2007 Annual Report

LETTER FROM THE PRESIDENT

The Federal Reserve Bank of Chicago has a tradition of strong performance that continued in 2007, a year of leadership transition. I had the honor of succeeding retiring President and CEO Michael Moskow in September. Though I have been president for just over six months, I have been deeply involved in the monetary policy-making process for more than a decade. In fact, most of my research career has involved studying monetary policy decision-making and its effects on the economy. Since 1995, it has been my privilege to attend Federal Open Market Committee (FOMC) meetings — first as a senior staffer and since 2003 as the Bank's Research Director. I have been involved in the policy-making process during a variety of interesting economic and financial periods — experience that suits me well as we deal with current challenges.

The Federal Reserve is responsible for promoting sustainable economic growth, stable prices, maximum employment, and an efficient payment and financial system. The Chicago Fed represents the Seventh Federal Reserve District, a unique population center with significant agri-business, manufacturing, financial service and technology sectors. We work in the public interest, and our strategies and actions are aligned with the needs of our regional and national economy. As the challenges facing the economy become increasingly complex, it is essential that our policies and practices evolve to meet them. The leaders and staff of the Federal Reserve Bank of Chicago are the key element in dealing effectively with these challenges, and I am proud to lead such a talented and innovative group of people.

I am also pleased to be working with the many dedicated individuals who served in 2007 on our boards of directors in both Chicago and at our Detroit Branch. I greatly appreciate the counsel of these talented people and how generously they give of their time. In particular is the contribution of Miles White, the Chief Executive Officer at Abbott, who finished his service on the Chicago board after six years, including the last two as chairman.

As for the publication you are holding, this annual report recaps some important economic developments last year. It also features a discussion of financial markets in 2007 and looks at the Federal Reserve's role in responding to developments in these markets. In addition, the report includes a discussion with the leader of our team of researchers dedicated to the study of financial markets. It also looks at the resiliency of our many electronic access products, which contribute to the effective functioning of the financial system. I hope you find the report informative.

Charles L. Evans
President and Chief Executive Officer