More than a week after Hurricane Maria ripped through Puerto Rico, downing power lines and washing away homes, public attention has been directed toward the federal response, as the Defense Department and other agencies address an escalating humanitarian crisis.

Less visible, but also vital, in the recovery effort is the Federal Reserve.

Since the storm hit, the Fed has flown in shipments of cash to the island on a daily basis — sometimes multiple times per day — to meet the extraordinarily high demand for greenbacks. The cash has been delivered to two bank vaults, or "strategic inventory locations," on the island to replenish the stockpile of currency that local banks draw on in an emergency.

Cash orders from local banks have soared as high as 700% above their normal daily levels in the aftermath of the hurricane, according to a Fed spokesman.

“We have sufficient inventory to meet demand,” said Mark Gould, chief operating officer at the Federal Reserve Bank of San Francisco and head of the Fed’s cash product office, which sets policy on currency services for the 12 regional banks.

Gould said the Fed began delivering cash to the island just before the hurricane made landfall in late September.

Overview of Federal Reserve to deliver emergency cash to Puerto Rico.

Still, with most of the island lacking power, local banks are struggling to get their branches and ATMs up and running — and to get cash into the hands of customers. Long lines and spotty service at banks have contributed to what media reports have depicted as a growing sense of desperation across Puerto Rico.

The dire situation in many ways underscores the limitations of the Fed’s role in disaster recovery.

After the central bank fills its vaults, it is up to the local banks to manage the distribution.

“One of the things we can manage is the supply of currency to the island,” Gould said. “There are a lot of things that we can’t manage, which is the supply of power or gasoline or things like that.”

Popular on Sunday said on its Facebook page that 60 of its roughly 170 branches would be open on Monday from 10 a.m. until 2 p.m., and that 150 ATMs were available throughout the island.

OFG Bancorp, meanwhile, said on its Facebook account that 13 of its branches — about a quarter of its network — would also be open from 10 a.m. until 2 p.m.

The Fed’s response to Hurricane Maria is just one small part of a large and complicated recovery effort on the island.

In recent days, the Federal Emergency Management Agency, the U.S. Navy and other government offices have delivered medical supplies, food and diesel fuel. But distributing those supplies across the island has proved difficult, as the storm demolished major roadways and infrastructure.

The hurricane recovery effort in Puerto Rico “is the most logistically challenging event that the United States has ever seen,” FEMA Administrator Brock Long told Fox News Sunday.

President Trump is scheduled to visit the island Tuesday, amid widespread criticism that he was slow in his response. The president over the weekend lashed out on Twitter at the mayor of San Juan after she criticized the administration’s disaster recovery efforts.

One factor complicating the recovery, from the perspective of the banking sector, is that Puerto Rico relies more heavily on cash than other parts of the United States.

As businesses have struggled to cope with the lack of electricity, day-to-day operations such as credit card payments and direct deposits have become more difficult. To stay open, many have begun operating almost entirely on cash.

“If an area isn’t a largely cash-based economy, they become cash-based after a storm hits,” Gould said. “In Puerto Rico for example, we’re seeing businesses pay their employees in cash, most commerce right now is being conducted using cash, and as a result we’ve seen a spike in demand.”

A source familiar with the local banking industry reiterated the Fed’s message, saying that the supply of cash has been adequate, despite the surge in demand. Transporting and distributing it to those who need it, however, has been difficult in light of the infrastructure problems on the island.

People stand in line to withdraw cash from a Banco Popular ATM after Hurricane Maria in San Juan, Puerto Rico.
Cash on hand
“One of the things I’m sure we’ll have a conversation about is, was that the right amount” of emergency cash held on the island before the storm hit, says Mark Gould, head of the Federal Reserve System’s cash product office, which sets policy on currency services for the 12 regional banks. Bloomberg News

The Fed’s response in Puerto Rico provides a glimpse of the critical role that the central bank plays in disaster planning across the country.

Similar to its operations in Puerto Rico, the Fed maintains emergency supplies of currency in bank vaults across the U.S. As a policy, the central bank does not comment on the locations or supply levels.

The idea is to have a secure location where banks can access cash in the event of a natural disaster such as an earthquake where transportation is disrupted, or even during big sporting events such the Super Bowl where large volumes of bills change hands.

“It’s the currency that’s sitting there in case of an emergency-break-the-glass situation,” Gould said.

Gould said that the Fed’s cash policy office has responded to disasters in various ways in recent years. After Hurricane Katrina, for instance, the office oversaw the replacement of currency that was contaminated from the widespread flooding.

In the case of Puerto Rico, the New York Fed — whose district includes the U.S. territory — is responsible for overseeing shipping of the currency and related logistics. The Fed has used commercial and chartered flight services to make its deliveries.

In the months ahead, the Fed’s cash product office will study its response in the aftermath of the hurricane, including how much contingency cash it keeps in the strategic inventory vaults in Puerto Rico.

“One of the things I’m sure we’ll have a conversation about is, was that the right amount?” Gould said.

“Should we consider a different amount?”

In the meantime, the Fed is focused making regular shipments of currency to the island for as long as needed, he said.

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Kristin Broughton

Kristin Broughton

Kristin Broughton is a reporter for American Banker, where she writes about the business of national and regional banking.