
State Bank notes of various sizes, shapes, and designs were in circulation. Some of them were
Bank notes issued in
relatively safe and exchanged for par value and others were relatively worthless as speculators California in the 1870s.
and counterfeiters flourished. By 1860, an estimated 8,000 different state banks were circulating
"wildcat" or "broken" bank notes in denominations from ½ cent to $20,000. The nickname "wildcat" referred to banks in
mountainous and other remote regions that were said to be more accessible to wildcats than customers, making it difficult for
people to redeem these notes. The "broken" bank notes took their name from the frequency with which some of the banks
failed, or went broke.

Civil War

This is a rare gold certificate,
payable in gold coin, with the
head of Abraham Lincoln.

Once again the need to finance a war provided the impetus for a change in the monetary
system. In 1861, to finance the Civil War, Congress authorized Demand Notes­­the first issue
of paper money by the government since the Continentals. These Notes were printed in $5,
$10, and $20 denominations, redeemable in coins on demand, and green in color­­hence the
name "greenbacks." A total of about $10 million was issued, a relatively small series. These
notes, and all paper money issued since 1861, are still valid and redeemable in current cash
at face value. While most early money is now in the hands of collectors or museums, it is
important to note the record of currency stability which this represents.

In 1862, Congress discontinued issuing Demand Notes and issued Legal Tender Notes, also
known as United States Notes. These new notes­­issued in denominations from $1 to $1,000
(later $5,000 and $10,000)­­were the first national currency used as legal tender for most public and private debts. The design
of these notes incorporated a Treasury seal, fine­line engraving, intricate geometric lathe work patterns, and later incorporated
various forms of distinctive cotton and linen papers with embedded red and blue fibers. Confidence in the notes waned
somewhat when the Treasury stopped redeeming them in coins during the Civil War to save gold and silver. However,
redemption resumed in 1879 following the war.
Coin hoarding and the need to use metals for war purposes created a shortage of coin during the Civil War and led to the
circulation of small change substitutes. In some cases these included tickets, bills, and even postage stamps. From 1862 to
1876 the government issued more than $368 million in Fractional Currency in three­to fifty­cent denominations. These "paper
coins," which were much smaller in size than our present currency, were nicknamed "shinplasters," as the hardships of war
often forced troops to line their worn­out boots with them. These fractional notes are still redeemable today.
Between 1861 and 1865 Confederate currency was being issued to millions of Southerners, gambling that a Confederate victory
would ensure the currency would be redeemable. In an effort to debase this currency, the North printed counterfeit Confederate
money and circulated it in the south. Inflation was soon rampant in both the north and south, but far worse in the Confederacy.
As the end of the war neared, Confederate citizens completely lost confidence in their currency and came to rely on barter or
black­market greenbacks. In some cases Confederate soldiers were even paid in Northern greenbacks. By the end of the war,
Confederate notes were totally worthless.

National Bank Act
President Abraham Lincoln, urged by the Secretary of the Treasury, convinced Congress to pass
the National Banking Act in 1863 which established a national banking system and a uniform
national currency to be issued by the new "national banks." The banks were required to
purchase U.S. government securities as backing for their National Bank Notes. In 1865 a 10­
percent tax was levied on State Bank notes eliminating the profit in issuing them and basically
taxing them out of existence.
Although United States Notes were still widely accepted as a medium of exchange, most paper
currency circulating between the Civil War and World War I consisted of National Bank Notes.
They were issued from 1863 through 1932. From 1863 to 1877 National Bank Notes were printed
by private bank note companies under contract to the Federal government. The Federal
government took over printing them in 1877.

Gold and Silver Certificates

Issued from 1919 to 1921,
only in Ohio and Louisiana.
At the left is Washington
crossing the Delaware. At
the right is Washington at
prayer. This is one of four
known specimens.

The economy was in turmoil in the late 19th century. The government, in a move to increase its
reserve of precious metals, offered certificates in exchange for deposits of silver and gold.
Gold certificates, colorful and vivid, were first issued in 1863 and put into general circulation in
1882. They are among the most attractive of all currency issues, with the reverse a brilliant
golden orange, symbolic of the gold coin they represent. In 1933, when the country faced a
severe depression and a banking crisis, the public began to demand gold.

Pictured above is an
extremely rare silver
certificate, series of 1878,
payable at New York. The
head is of James Monroe.

Runs developed on both Federal Reserve Banks (which had been established under the Federal
Reserve Act in 1913) and commercial banks. In order to deal with this crisis, only Federal
Reserve Banks were permitted to hold gold. In 1934, Federal Reserve Banks were required to
turn over all gold coin, bullion, and certificates to the U.S. Treasury in return for a new type of
gold certificate. These were never put into circulation and the last ones were printed in January
1935. In 1964, private citizens could once again hold gold certificates issued before January 30,
1934, but they could no longer be redeemed in gold. This changed in 1974, and private U.S.
citizens could once again hold gold legally.

Silver certificates were first issued in exchange for silver dollars in 1878. They offered many varieties of design and subject
matter including inventors, military heroes, a Sioux Indian, and the famous Educational series of 1896. An 1886 $1 silver
certificate is also the only piece of U.S. paper currency to bear the portrait of a woman­­Martha Washington.
For many years silver certificates were the major type of currency in circulation. However, in the early 1960s when the price of
silver jumped to over $1.29 an ounce it was evident that further increases would make it profitable for holders of silver coins to
sell them in the open market. To avert this crisis, Congress eliminated silver certificates in 1963, and empowered the Federal
Reserve to issue $1 and $2 Federal Reserve Notes for the first time.

Federal Reserve System
In 1913 a major change in paper currency occurred with the passage of the Federal Reserve
Act aimed at resolving some long­standing money and banking problems which had led to bank
failures, business bankruptcies, and general economic contractions. The Act created the Federal
Reserve System as the nation's central bank to regulate the flow of money and credit for
economic stability and growth. In 1914, Federal Reserve Notes, which comprise more than 99
percent of today's paper money, were issued by Federal Reserve Banks as direct obligations of
the Federal Reserve System.They replaced National Bank Notes as the dominant form of paper
This is an extremely rare
note known as a "Grand
Federal Reserve Notes were issued in denominations ranging from $1 to $10,000. The $100
Watermelon" note because of
note has been the largest denomination printed since 1946, and in 1969 all notes greater than
the shape of the zeroes. It
$100 were retired because of declining demand.
was redeemable in coin, and
it has Rosecrans­Huston
The design of Federal Reserve Notes has changed little over the years. In 1929, the size of the signatures and a large brown
notes was reduced; in 1955, the inscription "In God We Trust" was added; and in 1966, the
seal. The head is of General
Latin wording on the Treasury seal was replaced by an English translation. In 1929, it was also
George Gordon Meade,
decided that all currency would have a portrait on the front, and denominations under $100
commander of the Union
would have buildings or monuments on the back. Higher denominations had the denomination
troops at the battle of
on the back.

This bill is a series of 1918 Blue Seal note with
Burke­Glass signatures and a small blue
scalloped seal. The front shows the head of
Salmon P. Chase. The reverse design is the
embarkation of the Pilgrims.

A New Look for Currency
In 1990 a new series of notes was introduced to improve security and stay ahead of counterfeiters and advances in technology
which make it easier to reproduce currency. These notes include microprinting and an embedded security strip.
A more complete redesign is being introduced starting with the issue of new $100 bills early in 1996 and will continue as new
designs for the lower denominations are introduced at intervals of about a year. The most noticeable changes in the $100 bill
are that the portrait of Benjamin Franklin is larger and off center and the borders are simplified. This creates more space to
incorporate a watermark in the paper to the right of the portrait depicting the same historical figure as the portrait.
Other new or modified features include the use of a unique security thread which glows red when exposed to ultraviolet light,
color­shifting ink, microprinting, and fine­line printing. A universal Federal Reserve seal appears on the new note, rather than
an individual seal for each Reserve Bank. This is expected to create some efficiencies in production ad inventory. The Federal
Reserve District letter ("L," in the case of San Francisco) is being retained, however, and will be included in the serial number.

The Future of Currency
Despite predictions of a "cashless society" relying on electronic payments, the public demand for currency continues to grow.
Debit cards used for purchases and transaction records could greatly reduce the need for cash, but paper currency still has the
advantage of privacy.

Did You Know?
During much of the 17th and 18th centuries, the Spanish Dollar coin served as the unofficial national currency of the
American colonies. To make change the dollar was actually cut into eight pieces or "bits." Thus came the terms "pieces
of eight" from these early times and "two bits" from our time.
More than half of a dollar bill is considered legal tender, and only the front of a dollar bill is valuable. If you could
separate the front of a bill from the back, only the front half would be considered "money."
In 1955 a law was passed that all new designs for coin and currency would bear the inscription "In God We Trust." Those
words had first appeared on a U.S. coin­­the two­cent piece­­in 1864.
Until 1929 currency measured 7.42 x 3.13 inches. Since then it has remained at its present size of 6.14 x 2.61 inches­­an
easier size to handle and store. Since that size requires less paper, it is also less expensive to produce.
By 1865 approximately one­third of all circulating currency was counterfeit, and the Department of the Treasury
established the United States Secret Service in an effort to control counterfeiting.

The lobby of the headquarters building in San Francisco will soon house one of the preeminent exhibitions of
historical United State currency in existence. This Bank's collection is outstanding in terms of the diversity of notes
and rarely seen denominations and series, long forgotten by the public. It contains more than 1,700 individual
notes and is considered by numismatists to be irreplaceable.
Many pieces in the collection date from the 1880s, with the oldest being an 1862 $10 Legal Tender note bearing
the signatures of Treasury officials Chittenden and Spinner. The most valuable item in the collection is one of only
two known, remaining $10,000 gold certificates printed in 1882, signed by Treasury officials Teehee and Burke
and marked with a small red seal. It is valued at over $200,000 by numismatists. Another item, a series 1890
Treasury/Coin $1,000 note, with Rosecrans and Nebeker signatures and a small red seal, is one of only two
known existing bills and is valued at $150,000. Several items in the collection are the only remaining notes of
their type in existence.
This collection, interestingly enough, was rediscovered in the vaults below the Federal Reserve Bank of San
Francisco in 1992. Long forgotten in the Bank's day­to­day operations, the currency had remained sequestered in
a padlocked, steel currency cart for more than 40 years. It was when one of the nation's foremost experts on
U.S. historical currency learned of the Bank's collection and asked to view it that the rediscovery process began.
It is believed that at least parts of the collection were sent to the Bank long ago from the Treasury department as
historical currency specimens. Other pieces were acquired during the 1950s when the Bank exchanged duplicate
pieces in an effort to increase the collection and create a display­­a project which never materialized at that time.
The new exhibition is an addition to the existing "World of Economics" and will be of interest to the general public
and educators as well as numismatists. It is designed to integrate both the economic and chronological history of
the United States.

The Federal Reserve Bank of San Francisco

1995 Annual Report: Executive Committee, Officers, and Branch
Executive Committee
Bank Officers
Branch Officers
Los Angeles Branch
Northern Region
Portland Branch
Salt Lake City Branch
Seattle Branch
Branch Operations

Executive Committee (As of December 31, 1995)
From left, Elizabeth K. Christensen, Senior Vice President; Patrick K. Barron, First Vice
President and Chief Operating Officer (seated); Gordon R. G. Werkema, Senior Vice President;
John F. Moore, Executive Vice President; Jack H. Beebe, Senior Vice President and Director of
Research; Robert T. Parry, President and Chief Executive Officer (seated); and Terry S.
Schwakopf, Senior Vice President.

Bank Officers (As of December 31, 1995)
Robert T. Parry
President and Chief Executive Officer

Douglas R. Shaw
Vice President and Counsel

Patrick K. Barron
First Vice President and Chief Operating Officer

W. Gordon Smith
Vice President and Director

Jack H. Beebe
Senior Vice President and Director

D. Kerry Webb
Vice President

Elizabeth K. Christensen
Senior Vice President

Sallie H. Weissinger
Vice President

Sara K. Garrison
Senior Vice President

Patricia A. Welch
Vice President

Michael J. Murray
Senior Vice President

James M. Barnes

Terry S. Schwakopf
Senior Vice President

Kenneth R. Binning

Laurence Washtien
Senior Vice President

Harold H. Blum

S. Jean Hinrichs
General Auditor

Nancy Emerson

Robert D. Mulford
Vice President and General Counsel

Eliot E. Giuili

Elizabeth R. Masten
Vice President and Secretary of the Board

Donald R. Lieb

C. Kenneth Arnold
Vice President

John Y. C. Lin

Barbara J. Contini
Vice President

Susan G. Porterfield

Robert L. Fienberg
Vice President and Director

Wayne L. Rickards

Frederick T. Furlong
Vice President

Kenneth M. Kinoshita
Associate General Counsel

William K. Ginter
Vice President

Paige Birdsall
Assistant Vice President

Reuven Glick
Vice President

Sylvia A. Cunningham
Assistant Vice President

John P. Judd
Vice President and Associate Director

Gail A. Garvey
Assistant Vice President

Vice President and Associate Director

Assistant Vice President

Ronald E. Mitchell, Jr.
Vice President

Elaine Geller
Assistant Vice President

Todd Glissman
Assistant Vice President

Beatrice K. Ashburn
Audit Officer

John S. Hsiao
Assistant Vice President

Beverley­Ann Hawkins
Automation Officer

Peter K. C. Hsieh
Assistant Vice President

Michael E. Johnson
Applications Officer

Deborah S. Jackson­Duke
Assistant Vice President

Lelia M. Jones
Assistant Vice President

Ellsworth E. Lund, Jr.
Assistant Vice President

Craig B. Knudsen
Financial Planning & Control Officer

Elizabeth M O'Shea
Assistant Vice President

Mark Levonian
Research Officer

Philip M. Ryan
Assistant Vice President

Bonnie Martina
Examining Officer

W. Starr Seegmiller
Assistant Vice President

Brian Motley
Research Officer

Susan A. Sutherland
Assistant Vice President

Gary P. Palmer
Financial Analysis Officer

James J. Tenge
Assistant Vice President

Glenn D. Rudebusch
Research Officer

Thomas R. Thaanum
Assistant Vice President

Virginia N. Salinas
Audit Officer

David M. Vandre
Assistant Vice President

Bharat Trehan
Research Officer

David W. Walker
Examining Officer

Elizabeth L. Wood
Systems Officer

Kelly K. Walsh
Assistant Vice President

Branch Officers (As of December 31, 1995)
Los Angeles Branch

Northern Region

John F. Moore
Executive Vice President

Gordon Werkema
Senior Vice President

Sean J. Rodriguez
Vice President

Portland Branch

Nancy Olmstead

Raymond H. Laurence
Vice President

Darcy J. Coulter
Assistant Vice President

Mary E. Lee
Assistant Vice President

Robert C. Johnson
Assistant Vice President

Robert D. Long
Assistant Vice President

Rachel A. Romero
Assistant Vice President

Robin A. Rockwood
Assistant Vice President

Lisa Moraes
Operations Officer

Mary Rector
Administrative Officer

Roger W. Replogle
Business Development and
Electronic Product Support Officer

Dale L. Vaughan
Examining Officer

Salt Lake City Branch
Andrea P.
Jed W.
Gerald R.
Thomas P.

Richard B.

Gale P.
Jimmy F.
assigned to
Kenneth L.
Michael J.

Branch Operations (As of December 31, 1995)
From left, Gordon R. G. Werkema, Senior Vice President, Northern Region; Raymond H. Laurence, Vice President,
Portland; John F. Moore, Executive Vice President, Los Angeles; and Andrea P. Wolcott, Vice President, Salt Lake

The Federal Reserve Bank of San Francisco

1995 Annual Report: Highlights of 1995
Check Services
Electronic Payments and Fiscal Agency
Cash Services
System Support Function Office
Economic Research
Banking Supervision and Regulation
Credit, Compliance, and Community Affairs
Building upon its growing reputation for excellence in operations, outstanding service to customers, and effectiveness in the
oversight of financial institutions, the Federal Reserve Bank of San Francisco took on major new leadership responsibilities in
1995. In particular, the District played a key role in the Federal Reserve System's efforts to integrate its financial services
activities on a more national basis.
Faced with continuing consolidation and restructuring of the financial services industry, as well as the push toward interstate
branch banking, the System reorganized its financial services management structure along major product lines early in the
year, awarding the Twelfth District responsibility for System­wide support functions, including accounting, automation, and
customer electronic access. The District also played a major role in shaping the System's response to changing customer and
constituent needs in the retail payments, wholesale payments, and fiscal services product areas, as well as in the areas of
banking supervision and community affairs.
To meet these leadership challenges and provide for a more flexible organization, the District reorganized its management
structure early in the year, replacing the former Management Committee with a new policy­making framework that comprises
seven key committees: Executive; District Steering; Operations; Information Management; Personnel; Capital Budget and
Building; and Loan. This new structure is designed to:
ensure in­depth review of strategic issues;
provide for greater involvement on the part of those with direct knowledge of the issues; and
promote increased information­sharing and team building among Bank management.
This new structure will optimize resources in fulfilling the District's leadership responsibilities and achieving continuing gains in
productivity, cost control, and customer responsiveness.

Check Services
The Twelfth District's leadership was evident in a number of initiatives in 1995. In addition to
leading the development of a System­wide strategy for implementation of digital image technology
and image­based check services, the District lent expertise to a variety of projects aimed at
enhancing the efficiency and quality of check services nationwide.
While making significant contributions to Federal Reserve System efforts, the District implemented
a variety of products to appeal to new customers, and operational initiatives that resulted in continued improvement in
productivity and unit costs. These efforts enabled the District to end the year in a positive cost recovery position.

Electronic Payments and Fiscal Agency
The District's Automated Clearing House (ACH) continued a trend of outstanding cost recovery, productivity, and unit cost
management in 1995. Several new projects were initiated to improve operations and expand the scope of the ACH. A concerted
effort to convert Reserve Bank payments to the ACH resulted in more than 50 percent of Twelfth District vendor payments
being made through the ACH at the end of 1995, compared to 26 percent at the end of 1994. Another initiative gave customers
the opportunity to receive ACH advices by FED­Mail rather than in paper form. At year­end, more than 190 customers were
enjoying this efficiency, and more are converting each week.
To bring together expertise in the business of wholesale electronic payments, including securities and wire
transfer, the District formed a new Wholesale Payments department, which parallels the new System­wide
Wholesale Payments Product Office. Under the leadership of this new department, cost recovery exceeded
targets, and funds transfer staff embarked on an ambitious key customer outreach program, visiting 20 large
customers in three states to share expertise and expectations.
In the District's Fiscal Services function, steep increases in interest rates during the first quarter dramatically increased the
demand for Treasury securities and resulted in a remarkably high volume of activity in the Treasury Direct and Customer
Service units at all five offices.

Cash Services
In 1995, Cash Services made significant progress toward increasing currency processing capabilities, reducing unsorted
backlogs, and enhancing controls. Seven new currency processing machines went into production in 1995, bringing the District
total to 18, three­quarters of the total planned. Along with the new equipment have come significant increases in processing
capability and the ability to support the new 1996 series $100 note. Total daily processing increased nearly one­fourth over
In the continuing effort to balance public policy interests with customer service, the District announced a revised Cash Service

In the continuing effort to balance public policy interests with customer service, the District announced a revised Cash Service
Structure that offers depository institutions a basic level of free service, while providing additional service for a fee. Cash and
Business Development staff worked in concert to solicit customer input in the development of the new structure, and to
communicate these changes to customers. Bank staff also held seminars for over 1,500 customers to explain the 1996 series
currency release and counterfeit detection methods.
The District also assumed major national leadership responsibilities in the cash area in 1995 by chairing the System's Advisory
Group on Cash Services. The Advisory Group ensures regional needs and issues are factored into System policy­making in cash

System Support Function Office
Beginning in January 1995, the Support Function Office (SFO) assumed a broad range of new
System­wide responsibilities. The office was structured into three major divisions dealing with
accounting, automation, and customer electronic access. From this base, the SFO oversees
seven central business administration functions and 18 applications which share resources
throughout the Federal Reserve System.
A key accomplishment during the year was the successful migration of FED­Mail from pilot to full production status. FED­Mail
uses electronic­mail technology to deliver low­security data to customers. By year end 1995, more than 1,100 customers were
using the new information delivery vehicle on a daily basis.

Economic Research
Research focused during 1995 on a wide range of national, regional, and regulatory policy issues, including monetary policy in
the U.S. and monetary policy and exchange rates in East Asian countries. Staff also examined longer­term issues, such as
economic growth in the U.S. and abroad, NAFTA­like trade agreements, and measures of international financial integration.
Research on labor markets dealt with seniority and the duration of unemployment, as well as health insurance and worker
mobility. Regional analysis addressed population flows between California and the rest of the District. Staff also studied various
regulatory initiatives, including the implications of bank mergers on competition and structure.
The department published an increased number of papers in academic journals, as well as in Bank publications. In
addition, economic education and public programs continued to expand their reach, and Economic Research staff
delivered 74 speeches to outside organizations, made 48 presentations at conferences and seminars, and held 75
meetings with visiting officials from the United States and abroad, principally from Pacific Basin countries. In
March, the department co­hosted an academic conference on monetary policy in a changing financial environment
with the Center for Economic Policy Research at Stanford University.

Banking Supervision and Regulation
The Twelfth District continued to provide significant support to the Federal Reserve System in such areas as capital markets,
emerging issues, and programs to enhance the supervisory process. Additionally, international outreach efforts increased
during the year and included various initiatives with China, Japan, Malaysia, and the Philippines. The District also hosted central
bankers from Asia, Africa, and Europe; and provided technical assistance to Russia, Moldova, Poland, and Slovakia.
There were 59 state member banks in the District at year end­­8 with assets exceeding $1 billion, and 21 with assets between
$100 million and $1 billion. In addition, the District supervised 214 holding companies with assets totaling $461 billion, 136
branches and agencies of foreign banks, 20 Edge and Agreement corporation offices, and 38 representative offices.
Applications activity increased during the year from 270 in 1994 to 310 in 1995, reflecting increases in both domestic and
international applications and a continuation of expansion and consolidation trends.

Credit, Compliance, and Community Affairs
The leadership of the Twelfth District in the area of community reinvestment is well recognized. In
1995, Community Affairs sponsored 12 seminars throughout the District, providing information to
more than 500 lenders on how to prepare for the new CRA examination, which will focus on bank
performance with the lending, service, and investment tests.
At two other Community Affairs­sponsored conferences, more than 600 bankers, non­profit
representatives, and government officials heard nationally recognized speakers discuss community reinvestment, rural
community development, fair­lending issues, and successful public­private partnerships.
As part of its continuing efforts to provide guidance on the formation of bank lending consortia, the department played a key
role in the development of the California Economic Development Lending Initiative, a statewide consortium of 34 banks and
three corporations which pooled $50 million to provide financing to small businesses that currently do not have access to

The Federal Reserve Bank of San Francisco

1995 Annual Report: Summary of Operations

(in thousands)



4,069,935 4,212,494


Custody Services
Cash Services
Currency notes paid into circulation
Food stamp coupons processed




Other Treasury original issues




Book­entry securities processed




2,994,572 2,269,690


Securities Services

Payments Services
Check Services
Commercial checks collected
Government checks processed




Return items processed
















Electronic Payments Services

Wire transfers processed
Automated clearinghouse transactions processed

Discounts and Advances
Total discounts and advances*
Number of financial institutions accommodated*

* Whole number (not in thousands)

The Federal Reserve Bank of San Francisco

1995 Annual Report: Comparative Statement of Account
(Thousands of Dollars)
Dec. 31,


Gold certificate account



Special Drawing Rights certificate account



Other cash



Loans to depository institutions



Federal Agency obligations












Total United States Government securities



Total loans and securities



Items in process of collection



Bank premises



­Operating equipment



­Denominated in foreign currencies



­All other




United States Government securities:

Other assets:

Interdistrict Settlement Account



Total assets





Federal Reserve Notes

­Total depository institutions­reserve accounts 4,187,535





­Other deposits



Total deposits



Deferred credit items



Other liabilities



Total liabilities



Capital paid in






Total liabilities and capital accounts



Capital Accounts

The Federal Reserve Bank of San Francisco

1995 Annual Report: Earnings and Expenses
(Thousands of Dollars ­ Dec. 31)

Current Earnings
­Discounts and advances
­United States Government securities
­Foreign currencies
­Income from services
­All other

Total current earnings

















Current Expenses:
­Total current expenses
­Less: reimbursement for certain fiscal
agency and other expenses
­Net Expenses
­Cost of earnings credits

Current net earnings





















Profit and Loss
Additions to current net earnings
­ Profit on prior period adjustments
­Profit on sales on U.S. Government
securities (net)
­Profit on foreign exchange transactions
­All other
Total additions

Deductions from current net earnings
­Loss on sales of U.S. Government securities

­Loss on foreign exchange transactions (net)

­All other

508,919 392,452



Total deductions



Net additions (+) or deductions (­)





­Board expenditures



­Federal Reserve currency costs











Surplus, January 1



Surplus, December 31



Cost of Unreimbursed Treasury Services

Assessments by Board of Governors:

Net earnings before payments to the U.S. Treasury
Dividends paid
Payments to the U.S. Treasury
(interest on Federal Reserve Notes)

Transferred to surplus

The Federal Reserve Bank of San Francisco

1995 Annual Report: Boards of Directors
Federal Reserve Bank of San Francisco
Los Angeles Branch
Portland Branch
Salt Lake City Branch
Seattle Branch

Federal Reserve Bank of San Francisco Board of Directors
Chairman of the Board and
Federal Reserve Agent
Judith M. Runstad
Foster, Pepper & Shefelman
Seattle, Washington

Gary G. Michael
Chairman and CEO
Albertson's, Inc.
Boise, Idaho

Deputy Chairman
James A. Vohs
Chairman (Retired)
Kaiser Foundation Health Plan, Inc.
and Kaiser Foundation Hospitals
Oakland, California

Richard L. Mount
Chairman, President and CEO
Saratoga Bancorp
Saratoga, California

Gerry B. Cameron
Chairman and CEO
U.S. Bancorp
Portland, Oregon

Cynthia A. Parker
Executive Director
Anchorage Neighborhood Housing Services, Inc.
Anchorage, Alaska

Krestine Corbin
President and CEO
Sierra Machinery, Inc.
Sparks, Nevada

Stanley T. Skinner
Chairman and CEO
Pacific Gas and Electric Co.
San Francisco, California

Warren K. K. Luke
Vice Chairman, President & CEO
Hawaii National Bank
Honolulu, Hawaii

Federal Advisory Council Member
William E.B. Siart
Chairman of the Board and CEO
First Interstate Bancorp
Los Angeles, California

Los Angeles Branch Board of Directors
Chairman of the Board
Anita E. Landecker
Western Regional
Vice President
Local Initiatives Support Corporation
Los Angeles, California

David Lewis Moore
Western Growers Assn.
Irvine, California

Stephen G. Carpenter
Chairman of the Board and CEO
California United Bank, N.A.
Encino, California

William S. Randall
First Interstate Bancorp
Los Angeles, California

Anne L. Evans
Evans Hotels
San Diego, California

Thomas L. Stevens, Jr.
Los Angeles Trade­Technical College
Los Angeles, California

Antonia Hernandez
President and General Counsel
Mexican American Legal
Defense and Educational Fund (MALDEF)
Los Angeles, California

Portland Branch Board of Directors
Chairman of the Board
Ross R. Runkel
Professor of Law
Willamette University
Salem, Oregon

Marvin R. O'Quinn
Chief Operating Officer
Providence Portland Medical Center
Portland, Oregon

Cecil W. Drinkward
President and CEO

Carol A. Whipple

Hoffman Corporation
Portland, Oregon

Rocking C Ranch
Elkton, Oregon

John D. Eskildsen
President and CEO
U.S. Bank of Oregon
Portland, Oregon

Thomas Cook Young
Chairman, President and CEO
Northwest National Bank
Vancouver, Washington

Elizabeth (Betsy) Johnson
TransWestern Aviation, Inc.
Scappoose, Oregon

Salt Lake City Branch Board of Directors
Seattle Branch Board of Directors
Chairman of the Board
Gerald R. Sherratt
Southern Utah University
Cedar City, Utah

J. Patrick McMurray
Chairman, President and CEO
First Security Bank of Idaho, N.A.
Boise, Idaho

R. D. Cash
Chairman, President and CEO
Questar Corporation
Salt Lake City, Utah

Nancy Mortensen
Vice President­Marketing
Zions Cooperative Mercantile Institution
Salt Lake City, Utah

Richard E. Davis
President and CEO
Salt Lake Convention & Visitors Bureau
Salt Lake City, Utah

Roy C. Nelson
Bank of Utah
Ogden, Utah

Constance G. Hogland
Executive Director
Boise Neighborhood Housing Services, Inc.
Boise, Idaho
Chairman of the Board
George F. Russell, Jr.
Frank Russell Company
Tacoma, Washington

John V. Rindlaub
Chairman and CEO
Seafirst Bank
Seattle, Washington

Thomas E. Cleveland
Enterprise Bank
Bellevue, Washington

Helen M. Rockey
Brooks Sports, Inc.
Bothell, Washington

Tomio Moriguchi
Chairman and CEO
Uwajimaya, Inc.
Seattle, Washington

William R. Wiley
Senior Vice President,
Science and Technology Policy
Battelle Memorial Institute
Richland, Washington

Constance Leigh Proctor
Alston, Courtnage, MacAulay & Proctor
Seattle, Washington

The Federal Reserve Bank of San Francisco

1995 Annual Report: 1996 Advisory Council on Small
Business and Agriculture
Bailey S. Barnard
Former President
Heller First Capital
San Francisco,

Vice Chairman
Karla S. Chambers
Vice President
Stahlbush Island Farms,
Corvallis, Oregon

Peter H. Parra
Executive Director
Employers' Training

Walter F. Payne, Jr.
President and Chief
Executive Officer
Blue Diamond Growers
Sacramento, California

Barry Baszile
Baszile Metals Service
Los Angeles, California
Jerry D. Caulder
Chairman, President and CEO
Mycogen Corp.
San Diego, California
Nancy G. Learned
Learned­Mahn, Inc.
Boise, Idaho
Lawrence S. Okinaga
Carlsmith, Ball, Wichman
Case & Ichiki
Honolulu, Hawaii

Leslie Tang Schilling
L.T.D.D., Inc.
San Francisco, California
Peter H. van Oppen
President and Chief
Executive Officer
Redmond, Washington
Bob L. Vice
California Farm Bureau
Sacramento, California
Richard S. Walden
Farmers Investment
Sahuarita, Arizona

The Federal Reserve Bank of San Francisco

1995 Annual Report: Twelfth Federal Reserve District
San Francisco Office
P.O. Box 7702
San Francisco, CA 94120
Los Angeles Branch
P.O. Box 2077, Terminal Annex
Los Angeles, CA 90051
Portland Branch
P.O. Box 3436,
Portland, OR 97208
Salt Lake City Branch
P.O. Box 30780
Salt Lake City, UT 84125
Seattle Branch
P.O. Box 3567, Terminal Annex
Seattle, WA 98124