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President's Message

Charles Plosser

The theme of this year's annual report, "Out of Many...One," may sound familiar. The Latin translation, "E Pluribus Unum," is the motto found on the Great Seal of the United States. It indicates that out of many states, a single nation emerged — a nation founded just a few blocks from the Philadelphia Fed in Independence Hall.

In today's dynamic economic environment, "Out of Many...One" is also particularly apt. It reflects the idea that out of many markets and sectors, we are one economy. It also applies to our decentralized central bank structure: 12 regional Reserve Banks around the nation and a Board of Governors in Washington form one central bank — the Federal Reserve. Although individual Federal Reserve policymakers have different perspectives and often articulate diverse views, they work together to set one monetary policy for the nation.

Throughout last year, I talked about the need to preserve the foundational structure of the Federal Reserve as we consider financial regulatory reform. In this year's essay, "The Importance of a Regional and Independent Federal Reserve," I discuss how this decentralized structure and independence from short-term political pressures help the Fed pursue the goals that Congress has set for the central bank. Almost a century ago, Congress established the structure of the Federal Reserve to balance the interests of Main Street and Wall Street, and to balance the power of the public sector in Washington and the private sector throughout our great and vast nation. These checks and balances remain just as important today.

Other articles in this year's annual report describe the many ways people in our Bank have helped fulfill the mission Congress has defined for the Fed: conducting monetary policy, supervising financial institutions, supporting an efficient payment system, and serving as a "bankers' bank" to depository institutions and as the bank of the U.S. government.

One highlight of the year was the vital role played by Philadelphia's Supervision, Regulation and Credit (SRC) Department during the Supervisory Capital Assessment Program (SCAP), which was popularly known as the large banks' stress test. SCAP involved an in-depth analysis of 19 of the largest bank holding companies against a common set of assumptions. To my mind, the value was not to focus solely on these largest institutions but to demonstrate the value of a macro-prudential approach that can be incorporated into oversight of a broader class of financial institutions.


Philadelphia's SRC also supported the Fed in another important way during 2009 by helping bankers understand and follow new regulations and consumer compliance issues. On behalf of the Federal Reserve System, SRC produces the quarterly Consumer Compliance Outlook, a newsletter distributed to state member banks and bank holding companies supervised by the Fed's 12 Reserve Banks. This newsletter also reaches interested credit unions, savings and loan institutions, law firms, and consulting firms.

This annual report also tells how our Research Department contributed to a better understanding of economic trends during a tumultuous year. For instance, the Philadelphia Fed's monthly Business Outlook Survey of Third District manufacturers has been widely viewed as a gauge of the direction of the national economy. Many economists and forecasters followed the index as it turned positive at mid-year. The report also describes some of the department's other work, such as the Real-Time Data Research Center's quarterly Survey of Professional Forecasters and the Aruoba-Diebold-Scotti business conditions index, and the regional section's state coincident indexes. Our staff economists also conduct research in varied subject areas, including monetary and regulatory policy, banking and financial markets, payments, and the regional economy.

The Bank's Community Affairs Department has worked to address the mortgage crisis through its biennial "Reinventing Older Communities" conference and through workshops with lenders and housing counselors. The department also participated in the Fed's Mortgage Outreach and Research Efforts (MORE) program. One of MORE's goals is to improve data collection related to housing and credit markets, which, in turn, will help us find ways to mitigate the impact of the mortgage crisis on individuals and communities.

In addition, Community Affairs also engages in outreach, educational, and technical assistance activities to help financial institutions, community-based organizations, government entities, and the public understand and address financial services issues affecting low- and moderate-income people and communities. It also offers a number of economic education programs.

Our final story marks the end of an era as the Philadelphia Fed closed its check processing operations in December 2009. I want to express my sincere gratitude to our Retail Payments staff, who worked diligently throughout several consolidations in recent years as our economy shifted from paper to electronic check processing.

Board of Directors

On behalf of the entire Bank, I offer all of our directors my sincere thanks for giving their time and perspectives in serving on the Board of Directors of the Philadelphia Fed. Reserve Bank directors help keep this nation's central bank connected with the concerns of Main Street, and they therefore play a key role in providing balance in the conduct of monetary policy in the United States.

In particular, I thank William F. Hecht, retired president and CEO of PPL Corporation, and Garry L. Maddox, president and CEO of A. Pomerantz & Company, who both completed their terms of service in 2009. I am grateful for their years of distinguished service to the Federal Reserve Bank of Philadelphia and will miss their valuable insights and wise counsel.

I am pleased that board member Charles P. Pizzi, president and CEO of Tasty Baking Company, has been appointed chairman of the Board of Directors and that Jeremy Nowak, president and CEO of The Reinvestment Fund, has been appointed deputy chairman. Their dedication and leadership will no doubt prove invaluable to our Bank in the years ahead.

At the beginning of 2010, the Bank also welcomed its newest board members: Deborah M. Fretz, president, CEO, and director of Sunoco Logistics, and James E. Nevels, chairman of the Swarthmore Group. I look forward to the contributions of their experience and expertise. In addition, Aaron L. Groff, Jr., chairman, president, and CEO of the Ephrata National Bank, one of the three bankers on our nine-member board, was re-elected.

Closing Thoughts

I am proud to present this annual report and share how the Philadelphia Fed has played one part, out of many, to help support the recovery of financial markets and the national economy. The Philadelphia Fed, in cooperation with its 11 regional counterparts and the Board of Governors, has worked tirelessly to ensure a sound financial system and an effective monetary policy. We will continue to support, through a strong and independent central bank, a healthy and robust American economy.

I look forward to working with you in the year ahead.

Charles Plosser Signature
Charles I. Plosser
President and Chief Executive Officer
June 2010