Reviewing 2020: Working through the COVID-19 pandemic to serve the American public
The Federal Reserve Bank of Boston releases its 2020 audited consolidated financial statements
The onset of the COVID-19 pandemic in 2020 dramatically affected so many of our lives and livelihoods. The pandemic’s enormous impact on the regional and national economy – coupled with societal tensions and troubling events that forced the nation to confront deeply-rooted issues of racial inequality – made for a challenging year. Still, despite the many personal and professional challenges of 2020, the Boston Fed continued to fulfill our mission of public service that makes a difference.
Essential staff increased safety measures to keep U.S. currency circulating in the New England region. Economists and researchers developed innovative ways to acquire and analyze real-time data on economic activity and social distancing, to guide and inform monetary policy decisions. Our experts explored, and helped spur, the evolution of the U.S. payments system to increase efficiency, security, and accessibility. The Reserve Bank remained focused on its signature contributions to the central bank’s payments work, and administered, for the Board of Governors and the U.S. Treasury, the Main Street Lending Program in an ambitious effort to support small and medium-sized businesses contending with financial hardship due to the pandemic.
This year’s consolidated financial statements show that the Boston Fed remitted $1.78 billion to the U.S. Treasury, part of the $86.9 billion the Federal Reserve System remitted in total to the U.S. Treasury during 2020. Every year, the Federal Reserve remits excess earnings to the U.S. Treasury after expenses, dividends, and reservation of an amount to maintain surplus.
Along with the release of the Boston Fed’s 2020 audited consolidated financial statements, we would like to highlight some of the impactful work done by the Bank during this uniquely turbulent year. The road to economic recovery will be long, but these activities reflect our ongoing commitment to promoting a strong, resilient, and inclusive economy and financial system.
The Main Street Lending Program
Small and medium-sized businesses and nonprofit organizations were hit hard as a result of the pandemic. In July 2020 the Main Street Lending Program was established by the Federal Reserve as a bridge to post-pandemic recovery for businesses that were in good financial standing prior to COVID-19. Administered by the Boston Fed on behalf of the Federal Reserve System, the program extended more than $16.5 billion in lending to over 1,800 companies. Its geographic reach was broad, covering 49 states and two U.S. territories. Perhaps unsurprisingly, the industries helped most by the program were those in which social distancing is most difficult, including food service, arts, and recreation.
The program evolved throughout 2020 to meet the public’s needs. Borrower eligibility and loan terms were adjusted, and the minimum loan amount was decreased to $100,000 to help as many businesses and nonprofit organizations as possible. The program saw a dramatic uptick in its final month of operation. It had settled about 650 loans from July to November. Then, it processed an additional 1,150 loans in December alone before closing to new loan participations in January 2021.
Timely and impactful research
Bank economists realized early that economic outcomes during the pandemic were intertwined with the spread of the virus and public health concerns. They produced meaningful, timely analysis to help inform monetary policy decisions. They published research on the economic impact of mask mandates, on the impact of COVID lockdowns on consumption spending by occupation, and on the usefulness of surveys to track labor market developments in real time.
Research teams also introduced creative ways to capture relevant data more quickly. The Yale Labor Survey was developed during the pandemic by Boston Fed economists, in partnership with Yale University and Stanford University, to provide close to real-time information about the U.S. labor market.
Progress toward the future of payments
As Bank employees tackled challenges brought about by the pandemic, we continued to advance projects that will revolutionize the U.S. payments system, including the FedNowSM Service and Project Hamilton.
FedNow is an instant payment service the Federal Reserve is developing to enable financial institutions of all sizes, and in all communities, to provide safe and efficient instant payment services 24 hours a day, 365 days a year. Financial institutions and their service providers will be able to use the service, set to launch in 2023, as a springboard for innovative instant payment services to customers.
Project Hamilton is a collaboration between the Boston Fed and the Massachusetts Institute of Technology’s Digital Currency Initiative to explore the technological implications of general purpose central bank digital currency. The Bank is bringing together its talent in a range of disciplines – technology, law, research, and software engineering – to serve the public interest in this forward-looking field.
Promoting diversity and equity in the economy and the workplace
A number of troubling events across the country in 2020 highlighted the racial divide that still exists in the U.S. For years, the Boston Fed has worked to create a more inclusive and equitable economy and workplace, and those efforts became even more critical amid nationwide unrest and calls for racial justice.
At the Boston Fed, we know that building a more inclusive environment and continuously advancing diversity and equity in our workforce improves the Bank’s ability to achieve its mission. We work to infuse diversity and inclusion into the Bank's culture, idea-vetting processes, recruitment and retention practices, management expectations, leadership development, and business activities. In 2020, our leadership conducted wide-ranging listening sessions, so we could hear and respond to employee needs during a time of social unrest. Many employee-driven groups reached out to those working remotely or in the office to ensure they felt connected and supported and had what they needed to succeed.
Researchers in our community economic development area conducted analysis that highlighted the vulnerability of the essential workforce, the crippling childcare issues confronting parents during the pandemic, expanding health insurance gaps in the region, and rising unemployment claims among different industries and demographics. This work aimed to inform policymakers, identify issues, and help those most affected by COVID-19 and its economic impacts.
Connecting with the community
Community development teams extended their reach to Maine and Vermont through the Boston Fed’s Working Communities Challenge, which is designed to serve northern New England’s smaller cities and towns. Teams from across the states were encouraged to submit proposals on ways to tackle economic challenges facing their communities.
In fall 2020, four Vermont communities were selected to receive $300,000 grants to fund their plans. Earlier this month, eight teams from Maine were chosen to receive $25,000 grants to develop plans to bring economic development and social change to their communities. Later this year, five of those eight teams will be selected to receive $375,000 grants to implement their plans.
As we reflect on the tremendous challenges of 2020 and take stock of the initiatives we pursued, we are grateful for the opportunities we had to serve the public interest and contribute to economic recovery that benefits all. We look forward with optimism to a brighter 2021 and the opportunities to make a difference, in service to the public throughout New England and the nation.
The Federal Reserve Board engaged KPMG to audit the 2020 combined and individual financial statements of the Reserve Banks and the financial statements of the five limited liability companies (LLCs) that are associated with the Board of Governors’ actions to address the coronavirus pandemic, of which four LLCs are consolidated in the statements of the Federal Reserve Bank of New York and one LLC is consolidated in the statements of the Federal Reserve Bank of Boston.1
In 2020, KPMG also conducted audits of internal controls over financial reporting for each of the Reserve Banks. Fees for KPMG services totaled $10.3 million, of which approximately $3.0 million were for the audits of the LLCs.2 To ensure auditor independence, the Board of Governors requires that KPMG be independent in all matters relating to the audits. Specifically, KPMG may not perform services for the Reserve Banks or affiliated entities that would place it in a position of auditing its own work, making management decisions on behalf of the Reserve Banks, or in any other way impairing its audit independence. In 2020, the Bank did not engage KPMG for any non-audit services.