The Federal Reserve Bank of Richmond resides in an dominating office tower on the James River that looms over downtown Richmond. The office is big, secretive and highly fortified against possible terrorist attack. I've always wondered, why would terrorists want to bomb the Federal Reserve Bank of Richmond? What exactly goes on there that's so important? If we Richmonders don't know why it's worth bombing, how could a bunch of zealots in Afghanistan figure out the bank is a juicy target?
Obviously, the people in the bank itself know something we don't know. The federal reserve bankers play their cards pretty close to the chest, but they do reveal a bit about themselves in the 2007 Annual Report that has just been posted online.
The bank is big. By Richmond standards, it is very big. The bank lists assets of $84.4 billion. Let me put that in perspective for you. The biggest private corporation in Richmond is Dominion, a company that operates electric power plants and transmission lines not just in Virginia but over much of the northeastern United States. Dominion counts assets of a mere $39.1 billion.
The bank's assets are an interesting mix. They include $134 million in coin, $869 million in gold certificates, $12.6 billion in securities denominated in foreign currencies, and $64.6 billion in U.S. government securities. The bank premises and equipment, which include not only the Richmond headquarters but branch offices in Charlotte and Baltimore, are valued at $287 million.
How much of those assets generates real economic activity, though, as opposed to buying, holding and selling massive amounts of U.S. Treasury bonds? Well, the bank reports $3.4 billion in interest income and -- I like this because I never suspected it -- $501 million in foreign currency gains. It's nice to know that someone in Richmond is benefiting from a weak dollar and strong foreign currencies!
As far as tangible economic impact, the Bank reports salaries and benefits of $287 million. Most of that, I would surmise is spent in the Richmond area, but some it undoubtedly goes to employees in Charlotte and Baltimore as well. The Bank also spent $35 million on occupancy expense, which I would think is imputed rent, and $56 million in equipment expense.
The Federal Reserve Bank of Richmond doesn't come right out and say this, but it may be rising in stature among the nation's 13 federal reserve banks. New York no longer has a monopoly in big-time commercial banking. Two of the nation's largest banks are located in North Carolina, part of the Richmond bank's territory, as well as several major regional banks. As First Vice President Sally Green states in the management report:
"During 2007, our on-site examination staff communicated daily with key individuals in these banks, which enabled them to provide data to Fed staff in risk and policy, lending, research, and legal areas. This information has proven to be critical to understanding the complex evolution of financial markets."
Among other noteworthy developments at the bank in 2007, the number of electronic payments exceeded the number of check payments. The rise of electronic banking requires significant changes in infrastructure and payment processing services. The bank also keeps close tabs on regional economic data, cooperates with the Bureau of Engraving to keep ahead of currency counterfeiters and electronically transferred more than $100 trillion (yes, that's trillion) in electronic payments on behalf of the U.S. Treasury.
Now, getting back to our original question... If terrorists knocked out the Federal Reserve Bank of Richmond, they could wipe out the capability to process tens of billions of dollars in electronic payments, knocking out the props of a regional economy (Maryland to South Carolina) that's larger than the economy of most nations. Let's just hope they don't read Richmond.com in the caves along the Afghanistan-Pakistan border!