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While the 1920s began with sharp though brief disturbances as part of the final adjustments to a postwar economy and ended with a dramatic stock market crash that evolved into the Great Depression, the decade was otherwise a period of relative stability, especially in the Sixth District. Once the long and frantic days of World War I and the immediate postwar period had ended, fiscal agency duties subsided and routines developed. Atlanta had the largest Branching network in the System but remained one of the smaller Reserve Banks and played only a modest role on the national scene. As many predicted, the New York Fed, led by its governor, Benjamin Strong, defined the leading edge and explored the frontiers of open market operations and domestic and international monetary policy. The Atlanta Bank, with its organizational problems and faulty credit procedures now cured, attracted little concern from Washington.

The Atlanta Fed was one of the least expensive to operate, due to lower wages and land costs in the South. After reviewing System operating results for 1923, Wellborn told his board, "[T]he Federal Reserve Bank of Atlanta shows the least number of employees and the second lowest total expense of any Federal Reserve Bank in the System, notwithstanding the fact that it now operates four Branches and two agencies."

Atlanta ranked second (to Chicago) for the final quarter of 1923 in number of notes issued, seventh in the volume of currency handled, and last in transit volume, a reflection of the resistance to par clearing in the District. Atlanta's currency handling costs were high but only because it verified its counts one more time than the other Banks, Wellborn explained.

The earnings of the Atlanta Bank, once the inflationary wave after World War I passed, declined from their 1920 peak of $7.5 million and ranged from $2 million to $4 million between 1922 and 1929. Erratic earnings were taken in stride as somewhat accidental. During that period, they reflected monetary policy objectives, credit demand, government borrowing, and prevailing interest rates. As W.P.G. Harding explained during a 1922 visit to the Atlanta Bank, "[T]here would always be lean years in the Federal Reserve System, and good years, and that there was no cause for undue alarm when earnings were not large."

Slow start in supervision and regulation
The banking crisis of 1920–21, while it may have vindicated the policies of Governor Wellborn, left the Atlanta Fed as creditor to a group of damaged banks. "We are still confronted with a serious situation in handling a number of member banks which are already over extended, but which from time to time are pressing us for additional accommodations," Wellborn reported in 1922. "Their credit on the outside is evidently impaired, and they are necessarily depending upon our Bank entirely for their support."

Some of the banks eventually recovered; others finally failed, but the persistent problem brought attention to the Bank's role in examining, supervising, and regulating its members. The Federal Reserve Act gave the Reserve Banks authority to examine member banks, but this power came to be exercised slowly. Bank examinations were ordered, as needed, by the Federal Reserve agent. Apparently few were needed, because written records are largely silent on this subject prior to the banking collapse of the early 1930s.

One reason for the slow start was that most Fed member banks were national banks examined by the staff of the Comptroller of the Currency. State banks were examined by state banking departments. As a practical matter, the Atlanta Fed seems to have examined banks when they applied for credit and to have exercised regulatory suasion through access to rediscount privileges.

An examination division was organized in the early 1920s. In a letter, Chairman McCord says he "established the examination division" during his term as chairman, and the minutes record the resignation in 1922 of an assistant Federal Reserve agent in charge of the department of bank examinations.

Bank examination seems to have been regarded prior to 1930 as a weak instrument for effecting safety and soundness. Such concerns evoked different measures, as would be seen in Governor Wellborn's alarm over the Florida land boom of the mid-1920s. The Fed moved to straighten out the management of faltering banks in ways that appear informal today. When the Heard National Bank in Florida was found to be in "very deplorable condition" in 1916, J.B. Pike, cashier of the Atlanta Fed, resigned his post temporarily to take over as president of Heard National. He returned to his old job at the Fed 17 months later.

Making the case for membership
Declining membership returned as a nagging problem in the 1920s. The turbulence of the 1919–21 period had demonstrated the value of a central bank and brought to the Bank a new group of members, but the return of prosperity was accompanied by declining Fed membership. From a peak of 543 in 1922 (including 147 state-chartered banks), membership subsided slowly to 464 in 1927. When McCord proposed a "Member Bank Relations Department" in 1922, a skeptical Wellborn opposed the program, but directors backed McCord this time. Beginning in 1924 several of the Bank's senior officers were enlisted to go into the field and call on prospective members. They failed to stop a decline in membership, however, and by 1927 Wellborn was trying to explain why 19 state banks had dropped their membership in recent years: "[T]he small banks at the present time are earning very little, and take the position that it is expensive for them to hold membership in the Federal Reserve System because of their loss of exchange charges and interest on their reserve deposits with us," he said.

Federal Reserve Bank membership in the Sixth District, 1914–1941.

He had argued the question of the value of membership in 1925 with the president of a small member bank in Lineville, Alabama, who asked why a small bank should sacrifice interest on its reserves, forgo exchange charges, and own stock yielding 6 percent in order to belong to the System. Wellborn rose to the challenge. "I am inclined to believe that you are asking these questions because at the present time you are not having occasion to borrow from us, but you will recall that there was a time when you availed yourself of this privilege," he wrote. "I am sure you found this service very helpful in 1920-21; and if you had not been a member of the System, you would have experienced considerable uneasiness through not having this great financial bulwark back of you to be called upon in times of stress."

Containing the Florida land boom
Times of stress in the Sixth District did not entirely lie in the past or the more distant future in 1925. At the time Wellborn was reminding an Alabama banker about a past crisis, he confronted a present one in Florida. An extraordinary land boom there was alarming the Reserve Bank's leaders and causing them to brace for the Bank's second financial crisis.

When the Sixth District was formed in 1914 Florida was a sleepy peninsula of idle land with one financial center, Jacksonville, and a lot of swamps and beaches. Data presented to the Organization Committee in 1913, for example, showed Florida with one of the smallest economies of any southern state. Florida had bank deposits at that time of $61 million, behind Georgia ($144 million), Tennessee ($99 million), and Alabama ($96 million). Only Mississippi ($53.5 million) had less. Manufacturing data for 1909 showed Florida dead last with $73 million, behind even Mississippi ($80.5 million) and dwarfed by Georgia ($203 million). A handful of business tycoons had discovered the delights of south Florida (and completed, in 1912, a railroad line to Key West), but the potential of the state destined to have the most vibrant economy in the District was largely unnoticed before the 1920s.

During the 1920s however, favorable publicity and improved transportation kicked off a scramble to buy, build, and sell real estate that sent land prices soaring and caused shortages of labor and materials. Demand for credit ballooned, fattening the real estate loan portfolios of Florida banks and causing them to grow rapidly. Officers of the Atlanta Fed did not have to leave home to see the consequences of the boom. The Florida banks were spending liberally to hire Atlanta bankers, including several members of the Fed's own staff. Deputy Governor Campbell had to appeal to the Board in Washington for permission to pay higher salaries; due to "the close proximity of our bank to the developments now going on in Florida, we have lost and are losing some of our best men to banks in that state," he explained.

Land speculation posed a different problem for the Atlanta Fed than the 1920 crash in commodities prices. Since mortgage loans were not eligible for rediscounting, there was less the Reserve Bank could do to help member banks in a real estate crunch. And while Wellborn was sympathetic to the plight of farmers victimized by drought, weevils, foreign wars, and unstable markets, he was disgusted by the kind of wheeling and dealing he saw in Florida. In a letter to his son in October 1925, at the height of the boom, he said, "I have been a spectator in the midst of the most active land speculation the world has ever had. . . . Everything is magnified and exaggerated. . . . The bright sun shines upon the largest and most varied collection of thieves ever before gotten together in any clime—they hesitate at nothing."

Back in Atlanta he predicted "a very sudden and tremendous decline in bank deposits" and urged that the Reserve Bank "warn our banks to keep their funds in liquid condition, if possible." Member banks were urged to "hold their loans down to their local customers, and keep their funds with strong banks; to buy high-class commercial paper and Government securities." Nonetheless, by December 1925 deposits at member banks in Florida had grown to $446 million, up from $166 million 18 months earlier.

The Bank established a $3 million revolving currency fund at the First National Bank of Miami in January 1926 to provide quick liquidity. Another such fund was being put together in Tampa when the Federal Reserve Board overruled such measures. Feeling that a collapse was imminent, Wellborn set out for Florida on January 10, intent on visiting every member bank in the state. He warned them that their new deposits soon would melt like snow in the sun.

By spring, bank failures did materialize in Florida, then spread to Georgia when a chain of small banks linked to two Florida financiers failed. In the summer of 1926, 41 Florida banks and 83 Georgia banks were closed, but only one in each state was a member bank. "While these failures in Georgia have been disastrous to their own communities, the banks were small, and the general economic and business situation in the state has not been materially affected," Wellborn assured his board. The Atlanta Bank worried about a few large member banks in Florida that had borrowed from correspondents and whose failure might precipitate other failures.

What was left of the Florida land boom was washed out by a September hurricane that devastated Miami, killing 370 people and destroying $100 million in property. Yet the banking crisis was not as serious as some had feared. Deposits fell, but not so drastically as to cause the failure of large banks, and alarm subsided by October. The danger had been recognized not only by the Federal Reserve Bank but by the major commercial banks in Florida. When the deflation came, most banks were ready. By helping to sound the alarm, the Atlanta Fed probably helped to nip the problem in the bud.

The titan departs
Max Wellborn retired at the end of 1927, bringing to the Bank a palpable sense that an era was ending. He had been a dynamic, forceful, and charismatic leader who had played the decisive role of steering and shaping the Bank through its first 12 years. They had been years of growth. By December 31, 1926, the Bank's surplus stood at $9.6 million, and its staff had grown from 27 to 430 during Wellborn's tenure. As his term drew to a close, his colleagues honored him, particularly for his daring credit policy in 1920 and his "determination to aid consistently deserving member banks."

Wellborn returned to his country estate, "Maxwellborn," outside Anniston, where he lived for another 30 years and died at the age of 95. For all his accolades, he went out as an embattled figure. The 1926 battle over the Cuban excursion had been bruising, and the message that three members of the Federal Reserve Board wanted Wellborn out was a gauge of how things stood in Washington. Although one newspaper account pointedly referred to Wellborn's "voluntary retirement," cashier M.W. Bell implied otherwise in a 1941 letter; the Federal Reserve Board "ordered the Board of Directors of the Federal Reserve Bank of Atlanta to elect another Governor," he wrote. In these early years of the Federal Reserve, success in the District did not necessarily equate to success in the System.