Extra Credit (Spring 2008)

  Frequently Asked Questions

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FAQ archives
Q: Our currency seems to be changing all the time. What are the latest updates?

The redesigned $5 bill entered circulation in March 2008. The bill retains two of the most important security features that were first introduced in the 1990s and are easy to check—watermarks and a security thread. The most noticeable changes on the front of the new $5 note are the addition of a light purple and gray background in the center of the bill and the larger portrait of President Lincoln. On the back of the bill, the most striking change is the larger "5" in the lower right corner, now printed in high-contrast purple ink.

These and other features of the new $5 bill are designed to help thwart counterfeiters. To stay ahead of technological advances that make counterfeiting easier, the U.S. Treasury plans to introduce new designs into currency every seven to 10 years. More information about the new $5 bill can be found at www.moneyfactory.gov/newmoney.

Q: What is the Federal Reserve's role with currency?

An important function of the Federal Reserve is ensuring that enough cash—that is, currency and coin—is in circulation to meet the public's demand. When Congress established the Federal Reserve, it recognized that the public's demand for cash is variable, increasing or decreasing seasonally and as the level of economic activity changes. For example, as a holiday season approaches, depository institutions increase their orders of currency and coin from Reserve Banks to meet their customers' demand. After the holiday, depository institutions ship excess currency and coin back to the Reserve Banks, where it is credited to their accounts.

The Federal Reserve Act authorizes each of the 12 Reserve Banks to issue currency. The U.S. Department of the Treasury's Bureau of Engraving and Printing (BEP) prints currency notes; the Federal Reserve Board places an annual printing order with the BEP and pays for the cost of printing. The Federal Reserve Board coordinates shipments of currency to the Reserve Banks, which in turn issue the notes to the public through depository institutions. Federal Reserve notes are obligations of the Reserve Banks. The Reserve Banks secure the currency they issue with legally authorized collateral, mostly in the form of U.S. Treasury securities held by the Reserve Banks.

Coin, unlike currency, is issued by the Treasury, not the Reserve Banks. The Reserve Banks order coin from the Treasury's Bureau of the Mint and pay the Mint the full face value rather than the cost to produce it. The Reserve Banks then distribute coin to the public through depository institutions.
Consumer Protection
Q: Can the Federal Reserve help me understand where to go if I have questions or complaints about my financial institution?

Yes. Consumers can visit the Federal Reserve's consumer assistance Web site at federalreserveconsumerhelp.gov. This central resource assists consumers who have complaints or questions about their bank and provides valuable information on credit, checking accounts, mortgages, and more. Additionally, consumers may also receive assistance by calling 888-851-1920 or e-mailing ConsumerHelp@FederalReserve.gov.