How the Fed Distributes Billions of Dollars in Cash

Tracy Alloway (0:00)

Hey there, Odd Lots listeners, it's Tracy Alloway and Joe Weisenthal. We are very excited to announce that Odd Lots is going to Washington.

Joe Weisenthal (0:08)

That's right, for the first time, we are going to do a live public Odd Lots recording in our nation's capital. That's going to be March 12th in Washington, DC at the Miracle Theater. And guests will be announced in the coming days, but in the meantime, you can find a ticket link at bloomberg.com/oddlots.

Austan Goolsbee (0:40)

Go forward until the other door is shut.

Mike Kepler (0:48)

We gotta go through, so come on in.

Tracy Alloway (0:50)

Oh, wow. You could definitely get trapped in here.

Austan Goolsbee (0:54)

This is the trap, and everyone must come in, and the door must shut.

Tracy Alloway (1:00)

Very willing.

Austan Goolsbee (1:01)

Now we can go to the next door.

Joe Weisenthal (1:04)

Deep underground, coming through elevator, the sort of monochrome, quietness, the uniforms. It kinda reminds me of Severance a little bit. Has anyone made that observation before?

Tracy Alloway (1:25)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (1:29)

Is this the one where we get severed, Tracy? My name is Joe Weisenthal, and I freely consent to being severed.

Tracy Alloway (1:36)

Joe, we are not getting the severance procedure, but we are about to go to a place that not many people get to see. We are going deep into the vaults of the Federal Reserve Bank of Chicago to tour its cash operations and get an inside look at how money is actually distributed.

Joe Weisenthal (1:53)

All right, yes. Okay, welcome to cash. In this episode, we take a walk through the basement of the Chicago Fed, and we learn all about how the Central Bank processes and delivers cash. Cash operations, while not, quote, highly classified, like in the inner workings of The Office and the show Severance, they're well beyond the public eye for obvious reasons. So this is a rare look, or a listen, I guess, at the inside.

Tracy Alloway (2:18)

Yeah, and you're not actually allowed to take any pictures or videos inside the vaults, so an audio format actually does pretty well here. And this is all really interesting because we're used to thinking about the Fed in terms of monetary policy, raising or cutting interest rates to try to keep inflation in check and unemployment low. And there's stuff like bank regulation. Of course, we talk a lot about that on the show. All of that can feel very theoretical, but there's this very physical side to the Fed as well.

Joe Weisenthal (2:49)

That's totally right. The cash in your wallet has got to come from somewhere, right? And a lot of it comes from the Fed. Or at least it moves through one of the 12 Federal Reserve Banks, the Bureau of Engraving and Printing actually makes the money, and then it gets delivered and processed through the Fed banks.

Tracy Alloway (3:05)

And the Chicago Fed building itself, I mean, it kind of looks exactly like how you might picture an old-fashioned bank. It has these giant, beautiful, neo-classical columns on the outside. And inside, inside is where the magic happens.

Austan Goolsbee (3:26)

We set up a system in the United States with 12 reserve banks around the country because in 1913, as today, people were deeply uncomfortable with the financial system being run exclusively by New York City and Washington, DC. So they wanted input from all around the country, and one component of the job is monetary policy like we talk about all the time.

Joe Weisenthal (3:56)

That's Austan Goolsbee, president of the Chicago Federal Reserve Bank, and you've probably heard him on the podcast a couple of times before, very recognizable voice, and he's usually talking about the macro environment, monetary policy, things like that.

Tracy Alloway (4:11)

But now you're going to hear him talk about something very different, being the bank behind the banks, the one that actually provides them with cold hard cash.

Austan Goolsbee (4:22)

We're also a real live working bank, and we got 17, 1800 employees. We are a bank to banks, and they have a master account. We pay interest on their deposits into that account, which are bank reserves, and we provide Fed wire. We do ACH direct deposit. We do FedNow. And one of the things we do is cash. It's one of the Fed financial services. And so if one of our member banks wants cash for their ATMs, they'll send in and say, just like you, in your account, you go down the ATM, you take some cash out. They say, we want cash to put in our ATMs, so take that out of our master account. They send a brinkstruck over here, and they place an order. We count it out. We give it to them. If they have too much currency, they send it to us in the same brinkstruck. We take it in. We run it through machines. We count it. We pull out anything that's been signed or somebody spit on it or, you know, it's dirty and shred it. We process it, put it in our vaults, send it out the next day, and we get a bunch of shipments of brand new money from the Bureau of Engraving and Printing. So it's a very live operation, and you're going to see it. There are a lot of people work there. There's a lot of machinery, and it's pretty neat.