WASHINGTON - Federal Reserve Board Governor Edward W. Kelley Jr. remembers building a crude data processing system for his business in the 1960s.
Using bulky first-generation computers, the Houston-based entrepreneur created a system to help him manage his metal and plastics manufacturing operations.
Today, Mr. Kelley is overseeing construction of another computer system. Only this time, he won't be keeping track of inventories. Rather, the Fed's $225 million project will serve all of the central bank's data processing needs.
The massive project, which is half-way complete, will replace each reserve bank's data processing units with three regional sites, all capable of backing the others up in case of a technical failure.
Best of all, the five-year project will pay for itself by 1997, Mr. Kelley said. "Then we will be able to save the taxpayers money," he said, adding that the new system will require a third fewer employees.
The Fed will rely on the system - based in Richmond, Va.; East Rutherford, N.J.; and Dallas - for regulatory work, payment system operations, and monetary policy projects.
On the regulatory side, the system will give examiners near instant access to data, historical and current, on any bank subsidiary, regardless of whether its located outside the examiner's reserve bank district.
"We now have the capability of pulling into one data base all the figures for any one organization," he said.
The benefits carry through to the payment system as well, Mr. Kelley said. Rather than relying on a patchwork of reserve bank systems for Fed Wire transactions, the Fed will use the central system.
Local reserve banks, however, will continue to process checks individually. Mr. Kelley said the Fed learned that the individual banks can perform this task more efficiently.
The Fed even is using the system for monetary policy issues, such as monitoring reserve requirements, he said.
"The discount window has much more complete and real-time information on banks that want to borrow," Mr. Kelley said.
The Fed already has transferred more than 1,000 operations to the data center, making nearly all the switches after the close of business on Fridays.
"This has been done without a single operational hitch," Mr. Kelley said.
So, how did a Federal Reserve governor get stuck as the board of governor's point man on computers?
He volunteered, saying he finds it a "fascinating" management challenge, similar to what he encountered in private business.
"I think many of my colleagues who are economists are glad to have someone who enjoys it to do it," Mr. Kelley said.
Carl E. Powell, who runs the Fed data centers, credits Mr. Kelley with helping to get the system built.
"He is the chairman of the Bank Activities Committee, so all these activities flow up to him," Mr. Powell said. "His support is essential."
Jack Guynn, a vice president at the Atlanta Fed who has overseen development of the data centers since their inception, said the Fed built the system to keep pace with the industry.
"Years ago we were dealing with very regional banking operations," Mr. Guynn said. "Very often the needs were different. But as the industry has involved into more of a national operation, it is important that the Fed not look like 12 organizations, but like one organization."
