Ar 2009

2009 Annual Report
Federal Reserve Bank of Boston
Lessons
from
Resurgent
Cities
Federal Reserve Bank of Boston 1

2 2009 Annual Report
Downtown, New Haven, CT

Contents
Letter from the President 4
Lessons from Resurgent Cities 9
The Bank in the Community 33
2009 Bank Highlights 35
Board of Directors 38
Senior Officers 39
Advisory Councils 40
Officers 43
Bank Mission 44
Financial Statements 45
External Auditor Independence 73
Cover: Union Station, Worcester, MA

Letter
from
the
President
I am pleased to share this report on the Bank’s 2009 activities and, with this
letter, provide a perspective on the economy, Federal Reserve activities, and the
financial crisis of the last few years.
Economic difficulties persisted through 2009. Despite significant improvement

in financial conditions, the recovery in the real economy proceeded slowly —
with the declines of the first half of the year turning to growth in the third and
fourth quarters. Unemployment remained unacceptably high. At 9 percent in
November, the unemployment rate in New England was at the highest level in
33 years — although still below the national rate.
At year end, the economy still faced significant challenges. First, while the banking
crisis had passed, banking problems remained in many parts of the country and
constrained the supply of credit. Second, consumers and businesses remained
cautious, with housing prices well below their peak, high unemployment rates,
and continued home foreclosures. A third challenge involved the fact that
severe recessions have broader ramifications for labor markets — for example,
some workers who are unemployed for long periods may suffer a permanent
deterioration in their skill sets.
Still, the financial system and economy were in far better shape as 2009 ended
than at the beginning of the year. Some of this was due to Federal Reserve
actions. Measures like our program to purchase mortgage-backed securities
contributed to lower mortgage rates, making it more affordable for households
to obtain or refinance a mortgage. Our AMLF lending facility supported money
market mutual funds at a time of stress and, ultimately, shored up the market
for commercial paper — a market that funds credit cards, student loans, and

Downtown, New Haven, CT
home equity loans. Our Term Asset-Backed Securities Loan Facility (TALF)
facilitated the renewed issuance of consumer and small-business asset-backed
securities — essentially providing a financing vehicle for credit instruments that
had been disrupted by poor functioning in securitization markets. In doing
this, we helped make credit more available for student loans, consumer credit,
commercial real estate, and small business loans.
Although we are distressed by the financial and economic difficulties that many
New Englanders continue to face, we are confident that the steps we took to
address the crisis helped avoid much worse outcomes, and we know that our
work is not yet done. Some of our notable activities at the Boston Fed in 2009
included operating the AMLF lending facility on behalf of the Federal Reserve
System, taking a critical role in the so-called “stress tests” of major banks,
and influencing foreclosures and policymaking with workshops for troubled
borrowers in Hartford and Boston and with insightful research. We have also
tried to contribute to the revitalization of the city of Springfield, Massachusetts,
with research and with meetings with local stakeholders around the issue of
fostering more collaborative leadership. We have developed innovative payment
and accounting services that assist the U.S. Treasury Department and, ultimately,
taxpayers. Also, as discussed in last year’s annual report, we have an ongoing
interest in New England’s future skilled labor force and retaining recent college
graduates. Building on that work, this year we partnered with the Greater
Boston Chamber of Commerce and others to engage summer interns at local
businesses, to explain the benefits of living and working in Greater Boston after
graduation. My colleague Paul Connolly, the Bank’s Chief Operating Officer,
has been a true leader in this work. These and other initiatives are described in
more detail in the Bank Highlights section of this report.

With the financial crisis ebbing, in 2009 we worked hard to parse out, and
apply, its lessons. We are, for example, reorienting our bank-supervisory
activities in areas like capital adequacy, risk-management practices, liquidity
management, and the effects on risk-taking of compensation structures. And we
are augmenting traditional firm-specific oversight with a more comprehensive
approach to anticipating and addressing threats to financial stability — a so-
called “macroprudential” approach that goes beyond a focus on the safety and
soundness of individual institutions to also focus on risks to the financial system
as a whole.
Chief among the lessons I believe the nation should draw from the crisis is the
need to address critical gaps in the U.S. financial regulatory framework. The
much-discussed financial rescue of AIG, for example, highlights that no agency
had direct supervisory oversight of complex high-risk activities undertaken by a
large, interconnected nonbank financial institution; and once everything went
wrong, no framework existed to “wind down” or resolve the institution in an
orderly manner and minimize collateral damage.
I have on occasion used a highway metaphor for the country’s lack of wind-
down or resolution authority for important non-bank financial institutions —
which in my thinking is the most pressing of several issues in financial regulatory
reform. The financial system is akin to a highway that moves well most of
the time. Car accidents occur, but cause only minor disruptions to traffic —
although those involved in the accident may be seriously impacted. However,
if something other than a car overturns — say a tractor-trailer carrying volatile
materials — you need specialized emergency equipment that can clear away
such an accident. In the absence of such equipment, the roadway grinds to an
extended halt, and everyone is affected — not just those in the accident. Traffic
jams may even spill over onto surface roads. We have been operating in a world
where bank failures can be addressed with acceptable side effects, but the failures
of large non-bank financial firms cannot. It is in everyone’s interest that the tools
exist to clear such “vehicles” and keep the “roadways” moving.
College Hill, Providence, RI

There are many distasteful parts to the financial crisis and the choices that had to
be made. The frustration many people feel is absolutely understandable. I would
simply observe that the legal framework for resolution of non-bank financial
institutions in an orderly, transparent, and more palatable manner did not exist
— but should have, and must as we move ahead.
We are fortunate to have very dedicated staff at the Bank, and I want to thank
them for their professionalism, engagement, and commitment to making a
difference in the public’s interest, especially during these challenging times. I
also thank the members of our Board of Directors and the members of our
advisory groups for the wealth of insights they shared with us from all corners of
the New England economy.
I especially want to thank the three directors who completed terms of service
on our board in 2009. Among their many contributions, Stuart Reese helped us
greatly in launching our efforts in Springfield, and Robert Kraft hosted our first
foreclosure-prevention event at his “home-away-from-home,” Gillette Stadium.
This workshop welcomed thousands of people in tough personal situations for
a very unique event that made a difference. And during her time on the board,
Lisa Lynch served as a director, deputy chair, and chair; she also headed the
System’s Conference of Chairs. I want to thank each of them, and our other
directors, for their service and their clear focus on advancing economic well-
being for the region and nation.
Eric Rosengren

Downtown, Providence, RI

Lessons from Resurgent Cities
By Yolanda Kodrzycki
and Ana Patricia Muñoz*
In 2008, the Federal Reserve Bank of Boston began a project to help reinvigorate the city of
Springfield, Massachusetts. This cross-departmental initiative uses the Boston Fed’s research
and convening capabilities to complement the efforts of other organizations dedicated to
improving economic and social conditions in New England’s fourth-largest city. As noted in
an earlier joint Federal Reserve-Brookings Institution study, Springfield has one of the highest
rates of concentrated poverty in the country: one-third of the city’s poor live in neighborhoods
where poverty rates exceed 40 percent.1 Thus, a particular focus of the Boston Fed project has
been to support revitalization strategies that would enable more city residents, particularly
those located in poor areas, to prosper.
While the Boston Fed project focuses on the city of Springfield, we hope to devise approaches
that can be replicated in other struggling mid-sized cites around New England and the nation.
To this end, this essay reports on lessons learned from our research on older industrial cities that
have adapted relatively well to economic challenges, and are recognized as vital communities
today. We believe these “resurgent cities” provide relevant, inspiring insights on development
strategies for urban America.
Mid-sized manufacturing cities face challenges

The early 1960s were good times for the residents of Springfield. Median family income in
Springfield was slightly higher than the national average, and the city’s poverty rate was a little
below average. About one-third of its resident jobholders worked in manufacturing. In many
ways, Springfield in the beginning of the 1960s was emblematic of other successful U.S. cities
of that era.
*Yolanda Kodrzycki is Vice
President and Director of
Our study identified 25 peer cities that most closely matched Springfield’s profile (see Figure
the New England Public
Policy Center at the Federal 1).2 As it turned out, all of these cities are in the Northeast, Midwest, or Upper South. These
Reserve Bank of Boston. Ana
Patricia Muñoz is Policy peer cities had populations ranging from about 100,000 to about 250,000 residents in the
Analyst at the Federal
Reserve Bank of Boston. Federal Reserve Bank of Boston 9
Figure 1
Springfield, MA, and 25 Peer Cities*
ME
VT
WI NY NH
MI Rochester
Flint Syracuse MA Worcester
Springfield * CT
Grand Rapids Providence
Waterbury Hartford RI
Rockford Erie Bridgeport New Haven
PA
South Bend Paterson
Gary Youngstown Jersey City
Akron
Fort Wayne Allentown
Peoria NJ
OH
IN MD
IL Dayton DE
WV Resurgent cities
Other peer cities
Evansville VA ✱ Springfield
KY
Winston-Salem Greensboro
TN NC
*Based on population, employment in manufacturing, and the role of the city in the region from 1960 to 1980.
period from 1960 to 1980, although a few started with larger populations in 1960
before shrinking in size. Their manufacturing employment shares in 1960 ranged
from 30 percent to just over 50 percent. Like Springfield, each of the peer cities
has remained the primary urban center of its respective metropolitan area. Thus, in
addition to bearing responsibility for the well-being of their own residents, these cities
continue to provide job opportunities, medical care, higher education resources, and a
range of other services and amenities for the residents of the surrounding region.
We identified 10 cities (out of these 25) that have done substantially better than the
others. These “resurgent cities” are Evansville (IN), Fort Wayne (IN), Grand Rapids
(MI), Greensboro (NC), Jersey City (NJ), New Haven (CT), Peoria (IL), Providence
(RI), Winston-Salem (NC), and Worcester (MA). Among the indicators we used
to make this identification are family income, poverty rates, population trends, and
reputation among economic development experts (see Table 1 and “Recognition of
Resurgence” box).
The 10 resurgent cities have a number of factors in common. First, although they
have fared considerably better than their peers, their economic performance over the
past five decades has not been as strong as that of the national economy. In 1960,
Recognition of Resurgence
Resurgent cities have received nationwide recognition for their individual
programs and for their overall revitalization process. One of the most impor-
tant recognitions is the All-America City Award, a program of the National
Civic League that recognizes communities whose citizens work together to
identify and tackle community-wide challenges and achieve uncommon results. In the past two
In the past two decades, Evansville, Fort Wayne, Grand Rapids, Greensboro, decades, Evansville,
New Haven, Providence, Winston-Salem, and Worcester have been among
the winners or finalists of this award. In fact, Fort Wayne has been named an
Fort Wayne,
All-America City three times, most recently in 2009. Among other initiatives, Grand Rapids,
the latest award recognized the establishment of the Refugee Resource Center
Greensboro, New
to provide services to the city’s burgeoning immigrant and refugee population.
Funded in part by a federal government grant, the center helps new residents Haven, Providence,
of Fort Wayne learn English and other skills, and gain access to health care and Winston-Salem,
employment.
and Worcester
The range of honors awarded to Winston-Salem over the past decade illus- have been among
trates the extent of the city’s transformation since being known primarily as the
the winners or
center of the U.S. cigarette industry. In 2004, Partners for Livable Communities
selected Winston-Salem as one of the 30 “Most Livable Communities,” based finalists of this
on its “creativity and ability to prepare for the new economy.”7 Winston-Salem award.
was also named one of the world’s “Most Intelligent Communities” in 2008,
in a list drawn up by the Intelligent Community Forum.8 In 2006, the city was
included among “America’s 50 Hottest Cities” for business relocation or expan-
sion,9 and in 2009 Forbes Magazine ranked the Winston-Salem metropolitan
area as the 18th-best place in the United States for business and careers.

Table 1
Key Economic Indicators, 1960, 1980, and 2005–07
Springfield, Peer Cities, and U.S. Total

Median Family Income Population Poverty Rate Population
1960 2005–07 1980 2005–07 1960 2005–07
Percent of U.S. median Percent In thousands
Resurgent Cities
Evansville 93.6 76.9 12.2 17.8 142 114
Fort Wayne 114.7 89.4 11.0 13.9 162 250
Grand Rapids 107.2 75.2 13.5 21.9 177 194
Greensboro 103.3 87.8 12.8 18.7 120 237
Jersey City 105.1 80.1 21.2 17.4 276 235
New Haven 103.6 71.9 23.2 24.0 152 124
Peoria 105.3 90.7 12.3 16.9 103 111
Providence 89.6 70.2 20.4 27.2 207 170
Winston-Salem 93.9 85.6 16.4 18.6 111 214
Worcester 102.5 92.4 14.4 18.3 187 166
Springfield 105.9 65.2 17.8 27.7 174 148
Peer City Averages
All cities 105.3 71.1 16.7 23.6 174 149
Resurgent cities 101.9 82.0 15.7 19.5 164 181
Other peer cities 109.1 64.3 17.3 26.1 180 128
U.S. total 100 100 11.7 13.3 179 * 299*
Source: U.S. Bureau of the Census. County and City Data Book (1960), American Community Survey (2005–2007).
*In millions
average median family income in the 10 resurgent cities was $5,700, similar to the
U.S. figure. In 2005–07, their average median family income of $50,000 was only 82
percent of the U.S. median (see Figure 2). Similarly, the average population poverty
rate deteriorated from 16 percent in 1980 to 19 percent in 2005–07; this latter reading
was six percentage points higher than the U.S. average (see Figure 3). Thus, as U.S.
economic activity has decentralized since around 1960, middle- and higher-earning
families increasingly have tended to live in the suburbs. Even the relatively successful
cities have had to cope with the challenges of being home to poorer populations than
was the case in the past.
Second, most of the resurgent cities have also undergone deep changes in the racial
and ethnic make-up of their populations. In 1960, as a group, the resurgent cities were
not very different from the nation. On average, whites comprised 87 percent of city
populations, compared with 89 percent of the national population. Now, however,

resurgent city populations are, on average, more racially mixed than many other parts
of the United States. As of 2005–07, the average city in the resurgent group was
62 percent white, and two of the resurgent cities—Jersey City and New Haven—
went from being over 85 percent white in 1960 to having nonwhite majorities in
2005–07. The mix for the nation in 2005–07 was 76 percent white and 24 percent
other race categories (see Table 2). Hispanics have increased as a share of resurgent
city populations from an average of 4 percent in 1980 to 15 percent in 2005–07,
similar to their nationwide share. Providence’s population was 6 percent Hispanic in
1980, and then skyrocketed to 36 percent in 2005–07, the highest share among the
resurgent cities (see Table 3).
Transitioning away from a manufacturing-oriented economy has posed major

challenges. Nationally, the share of manufacturing jobs has decreased dramatically
since the early 1960s and, in fact, the total number of people employed in the U.S.
manufacturing sector is lower now than it was then. In addition, manufacturing
work has shifted increasingly to suburban areas, making it that much harder for
city residents to access these jobs. A third common factor for the resurgent cities is
that, by 1960, each of them already had a nonmanufacturing job base that offered
development potential. In Evansville and Greensboro, for example, about 70 percent
of employed residents worked outside of manufacturing in 1960. By contrast, none
of the cities where over 40 percent of employed residents had manufacturing jobs in
1960 has yet managed to achieve resurgent status (Figure 4).3
The declining dependence on manufacturing over time is striking. On average,

only about 14 percent of the residents of resurgent cities were employed in the
manufacturing sector in the mid-2000s (Table 4). A number of other industries
were major employers of urban populations, especially retail trade, education, and
leisure and hospitality. In fact, industry diversification has become the norm both in
resurgent and in the remaining peer cities.
A final observation is that economic resurgence has been only weakly linked to
geography. States such as Connecticut, Massachusetts, New Jersey, Indiana, Michigan,
and Illinois each had both at least one resurgent city and at least one non-resurgent
city. This pattern suggests that although statewide policies may have been a factor in
easing economic adjustment, mid-sized cities ultimately played an important role in
determining their own fates.
Leadership and collaboration drive resurgence

Time and again, our examination of the resurgent cities’ histories indicated that the
resurgence involved leadership on the part of key institutions or individuals, along
Massachusetts College of Pharmacy and Health Sciences, Worcester, MA

Figure 2
Median Family Income as a Share of U.S. Median
Family Income
Percent
120
Average other peer cities
100
Average resurgent cities
80 Springfield
In some cases,
the turnaround
60
started with efforts 1960 1980 2000 2005-07
on the part of the Source: U.S. Bureau of the Census. County and City Data Book (1960),
Decennial Census (1980 and 2000), American Community Survey (2005–2007).
public sector, while
in other cases with collaboration among the various constituencies with an interest in economic
development. Initial leadership in these cities came from a variety of key institutions
nongovernmental
and individuals. In some cases, the turnaround started with efforts on the part
institutions or even of the public sector, while in other cases nongovernmental institutions or even
private developers were at the forefront. In these success stories, the instigators of
private developers
city revitalization recognized that it was in their own interest to prevent further
were at the deterioration in the local economy, and they took responsibility for bringing about
forefront. improvement.
Regardless of who initiated the turnaround, economic redevelopment efforts spanned

decades and involved collaborations among numerous organizations and sectors.
Collaboration became necessary because economic transformation is complex,
and because outsiders—such as state and national governments, foundations, and
businesses that are potential sources of funding and jobs—often require proof of joint
efforts in order to contribute to a city’s development.
Public sector leadership

In some cities, revitalization stemmed from the mayor’s leadership. However,
ongoing commitments of business and nonprofit groups provided critical continuity
as mayors changed. An interesting illustration is Providence. After World War II, the
city fell into a downward spiral, losing population and jobs. In 1974, Vincent Cianci

Museum Quadrangle, Springfield, MA
was elected mayor. Although controversial, Cianci brought energy and a strong
presence to the city. Working with private partners, he led Providence in carrying
out a series of ambitious projects that eventually enabled its successful promotion as
the “Renaissance City.” After a major personal scandal forced Cianci to leave office, a
private-sector coalition—led by the Providence Foundation, the Greater Providence
Chamber of Commerce, corporate leaders, and the Rhode Island Foundation—was
Working with
instrumental in pursuing development initiatives. Collaboration between the public
and private sectors was fundamental in completing long-range projects that were private partners,
essential in reconnecting downtown to the rest of the city and in developing the
the mayor led
waterfront. The projects included the relocation of railroad tracks running through
the downtown and the removal of the so-called “widest bridge of the world”4 that Providence in
had obscured the two rivers crossing the city. Upon reelection as mayor in the mid- carrying out
1990s, Cianci worked to establish tax incentives to attract artists to live downtown
and a loan program to help in launching restaurants. a series of
ambitious projects
Evansville is another example of a mayor-initiated turnaround. Frank F. McDonald II,
Evansville’s mayor from 1959 to 1971, started his period in office by commissioning that eventually
a study on the city’s potential, and personally contacted businesses to persuade them enabled its
to settle in Evansville. During this time, the city benefited from the construction of
a civic center, federal buildings, a community center, and the state’s first enclosed successful
mall, as well as the beginnings of downtown renewal. These efforts were followed by promotion as the
the launching of an aggressive economic development program by the Metropolitan
Evansville Chamber of Commerce in the 1980s, and more recently, by actions to
“Renaissance City.”
develop technology-oriented businesses co-sponsored by the non-profit Innovation
Pointe and the University of Southern Indiana.
Private sector leadership

While the revivals of Providence and Evansville arguably started in city halls, in other
resurgent cities, businesses, philanthropists, and nonprofit organizations initiated the
turnaround, and public officials joined the efforts later in the process. Located on

Figure 3
Population Poverty Rate, 1980, 2000, and 2005-07
U.S., Springfield, and Peer Cities
Percent
30
Springfield
25
20
Grand Rapids, Average resurgent cities
one of the 15 U.S. total
resurgent cities in
10
the Midwest, is a 1980 2000 2005-07
prime example of Source: U.S. Bureau of the Census. County and City Data Book (1960),
Decennial Census (1980 and 2000), American Community Survey (2005–2007).
the impact that

philanthropists the west bank of the Hudson River across from Manhattan, Jersey City evolved from
being a heavily industrial city in the 1950s to becoming a major financial center by
and committed the turn of the century. As employment plummeted in the 1960s and 1970s, job and
entrepreneurs can population declines were accompanied by corruption scandals and soaring crime.
Private-sector investors stepped in to take advantage of the city’s location and relative
have in a city. affordability. The mid-1980s construction on abandoned waterfront property of the
Newport Development, a $2.5 billion mixed-use community, is widely credited with
kicking off Jersey City redevelopment. Over time, more high-rise buildings were
constructed, and financial and other professional services job opportunities emerged.
The private sector could not take on the full burden of the Jersey City turnaround,
however. Mayor Bret Schundler, in office from 1992 to 2001, is viewed as having
changed the course of a city marked by years of corruption and economic decline,
“bringing the diverse people of Jersey City together, and moving one of America’s
formerly most distressed cities forward.”5 Business tax incentives offered by the
State of New Jersey and public transportation system improvements, including the
construction of a $2.2 billion light rail system in the early 2000s, provided further
impetus for firms to locate in the city.
Grand Rapids, one of the resurgent cities in the Midwest, is a prime example of
the impact that philanthropists and committed entrepreneurs can have in a city.

Once known as the “Furniture Capital of the World,” Grand Rapids has diversified
its economy both within and outside the manufacturing sector. A significant early step
in turning around the city economy was the development of a health care industry.
Jay Van Andel, one of the founders of Amway Corporation, created the Van Andel
Institute in 1996 to focus on research pertaining to the genetic and molecular origins
of cancer and other diseases. Later on, a number of additional medical facilities and
research institutions joined the Institute and the Grand Rapids Medical Education and
Research Center to form the “medical mile.” More recently, public-private partnerships
and donations from the private sector have sparked downtown revitalization in Grand
Rapids. Private investments have been viewed as providing risk-sharing and know-how
to public projects.
In some of the resurgent cities, chambers of commerce and business organizations

have been involved in broad aspects of economic development including education
Table 2 Racial Composition of Population, 1960 and 2005-07

Springfield, Peer Cities, and U.S. Total
White Black All Other*

1960 2005–07 1960 2005–07 1960 2005–07
Resurgent cities
Evansville 93.4 86.1 6.6 11.7 0.0 2.2
Fort Wayne 92.6 78.4 7.2 15.5 0.2 6.1
Grand Rapids 91.7 68.5 8.0 21.1 0.3 10.4
Greensboro 74.0 52.6 25.8 39.7 0.2 7.6
Jersey City 86.5 35.5 13.3 28.7 0.2 35.9
New Haven 85.1 45.7 14.5 36.8 0.4 17.6
Peoria 90.5 67.8 9.3 26.7 0.2 5.4
Providence 94.2 50.3 5.4 15.6 0.4 34.1
Winston-Salem 62.9 55.0 37.1 34.7 0.0 10.3
Worcester 98.8 79.7 1.1 9.0 0.1 11.3
Springfield 92.3 52.4 7.5 22.4 0.2 25.1
Peer City Averages
All cities 87.4 56.4 12.5 30.6 0.2 13.0
Resurgent cities 87.0 62.0 12.8 24.0 0.2 14.1
Other cities 87.6 52.9 12.3 34.7 0.2 12.4
U.S. total 88.6 75.7 10.5 12.6 0.9 11.7
*Asian; American Indian and Alaska Native; Native Hawaiian and Other Pacific Islander; or some other race.
Note: In 2005–07, entries show the number of white-alone and black-alone populations as a percent of total
single-race population, with all other and mixed races as the residual.
Source: U.S. Bureau of the Census. American Community Survey (2005–2007).

and workforce development programs. For instance, the Winston-Salem Chamber
of Commerce developed the Blueprint for Technology in 1991, which included
initiatives for K-12 public education. The chamber also formed the Winston Works
task force that launched a campaign to encourage companies to dedicate at least 1
percent of their discretionary spending to local suppliers.
Although institutional arrangements have varied across cities and over time, the
more successful cities now typically have a private, nonprofit organization heading
economic development efforts. Such organizations collaborate closely with local
Although chambers of commerce and other nongovernmental entities, but they have broader
mandates. Economic development organizations have institutionalized relationships
institutional with city government, usually in the form of funding and representation on the board
arrangements of directors.
have varied For example, in Peoria, a group of civic leaders created the Economic Development
across cities and Council (EDC) for the Peoria Area in 1981. The EDC attracted new companies
over time, the

more successful Table 3 Hispanic Share of Population,
1980 and 2005-07
cities now Springfield, Peer Cities, and U.S. Total
typically have a 1980 2005–07
private, nonprofit Resurgent cities

Evansville 0.5 1.5
organization Fort Wayne 2.2 6.8
Grand Rapids 3.2 16.4
heading economic Greensboro 0.8 6.5
development Jersey City 18.6 27.7
New Haven 8.0 24.0
efforts. Peoria 1.4 2.9
Providence 5.8 36.0
Winston-Salem 0.8 12.2
Worcester 4.3 17.7
Springfield 9.1 33.6
Peer City Averages
All cities 6.2 17.1
Resurgent cities 4.5 15.2
Other cities 7.3 18.3
U.S. total 6.4 14.7
Source: U.S. Bureau of the Census. Decennial Census (1980), American

Community Survey (2005–2007).

Forest Park, Springfield, MA

Figure 4
Share of Employed Residents Working in Manufacturing, 1960
Springfield and Peer Cities
Percent
60
Resurgent cities
Other peer cities
50
40
30
20
10
0
Waterbury
Flint
Gary
Bridgeport
Paterson
Rockford
Akron
Allentown
Rochester
Youngstown
Erie
South Bend
Worcester
Dayton
Winston-Salem
Grand Rapids
Providence
Springfield
Jersey City
Fort Wayne
Peoria
New Haven
Syracuse
Evansville
Hartford
Greensboro
Source: U.S. Bureau of the Census. County and City Data Book (1960).
to the area, helped retain existing companies, and worked to ensure that the entire
Foundations and region was involved in economic development strategies. After going through rough
groups of civic times during the recessions of the early 1980s, community leaders, Peoria’s mayor,
and the private sector (including Caterpillar, the city’s largest employer) joined forces
leaders have to strengthen the EDC. The following year, Caterpillar and other local businesses
played an active and civic leaders formed a membership organization called Peoria Next to promote
technology-centered development for the city. Through activities such as networking
role in revitalizing meetings and business incubation, Peoria Next has built up a “knowledge community
resurgent cities network” to foster and sustain an intellectual creative class. One early mark of success,
growing out of research conducted at Caterpillar, was the founding of battery
both indirectly developer Firefly Energy Inc., co-winner of the 2007 Wall Street Journal Technology
. . . and directly Innovation Award.
by developing
Foundations and nonprofit organizations
programs that Foundations and groups of civic leaders have played an active role in revitalizing
resurgent cities both indirectly through initiating conversations and collaborations
contribute to
between different stakeholders and directly by developing programs that contributed
transformation of to transformation of these cities.
these cities.
In Greensboro, local foundations initiated a collaborative process to determine
economic development strategies. In 2000, six local foundations financed a study
aimed at evaluating Greensboro’s economic prospects. As a result of the study, the
foundations created the not-for-profit organization Action Greensboro to coordinate
the development-related activities of the city’s numerous business and civic groups.
Action Greensboro became a major player in development, investing in numerous
projects—including parks, job recruitment programs, and downtown revitalization—
and gauging the progress of the city. In 2008, Greensboro was chosen among Fortune
magazine’s “100 Best Places to Live and Launch.”
Universities make a difference With the continued

With the continued transition to a knowledge-based economy, development
transition to
strategies increasingly have emphasized improvements to human capital.
Educational attainment has improved considerably in resurgent cities. As of 2005– a knowledge-
07, the share of population 25 years and older with a bachelor’s degree or more based economy,
was slightly higher than the national average (see Figure 5). As the resurgent cities
demonstrate, institutions of higher education have participated in reinvigorating development
the cities’ economies in their roles as major employers and as educators. The strategies
examples of Yale University in New Haven, educational institutions in Greensboro,
and university partnerships in Worcester stand out. increasingly have
emphasized
Close to 40 percent of employed residents of New Haven work in the education,
health care, and social assistance industries. The biomedical sector has become
improvements
a growing driver of the city’s economy, in part thanks to the role of New Haven’s to human capital.
educational institutions. In the early 1990s, Yale emerged as the engine of New
Haven’s revitalization, participating in the city’s redevelopment programs (see
Educational
“Yale University’s Changing Role” box). In addition, other local universities such attainment
as Southern Connecticut State University and Gateway Community College,
together with area businesses, are working with the city’s public schools to develop
has improved
curricula and materials and to provide teacher training related to biotechnology. The considerably in
state of Connecticut recently matched $1.5 million in funding provided by private
resurgent cities.
biotechnology and pharmaceutical companies for the “Biobus,” a state-of-the-art
mobile laboratory that takes biotechnology education on the road.
The Greensboro News & Record noted that “universities are the primary players in a
key group that includes GTCC [Guilford Technical Community College], public
schools and business that will form tighter bonds as Greensboro rebuilds, supplanting
the old world dominated by businesses leaders who once met privately.”6 In 1996,
the Wall Street Journal praised Greensboro Community College’s job-training
curriculum, which was redesigned with the help of area businesses and prepares

students to perform high-tech jobs in auto mechanics, textiles, and other industries.
In addition, GTCC offers a Quick Jobs program that provides trainees with the basic
skills required to find employment.
In Worcester, educational institutions formed UniverCity Partnership in 2005 to

adopt strategies allowing higher education institutions to participate in economic
growth by improving local purchasing, employment, real estate development,
business incubation, and workforce development. Among its current efforts, the
city is looking to attract more technology firms through the Worcester Polytechnic
The University Institute Venture Forum. Universities also have also been involved in community
Park Partnership,
Figure 5
the result of Share of Population 25 Years and Older. . .
long-standing Springfield and Peer Cities
Percent
collaboration 100 . . . Completing At Least High School
between Clark U.S. total

80
University and
its surrounding 60
Springfield
community, focuses
40
on neighborhood Average other peer cities
revitalization. 20
1960 1980 2000 2005-07
Percent . . . With College Degree or More

30

25
U.S. total
20 Springfield
15

10
5
1960 1980 2000 2005-07
Source: U.S. Bureau of the Census. County and City Data Book (1960), Decennial
Census (1980 and 2000), American Community Survey (2005–2007).

Yale University, New Haven, CT
Yale University’s Changing Role
Although Yale University was founded in New Haven over three centuries
ago, the university has been deeply involved in fostering New Haven’s overall
development only in the past few decades. Before that, the University tended to
isolate itself from the city’s economic troubles, “retreat inside its walls and lock
its doors.”10
In the mid-1980s,
In the mid-1980s, Yale joined city economic development officials and corporate
leaders to try to enhance New Haven’s service-sector employment. One result
Yale joined city
was “New Haven 1990,” a marketing proposal that grew out of conversations economic
among development, business, and neighborhood representatives, and with ex-
perts from other cities that had undertaken similar initiatives, including Baltimore, development
Boston, and Indianapolis.
officials and
In 1991, Yale reached a formal agreement with the city of New Haven that corporate leaders
marked a decisive turning point in the university’s participation in civic affairs.
The university agreed to pay the city $1.2 million a year (an amount equivalent to try to enhance
to over 5 percent of the municipal budget) in recognition of fire protection ser-
vices, and to put its golf course on the property tax rolls. Under the agreement,
New Haven’s
Yale also agreed to spend $50,000 annually for five years to fund The Center service-sector
for the City, an organization aimed at tapping business, government, and other
resources to attack the city’s social problems. Yale’s initiatives also included employment.
funding the following: redevelopment of four deteriorating blocks in the city’s
retail center; investment in a face-lift for the Broadway shopping strip; creation
of a venture capital fund aimed at luring biotechnology companies to the Sci-
ence Park incubator; payment of an annual $2,000 stipend (for up to 10 years)
to any Yale employee buying a house in the city; and the resources to renovate
four vacant storefronts on Park Street to house a Yale police substation and
several student programs.11
By the mid-1990s, New Haven’s economy seemed to be on a firmer footing.

Biomedical industry and other projects developed in the city. Nonetheless, de-
velopment experts see a need to broaden the economic base of the city even
further. As an example of recent initiatives, in partnership with Yale University
and the business community, the city of New Haven launched an Economic
Development Corporation in February 2008 to operate as a one-stop center to Federal Reserve Bank of Boston 23
attract new businesses and to retain existing businesses.

Table 4 Employment by Industry, 2005–07
Springfield and Peer Cities
Percent of Total Employment of City Residents
Professional
Health care and Educational Leisure and and business Financial Other All
social assistance Manufacturing Retail trade services hospitality services activities services Other*
Resurgent cities
Evansville 11.9 16.3 14.3 5.7 11.4 8.9 6.0 6.1 19.4
Fort Wayne 14.5 19.6 11.1 7.2 9.7 8.1 6.2 4.3 19.2
Grand Rapids 14.4 18.1 11.6 8.7 9.9 9.6 5.0 5.2 17.5
Greensboro 12.1 12.5 12.4 11.2 10.1 9.0 8.2 3.3 21.2
Jersey City 12.7 6.4 8.7 7.2 7.6 13.5 14.3 4.7 25.0
New Haven 17.1 9.9 10.2 20.0 8.3 8.6 5.1 5.7 15.2
Peoria 16.3 15.8 10.8 8.9 10.5 9.7 6.3 5.4 16.3
Providence 14.8 15.0 10.8 12.6 12.5 8.5 6.5 4.3 14.9
Winston-Salem 15.7 11.8 10.9 9.7 9.9 9.5 7.9 4.8 19.7
Worcester 16.0 11.2 12.8 11.6 9.3 9.1 6.3 5.1 18.7
Springfield 19.1 12.5 10.2 8.8 9.0 7.4 6.9 5.0 21.0
Peer City Averages
All cities 16.1 14.4 11.9 9.3 9.9 8.6 6.0 5.0 18.9
Resurgent cities 14.5 13.7 11.4 10.3 9.9 9.5 7.2 4.9 18.7
Other peer cities 17.1 14.8 12.2 8.7 9.9 8.1 5.2 5.0 19.0
*Natural resources; Construction; Wholesale trade; Transportation and warehousing, and utilities; Information; and Government.
Source: U.S. Bureau of the Census. American Community Survey (2005–2007).
projects. For instance, the University Park Partnership, the result of long-standing
collaboration between Clark University and its surrounding community, focuses on
neighborhood revitalization.
Planning and re-evaluating are critical

Leadership and collaboration facilitated long-term planning that allowed the resurgent cities
to develop more dynamic economies. Their transformation has proved to be a continuing
process, and has required re-evaluating strategies and adapting to ongoing challenges.
Long-term planning
The city of Fort Wayne adopted a long-term economic development strategy in 2001
by working with community leaders and professionals in economic development.
The Peoria Civic Federation, primarily composed of the leaders of the region’s
largest employers, sponsored the Greater Peoria Vision 2020, which was released
in 2005 after a two-year planning process. Several community councils oversee the

implementation of master-plan areas such as quality of life, economic revitalization,
youth and education, and leadership. In 2009, the city of Peoria sought community
input on an updated comprehensive plan, which develops an overall vision for Peoria’s
growth and development over the next 10 to 20 years.
Grand Rapids has also benefited from working on long-term development plans
and from coordination efforts across sectors. In 1992, the city launched “Voices &
Visions,” a planning process that involved a wide range of actors from the Grand
Rapids City Commission to the Grand Rapids public schools to the private sector.
The city’s development plans were praised as rooted in community consensus by the
National Civic League in 2003. Another striking
feature of
Continuing adaptation
The resurgent cities also have illustrated the need to adapt to changing circumstances. resurgent cities’
In some cases, a given development strategy proved successful in some respects, stories is the need
but not in others. For example, working with the Chamber of Commerce and the
University of Massachusetts, Worcester established the Massachusetts Biotechnology for continuing
Research Institute (MBRI) in the 1980s in order to attract biotech companies. innovations
Despite the biotechnology industry boom, the city had to readapt its development
approach because biotech companies often employ only small numbers of workers
in overall
and take a long time to achieve profitability. In 1998, the MBRI changed its name to development
Massachusetts Biomedical Initiatives, as it launched efforts to attract medical devices
companies that could become an important source of jobs.
strategy.
Another striking feature of resurgent cities’ stories is the need for continuing
innovations in overall development strategy. In the 1980s, Fort Wayne adapted to the
shutdown of its largest employer by attracting investments on the part of other large
companies. More recently, however, the city’s focus has been on becoming a stronger
player in high-tech entrepreneurship. Greensboro succeeded in attracting service
jobs, but is now actively recruiting higher paying employers in aerospace technology
as a new engine for its economy. Peoria realized in the 1990s that building up its
retail and service sectors was insufficient to bring about the desired rate of economic
growth. The city turned to new strategies centered on medical research, technology,
and entrepreneurship.
Infrastructure improvements and industry

modernization matter
The stories of the resurgent cities involve fundamental shifts in local economies
and human and physical infrastructure. Mid-sized cities that were once known for
manufacturing items ranging from refrigerators and home furnishings to jewelry

Quinnipiac Terrace, Fair Haven, CT

and cigarettes have earned new identities. Many have turned to more technology-
related forms of manufacturing for part of their transformation. Over the course
of the last several decades, the resurgent cities have focused on modernizing their
transportation and communications infrastructures by expanding regional airports,
improving roads, and building high-speed broadband networks. Such infrastructure
improvements have been important draws for manufacturing and nonmanufacturing
firms alike.
Providence offers the most dramatic example of infrastructure makeovers to

reconnect the downtown area with the rest of the city and to redevelop the
waterfront. In Greensboro, the opening in 1982 of the Piedmont Triad International
Airport terminal just west of the city set off a building boom in the city. By 2002,
a “semiconductor cluster” of about 25 companies was thriving near Piedmont Triad
Providence
International Airport. In Peoria, the state’s overhaul of the city’s highway system offers the most
access and the construction of a new terminal at the Peoria International Airport
dramatic example
improved manufacturers’ and distributors’ access to transportation. Transportation
improvements in Worcester, such as the establishment of frequent commuter rail of infrastructure
service to Boston and direct access to the Massachusetts Turnpike, encouraged new
makeovers to
investments in the city.
reconnect the
Resurgent cities have also recognized that downtown revitalization is an important downtown area
step to create employment and attract residents. Several cities rely on nonprofit
organizations exclusively created to develop and implement strategies to revitalize with the rest of
downtown areas. The city of Greensboro relies on the Downtown Greensboro the city and to
Inc. nonprofit organization focusing entirely on downtown and more specifically
on the business improvement district to continue developing the urban core. The redevelop the
Downtown Winston-Salem Partnership, a member and advocacy organization, is the waterfront area.
lead organization implementing the downtown plan developed in 2007. Part of the
revitalization plan includes the Restaurant Row Program, introduced by the city with
federal and state support to help recruit and finance new eateries. The plan also calls
for promoting Winston-Salem as the “City of the Arts” and for attracting businesses
in the design industry.
Some cities not only built on their traditional strengths, but also succeeded in
creating business clusters virtually from scratch. As noted, Grand Rapids set out in
the 1990s to become a major center for health care in an initiative that has resulted
in the creation of medical facilities and research institutions to form the “Medical
Mile.” Likewise, Peoria decided to focus on health care and medical technology, and
is now gaining recognition as a “major medical powerhouse.” Winston-Salem, once
known internationally only for tobacco, chose to emphasize Internet connectivity
and has gained renown for creativity and intelligence and has become the 11th-largest
banking center in the country, just behind Boston. Jersey City built up a finance cluster
starting from a 1960 base that was not much larger than Springfield’s. Evansville’s
tourism industry became an important driver of the economy with the opening and
renovation of large convention centers in the early 1990s and the opening of one of
the city’s largest employers, the Aztar riverboat casino, in 1996.
Disadvantaged neighborhoods require specific focus

Despite their overall successes, the resurgent cities continue to struggle with
extending prosperity to a broader share of their populations. Except for Fort Wayne,
Despite their
all had poverty rates exceeding 17 percent as of 2005–07. Some of the resurgent
overall successes, cities have implemented distinct efforts to improve opportunities for their poor and
the resurgent minority residents, and to narrow the differences between the haves and the have-
nots. Although they are separate initiatives, these programs often adopt approaches
cities continue similar to those used to generate prosperity more generally. Most importantly, they
to struggle involve collaborations.
with extending The Providence Plan, a not-for-profit joint venture of the city of Providence, the
prosperity to a state of Rhode Island, the academic community, and the private sector, focuses on
children’s well-being, workforce development, and community building. Its successful
broader share of programs include Ready to Learn Providence, YouthBuild Providence, and the Local
their populations. Learning Partnership.
Except for Fort For many years, the successful redevelopment of Jersey City’s waterfront had little in
Wayne, all had the form of positive spillovers for poor neighborhoods. More recently, neighborhoods
have worked with the city in implementing their own economic development projects.
poverty rates Residents of one of Jersey City’s poorest neighborhoods, the Martin Luther King
exceeding 17 Drive, not only participated actively in writing their neighborhood development
plan, but also controlled its implementation through a neighborhood development
percent as of corporation. The plan received national and statewide awards and recognition for its
2005–07. innovative use of community outreach and implementation.
Direct involvement of the community in shaping planning efforts has proved to be

important in creating comprehensive long-term strategies. In Grand Rapids, the
city and the chamber of commerce have partnered with the Neighborhood Business
Alliance (NBA) on several occasions to work on economic development strategies.
Made up of representatives from all 20 neighborhood associations, NBA meets
monthly to coordinate city-wide services, share best practices, and advocate on issues
affecting neighborhood businesses and districts.

Baystate Medical Center contruction project, Springfield, MA
Springfield in Transition
Known as the “City of Firsts,” Springfield was for many years the center of a prosperous two-hundred-mile
industrial corridor in the Connecticut River Valley. Unfortunately, the city has suffered a steep economic
decline since the 1960s. The closures of the Springfield Armory in 1968 and the American Bosch metal
fabrication factory in 1986 are just two examples of the job losses in the city’s manufacturing sector. Since
the 1990s, expansion in the health care sector has filled some of the void produced by the departure of
industrial jobs, but the city continues to struggle with identifying and attracting other potential sources of job
growth within its borders.
In 2004, the dire condition of Springfield’s finances prompted the state to appoint a Finance Control Board,
which took over municipal spending decisions, focusing mainly on bringing expenditures into line with rev-
enues. The Control Board also worked on strengthening the city’s administrative capacity, in preparation for
resuming normal municipal operations after the expiration of the Board’s term in mid-2009.
In the past five years, organizations in and around Springfield have undertaken a number of initiatives to
attract new investment to the area and to revitalize the city. For example, in 2004, the Pioneer Valley Plan-
ning Commission started overhauling the earlier Plan for Progress, a blueprint for growth and development
of the regional economy.
Acknowledging their essential role in implementing workforce development programs and in creating and
attracting businesses, educational institutions have become more active participants in economic renewal
strategies. Springfield Technical Community College (STCC), in particular, has been a major contributor.
The Entrepreneurial Institute at STCC, created in 1996, provides entrepreneurship education for students of
all ages, while the STCC Technology Park has provided technology training and incubated new businesses.
Springfield-based educational institutions such as Springfield College (SC) and American International Col-
lege (AIC) are also committed to the overall well-being of the city of Springfield and the neighborhoods
where they are located. For example, both AIC and SC belong to the State Street Alliance, a large col-
laboration of institutions and residents overseeing the redevelopment of the major corridor running from
downtown Springfield to points east. Based largely on a 2006 report by the Urban Land Institute, numerous
revitalization projects are underway in the downtown area. Most recently, five major employers have part-
nered with the city and with lenders to promote homeownership in Springfield. The “Buy Springfield Now”
initiative is modeled on a program started in 2008 to provide homeownership incentives in Worcester.

What are next steps for struggling cities?
Fifty years ago, it would have been virtually impossible for either the leaders or the
residents of mid-sized U.S. cities to anticipate the full extent of challenges posed
by deindustrialization, suburbanization, and other structural and economic changes.
Other than starting from comparatively less dependence on manufacturing jobs, the
cities that would resurge in later decades did not possess obvious advantages over
their peers, however. Resurgence required the emergence of leaders who worked
collaboratively with the various constituencies with a stake in economic development.
Nonprofit entities—including universities and foundations—have taken active roles
in revitalization. Resurgent cities have reinvented themselves, creating new industries
and making major improvements to both human and physical capital. They have had
to exercise both patience in planning for the long term and flexibility continually to
revise these plans as circumstances warranted. For resurgent cities, perhaps the hardest
task of all has been extending prosperity to a broader segment of their populations.
These efforts have required community building and connecting communities to the
other collaborators in economic development.
No research study is capable of laying out the agenda for a struggling city. The Federal
Reserve Bank of Boston’s “Toward a More Prosperous Springfield, MA” initiative
has attempted to lay out reasonable aspirations for mid-sized cities whose economies
were once heavily dependent on manufacturing jobs, and to add to the available
information concerning the economic development approaches tried by their peers.
Although Springfield has taken constructive steps to turn around its economy (see
“Springfield in Transition” box), and undoubtedly so have many of the other cities in
the peer group, much work remains. We hope that these cities can adapt the lessons from
the resurgent cities to their own situations. They might usefully consider how specific
local groups could collaborate or form to promote and implement revitalization.
In addition, they might be able to identify selected economic development efforts
from their peer cities that have not been tried locally, and that are worth further
consideration. Eventually, such actions are likely to lead to new stories of resurgence.
1
DeAnna Green, “Springfield, Massachusetts: Old Hill, Six Corners, and the South End
neighborhoods,” in The Enduring Challenge of Concentrated Poverty in America: Case Stud-
ies from Communities Across the U.S., A Joint Project of the Community Affairs Offices
of the Federal Reserve System and the Metropolitan Policy Program at the Brookings
Institution, 2008. Available at http://www.frbsf.org/cpreport/.
2
For full details see Yolanda K. Kodrzycki, Ana Patricia Muñoz et. al., “Reinvigorating
Springfield’s Economy: Lessons from Resurgent Cities,” Federal Reserve Bank of Boston
Public Policy Discussion Paper No. 09-6, 2009. Available at http://www.bos.frb.org/eco-
nomic/ppdp/2009/ppdp0906.htm.
3
Econometric studies have demonstrated that U.S. cities that depended heavily on manu-
facturing in the past have tended to have relatively low rates of economic growth in recent

decades. See, for example, Edward L. Glaeser, José A. Scheinkman, and Andrei Shleifer,
“Economic Growth in a Cross-Section of Cities,” Journal of Monetary Economics, vol.
36, issue 1 (1995), pp. 117-143, and Edward L. Glaeser, Albert Saiz, Gary Burtless, and
William C. Strange, “The Rise of the Skilled City,” Brookings-Wharton Papers on Urban
Affairs, 2004, pp. 47-94.
4
Marion Orr and Darrell M. West, “Citizens’ Views on Urban Revitalization: The Case of
Providence, Rhode Island,” Urban Affairs Review 37, issue 3 (2002), p. 404.
5
Grover G. Norquist, “Jersey City on the Way Back,” The Washington Times, July 22,
1996.
6
“Rebuilding from Within; Knowledge, Innovation Form Base of Greensboro’s New
Economy,” Greensboro News & Record, April 13, 2008.
7
Founded in 1977, Partners for Livable Communities is a nonprofit leadership organiza-
tion that promotes quality of life, economic development, and social equity. See “Recent
Award Recognizes City’s Achievements,” Winston-Salem Journal, May 29, 2004.
8
For a city to be on the list, it has to excel in one of the following factors: broadband con-
nectivity, knowledge workforce, digital inclusion, innovation, or marketing and advocacy.
9
Expansion Management magazine asked over 80 prominent site location consultants to
list their top city choices for relocating and expanding companies, taking into consider-
ation such factors as the business climate, work force quality, operating costs, incentive
programs, and ease of working with local political and economic development officials.
10
“Focusing on Private Redevelopment, Not Public Urban Renewal,” Washington Post,
October 29, 1989.
These initiatives were promoted by Richard C. Levin, a Yale economist who lived in
11
New Haven for 23 years and became the university’s president in 1993.
Federal Courthouse, Springfield, MA

The Bank in the Community
While many responsibilities of the Federal Reserve Bank of Boston are regional,
national, and global in scope, the Bank also seeks to share its expertise with the
communities throughout its district in a variety of outreach activities. In addi-
tion, Bank staff are engaged in the local community, working and volunteering on
many projects and initiatives.
• United Way of Massachusetts Bay

• Community Care Day
• Foreclosure Prevention Workshops with HOPE NOW and NeighborWorks
• Cradles to Crayons
• Homeless Children’s Holiday Party
• Boston Earned Income Tax Credit Campaign
• Workforce Development
• Books and Kids Program
• Math and Kids Program
• Citizen Schools
• Operation Hope
• LifeSmarts – National Consumer League Program
• Massachusetts School Bank Association
• Boston Private Industry Council
• Excel High School Partnership
• FinTech Scholars Program
• Job Shadow Day
• Boston After School Jobs Program
• Boston Summer Jobs Program
• WriteBoston
• Classroom at the Workplace

Federal Reserve Bank of Boston, Boston, MA

2009 Bank Highlights
The turmoil of 2008 subsided in 2009 as credit markets quieted and financial conditions
stabilized. However, economic activity remained weak, and financial challenges intensified
for many families and businesses. Bank staff continued working to ameliorate conditions.
We contributed to the development of national policies and programs directed at easing
the crisis and also undertook a number of specific initiatives here in New England. We
tried to better understand the crisis, possible ways to address it more effectively, and
reforms that might ward off a recurrence. We also made progress on longer term issues
not directly related to the crisis.
Highlights of 2009 include the following:

Bank supervisory staff took on a number of new responsibilities. We led a Federal Reserve
System workgroup focusing on “lessons learned” to examine what bank supervisors
might have done differently and what might work better in the future. The group’s
recommendations are influencing views about large financial institution supervisory
processes going forward. Staff also contributed substantially to the Supervisory Capital
Assessment Program (the so-called “stress test”) that examined the capital adequacy of
the nation’s largest banks. This stress test proved particularly instructive and helped allay
public concerns about the solvency of these institutions. We will continue to conduct
forward-looking work of this nature. Additionally, Boston Fed supervisory personnel
continued to participate in international discussions of appropriate bank capital
requirements (Basel II modifications), and, with banks in some parts of the country
experiencing greater financial difficulties than banks here in New England, a number of
our examiners traveled to other districts to provide assistance.
The Bank’s economists advised the Bank president about economic conditions nationally
and in New England, about interest-rate policy, and about special programs to address
certain aspects of the deterioration in credit conditions. A focal point of analysis was the
value of bank-supervision responsibilities in informing central-banking responsibilities.
In October, the Bank hosted a conference of economists and policymakers focused on
this issue. Several presenters observed that the information gained in bank supervision

has provided valuable insight in the formulation of monetary policy. A number of
speeches by the Bank president also explored the contribution that bank supervisory
information makes to monetary policy. In other monetary-policy work, two of the
Bank’s economists published a paper on “changing inflation dynamics,” and two
economists organized a multi-Reserve Bank effort for the Federal Open Market
Committee to present our best understanding of the determinants of inflation.
Bank economists also engaged in research on the probability of deflation and
analyzed the effect on interest rates of the Federal Reserve System’s large scale asset
purchase programs.
As mortgage foreclosures continued to climb, the Bank responded by organizing

two major foreclosure-prevention workshops, one in Hartford in February and a
second in Boston in September. We were pleased that large numbers of borrowers
were assisted in both of these events, but we remain concerned that progress is slow
in achieving “permanently successful” modifications, and many borrowers continue
to be unable to meet their mortgage payments. Observing that unemployment
often plays a role in precipitating foreclosure, our economists developed a proposal
for helping unemployed homeowners avoid falling into foreclosure. They shared
this proposal with members of Congress and presented it to a number of groups.
They also provided testimony to the U.S. Senate Banking Committee and spoke
and wrote in a variety of other forums about the evolving foreclosure crisis.
The Bank continued its research and support for ongoing efforts to revitalize
the City of Springfield, Massachusetts, with the primary aim of integrating less
economically advantaged residents into the economic mainstream. The Bank
prepared a report analyzing the experiences of other mid-sized cities similar to
Springfield and explored labor market challenges for residents of Springfield’s low
income neighborhoods. The essay in this annual report summarizes the experiences
of some of the cities that have been particularly successful in achieving resurgence.
The Bank’s New England Public Policy Center produced a number of papers
addressing the fiscal challenges facing New England states and municipalities. These
included an analysis of the effectiveness of state business tax incentives and a history
of tax reform efforts in Maine. The center also continued its work to assess and find
ways to strengthen the supply of skilled labor in New England. Based on the Center’s
research, the Bank worked cooperatively with the Greater Boston Chamber of
Commerce on promoting internships as a way to retain more college graduates in the
area. This collaboration led to a workshop for employers and educational institutions
seeking to make more strategic use of internships and an informational and social
event that attracted some 300 interns working in Greater Boston.

The Bank’s work on behalf of the U.S. Treasury encompasses three funds management
programs: the Internet Payment Platform (IPP), an application enabling federal
agencies to handle all purchasing and payment transactions in a single web-based
system; the Stored Value Card (SVC) program, a payments card for use by military
personnel at bases in the United States and abroad; and a Cash Management
program that manages cash flows from depository institutions, enabling the
Treasury to collect the public’s money more efficiently. Significant efficiencies,
expansions, and improvements were achieved in these programs in 2009. Most
notably, we designed a new approach to collecting Treasury funds that will speed
the flow of funds into the Treasury’s account and provide greater information about
the funds flow. We also collaborated with Treasury and the Office of Management
and Budget to propose new ways to use IPP to increase government efficiency and
satisfy new government-spending transparency requirements. And, we continued
to expand the use of the SVC in overseas peacekeeping areas, making modifications
that increase convenience for military personnel and reduce costs.
On behalf of all Reserve Banks, the Boston Fed is responsible for Internet security and
for the coordination of Federal Reserve System financial management. In Internet
security, among 2009 accomplishments, the Bank conducted a comprehensive
review and introduced or planned several new security improvements and upgrades.
In financial management, a multi-year strategic plan was developed cooperatively
with other Reserve Banks and the Board of Governors. The plan both supports and
provides leadership for financial management across the Federal Reserve System.
The Bank achieved a number of additional milestones in 2009. Our Office

of Diversity completed its first full year of operation. A formal volunteer
program was established in the fourth quarter. And in December, our
property-management group was pleased to be able to complete and submit
all required documentation so that our building, 600 Atlantic Avenue,
can earn certification as meeting the highest industry standards for an
environmentally well-run and energy-efficient building (LEED-EB certification).

Board of Directors
Standing: Kirk Sykes, James Smith, Henri Termeer, Lisa Lynch, Eric Rosengren, Michael Wedge, Paul Connolly, David Lentini.
Seated: Robert Kraft, Kathryn Underwood.
Dr. Lisa M. Lynch, Chair Kirk A. Sykes

Dean and Professor of Economics President
The Heller School for Social Policy Urban Strategy America Fund, L.P.
and Management
Brandeis University Kathryn G. Underwood
President and CEO
Henri A. Termeer, Deputy Chair Ledyard National Bank
Chairman, President and CEO
Genzyme Corporation Michael T. Wedge
Former President and CEO
Robert K. Kraft BJ’s Wholesale Club, Inc.
Chairman and CEO
The Kraft Group
Federal Advisory Council Member
David A. Lentini Ellen Alemany
Chairman, President and CEO Chief Executive Officer
Connecticut Bank and Trust Company RBS Americas
Stuart H. Reese
Chairman, President and CEO
MassMutual Financial Group
James C. Smith
Chairman and CEO
Webster Bank, N.A.

Senior Officers
Standing: James Nolan, Lynn Browne, Christopher Gale, Jeffrey Fuhrer, Ronald Mitchell, Cynthia Conley, Geoffrey Tootell.
Seated: James Cunha, Linda Mahon, Roland Marx.
Eric S. Rosengren Roland H. Marx

President Senior Vice President
Chief Executive Officer General Auditor
Paul M. Connolly Ronald E. Mitchell, Jr.

First Vice President Senior Vice President
Chief Operating Officer
James T. Nolan
Lynn E. Browne Senior Vice President
Executive Vice President Director of Supervision,
Economic Advisor Regulation and Credit
Jeffrey C. Fuhrer Geoffrey M. B. Tootell

Executive Vice President Senior Vice President
Director of Research Deputy Director of Research
Cynthia A. Conley
Senior Vice President
General Counsel
James S. Cunha
Christopher J. Gale

New England Advisory Council
Standing: Oz Griebel, William Gurley, Paul Connolly, Eric Rosengren, Gregory Howey, Charles D’Amour, Ted Krantz.
Front row: Joseph Nagle, Keith Hutchins, Dwight Sargent, Amar Kapur, Meredith Reuben, James Brett, Ralph Crowley.
Ralph Crowley Keith Hutchins Daniel Wolf

President and CEO Partner President and CEO
Polar Beverages, Inc. The Flower Hutch Cape Air, Hyannis Air Services, Inc.
Charles L. D’Amour Amar Kapur Advisor

President and COO President and CEO James Brett
The Big Y Aimtek, Inc. President and CEO
The New England Council
Michael E. Dubyak Ted Krantz
President and CEO President
Wright Express Airmar Technology Corp.
Lynn Kraemer Goldfarb Craig Moore

President Chief Operating Officer
L.K. Goldfarb Associates Marox Corporation
Oz Griebel Joseph A. Nagle

President and CEO President and CEO
MetroHartford Alliance Delta Dental of Rhode Island
William D. Gurley Meredith Reuben

President and CEO (retired) Chief Executive Officer
Stanadyne Corporation Eastern Bag
Gregory B. Howey Dwight Sargent

President President
Okay Industries Pompanoosuc Mills Corporation

Community Development Advisory Council
Standing: Stuart Arnett, William Armitage, Eric Rosengren, Mayte Rivera, Sharon Conard Wells.
Seated: Bruce Seifer, Richard Walker, Aimee Griffin Munnings, Eloise Vitelli.
Pedro Arce Andrea Pereira Eloise Vitelli

President and CEO Senior Program Director Director of Program and
Veritas Bank Local Initiatives Support Corporation Policy Development
Connecticut Maine Centers for Women,
Stuart Arnett Work, and Community
Managing Partner Rebecca Regan
Arnett Development Group LLC Chief Operating Officer Sharon Conard Wells
Boston Community Capital Executive Director
Meredith Jones West Elmwood Housing
President and CEO Bruce Seifer Development Corporation
Maine Community Foundation Assistant Director for
Economic Development
Dr. John McCray City of Burlington, Vermont
Vice Provost for Urban Programs
University of Rhode Island Michael Swack
Providence Campus Professor
Carsey Institute
Frederick McKinney, Ph.D. University of New Hampshire
President
Greater New England Minority Christine Traczyk
Supplier Development Council Community Development Manager
TD Bank Connecticut
Aimee Griffin Munnings
Executive Director
New England Black Chamber
of Commerce

City Hall, Springfield, MA

Officers as of December 31, 2009
Executive Office Supervision, Regulation and Credit Brian L. Donovan

Eric S. Rosengren James T. Nolan Assistant Vice President
President and Chief Executive Officer Senior Vice President and
Director of Supervision, Regulation and Credit John E. McKinnon
Paul M. Connolly Assistant Vice President
First Vice President and Chief Operating Officer Robert Augusta, Jr.
Vice President National and Local Financial Management
Audit Ronald E. Mitchell, Jr.
Roland H. Marx Richard M. Burns Senior Vice President
Senior Vice President and Vice President
General Auditor Alan W. Bloom
Patrick Y. de Fontnouvelle Vice President
Stephen J. Bernard Vice President
Assistant Vice President and Assistant General Jon D. Colvin
Auditor Kimberly A. DeTrask Vice President and Chief Financial Officer
Vice President
Regional Outreach and Communications Mary L. Cottman
Lynn E. Browne Christopher J. Haley Assistant Vice President
Executive Vice President Vice President
and Economic Advisor Carl S. Madsen
Jacqueline Palladino Assistant Vice President
Thomas L. Lavelle Vice President
Vice President and Public Information Officer Jeanne Y. MacNevin
Judith S. Quenzel Assistant Vice President
Robert Tannenwald Vice President
Vice President and Economist Joan B. Mielke
Maureen B. Savage Assistant Vice President
Richard C. Walker III Vice President
Vice President Amy O. Ross
Anthony Bardascino Assistant Vice President
Marques E. Benton Assistant Vice President
Assistant Vice President Astier Sium
Preston S. Thompson Assistant Vice President
Prabal Chakrabarti Assistant Vice President
Assistant Vice President Kristine M. Van Amsterdam
Michael D. Watson Assistant Vice President
Joel W. Werkema Assistant Vice President
Assistant Vice President Treasury and Financial Services
Research James S. Cunha
Elaine Zetes Jeffrey C. Fuhrer Senior Vice President
Assistant Vice President Executive Vice President and Director of Research
and Assistant Corporate Secretary James McEneaney
Geoffrey M. B. Tootell Vice President
Human Resources and Legal Services Senior Vice President and Deputy Director of
Cynthia A. Conley Research Amina P. Derbali
Senior Vice President and General Counsel Vice President
Marianne D. Crowe
David K. Park Vice President Leah A. Maurer
Vice President, Deputy General Counsel, and Vice President
Corporate Secretary Giovanni P. Olivei
Vice President and Economist Christopher H. Ritchie
John J. Kroen Vice President
Vice President Robert K. Triest
Vice President and Economist David F. Tremblay
Patricia Allouise Vice President
Assistant Vice President and Assistant General Patricia Geagan
Counsel Assistant Vice President Elizabeth Ching
Assistant Vice President
Mary Hughes Bickerton Strategy, Information Technology,
Assistant Vice President and Facilities Jeannine DeLano
and Assistant General Counsel Christopher J. Gale Assistant Vice President
Krista M. Blair Lisa M. Perlini
Assistant Vice President James R. Rigoli Assistant Vice President
Vice President
Barry K. Maddix Kevin J. Rivard
Assistant Vice President Joyce Sandvik Assistant Vice President
and Assistant General Counsel Vice President
Michael T. Stewart
Lisa A. Wright Dana E. Warren Jr. Assistant Vice President
Assistant Vice President Vice President
and Assistant General Counsel Ralph A. Ventresco
Donald L. Anderson, Jr. Assistant Vice President
Assistant Vice President

Bank Mission
As part of the nation’s central bank,

the Federal Reserve Bank of Boston
promotes sound growth and
financial stability in New England
and the nation.
The Bank contributes to local

communities, the region, and the
nation through its high-quality
research, regulatory oversight,
and financial services, and
through its commitment to
leadership and innovation.

Financial Statements
Yale University, New Haven, CT

Management’s Report On Internal Control Over Financial Reporting
April 21, 2010
To the Board of Directors
The management of the Federal Reserve Bank of Boston (“FRBB”) is responsible for the preparation and fair presentation of the Statement
of Financial Condition, Statements of Income and Comprehensive Income, and Statement of Changes in Capital as of December 31, 2009 (the
“Financial Statements”). The Financial Statements have been prepared in conformity with the accounting principles, policies, and practices es-
tablished by the Board of Governors of the Federal Reserve System and as set forth in the Financial Accounting Manual for the Federal Reserve
Banks (“Manual”), and as such, include amounts, some of which are based on management judgments and estimates. To our knowledge, the
Financial Statements are, in all material respects, fairly presented in conformity with the accounting principles, policies and practices documented
in the Manual and include all disclosures necessary for such fair presentation.
The management of the FRBB is responsible for establishing and maintaining effective internal control over financial reporting as it relates
to the Financial Statements. Such internal control is designed to provide reasonable assurance to management and to the Board of Directors
regarding the preparation of the Financial Statements in accordance with the Manual. Internal control contains self-monitoring mechanisms,
including, but not limited to, divisions of responsibility and a code of conduct. Once identified, any material deficiencies in internal control are
reported to management and appropriate corrective measures are implemented.
Even effective internal control, no matter how well designed, has inherent limitations, including the possibility of human error, and therefore
can provide only reasonable assurance with respect to the preparation of reliable financial statements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
The management of the FRBB assessed its internal control over financial reporting reflected in the Financial Statements, based upon the
criteria established in the “Internal Control -- Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this assessment, we believe that the FRBB maintained effective internal control over financial reporting as it relates to
the Financial Statements.
Eric S. Rosengren, President
Paul M. Connolly, First Vice President
Jon D. Colvin, Chief Financial Officer

Independent Auditors’ Report
To the Board of Governors of the Federal Reserve System

and the Board of Directors of the Federal Reserve Bank of Boston:
We have audited the accompanying statements of condition of the Federal Reserve Bank of Boston (“FRB Boston”) as of December 31, 2009
and 2008 and the related statements of income and comprehensive income, and changes in capital for the years then ended, which have been
prepared in conformity with accounting principles established by the Board of Governors of the Federal Reserve System. We also have audited
the internal control over financial reporting of FRB Boston as of December 31, 2009, based on criteria established in Internal Control— Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. FRB Boston’s management is responsible for
these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal
control over financial reporting, included in the accompanying Management’s Report On Internal Control Over Financial Reporting. Our responsibility
is to express an opinion on these financial statements and an opinion on FRB Boston’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United
States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement and
whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over fi-
nancial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists,
and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
FRB Boston’s internal control over financial reporting is a process designed by, or under the supervision of, FRB Boston’s principal execu-
tive and principal financial officers, or persons performing similar functions, and effected by FRB Boston’s board of directors, management, and
other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with the accounting principles established by the Board of Governors of the Federal Reserve System. FRB
Boston’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of FRB Boston; (2) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of financial statements in accordance with the accounting principles established
by the Board of Governors of the Federal Reserve System, and that receipts and expenditures of FRB Boston are being made only in accor-
dance with authorizations of management and directors of FRB Boston; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of FRB Boston’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management
override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of
any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As described in Note 4 to the financial statements, FRB Boston has prepared these financial statements in conformity with accounting
principles established by the Board of Governors of the Federal Reserve System, as set forth in the Financial Accounting Manual for Federal Reserve
Banks, which is a comprehensive basis of accounting other than accounting principles generally accepted in the United States of America. The
effects on such financial statements of the differences between the accounting principles established by the Board of Governors of the Federal
Reserve System and accounting principles generally accepted in the United States of America are also described in Note 4.
In our opinion, such financial statements present fairly, in all material respects, the financial position of FRB Boston as of December 31,
2009 and 2008, and the results of its operations for the years then ended, on the basis of accounting described in Note 4. Also, in our opinion,
FRB Boston maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, based on the criteria
established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Boston, Massachusetts
April 21, 2010

Statements of Condition
As of December 31, 2009 and December 31, 2008 (in millions)
2009 2008
Assets
Gold certificates $ 412 $ 424
Special drawing rights certificates 196 115
Coin 64 56
Items in process of collection 19 41
Loans to depository institutions 4,161 16,393
Other loans – 23,765
System Open Market Account:
Securities purchased under agreements to resell – 3,355
Treasury securities, net 15,461 20,194
Government-sponsored enterprise debt securities, net 3,211 870
Federal agency and government-sponsored enterprise 17,628 –
mortgage-backed securities, net
Investments denominated in foreign currencies 1,012 1,411
Central bank liquidity swaps 411 31,498
Accrued interest receivable 243 447
Interdistrict settlement account 25,668 –
Bank premises and equipment, net 143 144
Other assets 27 28
Total assets $ 68,656 $ 98,741

Liabilities and Capital
Federal Reserve notes outstanding, net $ 32,169 $ 32,872
Securities sold under agreements to repurchase 1,491 3,706
Other liabilities 12 –
Deposits:
Depository institutions 32,934 49,810
Other deposits 9 27
Deferred credit items 56 69
Accrued interest on Federal Reserve notes 1 213
Interdistrict settlement account – 10,264
Interest due to depository institutions 2 10
Accrued benefit costs 86 73
Other liabilities 8 9
Total liabilities 66,768 97,053

Capital paid-in 944 844
Surplus (including accumulated other comprehensive loss of $20 million
and $10 million at December 31, 2009 and 2008, respectively) 944 844
Total capital 1,888 1,688
Total liabilities and capital $ 68,656 $ 98,741
The accompanying notes are an integral part of these financial statements.

Statements of Income and Comprehensive Income
For the years ended December 31, 2009 and December 31, 2008 (in millions)
2009 2008
Interest Income
Loans to depository institutions $ 34 $ 84
Other loans 73 470
Securities purchased under agreements to resell 1 81
Treasury securities 546 1,110
Government-sponsored enterprise debt securities 45 4
Federal agency and government-sponsored enterprise mortgage-backed securities 423 –
Investments denominated in foreign currencies 12 34
Central bank liquidity swaps 96 202
Total interest income 1,230 1,985

Interest Expense
Securities sold under agreements to repurchase 3 32
Depository institution deposits 77 55
Total interest expense 80 87
Net interest income 1,150 1,898

Non-Interest Income
Treasury securities gains – 168
Federal agency and government-sponsored enterprise mortgage-backed securities gains, net 10 –
Foreign currency (losses) gains, net (7) 56
Compensation received for services provided 21 31
Reimbursable services to government agencies 29 27
Other income 21 49
Total non-interest income 74 331

Operating Expenses
Salaries and other benefits 110 107
Occupancy expense 23 20
Equipment expense 11 11
Assessments by the Board of Governors 42 47
Other expenses 27 37
Total operating expenses 213 222

Net income prior to distribution 1,011 2,007

Change in funded status of benefit plans (10) (7 )
Comprehensive income prior to distribution $ 1,001 $ 2,000

Distribution of comprehensive income:
Dividends paid to member banks $ 55 $ 55
Transferred to (from) surplus and change in accumulated other comprehensive loss 100 (205 )
Payments to Treasury as interest on Federal Reserve notes 846 2,150
Total distribution $ 1,001 $ 2,000


Statements of Changes in Capital
For the years ended December 31, 2009 and December 31, 2008 (in millions, except share data)
Surplus
Net income Accumulated other

Capital paid-in retained comprehensive loss Total surplus Total capital
Balance at January 1, 2008
(20,989,418 shares) $ 1,049 $ 1,052 $ (3) $ 1,049 $ 2,098
Net change in capital stock redeemed

(4,103,969 shares) (205) – – – (205)
Transferred from surplus and change

in accumulated other comprehensive loss – (198) (7) (205) (205)
Balance at December 31, 2008

(16,885,449 shares) $ 844 $ 854 $ (10) $ 844 $ 1,688
Net change in capital stock issued

(2,002,898 shares) 100 – – – 100
Transferred to surplus and change

in accumulated other comprehensive loss – 110 (10) 100 100
Balance at December 31, 2009
(18,888,347 shares) $ 944 $964 $ (20) $ 944 $ 1,888

Notes to Financial Statements
1. STRUCTURE
The Federal Reserve Bank of Boston (“Bank”) is part of the Federal Reserve System (“System”) and is one of the twelve Federal Reserve Banks
(“Reserve Banks”) created by Congress under the Federal Reserve Act of 1913 (“Federal Reserve Act”), which established the central bank of
the United States. The Reserve Banks are chartered by the federal government and possess a unique set of governmental, corporate, and central
bank characteristics. The Bank serves the First Federal Reserve District, which includes the states of Maine, Massachusetts, New Hampshire,
Rhode Island, Vermont, and a portion of the state of Connecticut.
In accordance with the Federal Reserve Act, supervision and control of the Bank is exercised by a board of directors. The Federal Reserve
Act specifies the composition of the board of directors for each of the Reserve Banks. Each board is composed of nine members serving
three-year terms: three directors, including those designated as chairman and deputy chairman, are appointed by the Board of Governors
of the Federal Reserve System (“Board of Governors”) to represent the public, and six directors are elected by member banks. Banks that
are members of the System include all national banks and any state-chartered banks that apply and are approved for membership. Member
banks are divided into three classes according to size. Member banks in each class elect one director representing member banks and one
representing the public. In any election of directors, each member bank receives one vote, regardless of the number of shares of Reserve Bank
stock it holds.
In addition to the 12 Reserve Banks, the System also consists, in part, of the Board of Governors and the Federal Open Market Committee
(“FOMC”). The Board of Governors, an independent federal agency, is charged by the Federal Reserve Act with a number of specific duties,
including general supervision over the Reserve Banks. The FOMC is composed of members of the Board of Governors, the president of the
Federal Reserve Bank of New York (“FRBNY”), and, on a rotating basis, four other Reserve Bank presidents.
2. OPERATIONS AND SERVICES

The Reserve Banks perform a variety of services and operations. These functions include participating in formulating and conducting monetary
policy; participating in the payments system, including large-dollar transfers of funds, automated clearinghouse (“ACH”) operations, and check
collection; distributing coin and currency; performing fiscal agency functions for the U.S. Department of the Treasury (“Treasury”), certain
Federal agencies, and other entities; serving as the federal government’s bank; providing short-term loans to depository institutions; provid-
ing loans to individuals, partnerships, and corporations in unusual and exigent circumstances; serving consumers and communities by provid-
ing educational materials and information regarding financial consumer protection rights and laws and information on community develop-
ment programs and activities; and supervising bank holding companies, state member banks, and U.S. offices of foreign banking organizations.
Certain services are provided to foreign and international monetary authorities, primarily by the FRBNY.
The FOMC, in conducting monetary policy, establishes policy regarding domestic open market operations, oversees these operations, and
annually issues authorizations and directives to the FRBNY to execute transactions. The FOMC authorizes and directs the FRBNY to conduct
operations in domestic markets, including the direct purchase and sale of Treasury securities, Federal agency and government-sponsored en-
terprise (“GSE”) debt securities, Federal agency and GSE mortgage-backed securities (“MBS”), the purchase of these securities under agree-
ments to resell, and the sale of these securities under agreements to repurchase. The FRBNY executes these transactions at the direc-
tion of the FOMC and holds the resulting securities and agreements in a portfolio known as the System Open Market Account (“SOMA”).
The FRBNY is authorized to lend the Treasury securities and Federal agency and GSE debt securities that are held in the SOMA.
In addition to authorizing and directing operations in the domestic securities market, the FOMC authorizes the FRBNY to execute operations
in foreign markets in order to counter disorderly conditions in exchange markets or to meet other needs specified by the FOMC to carry out
the System’s central bank responsibilities. Specifically, the FOMC authorizes and directs the FRBNY to hold balances of, and to execute spot and
forward foreign exchange and securities contracts for, fourteen foreign currencies and to invest such foreign currency holdings, while maintaining
adequate liquidity. The FRBNY is authorized and directed by the FOMC to maintain reciprocal currency arrangements (“FX swaps”) with two
central banks and to “warehouse” foreign currencies for the Treasury and the Exchange Stabilization Fund (“ESF”). The FRBNY is also autho-
rized and directed by the FOMC to maintain U.S. dollar currency liquidity swap arrangements with fourteen central banks. The FOMC has also
authorized the FRBNY to maintain foreign currency liquidity swap arrangements with four foreign central banks.

Although the Reserve Banks are separate legal entities, they collaborate in the delivery of certain services to achieve greater efficiency and
effectiveness. This collaboration takes the form of centralized operations and product or function offices that have responsibility for the delivery
of certain services on behalf of the Reserve Banks. Various operational and management models are used and are supported by service agree-
ments between the Reserve Banks. In some cases, costs incurred by a Reserve Bank for services provided to other Reserve Banks are not shared;
in other cases, the Reserve Banks are reimbursed for costs incurred in providing services to other Reserve Banks.
Major services provided by the Bank on behalf of the System and for which the costs were not reimbursed by the other Reserve Banks
include Internet and Directory Services, Financial Support Office, and Centralized Accounting Technology Services. A portion of the Centralized
Accounting Technology Service costs related to services provided to the System in support of the electronic access channel is redistributed to
the Federal Reserve Bank of Chicago. The Bank’s total reimbursement for these services was $2 million for each of the years ended December
31, 2009 and 2008, and is included in “Other Income” on the Statements of Income and Comprehensive Income.
3. FINANCIAL STABILITY ACTIVITIES

The Reserve Banks have implemented the following programs that support the liquidity of financial institutions and foster improved conditions
in financial markets.
Expanded Open Market Operations and Support for Mortgage Related-Securities

The Single-Tranche Open Market Operation Program allows primary dealers to initiate a series of 28-day term repurchase transactions while
pledging Treasury securities, Federal agency and GSE debt securities, and Federal agency and GSE MBS as collateral.
The Federal Agency and GSE Debt Securities and MBS Purchase Program provide support to the mortgage and housing markets and foster
improved conditions in financial markets. Under this program, the FRBNY purchases housing-related GSE debt securities and Federal agency
and GSE MBS. Purchases of housing-related GSE debt securities began in November 2008 and purchases of Federal agency and GSE MBS
began in January 2009. The FRBNY is authorized to purchase up to $200 billion in fixed rate, non-callable GSE debt securities and up to $1.25
trillion in fixed rate Federal agency and GSE MBS. The activities of both of these programs are allocated to the other Reserve Banks.
Central Bank Liquidity Swaps

The FOMC authorized and directed the FRBNY to establish central bank liquidity swap arrangements, which may be structured as either U.S.
dollar liquidity or foreign currency liquidity swap arrangements.
U.S. dollar liquidity swap arrangements were authorized with fourteen foreign central banks to provide liquidity in U.S. dollars to overseas
markets. Such arrangements were authorized with the following central banks: the Reserve Bank of Australia, the Banco Central do Brasil, the
Bank of Canada, Danmarks Nationalbank, the Bank of England, the European Central Bank, the Bank of Japan, the Bank of Korea, the Banco de
Mexico, the Reserve Bank of New Zealand, Norges Bank, the Monetary Authority of Singapore, the Sveriges Riksbank, and the Swiss National
Bank. The maximum amount that could be drawn under these swap arrangements varied by central bank. The authorization for these swap
arrangements expired on February 1, 2010.
Foreign currency liquidity swap arrangements provided the Reserve Banks with the capacity to offer foreign currency liquidity to U.S. depository
institutions. Such arrangements were authorized with the Bank of England, the European Central Bank, the Bank of Japan, and the Swiss Na-
tional Bank. The maximum amount that could be drawn under the swap arrangements varies by central bank. The authorization for these swap
arrangements expired on February 1, 2010.
Lending to Depository Institutions

The Term Auction Facility (“TAF”) promotes the efficient dissemination of liquidity by providing term funds to depository institutions. Under
the TAF, Reserve Banks auction term funds to depository institutions against any collateral eligible to secure primary, secondary, and seasonal
credit less a margin, which is a reduction in the assigned collateral value that is intended to provide the Banks additional credit protection.
All depository institutions that are considered to be in generally sound financial condition by their Reserve Bank and that are eligible to bor-
row under the primary credit program are eligible to participate in TAF auctions. All loans must be collateralized to the satisfaction of the
Reserve Banks.

Lending to Primary Dealers

The Term Securities Lending Facility (“TSLF”) promoted liquidity in the financing markets for Treasury securities. Under the TSLF, the FRBNY
could lend up to an aggregate amount of $200 billion of Treasury securities held in the SOMA to primary dealers secured for a term of 28 days.
Securities were lent to primary dealers through a competitive single-price auction and were collateralized, less a margin, by a pledge of other
securities, including Treasury securities, municipal securities, Federal agency and GSE MBS, non-agency AAA/Aaa-rated private-label residential
MBS, and asset-backed securities (“ABS”). The authorization for the TSLF expired on February 1, 2010.
The Term Securities Lending Facility Options Program (“TOP”) offered primary dealers, through a competitive single-price auction, to
purchase an option to draw upon short-term, fixed-rate TSLF loans in exchange for eligible collateral. The program enhanced the effectiveness
of the TSLF by ensuring additional liquidity during periods of heightened collateral market pressures, such as around quarter-end dates. The
program was suspended effective with the maturity of the June 2009 TOP options and the program authorization expired on February 1, 2010.
Other Lending Facilities

The Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (“AMLF”) provided funding to depository institutions and bank
holding companies to finance the purchase of eligible high-quality asset-backed commercial paper (“ABCP”) from money market mutual funds. The
program assisted money market mutual funds that hold such paper to meet the demands for investor redemptions and to foster liquidity in the
ABCP market and money markets more generally. The Bank administered the AMLF and was authorized to extend these loans to eligible borrowers
on behalf of the other Reserve Banks. All loans extended under the AMLF were non-recourse and were recorded as assets by the Bank and loans
extended to borrowers that settle to depository accounts in other Districts were processed through the interdistrict settlement account. The credit
risk related to the AMLF was assumed by the Bank. The authorization for the AMLF expired on February 1, 2010.
4. SIGNIFICANT ACCOUNTING POLICIES

Accounting principles for entities with the unique powers and responsibilities of a nation’s central bank have not been formulated by account-
ing standard-setting bodies. The Board of Governors has developed specialized accounting principles and practices that it considers to be
appropriate for the nature and function of a central bank. These accounting principles and practices are documented in the Financial Accounting
Manual for Federal Reserve Banks (“Financial Accounting Manual” or “FAM”), which is issued by the Board of Governors. The Reserve Banks are
required to adopt and apply accounting policies and practices that are consistent with the FAM and the financial statements have been prepared
in accordance with the FAM.
Limited differences exist between the accounting principles and practices in the FAM and generally accepted accounting principles in the
United States (“GAAP”), primarily due to the unique nature of the Bank’s powers and responsibilities as part of the nation’s central bank.
The primary difference is the presentation of all SOMA securities holdings at amortized cost rather than the fair value presentation required by
GAAP. Treasury securities, GSE debt securities, Federal agency and GSE MBS, and investments denominated in foreign currencies comprising
the SOMA are recorded at cost, on a settlement-date basis rather than the trade-date basis required by GAAP. The cost basis of Treasury
securities, GSE debt securities, and foreign government debt instruments is adjusted for amortization of premiums or accretion of discounts on
a straight-line basis. Amortized cost more appropriately reflects the Bank’s securities holdings given the System’s unique responsibility to conduct
monetary policy. Accounting for these securities on a settlement-date basis more appropriately reflects the timing of the transaction’s effect on
the quantity of reserves in the banking system. Although the application of fair value measurements to the securities holdings may result in values
substantially above or below their carrying values, these unrealized changes in value have no direct effect on the quantity of reserves available to
the banking system or on the prospects for future Bank earnings or capital. Both the domestic and foreign components of the SOMA portfolio
may involve transactions that result in gains or losses when holdings are sold prior to maturity. Decisions regarding securities and foreign currency
transactions, including their purchase and sale, are motivated by monetary policy objectives rather than profit. Accordingly, fair values, earnings,
and gains or losses resulting from the sale of such securities and currencies are incidental to the open market operations and do not motivate
decisions related to policy or open market activities.
In addition, the Bank has elected not to present a Statement of Cash Flows because the liquidity and cash position of the Bank are not a primary
concern given the Reserve Banks’ unique powers and responsibilities. Other information regarding the Bank’s activities is provided in, or may be
derived from, the Statements of Condition, Income and Comprehensive Income, and Changes in Capital. There are no other significant differ-
ences between the policies outlined in the FAM and GAAP.

Preparing the financial statements in conformity with the FAM requires management to make certain estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the
reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Certain amounts
relating to the prior year have been reclassified to conform to the current-year presentation. Unique accounts and significant accounting
policies are explained below.
a. Gold and Special Drawing Rights Certificates

The Secretary of the Treasury is authorized to issue gold and special drawing rights (“SDR”) certificates to the Reserve Banks.
Payment for the gold certificates by the Reserve Banks is made by crediting equivalent amounts in dollars into the account established for the
Treasury. The gold certificates held by the Reserve Banks are required to be backed by the gold of the Treasury. The Treasury may reacquire
the gold certificates at any time and the Reserve Banks must deliver them to the Treasury. At such time, the Treasury’s account is charged,
and the Reserve Banks’ gold certificate accounts are reduced. The value of gold for purposes of backing the gold certificates is set by law
at $42 2/9 per fine troy ounce. The Board of Governors allocates the gold certificates among the Reserve Banks once a year based on the
average Federal Reserve notes outstanding in each Reserve Bank.
SDR certificates are issued by the International Monetary Fund (the “Fund”) to its members in proportion to each member’s quota in the Fund
at the time of issuance. SDR certificates serve as a supplement to international monetary reserves and may be transferred from one national
monetary authority to another. Under the law providing for U.S. participation in the SDR system, the Secretary of the Treasury is authorized
to issue SDR certificates to the Reserve Banks. When SDR certificates are issued to the Reserve Banks, equivalent amounts in U.S. dollars are
credited to the account established for the Treasury and the Reserve Banks’ SDR certificate accounts are increased. The Reserve Banks are
required to purchase SDR certificates, at the direction of the Treasury, for the purpose of financing SDR acquisitions or for financing exchange
stabilization operations. At the time SDR transactions occur, the Board of Governors allocates SDR certificate transactions among the Reserve
Banks based upon each Reserve Bank’s Federal Reserve notes outstanding at the end of the preceding year. There were no SDR transactions
in 2008, and in 2009 the Treasury issued $3 billion in SDR certificates to the Reserve Banks, of which $81 million was allocated to the Bank.
b. Loans to Depository Institutions and Other Loans

Loans are reported at their outstanding principal balances and interest income is recognized on an accrual basis.
Loans are impaired when, based on current information and events, it is probable that the Bank will not receive the principal or interest that
is due in accordance with the contractual terms of the loan agreement. Loans are evaluated to determine whether an allowance for loan loss
is required. The Bank has developed procedures for assessing the adequacy of any allowance for loan losses using all available information to
reflect the assessment of credit risk. This assessment includes monitoring information obtained from banking supervisors, borrowers, and other
sources to assess the credit condition of the borrowers and, as appropriate, evaluating collateral values for each program. Generally, the Bank
discontinues recognizing interest income on impaired loans until the borrower’s repayment performance demonstrates principal and interest will
be received in accordance with the term of the loan agreement. If the Bank discontinues recording interest on an impaired loan, cash payments
are first applied to principal until the loan balance is reduced to zero; subsequent payments are applied as recoveries of amounts previously
deemed uncollectible, if any, and then as interest income.
c. Securities Purchased Under Agreements to Resell, Securities Sold Under Agreements to Repurchase, and Securities Lending
The FRBNY may engage in purchases of securities with primary dealers under agreements to resell (“repurchase transactions”). These repur-
chase transactions are typically executed through a tri-party arrangement (“tri-party transactions”). Tri-party transactions are conducted with
two commercial custodial banks that manage the clearing, settlement, and pledging of collateral. The collateral pledged must exceed the principal
amount of the transaction. Acceptable collateral under tri-party repurchase transactions primarily includes Treasury securities; pass-through
mortgage securities of Fannie Mae, Freddie Mac, and Ginnie Mae; STRIP Treasury securities; and “stripped” securities of Federal agencies. The
tri-party transactions are accounted for as financing transactions with the associated interest income accrued over the life of the transaction.
Repurchase transactions are reported at their contractual amount as “System Open Market Account: Securities purchased under agreements to
resell” in the Statements of Condition and the related accrued interest receivable is reported as a component of “Accrued interest receivables.”
The FRBNY may engage in sales of securities with primary dealers under agreements to repurchase (“reverse repurchase transactions”). These
reverse repurchase transactions may be executed through a tri-party arrangement, similar to repurchase transactions. Reverse repurchase transac-

tions may also be executed with foreign official and international accounts. Reverse repurchase transactions are accounted for as financing transac-
tions, and the associated interest expense is recognized over the life of the transaction. These transactions are reported at their contractual amounts
in the Statements of Condition and the related accrued interest payable is reported as a component of “Other liabilities.”
Treasury securities and GSE debt securities held in the SOMA are lent to primary dealers to facilitate the effective functioning of the domes-
tic securities market. Overnight securities lending transactions are fully collateralized by other Treasury securities. TSLF transactions are fully
collateralized with investment-grade debt securities, collateral eligible for tri-party repurchase agreements arranged by the FRBNY, or both. The
collateral taken in both overnight and term securities lending transactions is in excess of the fair value of the securities lent. The FRBNY charges
the primary dealer a fee for borrowing securities, and these fees are reported as a component of “Other income.” In addition, TOP fees are
reported as a component of “Other income.”
Activity related to securities purchased under agreements to resell, securities sold under agreements to repurchase, and securities lending is allocated
to each of the Reserve Banks on a percentage basis derived from an annual settlement of the interdistrict settlement account that occurs in April
each year. The settlement also equalizes Reserve Bank gold certificate holdings to Federal Reserve notes outstanding in each District.
d. Treasury Securities; Government-Sponsored Enterprise Debt Securities; Federal Agency and Government-Sponsored Enterprise
Mortgage-Backed Securities; Investments Denominated in Foreign Currencies; and Warehousing Agreements
Interest income on Treasury securities, GSE debt securities, and investments denominated in foreign currencies comprising the SOMA is
accrued on a straight-line basis. Interest income on Federal agency and GSE MBS is accrued using the interest method and includes amortization
of premiums, accretion of discounts, and paydown gains or losses. Paydown gains or losses result from scheduled payment and prepayment of
principal and represent the difference between the principal amount and the carrying value of the related security. Gains and losses resulting
from sales of securities are determined by specific issue based on average cost.
In addition to outright purchases of Federal agency and GSE MBS that are held in the SOMA, the FRBNY enters into dollar roll transactions
(“dollar rolls”), which primarily involve an initial transaction to purchase or sell “to be announced” (“TBA”) MBS combined with an agreement
to sell or purchase TBA MBS on a specified future date. The FRBNY’s participation in the dollar roll market furthers the MBS Purchase Program
goal of providing support to the mortgage and housing markets and fostering improved conditions in financial markets. The FRBNY accounts for
outstanding commitments to sell or purchase TBA MBS on a settlement-date basis. Based on the terms of the FRBNY dollar roll transactions,
transfers of MBS upon settlement of the initial TBA MBS transactions are accounted for as purchases or sales in accordance with FASB ASC
Topic 860 (ASC 860), Accounting for Transfers of Financial Assets and Repurchase Financing Transactions, (previously SFAS 140), and the related
outstanding commitments are accounted for as sales or purchases upon settlement.
Activity related to Treasury securities, GSE debt securities, and Federal agency and GSE MBS, including the premiums, discounts, and realized
gains and losses, is allocated to each Reserve Bank on a percentage basis derived from an annual settlement of the interdistrict settlement
account that occurs in April of each year. The settlement also equalizes Reserve Bank gold certificate holdings to Federal Reserve notes
outstanding in each District. Activity related to investments denominated in foreign currencies, including the premiums, discounts, and realized
and unrealized gains and losses, is allocated to each Reserve Bank based on the ratio of each Reserve Bank’s capital and surplus to aggregate
capital and surplus at the preceding December 31.
Foreign-currency-denominated assets are revalued daily at current foreign currency market exchange rates in order to report these assets in U.S.
dollars. Realized and unrealized gains and losses on investments denominated in foreign currencies are reported as “Foreign currency gains or
losses, net” in the Statements of Income and Comprehensive Income.
Warehousing is an arrangement under which the FOMC agrees to exchange, at the request of the Treasury, U.S. dollars for foreign currencies
held by the Treasury or ESF over a limited period of time. The purpose of the warehousing facility is to supplement the U.S. dollar resources of
the Treasury and ESF for financing purchases of foreign currencies and related international operations.
Warehousing agreements are designated as held-for-trading purposes and are valued daily at current market exchange rates. Activity related
to these agreements is allocated to each Reserve Bank based on the ratio of each Reserve Bank’s capital and surplus to aggregate capital and
surplus at the preceding December 31.

e. Central Bank Liquidity Swaps

Central bank liquidity swaps, which are transacted between the FRBNY and a foreign central bank, may be structured as either U.S. dollar liquidity
or foreign currency liquidity swap arrangements.
Activity related to U.S. dollar and foreign currency swap transactions, including the related income and expense, is allocated to each Reserve
Bank based on the ratio of each Reserve Bank’s capital and surplus to aggregate capital and surplus at the preceding December 31. Similar to
investments denominated in foreign currencies, the foreign currency amounts associated with these central bank liquidity swap arrangements are
revalued at current foreign currency market exchange rates.
U.S. dollar liquidity swaps

At the initiation of each U.S. dollar liquidity swap transaction, the foreign central bank transfers a specified amount of its currency to a restricted
account for the FRBNY in exchange for U.S. dollars at the prevailing market exchange rate. Concurrent with this transaction, the FRBNY and
the foreign central bank agree to a second transaction that obligates the foreign central bank to return the U.S. dollars and the FRBNY to return
the foreign currency on a specified future date at the same exchange rate as the initial transaction. The Bank’s allocated portion of the foreign
currency amounts that the FRBNY acquires is reported as “Central bank liquidity swaps” on the Statements of Condition. Because the swap
transaction will be unwound at the same U.S. dollar amount and exchange rate that were used in the initial transaction, the recorded value of
the foreign currency amounts is not affected by changes in the market exchange rate.
The foreign central bank compensates the FRBNY based on the foreign currency amounts held for the FRBNY. The FRBNY recognizes com-
pensation during the term of the swap transaction and reports it as “Interest income: Central bank liquidity swaps” in the Statements of Income
and Comprehensive Income.
Foreign currency liquidity swaps

At the initiation of each foreign currency liquidity swap transaction, the FRBNY transfers, at the prevailing market exchange rate, a specified
amount of U.S. dollars to an account for the foreign central bank in exchange for its currency. The foreign currency amount received would be
reported as a liability by the Bank. Concurrent with this transaction, the FRBNY and the foreign central bank agree to a second transaction that
obligates the FRBNY to return the foreign currency and the foreign central bank to return the U.S. dollars on a specified future date. The FRBNY
compensates the foreign central bank based on the foreign currency transferred to the FRBNY. For each foreign currency swap transaction with
a foreign central bank it is anticipated that the FRBNY will enter into a corresponding transaction with a U.S. depository institution in order to
provide foreign currency liquidity to that institution. No foreign currency liquidity swap transactions occurred in 2008 or 2009.
f. Interdistrict Settlement Account

At the close of business each day, each Reserve Bank aggregates the payments due to or from other Reserve Banks. These payments result
from transactions between the Reserve Banks and transactions that involve depository institution accounts held by other Reserve Banks, such as
Fedwire funds and securities transfers and check and ACH transactions. The cumulative net amount due to or from the other Reserve Banks is
reflected in the “Interdistrict settlement account” in the Statements of Condition.
g. Bank Premises, Equipment, and Software

Bank premises and equipment are stated at cost less accumulated depreciation. Depreciation is calculated on a straight-line basis over the esti-
mated useful lives of the assets, which range from two to fifty years. Major alterations, renovations, and improvements are capitalized at cost as
additions to the asset accounts and are depreciated over the remaining useful life of the asset or, if appropriate, over the unique useful life of the
alteration, renovation, or improvement. Maintenance, repairs, and minor replacements are charged to operating expense in the year incurred.
Costs incurred for software during the application development stage, whether developed internally or acquired for internal use, are
capitalized based on the purchase cost and the cost of direct services and materials associated with designing, coding, installing, and testing the
software. Capitalized software costs are amortized on a straight-line basis over the estimated useful lives of the software applications, which range
from two to five years. Maintenance costs related to software are charged to expense in the year incurred.
Capitalized assets, including software, buildings, leasehold improvements, furniture, and equipment, are impaired and an adjustment is recorded
when events or changes in circumstances indicate that the carrying amount of assets or asset groups is not recoverable and significantly exceeds
the assets’ fair value.

h. Federal Reserve Notes

Federal Reserve notes are the circulating currency of the United States. These notes, which are identified as issued to a specific Reserve Bank,
must be fully collateralized. Assets eligible to be pledged as collateral security include all of the Bank’s assets. The collateral value is equal to the
book value of the collateral tendered with the exception of securities, for which the collateral value is equal to the par value of the securities
tendered. The par value of securities pledged for securities sold under agreements to repurchase is deducted.
The Board of Governors may, at any time, call upon a Reserve Bank for additional security to adequately collateralize the outstanding Federal
Reserve notes. To satisfy the obligation to provide sufficient collateral for outstanding Federal Reserve notes, the Reserve Banks have entered
into an agreement that provides for certain assets of the Reserve Banks to be jointly pledged as collateral for the Federal Reserve notes issued
to all Reserve Banks. In the event that this collateral is insufficient, the Federal Reserve Act provides that Federal Reserve notes become a first
and paramount lien on all the assets of the Reserve Banks. Finally, Federal Reserve notes are obligations of the United States government. At
December 31, 2009 and 2008, all Federal Reserve notes issued to the Reserve Banks were fully collateralized.
“Federal Reserve notes outstanding, net” in the Statements of Condition represents the Bank’s Federal Reserve notes outstanding, reduced by
the Bank’s currency holdings of $3,618 million and $5,409 million at December 31, 2009 and 2008, respectively.
i. Items in Process of Collection and Deferred Credit Items

“Items in process of collection” in the Statements of Condition primarily represents amounts attributable to checks that have been deposited for
collection and that, as of the balance sheet date, have not yet been presented to the paying bank. “Deferred credit items” are the counterpart
liability to items in process of collection. The amounts in this account arise from deferring credit for deposited items until the amounts are col-
lected. The balances in both accounts can vary significantly.
j. Capital Paid-in
The Federal Reserve Act requires that each member bank subscribe to the capital stock of the Reserve Bank in an amount equal to 6 percent of
the capital and surplus of the member bank. These shares are nonvoting with a par value of $100 and may not be transferred or hypothecated.
As a member bank’s capital and surplus changes, its holdings of Reserve Bank stock must be adjusted. Currently, only one-half of the subscription
is paid-in and the remainder is subject to call. A member bank is liable for Reserve Bank liabilities up to twice the par value of stock subscribed
by it.
By law, each Reserve Bank is required to pay each member bank an annual dividend of 6 percent on the paid-in capital stock. This cumulative
dividend is paid semiannually. To reflect the Federal Reserve Act requirement that annual dividends be deducted from net earnings, dividends
are presented as a distribution of comprehensive income in the Statements of Income and Comprehensive Income.
k. Surplus
The Board of Governors requires the Reserve Banks to maintain a surplus equal to the amount of capital paid-in as of December 31 of each
year. Accumulated other comprehensive income is reported as a component of surplus in the Statements of Condition and the Statements of
Changes in Capital. The balance of accumulated other comprehensive income is comprised of expenses, gains, and losses related to other post-
retirement benefit plans that, under GAAP, are included in other comprehensive income, but excluded from net income. Additional information
regarding the classifications of accumulated other comprehensive income is provided in Notes 12 and 13.
l. Interest on Federal Reserve Notes

The Board of Governors requires the Reserve Banks to transfer excess earnings to the Treasury as interest on Federal Reserve notes after
providing for the costs of operations, payment of dividends, and reservation of an amount necessary to equate surplus with capital paid-in. This
amount is reported as “Payments to U.S. Treasury as interest on Federal Reserve notes” in the Statements of Income and Comprehensive
Income. The amount due to the Treasury is reported as “Accrued interest on Federal Reserve notes” in the Statements of Condition. If overpaid
during the year, the amount is reported as “Prepaid interest on Federal Reserve notes” in the Statements of Condition. Payments are made
weekly to the Treasury.
In the event of losses or an increase in capital paid-in at a Reserve Bank, payments to the Treasury are suspended and earnings are retained until
the surplus is equal to the capital paid-in.

In the event of a decrease in capital paid-in, the excess surplus, after equating capital paid-in and surplus at December 31, is distributed to the
Treasury in the following year.
m. Interest on Depository Institution Deposits

On October 9, 2008, the Reserve Banks began paying interest to depository institutions on qualifying balances held at the Banks. The interest
rates paid on required reserve balances and excess balances are determined by the Board of Governors, based on an FOMC-established target
range for the effective federal funds rate.
n. Income and Costs Related to Treasury Services

The Bank is required by the Federal Reserve Act to serve as fiscal agent and depositary of the United States Government. By statute, the De-
partment of the Treasury has appropriations to pay for these services. During the years ended December 31, 2009 and 2008, the Bank was
reimbursed for all services provided to the Department of the Treasury as its fiscal agent.
o. Compensation Received for Services Provided

The Federal Reserve Bank of Atlanta (“FRBA”) has overall responsibility for managing the Reserve Banks’ provision of check and
ACH services to depository institutions and, as a result, recognizes total System revenue for these services on its Statements of Income
and Comprehensive Income. Similarly, the FRBNY manages the Reserve Banks’ provision of Fedwire funds and securities services and
recognizes total System revenue for these services on its Statements of Income and Comprehensive Income. The FRBA and the FRBNY com-
pensate the applicable Reserve Banks for the costs incurred to provide these services. The Bank reports this compensation as “Compensation
received for services provided” in the Statements of Income and Comprehensive Income.
p. Assessments by the Board of Governors

The Board of Governors assesses the Reserve Banks to fund its operations based on each Reserve Bank’s capital and surplus balances as of
December 31 of the prior year. The Board of Governors also assesses each Reserve Bank for the expenses incurred by the Treasury to produce
and retire Federal Reserve notes based on each Reserve Bank’s share of the number of notes comprising the System’s net liability for Federal
Reserve notes on December 31 of the prior year.
q. Taxes
The Reserve Banks are exempt from federal, state, and local taxes, except for taxes on real property. The Bank’s real proper-
ty taxes were $6 million for each of the years ended December 31, 2009 and 2008, and are reported as a component of “Occupancy
expense.”
r. Restructuring Charges
The Reserve Banks recognize restructuring charges for exit or disposal costs incurred as part of the closure of business activities in a particular
location, the relocation of business activities from one location to another, or a fundamental reorganization that affects the nature of operations.
Restructuring charges may include costs associated with employee separations, contract terminations, and asset impairments. Expenses are
recognized in the period in which the Bank commits to a formalized restructuring plan or executes the specific actions contemplated in the plan
and all criteria for financial statement recognition have been met.
Note 14 describes the Bank’s restructuring initiatives and provides information about the costs and liabilities associated with
employee separations and contract terminations. Costs and liabilities associated with enhanced pension benefits in connection with the restruc-
turing activities for all of the Reserve Banks are recorded on the books of the FRBNY.
The Bank had no significant restructuring activities in 2008 and 2009.
s. Recently Issued Accounting Standards

In February 2008, FASB issued FSP SFAS 140-3, Accounting for Transfers of Financial Assets and Repurchase Financing Transactions,
(codified in FASB ASC Topic 860 (ASC 860), Transfers and Servicing). ASC 860 requires that an initial transfer of a financial asset and a repur-
chase financing that was entered into contemporaneously with, or in contemplation of, the initial transfer be evaluated together as a linked
transaction unless certain criteria are met. These provisions of ASC 860 are effective for the Bank’s financial statements for the year beginning

on January 1, 2009 and have not had a material effect on the Bank’s financial statements. The requirements of this standard have been reflected
in the accompanying footnotes.
In June 2009, FASB issued SFAS 166, Accounting for Transfers of Financial Assets – an amendment to FASB Statement No. 140, (codified in ASC
860). The new guidance modifies existing guidance to eliminate the scope exception for qualifying special purpose vehicles (“SPVs”) and clarifies
that the transferor must consider all arrangements of the transfer of financial assets when determining if the transferor has surrendered control.
These provisions of ASC 860 are effective for the Bank’s financial statements for the year beginning on January 1, 2010, and earlier adoption is
prohibited. The adoption of this standard is not expected to have a material effect on the Bank’s financial statements.
In May 2009, FASB issued SFAS No. 165, Subsequent Events, (codified in FASB ASC Topic 855 (ASC 855), Subsequent Events), which establishes
general standards of accounting for and disclosing events that occur after the balance sheet date but before financial statements are issued or
are available to be issued. ASC 855 sets forth (i) the period after the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (ii) the circumstances under
which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (iii) the disclosures
that an entity should make about events or transactions that occurred after the balance sheet date, including disclosure of the date through which
an entity has evaluated subsequent events and whether that represents the date the financial statements were issued or were available to be
issued. The Bank adopted ASC 855 for the period ended December 31, 2009 and the required disclosures are reflected in Note 15.
In June 2009, the FASB issued SFAS No. 168, “The Statement of Financial Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles, a replacement of SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles” (SFAS 168). SFAS 168 establishes
the FASB ASC as the source of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in the
preparation of financial statements in conformity with GAAP. The ASC does not change current GAAP, but it introduces a new structure that
organizes the authoritative standards by topic. SFAS 168 is effective for financial statements issued for periods ending after September 15, 2009.
As a result, both the ASC and the legacy standard are referenced in the Bank’s financial statements and footnotes.
5. LOANS
The loan amounts outstanding to depository institutions and others at December 31 were as follows (in millions):
2009 2008
Primary, secondary, and seasonal credit $ 109 $ 243
TAF 4,052 16,150
Loans to depository institutions 4,161 16,393

AMLF – 23,765
Other loans – 23,765
Loans to depository institutions

The Bank offers primary, secondary, and seasonal credit to eligible borrowers. Each program has its own interest rate. Interest is accrued using
the applicable interest rate established at least every fourteen days by the board of directors of the Bank, subject to review and determination
by the Board of Governors. Primary and secondary credit are extended on a short-term basis, typically overnight, whereas seasonal credit may
be extended for a period of up to nine months.
Primary, secondary, and seasonal credit lending is collateralized to the satisfaction of the Bank to reduce credit risk. Assets eligible to collateralize
these loans include consumer, business, and real estate loans; Treasury securities; GSE debt securities; foreign sovereign debt; municipal, corpo-
rate, and state and local government obligations; ABS; corporate bonds; commercial paper; and bank-issued assets, such as certificates of deposit,
bank notes, and deposit notes. Collateral is assigned a lending value that is deemed appropriate by the Bank, which is typically fair value or face
value reduced by a margin.
Depository institutions that are eligible to borrow under the Bank’s primary credit program are also eligible to participate in the TAF program.
Under the TAF program, the Reserve Banks conduct auctions for a fixed amount of funds, with the interest rate determined by the auction pro-

cess, subject to a minimum bid rate. TAF loans are extended on a short-term basis, with terms ranging from 28 to 84 days. All advances under
the TAF program must be collateralized to the satisfaction of the Bank. Assets eligible to collateralize TAF loans include the complete list noted
above for loans to depository institutions. Similar to the process used for primary, secondary, and seasonal credit, a lending value is assigned to
each asset that is accepted as collateral for TAF loans reduced by a margin.
Loans to depository institutions are monitored on a daily basis to ensure that borrowers continue to meet eligibility requirements for these pro-
grams. The financial condition of borrowers is monitored by the Bank and, if a borrower no longer qualifies for these programs, the Bank will gen-
erally request full repayment of the outstanding loan or, for primary and seasonal credit lending, may convert the loan to a secondary credit loan.
Collateral levels are reviewed daily against outstanding obligations and borrowers that no longer have sufficient collateral to support outstanding
loans are required to provide additional collateral or to make partial or full repayment.
Other loans
The Bank administered the AMLF and was authorized to extend loans to eligible borrowers on behalf of the other Reserve Banks. All loans ex-
tended under the AMLF were recorded as assets by the Bank and, if the borrowing institution settled to a depository account in another Reserve
Bank District, the funds were credited to the institution’s depository account by the appropriate Reserve Bank and settled between the Banks
through the interdistrict settlement account. The loans extended under the AMLF were nonrecourse, so that the Bank had recourse only to the
collateral pledged by the borrowers. The credit risk related to the AMLF was assumed by the Bank. No losses were incurred on loans extended
during the years ended December 31, 2009 and 2008. Eligible collateral under the program was limited to U.S. dollar-denominated ABCP that
was not rated lower than A-1/P-1/F1 and was required to be purchased from an eligible money market mutual fund. The terms of loans under
the AMLF were limited to 120 days if the borrower was a bank or 270 days for non-bank borrowers. The interest rate for advances made under
the AMLF was equal to the Bank’s primary credit rate offered to depository institutions at the time the advance was made.
The remaining maturity distributions of loans outstanding at December 31 were as follows (in millions):
2009
Primary, secondary,
and seasonal credit TAF AMLF
Within 15 days $ 80 $ 4,052 $ –
16 days to 90 days 29 – –
Total loans $ 109 $ 4,052 $ –
2008
Primary, secondary,
and seasonal credit TAF AMLF
Within 15 days $ 132 $ 8,600 $ 9,682

16 days to 90 days 111 7,550 14,083
Total loans $ 243 $ 16,150 $ 23,765
Allowance for loan loss

At December 31, 2009 and 2008, the Bank did not have any impaired loans and no allowance for loan losses was required.

6. TREASURY SECURITIES; GOVERNMENT-SPONSORED ENTERPRISE DEBT SECURITIES; FEDERAL AGENCY AND

GOVERNMENT-SPONSORED ENTERPRISE MORTGAGE-BACKED SECURITIES; SECURITIES PURCHASED UNDER
AGREEMENTS TO RESELL; SECURITIES SOLD UNDER AGREEMENTS TO REPURCHASE; AND SECURITIES LENDING
The FRBNY, on behalf of the Reserve Banks, holds securities bought outright in the SOMA. The Bank’s allocated share of SOMA balances was
approximately 1.918 percent and 4.194 percent at December 31, 2009 and 2008, respectively.
The Bank’s allocated share of Treasury securities, GSE debt securities, and Federal agency and GSE MBS, excluding accrued interest, held in the
SOMA at December 31 was as follows (in millions):
2009
Treasury securities

Total Treasury GSE debt Federal agency and
Bills Notes Bonds securities securities GSE MBS
Par $ 353 $ 10,902 $ 3,642 $ 14,897 $ 3,067 $ 17,426
Unamortized premiums – 126 469 595 144 232
Unaccredited discounts – (19) (12) (31) – (30)
Total amortized cost $ 353 $ 11,009 $ 4,099 $ 15,461 $ 3,211 $ 17,628

Fair Value $ 353 $ 11,185 $ 4,426 $ 15,964 $ 3,212 $ 17,539

2008
Treasury securities
Par $ 773 $ 14,042 $ 5,147 $ 19,962 $ 827 $ –
Unamortized premiums – 12 281 293 44 –
Unaccredited discounts – (35) (26) (61) (1) –
Total amortized cost $ 773 $ 14,019 $ 5,402 $ 20,194 $ 870 $ –

Fair Value $ 773 $ 15,003 $ 7,107 $ 22,883 $ 875 $ –
The total of the Treasury securities, GSE debt securities, and Federal agency and GSE MBS, net, excluding accrued interest held in the SOMA at
December 31 was as follows (in millions):
2009
Treasury securities


Amortized Cost $ 18,423 $ 573,877 $ 213,672 $ 805,972 $ 167,362 $ 918,927
Fair Value 18,423 583,040 230,717 $ 832,180 167,444 914,290

2008
Treasury securities

Amortized Cost $ 18,423 $ 334,216 $ 128,810 $ 481,449 $ 20,740 $ –
Fair Value 18,423 357,709 169,432 $ 545,564 20,863 –

The fair value amounts in the above tables are presented solely for informational purposes. Although the fair value of security holdings can be
substantially greater than or less than the recorded value at any point in time, these unrealized gains or losses have no effect on the ability of
the Reserve Banks, as the central bank, to meet their financial obligations and responsibilities. Fair value was determined by reference to quoted
market values for identical securities, except for Federal agency and GSE MBS for which fair values were determined using a model-based
approach based on observable inputs for similar securities.
The fair value of the fixed-rate Treasury securities, GSE debt securities, and Federal agency and GSE MBS in the SOMA’s holdings is subject to
market risk, arising from movements in market variables, such as interest rates and securities prices. The fair value of Federal agency and GSE
MBS is also affected by the rate of prepayments of mortgage loans underlying the securities.
The following table provides additional information on the amortized cost and fair values of the Federal agency and GSE MBS portfolio at
December 31, 2009 (in millions):

Distribution of MBS
holdings by coupon rate Amortized cost Fair value
Allocated to the Bank:
4.0% $ 3,263 $ 3,179
4.5% 8,332 8,280
5.0% 3,749 3,768
5.5% 1,983 2,006
6.0% 244 248
Other1 57 58
Total $ 17,628 $ 17,539

System total:
4.0% $ 170,119 $ 165,740
4.5% 434,352 431,646
5.0% 195,418 196,411
5.5% 103,379 104,583
6.0% 12,710 12,901
Other1 2,949 3,009
Total $ 918,927 $ 914,290
1
- Represents less than one percent of the total portfolio
Financial information related to securities purchased under agreements to resell and securities sold under agreements to repurchase for the years
ended December 31, 2009 and 2008, was as follows (in millions):
Securities purchased under Securities sold under

agreements to resell agreements to repurchase
2009 2008 2009 2008
Allocated to the Bank:
Contract amount outstanding, end of year $ – $ 3,355 $ 1,491 $ 3,706
Average daily amount outstanding, during the year 152 3,682 1,779 2,362
Maximum month-end balance outstanding, during the year – 4,991 3,220 4,134
Securities pledged, end of year – – 1,494 3,309

System total:
Contract amount outstanding, end of year $ – $ 80,000 $ 77,732 $ 88,352
Average daily amount outstanding, during the year 3,616 86,227 67,837 55,169

Maximum month-end balance outstanding, during the year – 119,000 77,732 98,559
Securities pledged, end of year – – 77,860 78,896

The Bank has revised its disclosure of securities purchased under agreements to resell and securities sold under agreements to repurchase from
a weighted average calculation, disclosed in 2008, to the simple daily average calculation, disclosed above. The previously reported System total
2008 weighted average amount outstanding for securities purchased under agreements to resell was $97,037 million of which $4,070 million was
allocated to the Bank. The previously reported System total 2008 weighted average amount outstanding for securities sold under agreements to
repurchase was $65,461 million of which $2,746 million was allocated to the Bank.
The contract amounts for securities purchased under agreements to resell and securities sold under agreements to repurchase approximate fair
value.
The remaining maturity distribution of Treasury securities, GSE debt securities, Federal agency and GSE MBS bought outright, securities pur-
chased under agreements to resell, and securities sold under agreements to repurchase that were allocated to the Bank at December 31, 2009
was as follows (in millions):
Securities purchased Securities sold under

GSE debt Federal agency under agreements agreements to
Treasury securities securities and GSE MBS to resell repurchase
(Par value) (Par value) (Par value) (Contract amount) (Contract amount)
Within 15 days $ 223 $ 1 $ – $ – $ 1,491
16 days to 90 days 553 59 – – –
91 days to 1 year 974 413 – – –
Over 1 year to 5 years 6,270 1,907 – – –
Over 5 years to 10 years 4,100 648 1 – –
Over 10 years 2,777 39 17,425 – –
Total allocated to the Bank $ 14,897 $ 3,067 $ 17,426 $ – $ 1,491
Federal agency and GSE MBS are reported at stated maturity in the table above. The estimated weighted average life of these securities at
December 31, 2009, which differs from the stated maturity primarily because it factors in prepayment assumptions, is approximately 6.4 years.
At December 31, 2009 and 2008, Treasury securities and GSE debt securities with par values of $ 21,610 million and $180,765 million,
respectively, were loaned from the SOMA, of which $415 million and $7,582 million, respectively, were allocated to the Bank.
At December 31, 2009, the total of other investments was $5 million, of which the Bank’s allocated share was immaterial. Other investments
consist of cash and short-term investments related to the Federal agency and GSE MBS portfolio.
At December 31, 2009, the total of other liabilities was $601 million, of which $12 million was allocated to the Bank. These other liabilities,
which are related to purchases of Federal agency and GSE MBS, arise from the failure of a seller to deliver securities to the FRBNY on the settle-
ment date. Although the Bank has ownership of and records its investments in the MBS securities as of the contractual settlement date, it is not
obligated to make payment until the securities are delivered, and the amount reported as other liabilities represents the Bank’s obligation to pay
for the securities when delivered.
The FRBNY enters into commitments to buy Federal agency and GSE MBS and records the related MBS on a settlement-date basis. As of
December 31, 2009, the total purchase price of the Federal agency and GSE MBS under outstanding commitments was $160,099 million, of
which $32,838 million was related to dollar roll transactions. The amount of outstanding commitments allocated to the Bank was $3,071 million,
of which $630 million was related to dollar roll transactions. These commitments, which had contractual settlement dates extending through
March 2010, are primarily for the purchase of TBA MBS for which the number and identity of the pools that will be delivered to fulfill the com-
mitment are unknown at the time of the trade. These commitments are subject to market and counterparty risks that result from their future
settlement. As of December 31, 2009, the fair value of Federal agency and GSE MBS under outstanding commitments was $158,868 million, of
which $3,048 million was allocated to the Bank. During the year ended December 31, 2009, the Reserve Banks recorded net gains from dollar
roll related sales of $879 million, of which $10 million was allocated to the Bank. These net gains are reported as “Non-Interest Income: Federal
agency and government-sponsored enterprise mortgage-backed securities gains, net” in the Statements of Income and Comprehensive Income.

7. INVESTMENTS DENOMINATED IN FOREIGN CURRENCIES

The FRBNY, on behalf of the Reserve Banks, holds foreign currency deposits with foreign central banks and with the Bank for International
Settlements and invests in foreign government debt instruments. These investments are guaranteed as to principal and interest by the issuing
foreign governments. In addition, the FRBNY enters into transactions to purchase foreign-currency-denominated government-debt securities
under agreements to resell for which the accepted collateral is the debt instruments issued by the governments of Belgium, France, Germany,
Italy, the Netherlands, and Spain.
The Bank’s allocated share of investments denominated in foreign currencies was approximately 4.006 percent and 5.688 percent at December
31, 2009 and 2008, respectively.
The Bank’s allocated share of investments denominated in foreign currencies, including accrued interest, valued at amortized cost and foreign
currency market exchange rates at December 31, was as follows (in millions):

2009 2008
Euro:
Foreign currency deposits $ 296 $ 317
Securities purchased under agreements to resell 104 232
Government debt instruments 198 262

Japanese yen:
Foreign currency deposits 136 198
Government debt instruments 278 402

Total allocated to the Bank $ 1,012 $ 1,411
At December 31, 2009 and 2008, the fair value of investments denominated in foreign currencies, including accrued interest, allocated to
the Bank was $1,021 million and $1,423 million, respectively. The fair value of government debt instruments was determined by reference to
quoted prices for identical securities. The cost basis of foreign currency deposits and securities purchased under agreements to resell, adjusted
for accrued interest, approximates fair value. Similar to the Treasury securities, GSE debt securities, and Federal agency and GSE MBS discussed
in Note 6, unrealized gains or losses have no effect on the ability of a Reserve Bank, as the central bank, to meet its financial obligations and
responsibilities. The fair value is presented solely for informational purposes.
Total Reserve Bank investments denominated in foreign currencies were $25,272 million and $24,804 million at December 31, 2009 and 2008,
respectively. At December 31, 2009 and 2008, the fair value of the total Reserve Bank investments denominated in foreign currencies, including
accrued interest, was $25,480 million and $25,021 million, respectively.
The remaining maturity distribution of investments denominated in foreign currencies that were allocated to the Bank at December 31, 2009
was as follows (in millions):
Euro Japanese yen Total

Within 15 days $ 243 $ 145 $ 388
16 days to 90 days 100 18 118
91 days to 1 year 97 95 192
Over 1 year to 5 years 158 156 314
Total allocated to the Bank $ 598 $ 414 $ 1,012
At December 31, 2009 and 2008, the authorized warehousing facility was $5 billion, with no balance outstanding.
In connection with its foreign currency activities, the FRBNY may enter into transactions that contain varying degrees of off-balance-sheet market
risk that result from their future settlement and counterparty credit risk. The FRBNY controls these risks by obtaining credit approvals, establish-
ing transaction limits, receiving collateral in some cases, and performing daily monitoring procedures.

8. CENTRAL BANK LIQUIDITY SWAPS

U.S. Dollar Liquidity Swaps
The Bank’s allocated share of U.S. dollar liquidity swaps was approximately 4.006 percent and 5.688 percent at December 31, 2009 and 2008,
respectively.
At December 31, 2009 and 2008, the total Reserve Bank amount of foreign currency held under U.S. dollar liquidity swaps was $10,272
million and $553,728 million, respectively, of which $411 million and $31,498 million, respectively, was allocated to the Bank.
The remaining maturity distribution of U.S. dollar liquidity swaps that were allocated to the Bank at December 31 was as follows (in millions):
2009 2008
Within 15 16 days to Within 15 16 days to
days 90 days Total days 90 days Total
Australian dollar $ – $ – $ – $ 569 $ 730 $ 1,299
Danish krone – – – – 853 853
Euro 260 – 260 8,588 7,985 16,573
Japanese yen 22 – 22 2,724 4,256 6,980
Korean won – – – – 589 589
Mexican peso 129 – 129 – – –
Norwegian krone – – – 125 343 468
Swedish krona – – – 569 853 1,422
Swiss franc – – – 1,093 339 1,432
U.K. pound – – – 7 1,875 1,882
Total $ 411 $ – $ 411 $ 13,675 $ 17,823 $ 31,498
Foreign Currency Liquidity Swaps

There were no transactions related to the foreign currency liquidity swaps during the years ended December 31, 2008 and 2009.
9. BANK PREMISES, EQUIPMENT, AND SOFTWARE

Bank premises and equipment at December 31 were as follows (in millions):
2009 2008
Bank premises and equipment:
Land $ 27 $ 27
Buildings 144 142
Building machinery and equipment 30 30
Construction in progress 6 3
Furniture and equipment 60 56
Subtotal 267 258

Accumulated depreciation (124) (114)

Bank premises and equipment, net $ 143 $ 144

Depreciation expense, for the years ended December 31 $ 14 $ 12


The Bank leases space to outside tenants with remaining lease terms ranging from 1 to 11 years. Rental income from such leases was $13 mil-
lion and $12 million for the years ended December 31, 2009 and 2008, respectively, and is reported as a component of “Other income” in
the Statements of Income and Comprehensive Income. Future minimum lease payments that the Bank will receive under noncancelable lease
agreements in existence at December 31, 2009 are as follows (in millions):
2010 $ 11
2011 11
2012 11
2013 11
2014 10
Thereafter 20
Total $ 74
The Bank had capitalized software assets, net of amortization, of $7 million at December 31, 2009 and 2008. Amortization expense was $3 mil-
lion and $2 million for the years ended December 31, 2009 and 2008, respectively. Capitalized software assets are reported as a component of
“Other assets” in the Statements of Condition and the related amortization is reported as a component of “Other expenses” in the Statements
of Income and Comprehensive Income.
10. COMMITMENTS AND CONTINGENCIES

In the normal course of its operations the Bank enters into contractual commitments, normally with fixed expiration dates or termination provi-
sions, at specific rates and for specific purposes.
At December 31, 2009, the Bank was obligated under noncancelable leases for premises with remaining terms of approximately 3 years. These
leases provide for increased rental payments based upon increases in real estate taxes and operating costs.
Rental expense under operating leases for certain operating facilities, warehouses, and data processing and office equipment (including taxes,
insurance, and maintenance when included in rent), was $1 million for the years ended December 31, 2009 and 2008. Certain of the Bank’s
leases have options to renew.
Future minimum rental payments under noncancelable operating leases, with remaining terms of one year or more, at December 31, 2009 are
as follows (in thousands):
Operating leases
2010 $ 559
2011 559
2012 428
2013 –
2014 –
Thereafter –
Future minimum rental payments $ 1,546
At December 31, 2009, there were no material unrecorded unconditional purchase commitments or obligations in excess of one year.
Under the Insurance Agreement of the Federal Reserve Banks, each of the Reserve Banks has agreed to bear, on a per incident basis, a pro
rata share of losses in excess of one percent of the capital paid-in of the claiming Reserve Bank, up to 50 percent of the total capital paid-in
of all Reserve Banks. Losses are borne in the ratio of a Reserve Bank’s capital paid-in to the total capital paid-in of all Reserve Banks at the
beginning of the calendar year in which the loss is shared. No claims were outstanding under the agreement at December 31, 2009 or 2008.
The Bank is involved in certain legal actions and claims arising in the ordinary course of business. Although it is difficult to predict the ultimate
outcome of these actions, in management’s opinion, based on discussions with counsel, the aforementioned litigation and claims will be resolved
without material adverse effect on the financial position or results of operations of the Bank.

11. RETIREMENT AND THRIFT PLANS

Retirement Plans
The Bank currently offers three defined benefit retirement plans to its employees, based on length of service and level of compensation. Substan-
tially all of the employees of the Reserve Banks, Board of Governors, and Office of Employee Benefits of the Federal Reserve System (“OEB”)
participate in the Retirement Plan for Employees of the Federal Reserve System (“System Plan”). In addition, employees at certain compensation
levels participate in the Benefit Equalization Retirement Plan (“BEP”) and certain Reserve Bank officers participate in the Supplemental Retire-
ment Plan for Select Officers of the Federal Reserve Bank (“SERP”).
The System Plan provides retirement benefits to employees of the Federal Reserve Banks, the Board of Governors, and OEB. The FRBNY, on
behalf of the System, recognizes the net asset or net liability and costs associated with the System Plan in its financial statements. Costs associated
with the System Plan are not reimbursed by other participating employers.
The Bank’s projected benefit obligation, funded status, and net pension expenses for the BEP and the SERP at December 31, 2009 and 2008,
and for the years then ended, were not material.
Thrift Plan
Employees of the Bank participate in the defined contribution Thrift Plan for Employees of the Federal Reserve System (“Thrift Plan”). The Bank
matches employee contributions based on a specified formula. For the year ended December 31, 2008 and for the first three months of the
year ended December 31, 2009, the Bank matched 80 percent of the first 6 percent of employee contributions for employees with less than
five years of service and 100 percent of the first 6 percent of employee contributions for employees with five or more years of service. Effective
April 1, 2009, the Bank matches 100 percent of the first 6 percent of employee contributions from the date of hire and provides an automatic
employer contribution of one percent of eligible pay. The Bank’s Thrift Plan contributions totaled $4 million for each of the years ended De-
cember 31, 2009 and 2008, and are reported as a component of “Salaries and other benefits” in the Statements of Income and Comprehensive
Income.
12. POSTRETIREMENT BENEFITS OTHER THAN RETIREMENT PLANS AND POSTEMPLOYMENT BENEFITS
Postretirement Benefits Other Than Retirement Plans
In addition to the Bank’s retirement plans, employees who have met certain age and length-of-service requirements are eligible for both medical
benefits and life insurance coverage during retirement.
The Bank funds benefits payable under the medical and life insurance plans as due and, accordingly, has no plan assets.
Following is a reconciliation of the beginning and ending balances of the benefit obligation (in millions):
2009 2008
Accumulated postretirement
benefit obligation at January 1 $ 63.4 $ 56.4
Service cost benefits earned during the period 1.7 1.5
Interest cost on accumulated benefit obligation 3.8 3.6
Net actuarial loss 10.2 6.0
Curtailment gain – (0.2)
Contributions by plan participants 1.7 1.5
Benefits paid (5.6) (5.6)
Medicare Part D subsidies 0.2 0.2
Accumulated postretirement
benefit obligation at December 31 $ 75.4 $ 63.4
At December 31, 2009 and 2008, the weighted-average discount rate assumptions used in developing the postretirement benefit obligation
were 5.75 percent and 6.00 percent, respectively.

Discount rates reflect yields available on high-quality corporate bonds that would generate the cash flows necessary to pay the plan’s benefits
when due.
Following is a reconciliation of the beginning and ending balance of the plan assets, the unfunded postretirement benefit obligation, and the ac-
crued postretirement benefit costs (in millions):
2009 2008
Fair value of plan assets at January 1 $ – $ –
Contributions by the employer 3.7 3.9
Contributions by plan participants 1.7 1.5
Benefits paid (5.6) (5.6)
Medicare Part D subsidies 0.2 0.2

Fair value of plan assets at December 31 $ – $ –

Unfunded obligation and accrued
postretirement benefit cost $ 75.4 $ 63.4

Amounts included in accumulated
other comprehensive
loss are shown below:
Prior service cost $ 0.4 $ 1.1
Net actuarial loss (20.7) (11.3)
Deferred curtailment gain – 0.1
Total accumulated other comprehensive loss $ (20.3) $ (10.1)
Accrued postretirement benefit costs are reported as a component of “Accrued benefit costs” in the Statements of Condition.
For measurement purposes, the assumed health care cost trend rates at December 31 are as follows:
2009 2008
Health care cost trend rate assumed for next year 7.50% 7.50%
Rate to which the cost trend rate is

assumed to decline (the ultimate trend rate) 5.00% 5.00%
Year that the rate reaches the ultimate trend rate 2015 2014
Assumed health care cost trend rates have a significant effect on the amounts reported for health care plans. A one percentage point change in
assumed health care cost trend rates would have the following effects for the year ended December 31, 2009 (in millions):
One percentage One percentage

point increase point decrease
Effect on aggregate of service and interest cost components of
net periodic postretirement benefit costs $ 0.8 $ (0.7)
Effect on accumulated postretirement benefit obligation 8.7 (7.3)

The following is a summary of the components of net periodic postretirement benefit expense for the years ended December 31 (in millions):
2009 2008
Service cost for benefits earned during the period $ 1.7 $ 1.5
Interest cost on accumulated benefit obligation 3.8 3.6
Amortization of prior service cost (0.7) (0.8)
Amortization of net actuarial loss 0.8 0.1
Total periodic expense 5.6 4.4
Curtailment gain (0.1) (0.2)
Net periodic postretirement benefit expense $ 5.5 $ 4.2

Estimated amounts that will be amortized from
accumulated other comprehensive loss
into net periodic postretirement benefit expense
in 2010 are shown below:
Prior service cost $ (0.2)
Net actuarial loss 2.0
Total $ 1.8
Net postretirement benefit costs are actuarially determined using a January 1 measurement date. At January 1, 2009 and 2008, the weighted-av-
erage discount rate assumptions used to determine net periodic postretirement benefit costs were 6.00 percent and 6.25 percent, respectively.
Net periodic postretirement benefit expense is reported as a component of “Salaries and other benefits” in the Statements of Income and
Comprehensive Income.
A net curtailment gain associated with restructuring programs that are described in Note 14 was recognized in net income in the year ended
December 31, 2009, related to employees who terminated employment during 2009.
The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established a prescription drug benefit under Medicare (“Medi-
care Part D”) and a federal subsidy to sponsors of retiree health care benefit plans that provide benefits that are at least actuarially equivalent
to Medicare Part D. The benefits provided under the Bank’s plan to certain participants are at least actuarially equivalent to the Medicare Part D
prescription drug benefit. The estimated effects of the subsidy are reflected in actuarial loss in the accumulated postretirement benefit obligation
and net periodic postretirement benefit expense.
Federal Medicare Part D subsidy receipts were $0.3 million and $0.2 million in the years ended December 31, 2009 and 2008, respectively.
Expected receipts in 2010, related to benefits paid in the years ended December 31, 2009 and 2008, are $41 thousand.
Following is a summary of expected postretirement benefit payments (in millions):
Without subsidy With subsidy

2010 $ 4.4 $ 4.1
2011 4.8 4.5
2012 5.0 4.7
2013 5.3 4.9
2014 5.5 5.1
2015 - 2019 29.0 26.5
Total $ 54.0 $ 49.8

Postemployment Benefits
The Bank offers benefits to former or inactive employees. Postemployment benefit costs are actuarially determined using a December 31
measurement date and include the cost of medical and dental insurance, survivor income, and disability benefits. The accrued postemployment
benefit costs recognized by the Bank at December 31, 2009 and 2008 were $6 million and $5 million, respectively. This cost is included as
a component of “Accrued benefit costs” in the Statements of Condition. Net periodic postemployment benefit expense (credit) included in
2009 and 2008 operating expenses were $2 million and $(92) thousand, respectively, and are recorded as a component of “Salaries and other
benefits” in the Statements of Income and Comprehensive Income.
13. ACCUMULATED OTHER COMPREHENSIVE INCOME AND OTHER COMPREHENSIVE INCOME

Following is a reconciliation of beginning and ending balances of accumulated other comprehensive loss (in millions):
Amount related
to postretirement
benefits other than
retirement plans
Balance at January 1, 2008 $ (3)

Change in funded status of benefit plans:
Net actuarial loss arising during the year $ (6)
Amortization of prior service cost $ (1)
Change in funded status of benefit plans - other comprehensive loss $ (7)
Balance at December 31, 2008 $ (10)
Change in funded status of benefit plans:
Net actuarial loss arising during the year $ (10)
Amortization of prior service cost $ (1)
Amortization of net actuarial loss $ 1
Change in funded status of benefit plans - other comprehensive loss $ (10)
Balance at December 31, 2009 $ (20)
Additional detail regarding the classification of accumulated other comprehensive loss is included in Note 12.

14. BUSINESS RESTRUCTURING CHARGES

2007 and Prior Restructuring Plans
The Bank incurred various restructuring charges prior to 2008 related to a restructuring initiative to align the check processing infrastructure and
operations with declining check processing volumes.
Following is a summary of financial information related to the restructuring plans (in millions):
2007 and prior

restructuring plans
Information related to restructuring plans as of December 31, 2009:

Total expected costs related to restructuring activity $ 3.6
Estimated future costs related to restructuring activity 1.3
Expected completion date 2010
Reconciliation of liability balances:

Balance at January 1, 2008 $ 2.4
Employee separation costs 0.3
Adjustments (0.5)
Payments (1.6)
Balance at December 31, 2008 $ 0.6
Payments (0.1)
Balance at December 31, 2009 $ 0.5
Employee separation costs are primarily severance costs for identified staff reductions associated with the announced restructuring plans.
Separation costs that are provided under terms of ongoing benefit arrangements are recorded based on the accumulated benefit earned by the
employee. Separation costs that are provided under the terms of one-time benefit arrangements are generally measured based on the expected
benefit as of the termination date and recorded ratably over the period to termination. Restructuring costs related to employee separations are
reported as a component of “Salaries and other benefits” in the Statements of Income and Comprehensive Income.
Adjustments to the accrued liability are primarily due to changes in the estimated restructuring costs and are shown as a component of the
appropriate expense category in the Statements of Income and Comprehensive Income.
15. SUBSEQUENT EVENTS

There were no subsequent events that require adjustments to or disclosures in the financial statements as of December 31, 2009. Subsequent
events were evaluated through April 21, 2010, which is the date that the Bank issued the financial statements.

External Auditor Independence
In 2009, the Board of Governors engaged Deloitte & Touche LLP (D&T) for the audits of the individual and combined financial statements of
the Reserve Banks and the consolidated financial statements of the limited liability companies (LLCs) that are associated with Federal Reserve
actions to address the financial crisis and are consolidated in the financial statements of the Federal Reserve Bank of New York. Fees for D&T’s
services are estimated to be $9.6 million, of which approximately $2.0 million were for the audits of the LLCs1. To ensure auditor independence,
the Board of Governors requires that D&T be independent in all matters relating to the audit. Specifically, D&T may not perform services for
the Reserve Banks or others that would place it in a position of auditing its own work, making management decisions on behalf of Reserve Banks,
or in any other way impairing its audit independence. In 2009, the Bank did not engage D&T for any non-audit services.
1
Each LLC will reimburse the Board of Governors for the fees related to the audit of its financial statements from the entity’s
available net assets.

Design
Fabienne Anselme Madsen
Photography
Chip Fanelli Photography
Photography
Ralph Ragsdale, pages 38-41
Photography
Peter Vanderwarker, page 34
Union Station, Worcester, MA www.bos.frb.org

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2009 Annual Report

Federal Reserve Bank of Boston

Federal Reserve Bank of Boston 1

Downtown, New Haven, CT

Federal Reserve Bank of Boston 3

Cover: Union Station, Worcester, MA

Economic difficulties persisted through 2009. Despite significant improvement

4 2009 Annual Report

Federal Reserve Bank of Boston 5

6 2009 Annual Report

College Hill, Providence, RI

Federal Reserve Bank of Boston 7

8 2009 Annual Report

Mid-sized manufacturing cities face challenges

Federal Reserve Bank of Boston 11

12 2009 Annual Report

Transitioning away from a manufacturing-oriented economy has posed major

The declining dependence on manufacturing over time is striking. On average,

Leadership and collaboration drive resurgence

Federal Reserve Bank of Boston 13

Massachusetts College of Pharmacy and Health Sciences, Worcester, MA

Average other peer cities

Average resurgent cities

Regardless of who initiated the turnaround, economic redevelopment efforts spanned

Public sector leadership

14 2009 Annual Report

Private sector leadership

Federal Reserve Bank of Boston 15

Average other peer cities

Grand Rapids, Average resurgent cities

one of the 15 U.S. total

the impact that

16 2009 Annual Report

In some of the resurgent cities, chambers of commerce and business organizations

Table 2 Racial Composition of Population, 1960 and 2005-07

White Black All Other*

Source: U.S. Bureau of the Census. American Community Survey (2005–2007).

Federal Reserve Bank of Boston 17

over time, the

typically have a 1980 2005–07

private, nonprofit Resurgent cities

Source: U.S. Bureau of the Census. Decennial Census (1980), American

18 2009 Annual Report

Forest Park, Springfield, MA

Universities make a difference With the continued

Federal Reserve Bank of Boston 21

In Worcester, educational institutions formed UniverCity Partnership in 2005 to

between Clark U.S. total

Percent . . . With College Degree or More

Average resurgent cities

Average other peer cities

22 2009 Annual Report

By the mid-1990s, New Haven’s economy seemed to be on a firmer footing.

attract new businesses and to retain existing businesses.

Planning and re-evaluating are critical

24 2009 Annual Report

Infrastructure improvements and industry

Federal Reserve Bank of Boston 25

Quinnipiac Terrace, Fair Haven, CT