These checks must be returned to the bank of first deposit-with all the original accounting entries reversed. Federal Reserve check services compete for business with large private banks, clearinghouses and other check processors. To make sure the playing field is level between the Federal Reserve and private processors, the Fed is required by law to collect fees to cover all check processing costs, including adjustments for taxes and capital costs. Also, since the Fed's system of reserve accounts is unique, each Federal Reserve Bank or Branch opens its books daily to clearinghouses and other check processing associations for settlement among their members. These rules give Federal Reserve check processing services the feel of a private- sector operation.
Customers withdraw money from their banks, spending it at stores and other area businesses.
Those businesses deposit the cash back into their bank accounts on Monday morning-leaving some banks with too much cash on hand and others not enough. Throughout the week, banks come to the Houston Branch to withdraw cash for the coming week or deposit excess currency. The Houston Branch accepts each deposit of cash from a local bank, verifies the deposit is generally correct by counting the number of bundles of cash received, marks each bundle of 100 notes for ownership, separates the deposit by denomination and moves the deposit into its vault. Each bank is then given credit for its initial deposit, subject to later verification and adjustment. These machines also check the denomination of each note, test for counterfeits and verify each note is fit to be recirculated.