February 13, 2025 • 27 mins
We all know that the Federal Reserve tries to stabilize the economy by raising or cutting interest rates to balance inflation and unemployment. But the central bank’s mandate actually goes beyond monetary policy. The Fed is also responsible for reviewing and distributing billions of dollars in cash to banks all over the US. In this episode, we go deep inside the vaults of the Federal Reserve Bank of Chicago to see how physical money actually gets moved around. Chicago Fed President Austan Goolsbee is our guide for the tour, and you’ll hear how the central bank gets its cash, how it checks it for authenticity and condition, and how it gets currency to where it needs to be.
Read more: Fed’s Goolsbee Sees Uncertainty Driving Shallower Rate-Cut Path
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Hey, there are aud Loots listeners. It's Tracy Alloway and Joe.
Speaker 2 (00:03):
Why isn't thal.
Speaker 1 (00:04):
We are very excited to announce that Oddlots is going
to Washington That's right.
Speaker 2 (00:09):
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 twelfth 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 dot com slash odd.
Speaker 3 (00:27):
Lots, Bloomberg Audio Studios, podcasts, radio news.
Speaker 4 (00:40):
Go flow it until the other door.
Speaker 5 (00:41):
Shows and there's gonna be one more we got to
go through, so come on and.
Speaker 1 (00:50):
Oh wow, you can definitely get trapped in here.
Speaker 4 (00:54):
This is the trap and everyone must come in and
the door now we can go to the next.
Speaker 2 (01:02):
Door, deep underground, coming through elevator. The sort of monochrome quietness,
the uniforms. This kind of reminds me of severance a
little bit. Has anyone made that observation before?
Speaker 1 (01:25):
Hello, and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 2 (01:29):
Is this the one where we get severed? Tracy my
name is Jill Wisenthal, and I freely consent to being severed. Joe.
Speaker 1 (01:36):
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.
Speaker 2 (01:53):
Oh 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 will 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 listen,
(02:16):
I guess at the inside.
Speaker 1 (02:18):
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
(02:38):
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.
Speaker 2 (02:49):
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 twelve Federal Reserve Banks, the Bureau of
Engraving and actually makes the money, and then it gets
delivered and processed through the FED banks and the Chicago
FED building itself.
Speaker 1 (03:07):
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.
Speaker 4 (03:26):
We set up a system in the United States with
twelve reserve banks around the country because in nineteen thirteen,
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
(03:50):
one component of the job is monetary policy, like we
talk about all the time.
Speaker 2 (03:56):
That's Austin Gouldsby, 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 you know,
talking about the macro environment, monetary policy, things like that.
Speaker 1 (04:11):
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.
Speaker 4 (04:22):
We're also a real, live, working bank, and we got
seventeen eighteen hundred employees. We are a bank two banks,
and they have a master account. We pay interest on
their deposits into that account, which our bank reserves, and
we provide FED wire. We do ach direct deposit, we
(04:46):
do FED now 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 ATM, so take that out of our master account.
(05:08):
They send a brainstruck 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 brainstruck. 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
(05:31):
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 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
(05:51):
of machinery, and it's pretty neat.
Speaker 2 (05:56):
Pretty neat is putting it mildly, because it turns out
that Austin and Lusts giving the tours of the cash shop,
something that was totally evident while we did it. I
think most people on finance and economics love money, but
Austin really loves money.
Speaker 1 (06:11):
Yeah, So join me and Joe and Austin on this
special edition of odd Blots as we follow how money
actually moves through the Federal Reserve system. We are standing
in the lobby of the Chicago Fed building. There's a
beautiful staircase and a balcony that looks down on this
(06:33):
gorgeous atrium. Apparently there used to be machine guns mounted
up there, and now there's security guards at the entrance,
the Fed's own police force.
Speaker 2 (06:43):
And as Austin mentioned earlier, the Chicago FED was established
in nineteen fourteen, and back then investors didn't have much
reassurance that their bank deposits were, you know, actually safe.
And after months of back and forth, Congress passed the
Federal Reserve Act, establishing the FED Reserve System and the
twelve reserve banks that cover the entire.
Speaker 1 (07:03):
Country, and the Chicago FED covers parts of Illinois, Indiana, Wisconsin, Michigan,
and the state of Iowa. And as we've said before,
we are used to talking about whether the FED is
doing a good job on things like inflation and unemployment,
but we don't actually talk that much about its other
big job, which is managing the money.
Speaker 5 (07:24):
We know when we're doing a good job when you
can go to an ATM and there's money in it.
You can go to a grocery store and you can
pay in cash and they have changed to give you
in currency.
Speaker 2 (07:34):
Mike Kepler is an executive vice president of the district's
Cash Operation and the Chicago FED Central Bank Service Area.
Speaker 5 (07:41):
So essentially I oversee the full currency operation between our
Chicago and Detroit offices that includes everything from processing the
currency on the high speed machines to paying our orders
to financial institutions in our district and taking money in.
Speaker 1 (07:57):
Even though we live in a world that's full of
digital payment systems, cash still plays a role in everyday transactions.
Speaker 2 (08:05):
Cash is Lindy, that's right, Jo.
Speaker 5 (08:07):
It's extremely important. So you know, think about things like
hurricanes or weather related events or power outages where electronic
payments don't work. In fact, I was in the store
the other day and their credit card system was down,
and fortunately I had cash in my pocket, so I
was able to jump the line and get my stuff
and get out the door while theres were kind of
waiting for the credit card machine to pop back up.
(08:29):
So it is very important, and not all consumers use
just one payment type. So in fact, you can imagine
in today's times, electronic payments, debit cards credit cards are
the primary two vehicles that folks use for transactions, but
cash is a third, very close third for payments.
Speaker 4 (08:46):
And look, the thing is as the share of payments
that are made electronically mobile banking using cards rises, people
have this tendency to say, oh, well there is no cash.
I don't even see cash. If you go look, you
and you can look off fred. It's on there. Currency
(09:06):
and circulation as a share of GDP is over ten percent,
and that's among the highest percent on record, or at
least since the nineteen eighties that you can find on FRED.
That's double what it was in two thousand and eight.
That's like four times higher as a percent than it
(09:30):
was forty years ago. And it's shockingly large per person.
It's like forty eight hundred dollars per person on average
in money.
Speaker 1 (09:44):
Joe, I don't know about you, but I always keep
four eight hundred dollars in cash just in case I
have to spontaneously buy, like I don't know, a MacBook
Pro or something.
Speaker 2 (09:53):
Emergency lumber purchases, maybe a thousand chickens for you.
Speaker 1 (09:57):
That's sure.
Speaker 6 (10:01):
Hi, Hi, teat to.
Speaker 4 (10:09):
The amazing Ami Colorado.
Speaker 6 (10:11):
Welcome to cash.
Speaker 1 (10:13):
Getting into the basement where the Chicago Fed's cash ops
actually are is a process.
Speaker 4 (10:19):
There's a lot of cameras, there's a lot of security,
and there's a lot of rules. So don't don't go
fishing in your pockets, don't pull out your wallet while.
Speaker 1 (10:27):
We're right So there's no putting your hands in your pockets,
and you're not allowed to carry anything with you after
going down in the elevator. I'm not even sure what
floor we're actually on, and we have to pass through
multiple security doors before we get here.
Speaker 2 (10:40):
But when we do get there, it's pretty cool. We're
in the transfer area where money comes in and processing begins.
And let me tell you, there's money everywhere.
Speaker 1 (10:51):
So we're standing next to a big box filled with cash.
How much would be in something like that?
Speaker 6 (11:00):
Twenty is roughly eight and a half million.
Speaker 1 (11:02):
Wow, Joe, grab it quickly.
Speaker 3 (11:04):
Now you'll see a lot of money.
Speaker 6 (11:06):
As we walk around today.
Speaker 2 (11:08):
That's Amy Elvarado, the bank's vice president of district Cash Operations.
She oversees the entire process.
Speaker 6 (11:14):
Our team will go in the room and check all
of the bags as the armored carriers drop them off.
We'll make sure all the bags are intact and sealed
and everything. We'll count them. We're doing this bag count
and then we're signing off on it. That's when we
would release the carriers, and that's the transfer process coming in.
Speaker 1 (11:36):
There's a long hallway stretching out in front of us.
The walls are white and there's rooms on either side
that have large windows and glass doors. In fact, one
of the most striking things about this place is just
how much you can see.
Speaker 2 (11:49):
Everything is seen through, even the doors. Amy and Austin
tell us that transparency is paramount to the security of
the whole operation, giving that they're dealing with, you know, cash.
Speaker 6 (12:00):
A reason why these doors are clear is because we
are never in the room with these carriers. At the
same time. The carriers will come in onto the concourse,
they will unload their currency bags onto rolling screens, as
we call them, They will put them in the room,
they will go back out the other side of the room.
When our team comes in the room, they're supposed to
(12:22):
watch us flip all those bags because it's still theirs
at this point. And once we do that, we'll bring
the work in. But when we transfer work back out
to them, same process happens. We go in the room,
we drop off the currency, we come out. They come in,
so we all need to be able to see through
the glass of the transfer process happening.
Speaker 2 (12:41):
All of these security rules apply to employees too.
Speaker 4 (12:44):
People wear smocks, there are no pockets when they go in.
The colors indicate who's doing what role. And we have
very very good hygiene in an accounting.
Speaker 1 (12:55):
Sense, and it's a tough job. Cash, as it turns out,
is pretty we have you when you're piling up millions
of bills, millions of physical bills. The Chicago FED process
is something like five point five million pieces a day,
and the actual currency value of that can be higher
depending on the denomination of the notes.
Speaker 2 (13:15):
Once the money comes into the FED, the cash is
brought into a receiving room, which is down another floor
of the basement. This room looks very similar to the
transfer room.
Speaker 1 (13:24):
And getting cash into the FED is just the first
part of this process.
Speaker 6 (13:29):
We would now open the bags and make sure we
have the correct amount of bundles in each bag. And
a bundle, as I'll point out, is what you see
in these containers. They look like little bricks.
Speaker 2 (13:39):
It like a brick of cash, like a brick of.
Speaker 6 (13:41):
Cash, and it is ten straps of one hundred notes,
so one thousand notes per bundle or brick as it
looks like. And so we open those deposits up, we
make sure we have the correct number of bundles, and
this is where we're entering in the deposit ticket, and
we're making sure that all of the account is correct
at the bundle level and then all of the work
(14:03):
out of these rooms gets stored by denomination into containers
where they will be stored in vaults until it's time
for their piece count verification.
Speaker 2 (14:13):
We make our way through more long, stretching hallways until
we get to a room where there are a couple
of workers sorting through a bunch of cash, and most strikingly,
a big machine that takes up most of the room
with a computer on the left side and stacks of
money neatly sitting on top of the tables. They call
this a high speed room.
Speaker 4 (14:33):
And what's specifically and.
Speaker 2 (14:34):
That's the sound of cash being that is hard measured.
Speaker 6 (14:39):
That is the sound of the currency going into the machine,
and it's singling those notes. So there's stacks of hundreds, right,
they're going into that machine and they're kind of getting
stacked on a rake, and it is really pulling those
notes at rapid pace and then sending them singly one
by one through the machines.
Speaker 1 (14:58):
So it's not quite fed money intergo burr, but it
is a high speed money processor go burr.
Speaker 2 (15:03):
Some people are going to be disappointed that the FED
is not literally printing the cash.
Speaker 6 (15:09):
Certainly, we're imaging every strap that comes in here on
the currency, so that information relates back to the banks
that's sent it in, so we have that information. If
there's any disputes, we certainly send that out to our
financial institutions. The machine will cut the straps off and
then take each individual note, run it through our sensors,
(15:31):
and it will make rapid decisions on whether it is
fit for circulation or it would be shred or if
it needs to have another look.
Speaker 1 (15:38):
So the sensors would be looking for things like if
there's a mark on it, or a terror or that
sort of thing.
Speaker 6 (15:44):
Correct, it's checking the fitness level, so is it clean,
is it soiled. It's checking the authenticity of it. It
is checking that it's the correct denomination. So it's looking
at all of those things very rapidly.
Speaker 2 (15:56):
Does human judgment ever come into this or can it
just be one hundred percent determined?
Speaker 6 (16:01):
So any items that are rejected on the machine will
go to a secondary process where the operators will handle
notes by hand. They will feed them again through another
set of sensors and it'll take that read. But the
end determination on things like counterfeits are our staff are
trained on counterfeits, they're tested on counterfeits, and they do
(16:21):
make those decisions as they're looking at those notes. So
as you can see the large machine we talked about
here at the end of the machine, and this tube
that's going up into the ceiling, you can see the
fluttering in that clear window looks like a bank drive
up tu more pharmacy tube. That's where the shreds are
exiting our floor to go to our bricketder. That's what
(16:47):
it sounds like when they don't roll straight.
Speaker 4 (16:49):
Notice the wall guards.
Speaker 6 (16:52):
We have our bumpers for a reason.
Speaker 1 (16:55):
What happens to all the shredded money? I know you
sell some in like the gift shops.
Speaker 4 (16:58):
Well we give it a well give it away, Well.
Speaker 1 (17:01):
We definitely want some. But like what happens to the
majority of it Here.
Speaker 6 (17:04):
It's sent out for recycling. Most FED offices send it
out to be recycled.
Speaker 2 (17:09):
Recycled back into future bills.
Speaker 6 (17:12):
No, here it's turned into some sort of fuel. We
send it out and at other feds it's different to
know one of the fed's condos.
Speaker 2 (17:35):
Once the cash is all processed and sorted, it gets
stored in the bank's vaults.
Speaker 1 (17:39):
And these vaults are huge. They look straight out of
a movie, think Ocean's Eleven, but bigger.
Speaker 4 (17:45):
So as we locked it in, you got to lower
the floor or the door cannot shut.
Speaker 2 (17:51):
Each door weighs like eighty thousand pounds and you have
to drop the floor to actually be able to open
and shut them. So you just sort of have envision that.
Speaker 4 (18:01):
If they tell you to keep your hands and arms
inside the car at all times, you do it.
Speaker 7 (18:05):
In this one, the vaults are over one hundred years
old now, and it took over two hundred and twenty
trips to transfer the Chicago Fed's entire cash holdings from
their previous location to this new site.
Speaker 2 (18:23):
You know, the wheel gets turning, relaxing in place.
Speaker 4 (18:25):
Yeah, it's got kind of a master and commander's ship
wheel field to it.
Speaker 2 (18:34):
And what's the combination to a man, there's multiple. Now
we turn the dials on the combination so that way
it sets it back for the next business day, so
no one could just come.
Speaker 7 (18:49):
In and open it.
Speaker 2 (18:54):
As we walk around these halls. Down deep in the basement,
they're screens showing live streams of outside of the FED.
Bill You could see the streets and sidewalks outside the bank.
Speaker 1 (19:03):
Why is that showing a video of the outside.
Speaker 6 (19:07):
So that is what we call the windows to the world, because,
as Austin mentioned, we are in the basement and we
want to know if it's raining, and instead of calling
Austin to ask him if it's raining, we have our
own windows.
Speaker 4 (19:20):
We don't have windows. We got a second basement, a
third basement, and you want to know is it's sunny.
Speaker 6 (19:26):
Or Okay, So we're gonna come around the corner here
and then we're gonna step inside. This is considered a
working vault, so you follow me in.
Speaker 1 (19:40):
It's the vaults, oh my gosh.
Speaker 6 (19:43):
And so what we have in here are two more
paying rooms, just like we talked about outside, and then
this vault it has these working rooms and then we
have inventory storage. You can see some of our leadership
is in here doing some work right now. But this
is where we have the new inventory stored, as well
as some fit inventory and some of the orders that
(20:07):
will go out tomorrow. Where the smell is.
Speaker 4 (20:09):
The strongest, right, Yeah, you just smell that smell.
Speaker 3 (20:13):
This is a fresh money.
Speaker 4 (20:14):
That's fresh money.
Speaker 1 (20:16):
The smell fresh money in the morning.
Speaker 2 (20:19):
This is probably what I remember most about the experience,
the smell of new money. This is where the FED
keeps bills ready for distribution to banks.
Speaker 1 (20:27):
Yeah, in a room with millions of dollars in it,
that smell is strong. This is the room where you
really get to appreciate the physical aspects of money, because,
as it turns out, dollars aren't just green. When they're
all stacked up, you start to see there's a whole
range of colors in there. And of course there's that smell.
Speaker 4 (20:47):
It's a good smell.
Speaker 6 (20:49):
Yeah, And it's funny for the longer you work here,
there is a thing really about nose blind because oh,
I've heard you. You don't really pick it up as
much anymore as our visitors are always like, what is
that smell?
Speaker 1 (21:00):
Yeah.
Speaker 4 (21:01):
I went to the bureau engraving and printing. One of
my quests was where does this smell? Command is it?
The paper is in the wood and there are big
buckets of the green ink, and.
Speaker 3 (21:14):
I to go.
Speaker 4 (21:14):
I was like, that's it.
Speaker 2 (21:15):
That's the smell.
Speaker 1 (21:17):
And this room is where the fit money, All the
stuff that's been processed by the high speed machine gets
paid out chines.
Speaker 6 (21:23):
That machine creates fit inventory, and that's on the right
side of the room. Here on the left side of
the room. Are there orders that they're going to be
paying out tomorrow, So our allocator will pull the orders
like a grocery list. Those orders get downloaded. We have
a list of how many bundles they want of each denomination.
We'll fill it like a grocery list. They'll put the
(21:45):
inventory on the table and then the verifier will confirm
blindly that count will enter that work in. Once that
count is balanced, they will bag it and tag it,
put into their containers by armored carrier, and then that
work get stored in the vaults overnight and tomorrow will
be taking it up to where we do our transfer process.
Speaker 4 (22:05):
Mike will have the exact numbers. But we pay out
probably one hundred forty million.
Speaker 5 (22:10):
A day, hundred thirty five million a day, one hundred.
Speaker 4 (22:12):
Thirty five million a day, and we take in one
hundred million or nineteen one hundred nineteen million a day.
And then you say, wait a minute, how how can
you pay out more than Again, it is because we
get new money shipped in from Bureau of Graving and Printing.
Speaker 1 (22:27):
And it all comes full circle. The Bureau of Engraving
and Printing, which has facilities in Washington, d c and
fort Worth prints the money. They ship it to the
reserve banks, where this whole process takes place, and then
those bills go out to banks ATMs or wherever you're
getting your cash money.
Speaker 2 (22:44):
The life cycle of a bill is pretty interesting.
Speaker 4 (22:47):
That's where the money is printed. They put it on pallets,
They ship it to the reserve banks, and we receive
it and you'll see it. It'll circulate for a few times.
It will come back to the FED for processing. As
it gets spent. They it goes to a bank. The
(23:09):
bank puts it in the positi. They'll send it to
us and say we got too much currency credit. Our
deposit account. Will count it, run it through the high
speed machine. If it's too dirty, will shred it. If
it's fine, we'll bundle it up, put it in a package,
and send it out to the next bank that needs
more cash for their ATM. And that's kind of the cycle.
(23:33):
The money comes in, gets stuck in the vault, goes
out the next day or whenever people want it, and
it's supplemented by the new money that comes from bureau
engraving and printing.
Speaker 5 (23:45):
In terms of a life span of a dollar bill
or currency, it ranges somewhere from the one dollar bill.
I think last an average is six point six years
out in circulation versus as you can imagine, the one
hundred dollar bill less used probably more of those people
to keep it in their homes under mattresses or whatever.
That circulates every twenty two point nine years, So quite
(24:06):
a bit of difference, but it varies based on the denomination.
Speaker 2 (24:14):
There's supposed to be a strip. Yeah, you can.
Speaker 4 (24:18):
Say it's green. If you put the UV light right
up against it, it gets brighter. But there's a green strip.
Speaker 2 (24:27):
I don't know.
Speaker 1 (24:28):
I hope. We end our tour at the Chicago Fed's
Money Museum, which is both fun and even though it's
about money, it's actually free to enter and you can
learn even more about cash.
Speaker 6 (24:38):
Yeah.
Speaker 2 (24:39):
So if you're ever wondering which of the twelve Fed
banks your money comes from, if you look at the bill,
you see a big letter printed on each note on
a one dollar bill, it's just to the left of
George Washington.
Speaker 4 (24:50):
F Who's f that's Atlanta. This is Atlanta money. No wonder,
it's not no wonder, it's not there. So you can
see the in the corner that's the equivalent of the G.
They don't want to. So B would be the second district,
that'd be in New York. C C would be third district.
So is that Philadelphia? I think it might be Philadelphia.
Speaker 2 (25:14):
Each letter corresponds to the regional Fed that it passed through.
So if you're wondering what the Chicago Fed is, that's
G that's Chicago money. So the Chicago Fed will put
in an order with the Bureau of Engraving and Printing
for new cash, and that money will be made and
sent to the Chicago Fed.
Speaker 1 (25:29):
And let me tell you, Joe, I will never look
at cash the same way again. I will annoy everyone
that I know by telling them which Fed, bank or
money came from.
Speaker 2 (25:38):
And with that, our tour comes to an end and
we're thrown back out into the real cashless world and
we are blinded by the sun.
Speaker 1 (25:45):
Yeah, but we learned a lot. And how many people
actually get to say they've seen billions of dollars in
cash without doing something illegal?
Speaker 2 (25:55):
All right, Tracy, I am ready for my waffles and
dance party that let's go.
Speaker 1 (26:07):
Special Thanks to Austin Goolsby, Mike Kepler, Amy Alvarado, Mark Peters,
and the staff at the Cash Operations Department of the
Chicago Fed.
Speaker 2 (26:17):
This special look aside How the fit Stash is Cash
was written by Tracy Alloway and Carmen Rodriguez. I'm Jill
Wisenthal and together with Tracy, we co host the Odlots podcast.
Carmen produced this episode with the help of dash El
Bennett and Cal Brooks. Blake Maples is our sound engineer.
Brendan Newnam is our executive producer. Sage Bauman is the
(26:37):
head of Bloomberg Podcasts.
Speaker 1 (26:39):
If you enjoyed this special Odlots episode, then please leave
us a positive review on your favorite podcast platform. Thanks
for listening. Not in Ins
Hey, there are aud Loots listeners. It's Tracy Alloway and Joe.
Speaker 2 (00:03):
Why isn't thal.
Speaker 1 (00:04):
We are very excited to announce that Oddlots is going
to Washington That's right.
Speaker 2 (00:09):
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 twelfth 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 dot com slash odd.
Speaker 3 (00:27):
Lots, Bloomberg Audio Studios, podcasts, radio news.
Speaker 4 (00:40):
Go flow it until the other door.
Speaker 5 (00:41):
Shows and there's gonna be one more we got to
go through, so come on and.
Speaker 1 (00:50):
Oh wow, you can definitely get trapped in here.
Speaker 4 (00:54):
This is the trap and everyone must come in and
the door now we can go to the next.
Speaker 2 (01:02):
Door, deep underground, coming through elevator. The sort of monochrome quietness,
the uniforms. This kind of reminds me of severance a
little bit. Has anyone made that observation before?
Speaker 1 (01:25):
Hello, and welcome to another episode of the All Thoughts Podcast.
I'm Tracy Alloway.
Speaker 2 (01:29):
Is this the one where we get severed? Tracy my
name is Jill Wisenthal, and I freely consent to being severed. Joe.
Speaker 1 (01:36):
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.
Speaker 2 (01:53):
Oh 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 will 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 listen,
(02:16):
I guess at the inside.
Speaker 1 (02:18):
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
(02:38):
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.
Speaker 2 (02:49):
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 twelve Federal Reserve Banks, the Bureau of
Engraving and actually makes the money, and then it gets
delivered and processed through the FED banks and the Chicago
FED building itself.
Speaker 1 (03:07):
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.
Speaker 4 (03:26):
We set up a system in the United States with
twelve reserve banks around the country because in nineteen thirteen,
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
(03:50):
one component of the job is monetary policy, like we
talk about all the time.
Speaker 2 (03:56):
That's Austin Gouldsby, 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 you know,
talking about the macro environment, monetary policy, things like that.
Speaker 1 (04:11):
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.
Speaker 4 (04:22):
We're also a real, live, working bank, and we got
seventeen eighteen hundred employees. We are a bank two banks,
and they have a master account. We pay interest on
their deposits into that account, which our bank reserves, and
we provide FED wire. We do ach direct deposit, we
(04:46):
do FED now 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 ATM, so take that out of our master account.
(05:08):
They send a brainstruck 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 brainstruck. 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
(05:31):
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 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
(05:51):
of machinery, and it's pretty neat.
Speaker 2 (05:56):
Pretty neat is putting it mildly, because it turns out
that Austin and Lusts giving the tours of the cash shop,
something that was totally evident while we did it. I
think most people on finance and economics love money, but
Austin really loves money.
Speaker 1 (06:11):
Yeah, So join me and Joe and Austin on this
special edition of odd Blots as we follow how money
actually moves through the Federal Reserve system. We are standing
in the lobby of the Chicago Fed building. There's a
beautiful staircase and a balcony that looks down on this
(06:33):
gorgeous atrium. Apparently there used to be machine guns mounted
up there, and now there's security guards at the entrance,
the Fed's own police force.
Speaker 2 (06:43):
And as Austin mentioned earlier, the Chicago FED was established
in nineteen fourteen, and back then investors didn't have much
reassurance that their bank deposits were, you know, actually safe.
And after months of back and forth, Congress passed the
Federal Reserve Act, establishing the FED Reserve System and the
twelve reserve banks that cover the entire.
Speaker 1 (07:03):
Country, and the Chicago FED covers parts of Illinois, Indiana, Wisconsin, Michigan,
and the state of Iowa. And as we've said before,
we are used to talking about whether the FED is
doing a good job on things like inflation and unemployment,
but we don't actually talk that much about its other
big job, which is managing the money.
Speaker 5 (07:24):
We know when we're doing a good job when you
can go to an ATM and there's money in it.
You can go to a grocery store and you can
pay in cash and they have changed to give you
in currency.
Speaker 2 (07:34):
Mike Kepler is an executive vice president of the district's
Cash Operation and the Chicago FED Central Bank Service Area.
Speaker 5 (07:41):
So essentially I oversee the full currency operation between our
Chicago and Detroit offices that includes everything from processing the
currency on the high speed machines to paying our orders
to financial institutions in our district and taking money in.
Speaker 1 (07:57):
Even though we live in a world that's full of
digital payment systems, cash still plays a role in everyday transactions.
Speaker 2 (08:05):
Cash is Lindy, that's right, Jo.
Speaker 5 (08:07):
It's extremely important. So you know, think about things like
hurricanes or weather related events or power outages where electronic
payments don't work. In fact, I was in the store
the other day and their credit card system was down,
and fortunately I had cash in my pocket, so I
was able to jump the line and get my stuff
and get out the door while theres were kind of
waiting for the credit card machine to pop back up.
(08:29):
So it is very important, and not all consumers use
just one payment type. So in fact, you can imagine
in today's times, electronic payments, debit cards credit cards are
the primary two vehicles that folks use for transactions, but
cash is a third, very close third for payments.
Speaker 4 (08:46):
And look, the thing is as the share of payments
that are made electronically mobile banking using cards rises, people
have this tendency to say, oh, well there is no cash.
I don't even see cash. If you go look, you
and you can look off fred. It's on there. Currency
(09:06):
and circulation as a share of GDP is over ten percent,
and that's among the highest percent on record, or at
least since the nineteen eighties that you can find on FRED.
That's double what it was in two thousand and eight.
That's like four times higher as a percent than it
(09:30):
was forty years ago. And it's shockingly large per person.
It's like forty eight hundred dollars per person on average
in money.
Speaker 1 (09:44):
Joe, I don't know about you, but I always keep
four eight hundred dollars in cash just in case I
have to spontaneously buy, like I don't know, a MacBook
Pro or something.
Speaker 2 (09:53):
Emergency lumber purchases, maybe a thousand chickens for you.
Speaker 1 (09:57):
That's sure.
Speaker 6 (10:01):
Hi, Hi, teat to.
Speaker 4 (10:09):
The amazing Ami Colorado.
Speaker 6 (10:11):
Welcome to cash.
Speaker 1 (10:13):
Getting into the basement where the Chicago Fed's cash ops
actually are is a process.
Speaker 4 (10:19):
There's a lot of cameras, there's a lot of security,
and there's a lot of rules. So don't don't go
fishing in your pockets, don't pull out your wallet while.
Speaker 1 (10:27):
We're right So there's no putting your hands in your pockets,
and you're not allowed to carry anything with you after
going down in the elevator. I'm not even sure what
floor we're actually on, and we have to pass through
multiple security doors before we get here.
Speaker 2 (10:40):
But when we do get there, it's pretty cool. We're
in the transfer area where money comes in and processing begins.
And let me tell you, there's money everywhere.
Speaker 1 (10:51):
So we're standing next to a big box filled with cash.
How much would be in something like that?
Speaker 6 (11:00):
Twenty is roughly eight and a half million.
Speaker 1 (11:02):
Wow, Joe, grab it quickly.
Speaker 3 (11:04):
Now you'll see a lot of money.
Speaker 6 (11:06):
As we walk around today.
Speaker 2 (11:08):
That's Amy Elvarado, the bank's vice president of district Cash Operations.
She oversees the entire process.
Speaker 6 (11:14):
Our team will go in the room and check all
of the bags as the armored carriers drop them off.
We'll make sure all the bags are intact and sealed
and everything. We'll count them. We're doing this bag count
and then we're signing off on it. That's when we
would release the carriers, and that's the transfer process coming in.
Speaker 1 (11:36):
There's a long hallway stretching out in front of us.
The walls are white and there's rooms on either side
that have large windows and glass doors. In fact, one
of the most striking things about this place is just
how much you can see.
Speaker 2 (11:49):
Everything is seen through, even the doors. Amy and Austin
tell us that transparency is paramount to the security of
the whole operation, giving that they're dealing with, you know, cash.
Speaker 6 (12:00):
A reason why these doors are clear is because we
are never in the room with these carriers. At the
same time. The carriers will come in onto the concourse,
they will unload their currency bags onto rolling screens, as
we call them, They will put them in the room,
they will go back out the other side of the room.
When our team comes in the room, they're supposed to
(12:22):
watch us flip all those bags because it's still theirs
at this point. And once we do that, we'll bring
the work in. But when we transfer work back out
to them, same process happens. We go in the room,
we drop off the currency, we come out. They come in,
so we all need to be able to see through
the glass of the transfer process happening.
Speaker 2 (12:41):
All of these security rules apply to employees too.
Speaker 4 (12:44):
People wear smocks, there are no pockets when they go in.
The colors indicate who's doing what role. And we have
very very good hygiene in an accounting.
Speaker 1 (12:55):
Sense, and it's a tough job. Cash, as it turns out,
is pretty we have you when you're piling up millions
of bills, millions of physical bills. The Chicago FED process
is something like five point five million pieces a day,
and the actual currency value of that can be higher
depending on the denomination of the notes.
Speaker 2 (13:15):
Once the money comes into the FED, the cash is
brought into a receiving room, which is down another floor
of the basement. This room looks very similar to the
transfer room.
Speaker 1 (13:24):
And getting cash into the FED is just the first
part of this process.
Speaker 6 (13:29):
We would now open the bags and make sure we
have the correct amount of bundles in each bag. And
a bundle, as I'll point out, is what you see
in these containers. They look like little bricks.
Speaker 2 (13:39):
It like a brick of cash, like a brick of.
Speaker 6 (13:41):
Cash, and it is ten straps of one hundred notes,
so one thousand notes per bundle or brick as it
looks like. And so we open those deposits up, we
make sure we have the correct number of bundles, and
this is where we're entering in the deposit ticket, and
we're making sure that all of the account is correct
at the bundle level and then all of the work
(14:03):
out of these rooms gets stored by denomination into containers
where they will be stored in vaults until it's time
for their piece count verification.
Speaker 2 (14:13):
We make our way through more long, stretching hallways until
we get to a room where there are a couple
of workers sorting through a bunch of cash, and most strikingly,
a big machine that takes up most of the room
with a computer on the left side and stacks of
money neatly sitting on top of the tables. They call
this a high speed room.
Speaker 4 (14:33):
And what's specifically and.
Speaker 2 (14:34):
That's the sound of cash being that is hard measured.
Speaker 6 (14:39):
That is the sound of the currency going into the machine,
and it's singling those notes. So there's stacks of hundreds, right,
they're going into that machine and they're kind of getting
stacked on a rake, and it is really pulling those
notes at rapid pace and then sending them singly one
by one through the machines.
Speaker 1 (14:58):
So it's not quite fed money intergo burr, but it
is a high speed money processor go burr.
Speaker 2 (15:03):
Some people are going to be disappointed that the FED
is not literally printing the cash.
Speaker 6 (15:09):
Certainly, we're imaging every strap that comes in here on
the currency, so that information relates back to the banks
that's sent it in, so we have that information. If
there's any disputes, we certainly send that out to our
financial institutions. The machine will cut the straps off and
then take each individual note, run it through our sensors,
(15:31):
and it will make rapid decisions on whether it is
fit for circulation or it would be shred or if
it needs to have another look.
Speaker 1 (15:38):
So the sensors would be looking for things like if
there's a mark on it, or a terror or that
sort of thing.
Speaker 6 (15:44):
Correct, it's checking the fitness level, so is it clean,
is it soiled. It's checking the authenticity of it. It
is checking that it's the correct denomination. So it's looking
at all of those things very rapidly.
Speaker 2 (15:56):
Does human judgment ever come into this or can it
just be one hundred percent determined?
Speaker 6 (16:01):
So any items that are rejected on the machine will
go to a secondary process where the operators will handle
notes by hand. They will feed them again through another
set of sensors and it'll take that read. But the
end determination on things like counterfeits are our staff are
trained on counterfeits, they're tested on counterfeits, and they do
(16:21):
make those decisions as they're looking at those notes. So
as you can see the large machine we talked about
here at the end of the machine, and this tube
that's going up into the ceiling, you can see the
fluttering in that clear window looks like a bank drive
up tu more pharmacy tube. That's where the shreds are
exiting our floor to go to our bricketder. That's what
(16:47):
it sounds like when they don't roll straight.
Speaker 4 (16:49):
Notice the wall guards.
Speaker 6 (16:52):
We have our bumpers for a reason.
Speaker 1 (16:55):
What happens to all the shredded money? I know you
sell some in like the gift shops.
Speaker 4 (16:58):
Well we give it a well give it away, Well.
Speaker 1 (17:01):
We definitely want some. But like what happens to the
majority of it Here.
Speaker 6 (17:04):
It's sent out for recycling. Most FED offices send it
out to be recycled.
Speaker 2 (17:09):
Recycled back into future bills.
Speaker 6 (17:12):
No, here it's turned into some sort of fuel. We
send it out and at other feds it's different to
know one of the fed's condos.
Speaker 2 (17:35):
Once the cash is all processed and sorted, it gets
stored in the bank's vaults.
Speaker 1 (17:39):
And these vaults are huge. They look straight out of
a movie, think Ocean's Eleven, but bigger.
Speaker 4 (17:45):
So as we locked it in, you got to lower
the floor or the door cannot shut.
Speaker 2 (17:51):
Each door weighs like eighty thousand pounds and you have
to drop the floor to actually be able to open
and shut them. So you just sort of have envision that.
Speaker 4 (18:01):
If they tell you to keep your hands and arms
inside the car at all times, you do it.
Speaker 7 (18:05):
In this one, the vaults are over one hundred years
old now, and it took over two hundred and twenty
trips to transfer the Chicago Fed's entire cash holdings from
their previous location to this new site.
Speaker 2 (18:23):
You know, the wheel gets turning, relaxing in place.
Speaker 4 (18:25):
Yeah, it's got kind of a master and commander's ship
wheel field to it.
Speaker 2 (18:34):
And what's the combination to a man, there's multiple. Now
we turn the dials on the combination so that way
it sets it back for the next business day, so
no one could just come.
Speaker 7 (18:49):
In and open it.
Speaker 2 (18:54):
As we walk around these halls. Down deep in the basement,
they're screens showing live streams of outside of the FED.
Bill You could see the streets and sidewalks outside the bank.
Speaker 1 (19:03):
Why is that showing a video of the outside.
Speaker 6 (19:07):
So that is what we call the windows to the world, because,
as Austin mentioned, we are in the basement and we
want to know if it's raining, and instead of calling
Austin to ask him if it's raining, we have our
own windows.
Speaker 4 (19:20):
We don't have windows. We got a second basement, a
third basement, and you want to know is it's sunny.
Speaker 6 (19:26):
Or Okay, So we're gonna come around the corner here
and then we're gonna step inside. This is considered a
working vault, so you follow me in.
Speaker 1 (19:40):
It's the vaults, oh my gosh.
Speaker 6 (19:43):
And so what we have in here are two more
paying rooms, just like we talked about outside, and then
this vault it has these working rooms and then we
have inventory storage. You can see some of our leadership
is in here doing some work right now. But this
is where we have the new inventory stored, as well
as some fit inventory and some of the orders that
(20:07):
will go out tomorrow. Where the smell is.
Speaker 4 (20:09):
The strongest, right, Yeah, you just smell that smell.
Speaker 3 (20:13):
This is a fresh money.
Speaker 4 (20:14):
That's fresh money.
Speaker 1 (20:16):
The smell fresh money in the morning.
Speaker 2 (20:19):
This is probably what I remember most about the experience,
the smell of new money. This is where the FED
keeps bills ready for distribution to banks.
Speaker 1 (20:27):
Yeah, in a room with millions of dollars in it,
that smell is strong. This is the room where you
really get to appreciate the physical aspects of money, because,
as it turns out, dollars aren't just green. When they're
all stacked up, you start to see there's a whole
range of colors in there. And of course there's that smell.
Speaker 4 (20:47):
It's a good smell.
Speaker 6 (20:49):
Yeah, And it's funny for the longer you work here,
there is a thing really about nose blind because oh,
I've heard you. You don't really pick it up as
much anymore as our visitors are always like, what is
that smell?
Speaker 1 (21:00):
Yeah.
Speaker 4 (21:01):
I went to the bureau engraving and printing. One of
my quests was where does this smell? Command is it?
The paper is in the wood and there are big
buckets of the green ink, and.
Speaker 3 (21:14):
I to go.
Speaker 4 (21:14):
I was like, that's it.
Speaker 2 (21:15):
That's the smell.
Speaker 1 (21:17):
And this room is where the fit money, All the
stuff that's been processed by the high speed machine gets
paid out chines.
Speaker 6 (21:23):
That machine creates fit inventory, and that's on the right
side of the room. Here on the left side of
the room. Are there orders that they're going to be
paying out tomorrow, So our allocator will pull the orders
like a grocery list. Those orders get downloaded. We have
a list of how many bundles they want of each denomination.
We'll fill it like a grocery list. They'll put the
(21:45):
inventory on the table and then the verifier will confirm
blindly that count will enter that work in. Once that
count is balanced, they will bag it and tag it,
put into their containers by armored carrier, and then that
work get stored in the vaults overnight and tomorrow will
be taking it up to where we do our transfer process.
Speaker 4 (22:05):
Mike will have the exact numbers. But we pay out
probably one hundred forty million.
Speaker 5 (22:10):
A day, hundred thirty five million a day, one hundred.
Speaker 4 (22:12):
Thirty five million a day, and we take in one
hundred million or nineteen one hundred nineteen million a day.
And then you say, wait a minute, how how can
you pay out more than Again, it is because we
get new money shipped in from Bureau of Graving and Printing.
Speaker 1 (22:27):
And it all comes full circle. The Bureau of Engraving
and Printing, which has facilities in Washington, d c and
fort Worth prints the money. They ship it to the
reserve banks, where this whole process takes place, and then
those bills go out to banks ATMs or wherever you're
getting your cash money.
Speaker 2 (22:44):
The life cycle of a bill is pretty interesting.
Speaker 4 (22:47):
That's where the money is printed. They put it on pallets,
They ship it to the reserve banks, and we receive
it and you'll see it. It'll circulate for a few times.
It will come back to the FED for processing. As
it gets spent. They it goes to a bank. The
(23:09):
bank puts it in the positi. They'll send it to
us and say we got too much currency credit. Our
deposit account. Will count it, run it through the high
speed machine. If it's too dirty, will shred it. If
it's fine, we'll bundle it up, put it in a package,
and send it out to the next bank that needs
more cash for their ATM. And that's kind of the cycle.
(23:33):
The money comes in, gets stuck in the vault, goes
out the next day or whenever people want it, and
it's supplemented by the new money that comes from bureau
engraving and printing.
Speaker 5 (23:45):
In terms of a life span of a dollar bill
or currency, it ranges somewhere from the one dollar bill.
I think last an average is six point six years
out in circulation versus as you can imagine, the one
hundred dollar bill less used probably more of those people
to keep it in their homes under mattresses or whatever.
That circulates every twenty two point nine years, So quite
(24:06):
a bit of difference, but it varies based on the denomination.
Speaker 2 (24:14):
There's supposed to be a strip. Yeah, you can.
Speaker 4 (24:18):
Say it's green. If you put the UV light right
up against it, it gets brighter. But there's a green strip.
Speaker 2 (24:27):
I don't know.
Speaker 1 (24:28):
I hope. We end our tour at the Chicago Fed's
Money Museum, which is both fun and even though it's
about money, it's actually free to enter and you can
learn even more about cash.
Speaker 6 (24:38):
Yeah.
Speaker 2 (24:39):
So if you're ever wondering which of the twelve Fed
banks your money comes from, if you look at the bill,
you see a big letter printed on each note on
a one dollar bill, it's just to the left of
George Washington.
Speaker 4 (24:50):
F Who's f that's Atlanta. This is Atlanta money. No wonder,
it's not no wonder, it's not there. So you can
see the in the corner that's the equivalent of the G.
They don't want to. So B would be the second district,
that'd be in New York. C C would be third district.
So is that Philadelphia? I think it might be Philadelphia.
Speaker 2 (25:14):
Each letter corresponds to the regional Fed that it passed through.
So if you're wondering what the Chicago Fed is, that's
G that's Chicago money. So the Chicago Fed will put
in an order with the Bureau of Engraving and Printing
for new cash, and that money will be made and
sent to the Chicago Fed.
Speaker 1 (25:29):
And let me tell you, Joe, I will never look
at cash the same way again. I will annoy everyone
that I know by telling them which Fed, bank or
money came from.
Speaker 2 (25:38):
And with that, our tour comes to an end and
we're thrown back out into the real cashless world and
we are blinded by the sun.
Speaker 1 (25:45):
Yeah, but we learned a lot. And how many people
actually get to say they've seen billions of dollars in
cash without doing something illegal?
Speaker 2 (25:55):
All right, Tracy, I am ready for my waffles and
dance party that let's go.
Speaker 1 (26:07):
Special Thanks to Austin Goolsby, Mike Kepler, Amy Alvarado, Mark Peters,
and the staff at the Cash Operations Department of the
Chicago Fed.
Speaker 2 (26:17):
This special look aside How the fit Stash is Cash
was written by Tracy Alloway and Carmen Rodriguez. I'm Jill
Wisenthal and together with Tracy, we co host the Odlots podcast.
Carmen produced this episode with the help of dash El
Bennett and Cal Brooks. Blake Maples is our sound engineer.
Brendan Newnam is our executive producer. Sage Bauman is the
(26:37):
head of Bloomberg Podcasts.
Speaker 1 (26:39):
If you enjoyed this special Odlots episode, then please leave
us a positive review on your favorite podcast platform. Thanks
for listening. Not in Ins
Hosts And Creators
Joe Weisenthal
Tracy Alloway
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