INTERESTS OF MANY L.A. FEDERAL RESERVE'S INFLUENCE RANGES FAR BEYOND LENDING RATES.

Byline: Chris Sieroty Staff Writer

Cindy Stewart says when people discover she works at the Federal Reserve Bank in downtown Los Angeles, the most often asked questions are: ``Do you know Alan Greenspan?'' or ``What are you going to do about interest rates?''

``Many people don't realize that there is more to the Fed than Alan Greenspan and interest rates,'' Stewart said.

Yes, the Fed's most high-profile job is setting interest rates between banks that end up dictating how much interest consumers pay on their home, car and credit card loans.

But it also makes sure paychecks are directly deposited in bank accounts. It serves as a middleman between retailers and their check-writing customers. It led the effort to make sure the computers of local banks and credit unions were ready for the millennium.

And it counts and shreds money. Lots of money.

``They help the overall economy with the products they offer,'' said Jack Kyser, chief economist with the nonprofit Los Angeles Economic Development Corp. ``They also maintain outreach to the local banking community, which is a way to take the temperature of the local economy.''

Officials have lamented the fact that downtown is no longer home to any Fortune 500 companies, but there is still a branch of the Federal Reserve, which shows the power of the region's economy, Kyser said.

Stewart is among several hundred employees who work at the Los Angeles branch of the Federal Reserve Bank of San Francisco at 950 S. Grand Ave.downtown.

The branch is part of the Federal Reserve System that acts as the nation's central bank, and the price of a car or other consumer goods can ride on what it does. So can the value of the stock in retirement plans or the interest rate consumers pay to borrow money.

But the Fed does not live on interest rates alone. In fact, most people don't realize the extent of the Fed's influence on their daily lives. From direct deposits to new cash, the local Fed office seems to have a hand in every financial transaction in Southern California.

Mark Mullinix, Los Angeles branch manager and a senior vice president with the Federal Reserve, believes the most visible function of his office is direct deposits; that is, when a payroll check is directly deposited into a bank account or a utility bill is automatically withdrawn from the account.

``It's probably coming through the Federal Reserve,'' Mullinix said.

Also, if a consumer writes a check at a grocery store in Sherman Oaks, for example, there's a one-in-three chance it's coming through the Federal Reserve to be cleared, he said.

The branch also contains the largest check processing center in the Federal Reserve, with employees handling some 2.3 million checks daily and nearly 3 million over a holiday weekend.

Fed employees also handle currency and coin transactions.

About 8 million currency notes are processed every day at the Los Angeles branch. And it shreds lots of money, too; approximately 2.5 million to 3 million currency notes each day, valued at $30 million to $40 million.

Stewart has worked at the Fed since 1971, and says when she started there was a room of women only whose job it was to detect defective currency.

``We used to count the money by hand,'' said Stewart. ``We would place the currency in a bill sorter and it would tell us if it was defective. If the currency was defective, it was destroyed.''

Today, that work is done electronically, she said.

Food stamps are processed there, too, and about $7 million worth are destroyed daily, said Tom Waldman, director of public relations.

Unlike a dollar bill, which has an average life span of just over a year, or coins, which can last for 30 years, food stamps are destroyed after one use in an effort to cut down on fraud, Waldman said.

Still, interest rates is the topic that gives the Fed most of its headlines. And the setting of those rates is a much more complex process than the monthly headlines suggest.

In Los Angeles, a seven-member board of directors meets once a month to discuss what is happening to the region's economy and to hear what the Fed is doing.

The seven directors file a report each month, along with holding a vote on whether to recommend that the Federal Open Market Committee to lower, raise or stand pat on the discount rate. Similar meetings are held in 37 cities across the county.

After the vote, Mullinix and another board member fly to San Francisco, headquarters of the Fed's 12th District. They meet with other board members to discuss the economy of the district, which stretches from California to Washington and east to Utah.

Robert T. Parry, president of the 12th District and voting member of the Federal Open Market Committee, then takes that information to Washington, D.C.

The FOMC, which meets next(U0)(U0) on May 16, is composed of the seven members of the Board of Governors and five of the 12 Reserve Bank presidents. It is led by Greenspan, who has become the most famous economist in the world thanks to the FOMC's smooth handling of the nation's growing economy during the 1990s.

``The strength of the Fed is that there is a strong network of regional input so that the governors don't just sit in Washington looking at data without the benefit of real input from the citizenry,'' Mullinix said.

When the Los Angeles branch opened 80 years ago, the population of the county of Los Angeles was 936,400; that population has swelled to 9.7 million.

Today, the current office, which opened on March 11, 1987, houses a staff of between 600 and 700 people who oversee the monetary affairs of 56 bank branches and main offices from Burbank to Thousand Oaks.

The Greater San Fernando Valley represents 2 percent of the almost 1,000 bank branches and main offices in the region that do business with the Federal Reserve, Mullinix said.

With the increase in population over the years, the Los Angeles branch is now the second-largest branch in the Federal Reserve System, and serves financial institutions in Southern California, Southern Nevada and Arizona, he said.

The population has risen so dramatically over the years, that the Federal Reserve will open a new vault next September in Phoenix.

Mullinix said the new vault was being built to eliminate transportation costs and to increase capacity for the Los Angeles branch.

``The new vault also reflects the power of the region's economy,'' he said.

The branch also has a regulatory role, auditing all banks and credit unions to make sure they are financially sound and following regulations.

``The legislation for community reinvestment says a bank should participate fully in the community they serve, meaning that there shouldn't be any bias in their lending practices,'' Mullinix said. ``So we enforce those regulations on every bank in the region.''

A recent example of oversight was Y2K.

``There were concerns about if there was going to be enough money if the system fails,'' he said. ``We were probably more prominent than we have ever been in terms of the payment system, in that we were coming out publicly and saying these are the steps we have taken to ensure the money supply.''

HEAD OF THE FED

The local board of directors and its seven members meet once a month to give their input on what they see in the zone and to hear what the Federal Reserve is doing. Here is a list of board members:

--Lonnie Kane, president and chief executive officer of Los Angeles-based Karen Kane Inc.

--Lori Gay, president of Los Angeles Neighborhood Housing Services Inc.

--Jack Gelson, executive vice president for project planning for Phoenix-based DelWebb Corp.

--Russell Goldsmith, chairman and chief executive officer of Beverly Hills-based City National Bank.

--Linda Greigo, managing partner of Los Angeles-based Engine Co. 28.

--William Jones, president and chief executive officer of San Diego-based City Link Investment Inc.

--Liam McGee, president of Bank of America in Southern California.

SOURCE: Los Angeles branch of the Federal Reserve Bank of San Francisco.

CAPTION(S):

5 photos, box

Photo: (1 -- color) The stately downtown exterior of the Los Angeles branch of the Federal Reserve Bank reflects its influence over the region's economy.

Andy Holzman/Staff Photographer

(2 -- color) Los Angeles branch of the Federal Reserve bank, circa 1930.

(3 -- color) Your car

(4 -- color) Your money

(5 -- color) Your home

Box: HEAD OF THE FED (See text)