Federal Reserve Bank of Atlanta

The economy of the South has changed dramatically since the Federal Reserve Bank of Atlanta opened in 1914, and the Atlanta Fed has evolved along with it.

When the Atlanta Fed opened for business, the Southeast was a sparsely populated region of farmland, forests, mountains, and coastal plains. There were only eight cities of 50,000 or more people in the entire six-state region, according to the U.S. Census Bureau. Now, Florida alone has 77 such cities. The population of the six states combined has grown from about 10 million in 1914 to 52 million. Population growth has had huge effects on the economy.

One of the most meaningful shifts has been away from farming to modern service jobs in fields like engineering, law, information technology, and finance. There are also service jobs for cooks, waiters, and hotel clerks. In the Atlanta Fed’s early years, many people in the Southeast worked on farms. In Georgia, for example, census statistics tell us over half of all workers had agricultural jobs in the 1920s, compared to less than 1 percent now.  

In that age’s agrarian economy, it made sense that the Atlanta Fed focused on making sure banks that lent to farmers had enough money in reserve for emergencies. For instance, in 1920 a bad spell in the economy left big cotton buyers like textile and clothing factories with little demand for their products. So, they slashed their cotton purchases, and the price that farmers got plunged about 70 percent.

As a result, farmers had trouble repaying bank loans. To keep “cotton banks” from collapsing all over the Southeast and causing even wider economic damage, the Atlanta Fed made emergency loans to them. Although Federal Reserve officials in Washington did not fully agree with this action, it worked. “It was a rare demonstration of the ability of a Reserve Bank to rescue the economy of its District,” according to A History of the Federal Reserve Bank of Atlanta, 1914–1989.  

The coming years would bring bigger challenges. In the 1930s, the Great Depression forced the Atlanta Fed to try and save banks across the District or at least make sure their failures did not hurt other banks and companies too badly.

Nevertheless, the damage was severe. Unemployment nationally reached 25 percent, higher than it has been since. Dozens of banks in the Southeast closed. The Atlanta Fed had to cut employees’ pay, as it lost money on loans it had made to struggling banks.

However, the head of the Atlanta Fed handled the beginnings of the crisis well enough that President Franklin D. Roosevelt asked him to lead the entire Federal Reserve System. Then called “governor” of the Atlanta Fed, Eugene Black reluctantly went to Washington, DC, in 1932, with the understanding that he would serve for a year. He did so for 15 months.

Ag remains an Atlanta Fed priority

Well after the Great Depression, agriculture remained important to the Atlanta Fed. After World War II, the Reserve Bank launched a program to help farmers and, by extension, the economies of southern communities. At the time, the Atlanta Fed employed economists who specialized in agriculture. And as late as the 1960s, those economists regularly spoke at meetings—often held on farms—of agricultural bankers and farmers.

Agriculture is still important in the Southeast. It’s just not nearly as big a part of the region’s economy because so much other industry has grown up in the District. That reality is reflected in the Atlanta Fed’s bank regulation department. Where a staff of a couple dozen people used to attend to the needs of small agricultural banks, today some 350 Atlanta Fed employees in the Supervision and Regulation Department use sophisticated analytical methods to inspect small financial institutions along with large banks that operate around the world. 

As in most of the Atlanta Fed’s business areas, technology has played an important role in the evolution of bank supervision and regulation. Even before the coronavirus pandemic severely limited travel starting in 2020, Atlanta Fed staff were doing more work through secure electronic connections. Today’s examiners often inspect banks’ financial data remotely to make sure banks are lending responsibly and following the rules.

Processing payments another major part of Atlanta Fed’s story

The Federal Reserve’s Retail Payments Office, or RPO, is based at the Atlanta Fed. The RPO processes electronic payments, including routine transactions like home mortgages, power bill payments, and paychecks deposited electronically into workers’ bank accounts.

The Atlanta Fed and the 11 other regional Reserve Banks have long processed checks, basically making sure the money the checks represent comes out of and goes into the right bank accounts.

That business really picked up as the U.S. economy boomed after World War II ended in 1945. During the war, most of the nation’s factories made military materials rather than cars, appliances, or other consumer goods. So, when the war was over, much of the U.S. population went on a buying spree to purchase products they couldn’t get the previous four years. That meant more cash and checks for the Fed to process.

In 1963, the Atlanta Fed installed electronic check readers. They could process more than 40 times as many checks per hour as the workers who keyed in information by hand.

Several years later, the Atlanta Fed began an experiment with a truly automated payments system. The pilot project launched in the late 1960s eventually grew into a groundbreaking electronic payments system, one of the nation’s first two “automated clearing houses,” which are computer systems that quickly settle huge numbers of payments.

The automated payments system project started a broader push for efficiency across the Atlanta Fed.

The drive to adapt did not stop there. In 1980, Congress passed the Depository Institutions Deregulation and Monetary Control Act, which represented a major change for the Federal Reserve. That law required the Fed to charge commercial banks for services the Fed provided them, like processing checks and transferring money electronically. Federal Reserve Banks were also required to achieve “cost recovery,” which meant making enough money from those services to recover what it cost to provide them. Many Fed officials feared banks would take their business elsewhere once the Fed started charging them. But that did not happen much at the Atlanta Fed.

The decline of paper checks challenges Atlanta Fed

In the late 1990s and early 2000s, Americans began turning to credit and debit cards and later smartphones, tablets, and computers to pay for things. People wrote far fewer checks. In response, the Fed shrank its nationwide check processing operations, from 45 locations before 2007 to only one today. That painful process of laying off thousands of workers was handled in large part by officials at the Atlanta Fed because the RPO (mentioned above) managed check processing operations.

As the Fed now maintains a smaller check processing staff, other research- and analysis-focused work in the payments business has expanded. For example, the Atlanta Fed has developed a team of experts who work closely with people in the payments industry to track developments in financial technology, or fintech, like online banking and digital wallets.

Research has grown in importance

Economic research has also greatly modernized. The Atlanta Fed established the forerunner of today’s Research Department in 1938. In its first couple of decades, the research focused on agriculture. But over the years, the Research Department became increasingly important, as the Atlanta Fed’s job became more about bringing its viewpoint on the economy to making the nation’s monetary policy.

Good monetary policy requires deep understanding of a complex and always-changing economy and financial system, not just in America but across the world. That takes a lot of brainpower.

Today the Atlanta Fed employs more than 30 economists who do research on issues ranging from job markets to finance to complicated methods of making economic predictions called modeling. Where they once spoke to farmers and farm lenders, Atlanta Fed economists now conduct elaborate nationwide surveys of business executives to see where inflation might be headed. Atlanta Fed research economists have created numerous data tools that track employment and wages, inflation, overall economic growth, and more.

In recent years, the Atlanta Fed has also expanded its work aimed at one of the Fed’s main goals—maximum employment. Under the banner of making the economy work for everybody, the Reserve Bank has focused on projects such as using its research to help states and community groups boost low-wage workers up the income ladder.

Profound cultural shifts 

As the economy and the Atlanta Fed’s work have changed, so has the culture of the Atlanta Fed. When Raphael Bostic was named Atlanta Fed president in 2017, he became the first ever African American chief executive of a Federal Reserve Bank. Soon after, André Anderson was named the Atlanta Fed’s first vice president (the Bank's number two position), becoming the first Black person to hold that position at any Reserve Bank.

Those are big steps. The Atlanta Fed had no Black officer—which is one of the Bank’s top 100 or so leaders—until 1976. The Bank’s first woman officer was named in 1927, when Mary E. Mahon was appointed assistant cashier of the Jacksonville branch. But there would not be another female officer appointed for nearly 50 years.  

The Atlanta Fed is part of our larger society. Racism and discrimination were more a part of everyday life and even the law before the 1970s. Like most institutions across the country, before the 1960s the Atlanta Fed employed Black people only in lower-paying jobs like cleaning offices and preparing food. The Bank even kept separate bathrooms for Black and White people until the early 1960s. That was standard practice across the South at the time.

As of August 2021, not only were the Bank’s top two leaders Black, but more than half of its 112 officers were women or minorities.

Tested from inside and out

Those 21st-century Atlanta Fed leaders have been tested by all kinds of problems. A global pandemic, hurricanes, a massive oil spill, and a terrorist attack are among the catastrophes that tried the resilience of the nation, the Southeast, and the Atlanta Fed in the past quarter century.

The coronavirus pandemic that began in 2020 severely and rapidly damaged the economy. Almost overnight, more than 20 million jobs disappeared. The Atlanta Fed’s District includes many beaches, theme parks, and other places that rely on tourism and jobs related to that industry. Those jobs, at places like hotels and restaurants, depend on people gathering. And people mostly stayed home during the pandemic, so a lot of what economists call leisure and hospitality jobs were lost. Thankfully, many of these leisure and hospitality jobs began coming back in the spring of 2021.

The Atlanta Fed closely studied the effects of the pandemic on the overall economy and on communities in the Southeast. Knowledge and tools the Reserve Bank produced have sharpened policies meant to help people and businesses recover from the economic downturn the pandemic caused. For example, the Bank’s Community and Economic Development Department did surveys to track the problems the pandemic caused in low- and moderate-income communities, created an online tool to track the number of people being evicted from rental homes, and introduced another tool to track initial and continued claims for unemployment insurance.

Before the pandemic, the Atlanta Fed dealt with numerous natural disasters. Two dozen hurricanes struck the Southeast since 2000. Hurricane Katrina, which devastated New Orleans and other places in Louisiana and Mississippi, was the worst. The largest oil spill in the nation's history contaminated the Gulf of Mexico and damaged Gulf Coast economies in 2010. All of those events challenged the Atlanta Fed in areas like making sure banks had enough cash on hand for customers.

More challenges are sure to come. Nobody can say exactly what form they will take. But the Atlanta Fed will be as prepared as possible. The Bank has expert staff figuring out what risks might lie ahead and forming plans to work through those risks.

Written by the Federal Reserve Bank of Atlanta, September 2021. See disclaimer.