Currency control. A critical function of the Federal Reserve banks is to hold cash deposits from financial institutions and redistribute that cash as needed. For example, during the holiday season, banks may need more cash on hand and will request extra currency from the Federal Reserve Bank. Once the holidays are over, banks may find that they have too much cash and will deposit some of it with the Federal Reserve.
As the cash flows in and out of the Federal Reserve Bank, machines check the bills, verifying the amount within a certain time frame and pulling the damaged bills out of circulation. This can be a significant amount of bills as the life span of $1 bills is only about 10 months. These damaged bills are destroyed and replaced with new ones obtained from the Bureau of Engraving and Printing.
Each processing machine verifies 100,000 notes per hour. Counting the money is important because banks sometimes make mistakes—putting a $10 bill in place of a $20 bill, for example. Each of these errors must be documented.
The machines also pull out counterfeit notes. Though the number of counterfeit bills is less than 1/100th of 1 percent of all money in circulation, each counterfeit bill must be logged, counted, and turned over to the U.S. Secret Service.
The currency processing areas are enclosed behind clear glass walls, and the employees’ activities are under constant scrutiny both by supervisors watching through the glass walls and by high-resolution surveillance cameras that feed into the building’s central monitoring station.
There are numerous other security safeguards in place—workers carry access control cards and must wear protective smocks that have no pockets, for example. Moreover, there is a stringent hiring process. “Our screening and hiring program is comprehensive, so our track record regarding employee theft is very good,” says Robert McCarthy, manager of public affairs for the Federal Reserve Bank of Philadelphia. “We have very few incidents,” he notes.
Off-site screening. There have been many technical changes at the Fed in the last decade. For example, 10 years ago, the Philadelphia branch processed 7 million paper checks each night; now they process none, because all such transactions are handled electronically.