Liberty Street Economics

« | Main | »

July 15, 2016

Historical Echoes: The Fed’s Cuban Connection

LSE_Historical Echoes: The Fed’s Cuban Connection

Did you know that the Federal Reserve once had not one, but two offices in Cuba?

In the early years of the twentieth century, U.S. currency was in wide circulation in the Caribbean nation, a legacy of the Spanish-American War. But that had become a problem.

In late 1920, according to details provided in a report from the Federal Reserve Board, the Cuban Government sought help from the State Department to establish a local Federal Reserve agency, “for the redemption of all old and deteriorated currency circulating on the Island, because it was regarded as dangerous to public health.”

The Atlanta Fed investigated the feasibility of establishing an agency and in 1921 passed a resolution asking the Board to allow it to set up the operation. Then, in 1923, the Boston Fed issued its own resolution asking to establish an agency in Havana for the purpose of conducting operations permitted under Section 14(e) of the Federal Reserve Act. Atlanta protested, saying it was geographically closer to Cuba.

The President of the United States, Warren G. Harding, believed the presence of a Federal Reserve agency would help expand American commerce, while the U.S. ambassador to Cuba hoped it would prevent the possible establishment of a Cuban central bank and check the growth of Canada’s banking interests in Cuba. After a hearing in May 1923, the Board announced that both Boston and Atlanta could open agencies in Havana. The Board gave Boston “priority in the purchase and sale of all cable transfers and bills arising out of our trade with Cuba” and reserved to the Atlanta Bank, “the right to supply the currency involved in such transactions or otherwise entering into circulation on the Island.”

Both agencies opened for business on September 1, 1923. This dual arrangement did not last long due to friction between both parties. Boston closed its Havana operation in 1927 and the Atlanta Fed assumed its functions. Then in 1935, in an attempt to share operational costs, the Board decided that the Havana agency would be run by Atlanta on behalf of all twelve Reserve Banks. However, a Cuban currency was launched that same year, and after several years of operating deficits, the Federal Reserve officially closed its doors in Cuba in 1938.


Although the presence of the Federal Reserve in Cuba was relatively brief, it included a notable rescue of the banking industry.

Spreading rumors of a possible bank failure resulted in a run on banks in Havana over the course of an April weekend in 1926. In order to prevent the collapse of the Cuban banking system, the Atlanta Fed sent a shipment of currency to the island. The $26.5 million was too heavy to be delivered by plane. Instead, its journey began on a train that left Atlanta on Saturday, April 10, and reached Key West, Florida, the following afternoon. From there, the journey continued on a gunboat to Havana, which arrived on Monday morning, just in time to replenish local banks and assure customers that all was well.

Initially deemed a success, the mission was haunted by accusations of having been a “joy ride” for members of the Atlanta team. Deputy Governor Joseph L. Campbell of the Atlanta Fed faced allegations that he failed to keep proper records of the transaction and used “intoxicating liquor” on the trip to Cuba. This situation fueled tensions between Atlanta Fed employees and the Board of Governors, and ultimately led to Campbell’s resignation.


The views expressed in this post are those of the author and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. Any errors or omissions are the responsibility of the author.

Mary Tao is a research librarian in the Federal Reserve Bank of New York’s Research and Statistics Group.

How to cite this blog post:
Mary Tao, “Historical Echoes: The Fed’s Cuban Connection” Federal Reserve Bank of New York Liberty Street Economics (blog), July 15, 2016,


Feed You can follow this conversation by subscribing to the comment feed for this post.

The comments to this entry are closed.

About the Blog

Liberty Street Economics features insight and analysis from New York Fed economists working at the intersection of research and policy. Launched in 2011, the blog takes its name from the Bank’s headquarters at 33 Liberty Street in Manhattan’s Financial District.

The editors are Michael Fleming, Andrew Haughwout, Thomas Klitgaard, and Asani Sarkar, all economists in the Bank’s Research Group.

Liberty Street Economics does not publish new posts during the blackout periods surrounding Federal Open Market Committee meetings.

The views expressed are those of the authors, and do not necessarily reflect the position of the New York Fed or the Federal Reserve System.

Economic Research Tracker

Image of NYFED Economic Research Tracker Icon Liberty Street Economics is available on the iPhone® and iPad® and can be customized by economic research topic or economist.

Economic Inequality

image of inequality icons for the Economic Inequality: A Research Series

This ongoing Liberty Street Economics series analyzes disparities in economic and policy outcomes by race, gender, age, region, income, and other factors.

Most Read this Year

Comment Guidelines


We encourage your comments and queries on our posts and will publish them (below the post) subject to the following guidelines:

Please be brief: Comments are limited to 1,500 characters.

Please be aware: Comments submitted shortly before or during the FOMC blackout may not be published until after the blackout.

Please be relevant: Comments are moderated and will not appear until they have been reviewed to ensure that they are substantive and clearly related to the topic of the post.

Please be respectful: We reserve the right not to post any comment, and will not post comments that are abusive, harassing, obscene, or commercial in nature. No notice will be given regarding whether a submission will or will
not be posted.‎

Comments with links: Please do not include any links in your comment, even if you feel the links will contribute to the discussion. Comments with links will not be posted.

Send Us Feedback

Disclosure Policy

The LSE editors ask authors submitting a post to the blog to confirm that they have no conflicts of interest as defined by the American Economic Association in its Disclosure Policy. If an author has sources of financial support or other interests that could be perceived as influencing the research presented in the post, we disclose that fact in a statement prepared by the author and appended to the author information at the end of the post. If the author has no such interests to disclose, no statement is provided. Note, however, that we do indicate in all cases if a data vendor or other party has a right to review a post.