Production and Distribution
A commercial bank that maintains a reserve account with the Federal Reserve can obtain notes from the Federal Reserve Bank in its district whenever it wishes. The bank must pay the face value of the notes by debiting (drawing down) its reserve account. Smaller banks without a reserve account at the Federal Reserve can maintain their reserve accounts at larger "correspondent banks" which themselves maintain reserve accounts with the Federal Reserve.
Federal Reserve Notes are printed by the Bureau of Engraving and Printing (BEP), a bureau of the Department of the Treasury. When Federal Reserve Banks require additional notes for circulation, they must post collateral in the form direct federal obligations, private bank obligations, or assets purchased through open market operations. If the notes are newly printed, they also pay the BEP for the cost of printing (about 4¢ per note). This differs from the issue of coins, which are purchased for their face value.
A Federal Reserve Bank can retire notes that return from circulation by exchanging them for collateral that the bank posted for an earlier issue. Retired notes in good condition are held in the bank's vault for future issues. Notes in poor condition are destroyed and replacements are ordered from the BEP. The Federal Reserve shreds 7,000 tons of worn out currency each year,
Federal Reserve notes, on average, remain in circulation for the following periods of time:
| Denomination | $1 | $5 | $10 | $20 | $50 | $100 |
| Years in circulation | 4.7 | 3.8 | 3.6 | 7.0 | 11.9 | 21.6 |
The Federal Reserve does not publish an average life span for the $2 bill. This is likely due to its treatment as a collector's item by the general public; it is, therefore, not subjected to normal circulation.
Read more about this topic: Federal Reserve Note
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