That Time The Atlanta Fed Opened An Office In Havana, Got Really Drunk, And Bailed Out Cuba
One time the Atlanta and Boston Federal Reserve Banks opened their own offices there.
And one time they had to bail out Cuba.
The St. Louis Fed - which serves as unofficial historian for the Federal Reserve System - recently alerted us to this quirky chapter in the Fed's history.
Though the U.S. had ceded sovereignty of the island to Cubans in 1902, the greenback was still the island's official currency.
Several major U.S. and Canadian banks had substantial presences there, and the Atlanta Fed was overseeing $40 million circulating in the Cuban economy.
Around 1920, Atlanta decided it wanted to open an official Havana office.
After some heated negotiations, it was agreed that the Boston and Atlanta Feds would both open branches, with Atlanta overseeing physical circulation and Boston in charge of cables (Boston had argued that it was home to more banks operating in Cuba than in Atlanta).
The two branches remained rivals throughout their stay there.
Fast forward to the first week of April, 1926.
Rumors about a Canadian bank began circulating, and eventually escalated into a bank run throughout the country.
By Friday, the Atlanta Fed's $10 million reserve fund had been drained.
"Without more currency by Monday, the banking system in Cuba faced collapse," the St. Louis Fed recounts.
So the Atlanta Fed's branch manager called in for an emergency shipment of $26.5 million in cash.
The photo you see above shows the Cuban navy unloading the shipment, which arrived in Havana nine hours later.
The run was successfully stanched when banks opened Monday.
But the drama ended up jumping back stateside, when Atlanta Fed officials learned Washington was investigating them for having taken a "joyride."
"...there were charges that 'on the way over from Key West to Havana the entire party from Atlanta became intoxicated' and that its men arrived 'in a disgraceful condition' that discredited the Bank," the St. Louis Fed writes.
An initial investigation led from Washington said the charges were true:
"...the demeanor of rescue had gone awry and that four members of the Atlanta party, including Deputy Governor [J.L.] Campbell, did become drunk on the boat. Campbell should 'be eliminated from the Federal Reserve System,' the report concluded. It also noted "a feeling of jealousy and mutual distrust between the two Federal Reserve Agencies in Havana."
But Atlanta Fed members denounced the findings and demanded a chance to conduct their own investigation, and accusing the Boston Fed's Havana manager of having maliciously initiated the charges.
During a subsequent hearing, Campbell, the Atlanta Fed deputy governor "conceded that he had taken two drinks before dinner, but a parade of witnesses testified that he never appeared to be drunk," the St. Louis Fed says.
But it was not enough to save Campbell's job, and the Atlanta Fed eventually relieved him under protest.
In fact, the entire Havana adventure continued downhill from that point.
The Boston branch ended up folding the first day of 1927.
And as financial activity became increasingly volatile as Cuba entered its revolutionary phase, the Atlanta Fed's office became increasingly unprofitable.
On Sept. 30, 1938, it closed its doors for good.