In response to dramatic shifts in the payment landscape, the Federal Reserve in 2003 made some tough decisions regarding the offices in which it will continue to process checks. In the Eighth District, such decisions have had a ripple effect, prompting us to shut down our operational role in cash processing and vacate branch buildings in Little Rock and Louisville. By the end of 2004, the Little Rock and Louisville branches will no longer process any form of payment.

For an institution like the Fed, these changes were seismic. If you searched for a single word to sum up what the Fed is all about, the word stability would do a pretty good job. Our primary mission is to maintain price stability. Stability also defines the Fed’s goals since 1913 for supervising and regulating the nation’s banking system, as well as safeguarding the nation’s payments system. Finally, our employees have always regarded the Fed as a stable place to come to work each day.

In the wake of decisions that will reduce staff in Little Rock and Louisville to fewer than 10 each, we have pondered the question: What’s a Fed branch for anyway? Have branch offices served their time? The essay in this annual report answers the latter question with a resounding no.

We will detail the critical significance of the St. Louis Fed’s regional presence in cities around its district. Simply put, we cannot afford to lose or lessen the importance of the network of economic information-gathering resources we’ve established, the critical input we get from our branch boards of directors on the regional economy, and the one-on-one relationships we’ve nurtured among the region’s bankers, teachers, community development agencies and university professors. Indeed, we plan to expand these networks, as this report will discuss.

Our renewed efforts will result in a greater public and intellectual presence in branch cities than we’ve had. Even as we reduce our role as an employer of workers, we expect to be increasing our visibility in the community.

Our new branch direction marks a new era. At the same time, we should not forget the tremendous contributions of the employees who are leaving us. Our employees in Little Rock and Louisville are some of the finest in the Federal Reserve System, and we will miss them. They routinely have led the System in measures of productivity and cost recovery, and I am saddened by the decisions that have cost them their jobs. As we say goodbye to these employees during the second half of 2004, I will do my best to pay tribute to their dedication, excellence and customer service, for they deserve whatever thanks we can give them.

William Poole
PRESIDENT AND CEO

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