The Federal Reserve Centennial: The Atlanta Fed's Early Years

Towering prominently in the middle of the lobby at the Jacksonville Branch of the Federal Reserve Bank of Atlanta is a 10-foot high replica of the largest note ever printed: the $100,000 note. This note was never in general circulation but was a gold certificate used to transfer funds between Federal Reserve Banks. The front side of the note is faced with a portrait of President Woodrow Wilson, who created the Federal Reserve when he signed the Currency, or Owen-Glass, bill (also known as the Federal Reserve Act) into law in 1913.

Visiting tour groups sometimes wonder why Wilson's face is on the largest note ever printed (we tell them, of course—he signed the Currency Act!). But they are also curious about how the Federal Reserve got to Florida and exactly how the Atlanta headquarters was chosen. As the System observes its first hundred-year mark, digging into the Sixth Federal Reserve District's own history and early beginnings provides an interesting narrative that well illustrates the strength brought about by a decentralized organizational structure like the Fed's. In Jacksonville, our roots are very deep—we will be reaching our own branch centennial in just five years.

What follows are some notable highlights of the Federal Reserve Bank of Atlanta's early years, along with links to resources for teaching the history of the Fed as it connects with the history of the nation during the early twentieth century.

The beginning
After being signed into law at the end of 1913, the first task in carrying out the newly signed Federal Reserve Act was to choose where the 12 Federal Reserve Banks would be located. A Reserve Bank Organization Committee made up of the Secretary of the Treasury, the Secretary of Agriculture, and the Comptroller of the Currency traveled the country to scout out locations, which were to be chosen for both their location and the business needs of the region. Besides Atlanta, a number of southern cities vied for the honor, including Savannah, Charleston, New Orleans, and Birmingham. Once the cities were decided upon, districts were to be drawn around them. By the summer of 1914, the 12 Federal Reserve Banks had been designated, and Atlanta had elected its first Board of Directors.

On November 15, 1914, the Atlanta Fed opened with a staff of just 13, including Governor Joseph A. McCord, an Atlanta banker, and Max Wellborn, an Alabama banker who would succeed McCord as governor in 1919. ("Governor" was the term for what is now the role of president.) The Bank issued currency and cleared checks. Most important in the region's one-crop cotton economy was the Bank's role in providing credit to member banks by the rediscounting (or buying) of their loans, enabling them to provide liquidity to local farmers. Demand for currency to pay cotton farmers was so strong that the Atlanta District was first in the System in currency distribution relative to its capital. These early leaders set a goal to diversify the southern economy.

Although the Atlanta Fed got off to a slow start—with only one member bank its first year—by the end of 1919, it had a $3 million surplus, thanks in large part to earnings from war-time Treasury bonds and a strengthening economy. As economic activity began to grow in the South, the Federal Reserve Bank of Atlanta also expanded, outgrowing its original headquarters and relocating to a new space by 1918. This Marietta Street location would serve as the Bank's Atlanta home until 2001, when the Bank moved to its current Peachtree Street building. In fall 1915, a branch office opened in New Orleans, the first Reserve Bank branch in the Federal Reserve System. Although Atlanta had been chosen to be headquarters for the Sixth Federal Reserve District, New Orleans was actually considered the financial center of the South. Consequently, its location, more than 500 miles from Atlanta, necessitated an office for the city that had been a strong contender for a Bank of its own. Branches were added in Birmingham and Jacksonville in 1918, and in Nashville the following year. System branching was thought to have ended with the addition of the Charlotte branch of the Richmond Fed in 1928. However, the Sixth Federal Reserve District had the distinction of opening the final branch in the System when it opened the Miami Branch in 1975. This new branch was considered necessary to service the increasing needs of a large and dynamic Florida economy.

The Cuban Connection
Florida was also at the center of an interesting but short-lived adventure in the Bank's history during the 1920s. After the Spanish-American War, the U.S. dollar became Cuba's official currency. Because the Atlanta Fed's Jacksonville branch was the closest bank to the country, it became responsible for issuing the $40 million dollars in U.S. currency circulating there. In 1923, the Atlanta Fed opened a branch office in Havana, which would provide Federal Reserve Bank services to U.S. banks operating on the island. At first, Atlanta shared Fed operations in Cuba with the Boston Fed—which had been awarded the Cuban cable business—but within four years, all Cuban operations were transferred to Atlanta. In 1926, the Atlanta Bank quelled a financial panic on the island, rescuing the Cuban banking system from collapse with an injection of more than $35 million dollars. Much of that money was delivered in person by officials of the Atlanta Fed. However, after this success, Cuban business activity began to decline, and the Branch began making losses. Just 15 years after it was opened, the Havana office closed in 1938.

The post-World War I economy, the Great Depression
At the beginning of the 1920s, Governor Wellborn presided over a bold strategy of providing liquidity to support farmers and their banks when a post-War cotton bubble threatened the region's economy. The decade would then be a quiet one until problems arose in Florida—a collapse of the state's land boom required Fed intervention in 1926. Further intervention was needed in 1929 when a Mediterranean fruit fly invasion destroyed much of the state's valuable citrus crop, leaving growers unable to pay their bank loans. Other District banking crises soon followed with a series of bank runs in Havana, Nashville, and Knoxville in 1930. As the Great Depression worsened, the Atlanta Fed continued in its role as a source of liquidity in an economy that was still largely agrarian and dependent on "King Cotton." Economic conditions also resulted in the Bank overseeing a number of bank closures across the region.

Franklin D. Roosevelt's New Deal reforms brought many changes to the Bank's operations, beginning with the departure of Governor Eugene R. Black, who left the helm of the Atlanta Bank to serve a short-term assignment as Chairman of the Federal Reserve. To date, he is the only Atlanta Fed governor, or president, to have served on the Board. In 1933, several Sixth District states created bank "holidays" in the weeks leading up to FDR's national bank holiday, which for six days halted all nonemergency banking operations and permanently closed insolvent financial institutions.

A new focus on monetary policy
The creation of the Federal Deposit Insurance Corporation expanded the work for Fed bank examiners, and in 1934 the Atlanta Bank returned $7.7 million in gold back to the U.S. Treasury in exchange for gold certificates, as required by the Gold Reserve Act passed that year. The Banking Act of 1935 brought further change, as the creation of the Federal Open Market Committee centralized the workings of the Fed's monetary policy function. Prior to 1935, each Federal Reserve Bank carried out its own monetary policy in its own district. Federal Reserve officials began to understand the power of monetary policy to influence the national economy, and realized they needed to take a more unified approach. The System then renamed the heads of each of the 12 Federal Reserve Banks "presidents." "Governor" was reserved for those sitting on the Federal Reserve Board of Governors in Washington, D.C.

In keeping with the new emphasis on the Fed's role in monetary policymaking, the Atlanta Fed hired its first economist in 1938. As World War II began, wartime production demands would transform the Sixth District's traditional agricultural base into a modern industrial economy, bringing new opportunities and challenges for the central bank's southeastern center of operations.

Historical resources for educators
You may know that the Federal Reserve houses a wealth of free resources for economics and personal finance teachers, from lesson plans and activities to videos, podcasts, and online courses. But did you know that the Fed is also an excellent source of lessons and resources for history teachers? The 100-year history of the Fed is inextricably intertwined with the history of the nation. In fact, many of the eras of the last century are still identified by the economic conditions that prevailed at the time: the Roaring Twenties, the Great Depression, the Great Inflation, and the Great Recession.

Materials of significance for educators teaching Fed history include the Federal Reserve Bank of Atlanta's Classroom Economist series, which has a module on the history of central banking. Chairman Bernanke's Georgetown University lecture series, which is available online along with downloadable discussion questions, opens with a description of the Fed's origins, mission, and actions during the Great Depression and covers Fed history through the recent financial crisis. The Fed's history is also included as a theme for a chapter in the Philadelphia Fed's new video series, The Federal Reserve and You. And if you are looking for the history of central banking or finance before 1913, the Philadelphia Fed is a great source for publications, lessons, and other resources on the colonial period and early central banking eras. Also, you can find numerous history publications at the Federal Reserve's resource clearinghouse, For a list of history-related materials and lessons found there, see the link in the Resources section below.

The Federal Reserve Bank of St. Louis has included its popular Great Depression curriculum in its lineup of free online courses at its econlowdown web site. The curriculum is also available in a printable format, and the main landing page includes numerous links to primary sources such as pictures, cartoons and art, historic newsreels, audio recordings, oral histories, and video interviews with people who lived through the era. The Federal Reserve Bank of St. Louis often addresses history topics in its Page One Economics Classroom Edition newsletter and activity guide, and is also the home of FRASER, the archival system of the Federal Reserve. This vast collection not only contains data, statistics, and annual reports, but also primary sources going back to the 18th century. Here, you can find copies of items such as Andrew Jackson's veto message to Congress in 1832, which ended the operations of the Second Bank of the United States, and Alexander Hamilton's report to the Secretary of the Treasury arguing in favor of the establishment of the country's first central bank. You can even find more modern contributions, such as President Roosevelt's proclamation declaring the 1933 bank holiday, records from the personal papers of President Harry S. Truman, and Chairman Greenspan's testimony to Congress following September 11.

The economic lessons from the historical events of September 11 and Hurricane Katrina are also the subjects of video curriculum from the Federal Reserve Banks of San Francisco and Atlanta. For the essential primary Fed source, the full text of the Federal Reserve Act is available at the Board of Governor's website.

From agriculture to aerospace
Since its founding, the Federal Reserve Bank of Atlanta has presided over a southern economy that has seen remarkable change. Although cotton is still an export staple in some Sixth District states, the Atlanta Fed's early leaders would likely be proud to see a modern diversified economy that is just as well known for its automobile and aircraft industries as its agriculture. In a 1989 book written for the Atlanta Fed's 75th anniversary (a book that provided excellent source material for this article), the writer, historian, and journalist Richard H. Gamble, wrote, "The surprises can hardly be over, and by the time the Bank is 100 years old it may have taken turns no one can predict today." Prophetic words, and as the Federal Reserve Bank of Atlanta reaches its own centennial in 2014, they will no doubt be just as applicable to the next 100 years.

Additional Resources

By Lesley Mace, economic and financial education specialist with the Jacksonville Branch of the Federal Reserve Bank of Atlanta

November 6, 2013