Despite a turn toward electronic banking, officials say Federal Reserve has vital role in Montana finances

It's one of the most stately office buildings in Helena, and perhaps one of the least understood. Its 90 employees have little interaction with the public -- and these days, the public needs a good reason to even get in the door.

It's the 85-year-old Helena branch of the Federal Reserve Bank of Minneapolis on Neill Avenue -- part of the infrastructure of the country's money system.

Even as more and more business is conducted electronically, the Helena branch is still important to the state's financial services industry.

"Even with technology today, the role of the Helena branch is vital to the banking community," said Steve Turkiewicz, president of the Montana Bankers Association. It may be easier than ever to move money electronically, "but it's still hard to get a roll of quarters that way."

Helena wasn't originally scheduled to get a branch when the Federal Reserve announced in 1919 that 18 branches would be sited to support the 12 regional Reserve Banks that were opened in 1914. (The Minneapolis Fed district, of which Montana is a part, also includes North Dakota, Minnesota, northern Wisconsin and the Upper Peninsula of Michigan.)

But local businessman Norman Holter and bankers around the state began a lobbying effort, arguing that Montana was too far from Minneapolis to be served effectively by that Fed office, that a number of other Federal departments already had offices here and that Helena in particular made sense as the financial capital of the state.

The wish was granted, and the first local Fed branch opened on the corner of Park and Edwards on Feb. 1, 1921. That building was damaged in the earthquake of 1935, and three years later the branch moved into its second home, the building that's now the First Montana Title Co.

Ground was broken for the current building on Neill Avenue, and ribbon was cut in the new space on Dec. 3, 1990. The bank today is a little bigger than it was 85 years ago: at 5,500 square feet, the vault in the current building is as big as the entire first floor of the old Park Avenue branch.

Significant security upgrades were installed following Sept. 11, including upgraded security gates and a wall around much of the building.

Carrying some coin

Today, the branch has two primary functions: cash and checks.

When a bank needs cash, whether it's Mountain West here in Helena or Rocky Mountain Bank in Plentywood, the currency comes from the local Fed. Branch manager Sam Gane won't say how much cash the bank has on hand today due to security concerns, but it's probably safe to say it's more than the $113,420 in gold bullion and coins, $190,300 in gold certificates and $114,736 that filled the vault in 1921. (Back then, banks were still required to exchange paper money for gold or silver at the holder's request.)

On the cash side of the operation, "we're acting as a fiscal agent for the U.S. Treasury," Gane said. "It starts by accepting deposits from Montana banks that have more currency in their vaults than they want."

The incoming money is counted and sorted by a machine that can process 85,000 bills an hour, with worn or potentially counterfeit bills set aside for personal inspection. Bills deemed too tattered for circulation are shredded and pulverized, and a Dumster full is taken to the landfill once a month. (Don't bother heading out there with a gluestick -- it's destroyed beyond any possible repair, Gane said.)

The cash is then bundled and put in the vault, to be returned to banks as they need more currency on hand.

The other part of the local operation is dedicated to check processing, by many accounts a dying function across the country. (Dying being a relative term: the branch processed 160.9 million checks last year, down from a peak of 189 million in 2002).

Unlike the cash side, where the branch acts as a Treasury agent, the check side functions more as a private service for banks. The Fed gets checks from banks where they were deposited and routes them to the banks that hold the accounts the checks are drawn on.

"We're sort of an intermediary, a clearing agent for those checks," Gane said. "It's not something we do for the Treasury, it's actually a price service."

As Americans use more debit cards and other electronic transactions, they write fewer checks, and the Fed has closed a number of check processing sites around the country as a result. Thanks to cost-cutting and Helena's out-of-the-way location, the local check processing center has survived three rounds of closures as the Fed streamlines the process across the country.

"We got on the cost-cutting bandwagon early, before the first round of closures," Gane said. "Geography and the cost of transporting all those checks also have a lot to do with it."

A seat at the table

Beyond its banking services, the presence of the Federal Reserve here assures Montana businesses a voice in the monetary policy decision-making process on a national level.

Dean Folkvord, president of Wheat Montana, is one of five members of the branch's board of directors. One of his tasks each month is to survey a handful of businesses around the state to get a sense of the current economic climate: Are they hiring? Laying off? How's the crop yield look? How are sales? Raw materials prices?

The results are compiled by local economists, then taken to Minneapolis, where they're joined with similar data from across the region and forwarded to Washington, where national policy is developed.

Each month's questions come from the Minneapolis staff, Folkvord said, and they change regularly, giving him a sense of what information policy makers are interested in.

"We've been told on more than one occasion that the economic data is critically important in setting economic policy and direction for the country," Folkvord said. Aside from assuring Montana strong representation in Washington, Folkvord said having a branch here makes local owners feel their voices are being heard.

"I believe it's an excellent tool for the Fed to use as an outreach mechanism into the business community," he said. "When businesses are asked these questions and know their answers are being channeled back to the top of the Fed system, they realize we're all part of the process, and that's pretty exciting."

Spreading the word

With most of its customers being commercial banks and little interaction with the general public, the Fed operates somewhere below the radar in Helena, despite providing nearly 100 Federal jobs. Gane said the branch has made efforts in the last several years to get the word out about what goes on in the fortress on Neill.

That can include talks to civic organizations, tours for local school groups and visits to college economics classes across the state to explain the monetary system and the local branch's role in keeping the banking industry running smoothly.

John Harrington can be reached at 447-4080 or john.harrington@helenair.com.