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Episode 26 - The Twelve Cities, Part I

The beginning of our series on the fascinating story behind the choosing of the twelve Federal Reserve Districts and their city headquarters. Also, a fun and new way to look at the money in your purse and wallet!


Welcome to The Bankster Podcast. I’m your host, Alexander Bagehot. Every episode we dive into what I call The Centralverse! The incredibly fascinating and ever more consequential world of central banking. This is Episode 26 - The Twelve Cities, Part I.

I’m excited to dive into one of the defining characteristics of the Federal Reserve System - the decentralization of power across the country in the shape of twelve districts. On the next two episodes we will take a look at the twelve districts from two perspectives: the first through the lens of US currency and the second through the lens of history. The podcast is going to go through some transitions over the next few weeks. I’ll be announcing the changes in an upcoming episode. But for today, suffice it to say, I am very excited about the upcoming changes, and they are the result of months of preparation and thought.

The next couple of episodes may be a little bit shorter than usual. But then again, I find myself saying that at the beginning of a lot of episodes and then I end up covering enough material that it turns out normal length. So anyways, be on the lookout for future changes in the podcast and don’t be afraid to send in your feedback about what you’ve liked and disliked about the podcast so far. It’s hard to believe we’ve been going for nearly a year.

So without delay, let’s jump right into part one of The Twelve Cities.


Fed Districts on the Money

If there’s one thing that interests everyone, without exception, it’s money. Try and think about a part of your life that hasn’t been affected by money in one way or another. I tried and honestly couldn’t come up with a part of my life that isn’t influenced in one way or another by money, for better or worse.

Physical money, the stuff that is in your wallet and purse (by the way it’s made of cotton and linen - not paper) is probably what you think of when you think of money. However, as of January of 2017, the amount of currency in the economy is actually only about 10% of the total amount of money in the economy. And if you think about it that makes sense. Think of all the money that you have in your purse. Now think of the amount that’s in your bank account. The physical money is a small portion of the total.

To loyal listeners of the podcast who were with me from the beginning, or for those who have gone back and listened to the early episodes, one of my first topics concerned the relationship between the Treasury department and the Federal Reserve.

The episode came after the announcement by the Treasury Secretary that the next iteration of $5’s, $10’s, and $20’s would feature portraits of civil rights leaders and early women’s rights leaders. And as a quick reminder - this is how the money gets to your bank: (1) Every summer the Board of Governors of the Federal Reserve send in an order to the Treasury Department for how much currency they will need printed for the following year; (2) The Bureau of Engraving and Printing, a division of the Treasury Department, then prints the physical money; (3) Each Federal Reserve Bank then orders specific amounts throughout the year depending on the need; (4) your bank or credit union, who has an account at the Federal Reserve then can come and withdraw cash from their account [not unlike how you can withdraw cash from your checking account].

Now, there are hundreds of features on the physical notes, but today I want to share with you just one. It’s a fun one that I learned a few years ago and I think of it every time I get a new piece of cash. This specific feature is applied at stage three in the process that I just described. The currency that each Federal Reserve Bank receives is slightly different. In fact, there’s a simple way of looking at the money and knowing which of the twelve Federal Reserve Districts the money originated from.

The distinguishing characteristic is a letter and number on the far left side of all of the notes. The number corresponds to one of the 12 districts. And the letter next to the number is simply that letter in the alphabet. So A1 is Boston. B2 is New York. C3 is Philadelphia. And so on and so on, until you get to L12 for San Francisco.

So now, if you haven’t already, you should pull out your purse or wallet and look at the cash you have. Chances are, especially if you live in a college town or a big city, your purse will have a whole range of bills. It’s always a fun reminder to me when I get change back and see where in the country the currency came from that our economy is wide and very interconnected. One quick side note - the one dollar bills only have the number (for some reason that I haven’t been able to find in my research they don’t include the Federal Reserve District letter that corresponds to the number).

So that’s your fun fact for the day. Every time you get a new bill you can think of The Bankster Podcast and how our physical money represents the interconnectedness of our country’s economy and the fact that our country is divided into 12 districts - each with a Federal Reserve Bank city.

On the next episode we will dive into the history behind the choosing of the Federal Reserve District cities and some new research that has come out over the last few years analyzing the decision making process. There is speculation about political favors and all sorts of conspiracies about how the district’s were divided and the cities chosen. We’ll talk about what we know and what we don’t know in the next episode.


As always, feel free to drop me a line with comments and questions about the Centralverse or the Bankster Podcast via email (alexander@thebanksterpodcast.com) or Twitter or Facebook.

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Today’s episode was written, edited, and produced by me, Alexander Bagehot. I dedicate this episode to the many hands that helped me move - I owe you all! To the rest of you, thanks for listening! I’m Alexander Bagehot, and I’ll see you next time on The Bankster Podcast!


Episode 27 - The Twelve Cities, Part II

Episode 27 - The Twelve Cities, Part II

Episode 25 - The Old Lady on Threadneedle Street

Episode 25 - The Old Lady on Threadneedle Street