Philadelphia's shrine to monetary policy
New exhibition teaches public what it needs to know about the Federal Reserve
PHILADELPHIA — On July 4, more than 10,000 visitors crammed into the National Constitution Center in Philadelphia, after its nationally televised inaugural ceremony earlier in the day.
Two days earlier, economists, bankers, and monetary-policy wonks gathered at a more low-key opening across the street.
Tucked into the lobby of the fortress-like Federal Reserve Bank, the interactive "Money in Motion" exhibition is now open for business. Although it's just a stone's throw from the Constitution Center, the boutique museum is definitely off the beaten path.
Vivienne Ehret, owner of the Uniquely Philadelphia tours, hadn't caught word of it. "But I'll make note of it," she promises after hearing about the museum in the heart of the historic district.
Still, about 100 visitors wander in each day. And few are interest-rate junkies or Alan Greenspan groupies. Some are passing time until their tour of the Constitution Center begins. While others, like Nick DeMarco of New Jersey, come in to get away from the sun.
Mr. DeMarco, a consultant, says he doesn't often read the business pages. "I'm just a poor guy making my way," he says. Nonetheless, he spent half an hour on a recent Saturday playing economic-trivia games and sharpening his eye for counterfeit bills.
DeMarco says videos and displays that explain how the regional Federal Reserve banks deliver money to commercial banks and process checks, make the Fed seem more relevant to his daily life. "Any doubts I had about guys sitting around smoking cigars and chatting were dispelled," he says.
The exhibition is not the only shrine to monetary policy in the United States: Similar exhibits are in at least seven other cities, including Cleveland, Kansas City, and San Francisco.
But creating an economics exhibit that appeals to fifth graders, economists, and everyone in-between isn't easy, says Faith Goldstein, the vice president of public affairs at the Philadelphia Fed.
One of the more eye-catching elements, the "In & Out" exhibit, explains how money is circulated and debunks a common assumption that the Fed prints money. (That's the job of the US Treasury.) The Fed distributes currency to commercial banks, and destroys it after it becomes too worn. A 25-foot tower of $100 million in shredded money and a sealed block of $1.7 million worth of $5 bills helps put into perspective the amount of money that passes through the Philadelphia Fed.
But explaining monetary policy in layman's terms - and making it interesting - is more difficult. "The subject matter isn't sexy," Ms. Goldstein admits.
The "Then & Now" exhibit tells how the Federal Reserve became the nation's central bank in 1913. It's goal: to ensure a sound US financial system and a healthy economy.
Today, its most powerful tool is setting interest rates. The Fed's 12 branches send representatives to the Federal Open Market Committee - chaired by Alan Greenspan - which decides on a target rate banks will charge each other for overnight loans.
In addition to helping pull the interest rate lever, the regional banks are charged with protecting consumers. DeMarco learns this while using a touch-screen computer that projects images of one face morphing into another.
The display gives tips on preventing identity theft, such as shredding receipts and bank statements before throwing them away. It also displays advice on guarding against credit-card fraud and lowering credit-card rates.
DeMarco says he was previously unaware that the bank helped protect consumers. "My impression of the Fed before was a big brick vault."
Knowledge is prevention, says Joe Elstner, a spokesman for the St. Louis Fed. The more informed Americans are about fraud, "the fewer regulatory laws we'll need to protect people."
In 1913, President Woodrow Wilson established the Federal Reserve System as a "decentralized" central bank. The bank has three parts: the board of governors, regional reserve banks, and the Federal Open Market Committee. The System is both public and private.
Alan Greenspan chairs the Federal Reserve Board of Governors. Its members are appointed by the president and confirmed by the Senate.
There are 12 regional Federal Reserve Banks: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. They are private institutions.
The Federal Open Market Committee establishes the target interest rate for commercial banks to loan money to each other. The board of governors and some regional banks are members. The committee meets about eight times each year in Washington D.C.
The Fed receives no government funding. It supports itself through investing activities and turns over excess income to the US Treasury.
Source: Kansas City Federal Reserve