 Welcome to the Money Connection, the new show that makes sense out of the Federal Reserve. Tonight, the MC News Crew covers everything from the pennies piling up in piggy banks, to the trillions of dollars flowing through our nation's economy. And now, the award-winning anchor that everyone can bank on, Bill Dixon. Where's Bill? Has anyone seen Bill? You know, sometimes the only way to get a job done is to do it yourself. Oh, re-cue the open. Come to the Money Connection, the new show that makes sense out of the Federal Reserve. And now, the award-winning anchor that everyone can bank on. Annie Becker. And now, the news. First national bank officials were flabbergasted when a woman deposited money in her savings account. Apparently, she opened that account in 1895. Granny Becker is believed to be the oldest bank depositor in America. We have an exclusive interview. Granny, you opened your account more than a hundred years ago. I'll bet a lot has changed in banking since then. It certainly has. Really, all days, banks were on their own. Some even printed their own money. Pretty-looking stuff, but you could never be sure it was worth anything. In the late 1800s, many small banks put their money in bigger banks. Sometimes those banks made loans to business speculators who couldn't repay the money. When the small banks and investors wanted their money back, it wasn't always there. That could lead to real panic. People raced to take their money out of the bank before it collapsed. That only made things worse. Once a run started, it could spread to other banks. Still get chills when I think about the panic of 1907. Let me tell you, it was no fun at all. And yet you stuck with it. Why were you so confident? Because everything changed in 1913. President Woodrow Wilson signed into law the Federal Reserve Act. It set up the Federal Reserve as the nation's central bank. Having a central bank added stability to the banking system and made panics less likely. For bankers, it offered loans and other financial services. For the government, it was a way to influence the nation's economy. And for ordinary people like me, I knew my money was worth something. The new bank issued paper money called Federal Reserve Notes that were accepted by everyone. So I didn't have to worry so much. I see. Well, thank you, Granny, for telling us about the old days of banking. You're welcome. Bye-bye. That is one cool granny. The Federal Reserve System is called the Fed for short. To shed a little sunlight on how it's set up, here's our meteorologist, Frannie Becker. Thanks, Annie. And let me be the first to give you snaps on that way cool outfit you're wearing. So, okay, here's the buzz on the Fed. I'll start with the national picture. There are 12 districts across the United States. Each one has a headquarters bank, and all the Boston and Philadelphia have branch banks. Like, over here is the Federal Reserve Bank of Boston. That's in the first district. And here, in the Windy City, is the Federal Reserve Bank of Chicago. That's the seventh district. And out here is the twelfth district. Foggy San Francisco is the home of the Federal Reserve Bank of San Francisco. Is that great or what? So here's the 411 on the west. Hello. Cool. The headquarters of the twelfth district is here in San Francisco. It's a totally huge job to cover this area. So the San Francisco Fed has branches in Salt Lake City, Los Angeles, Seattle, and Portland. The San Francisco Fed and its branches store money and vaults for banks in their region and distribute coins and currency to them. They also transfer money electronically for people and businesses and sort checks. The 12 districts of the Fed share a goal, creating a sunny economic climate for the country. Many important decisions are made here at the Fed's national headquarters in Washington, D.C. It's run by the seven members of the Board of Governors. Together with five district bank presidents, they form the Federal Open Market Committee, or FOMC. The FOMC studies the nation's economy. It takes steps that help control the amount of money and credit available for people and businesses. With support from the 12 districts, the FOMC watches over the economy of the country. So instead of a cloudy financial picture, it's blue skies in any season. The recent heat wave has left customers hot tempered on Park Street. MC reporter Danny Becker has a live update. Thanks, Annie. Today is allowance day, and that plus soaring temperatures have led to sour pushes at the only lemonade stand on the block. Prices are going up, up, up, and we're here to find out why. Tell me, why are you putting the squeeze on your thirsty customers? It's not my fault. Kids around here have a lot of money to spend, and there's only so much lemonade to go around. Prices have to go up. That's pretty good stuff. Two dollars, please. Two dollars for one glass of lemonade? You gotta be out of your mind. What, do you charge extra for the ice cubes? I can't even believe that. How much is she getting paid? Two dollars for one glass of lemonade? Every single one of you playing two dollars... Thanks, Danny. It's tough on thirsty customers when the price of lemonade goes up, but rough on all of us when prices on everything are rising. When that happens, it's up to the Fed to take action. Our nation's economy is filled by the spending of money on goods, such as clothing, cars, and yes, even lemons for lemonade. Normally, we spend money and the economy grows, but sometimes there is too much money flowing towards a limited number of goods. Then, just like at the lemonade stand, prices rise. That's inflation. The Fed has ways of fighting inflation. It reduces the amount of money available for people to spend and banks to loan. That helps to stop prices from rising. At other times, there is too little spending. When people spend less, businesses produce less and hire fewer workers. Prices stop rising and may even fall. This is called a recession. To avoid a recession, the Fed increases the amount of money available to banks and their customers to spend. The trick to managing our nation's money supply is to keep prices steady and the economy growing. That's the Fed's most important job of all. Money connection will be right back after this brain break. The giant signed slugger Stan Holmrun Becker to a new contract. Talk about big bucks. The deal includes an $8 million signing bonus. At a press conference, Stan talked about his plans for all that money. Stan, is the tree you're walking out of here with $8 million? Yep. I got the check right here. I don't get it, Stan. Where's the money? What are you, some kind of rookie? A check is as good as money. And it travels faster than a Randy Johnson fastball. Every day, people and businesses use checks to move billions of dollars from one bank account to another. I'm going to deposit this check in my account. My bank will send it to the Fed. The Fed handles one-third of all deposited checks. That's half a million checks every single day. The checks are sorted by high-speed machines. You see the numbers on the bottom of the check? It's like a secret code written in special magnetic ink. It tells the Fed which bank to pay and which one to charge. In this case, $8 million is subtracted from a giant's bank account and added to mine, making me a very happy ballplayer. So that's the whole ballgame? For a check it is. But the Fed has even faster ways of moving money. For really big amounts, the Federal Reserve Banks and nearly 8,000 other institutions use Fedwire, an online electronic system. Fedwire transfers huge sums of money across the country in an instant. For smaller amounts, like paychecks and social security checks, there's the Automated Clearance House, or ACH for short. This computer system uses electronic messages to make payments into and out of bank accounts. Thanks for the economics lesson, Stan. Hey, one last question. Is it true there's a clause in your contract saying you get paid for interviews like this one? Talk to my agent. Last week we reported the rumor that someone or something was destroying $400 million of cash every day. Now, with an important break in the case, here's investigative reporter Nan Becker. Imagine $400 million. That's enough money to buy 200,000 home computers, or 26 million CDs, or 101 million cheeseburgers. All that money destroyed every single day. And this is one of the places where that happens. The Federal Reserve Bank of San Francisco. To understand what's going on, let's find out how money gets here in the first place. All Federal Reserve Banks and branches are warehouses that store coins and currency. Some of the money is new coins ordered from the U.S. Mint and bills ordered from the Bureau of Engraving and Printing. But a lot of it comes from local banks. When banks have too much coin and currency on hand, they send the extra to the Fed for safekeeping. When banks run low on coin and currency, they order more from the Fed. When money arrives at the Fed from local banks, it's inspected, sorted, and counted. Most of the money is bundled and repackaged and then locked in the vault until banks need it. But some currency doesn't pass inspection. Suspicious-looking bills are pulled out and stamped counterfeit. This funny money is sent to the Secret Service, which stays on the trail of counterfeiters. So what about money that's worn out? This is a crisp, brand-new $1 bill. But after 18 months of being passed hand-to-hand, it will look like this. Worn-out bills must be destroyed and replaced by new ones. Most worn-out bills are destroyed automatically during sorting. Any bills the machine doesn't catch are sent here. The old bills go up, up, up, and away. And when it's all over, it looks like this. This was once enough money to buy top-of-the-line running shoes for your whole class. Now, if you've got the parade, I've got the confetti. Of course, not all of the work at the Fed happens within these walls. Bank supervision, one of the Fed's most important jobs, takes place all over town. Every day, Fed inspectors called bank examiners visit banks like the one your family uses. Examiners study the bank's records to make sure they are financially healthy and that they lend money to people who can repay their loans. If the examiners find any problems, they make sure the bank fixes them. This helps banks to avoid financial problems and keeps them safe. So there you have it. The inside scoop of what's happening at the Fed here and all over town. From the Federal Reserve Bank of San Francisco, this is Nan Becker reporting. Hey, how do I get out of here? Get out of here! Can you open the door and let me out? That's a wrap, right? Since 1913, the Federal Reserve has provided stability and security to our banking system. It's our nation's central bank, designed to meet the demands of our growing country. With 12 district banks and 25 branches, plus a headquarters in Washington, D.C., it manages the nation's money to keep prices stable and the economy growing. It's a bank or bank that holds currency and coins for safekeeping. While handling one-third of all checks and trillions of dollars electronically every day. In our modern and fast-changing world, the Federal Reserve is more important than ever. It remains one of the keys to a growing economy and a bright financial future. For Money Connection, this is Annie Becker saying goodbye and good banking. Well, Bill Dixon, the news anchor everyone can bank on. Hello, Annie. Where were you? Well, I was out getting a glass of lemonade, which, in my opinion, was not that great. The line was long, the prices were outrageous. Something has to be done about this. Two bucks for a glass of lemon concentrate.