Banks inundated by Iowa's floods have begun receiving special bags to deposit damaged and contaminated bank notes removed from ATMs and bank vaults, Annette Owens, assistant vice president of Cash Services at the Kansas City Federal Reserve Bank, tells ATM&Debit News, a CardLine sister publication. The liquid- and vapor-resistant bags come in two sizes. The smaller bags hold eight bound bundles of bank notes, and the larger ones hold 16 bound bundles of bank notes, according to Philip Johnson, the Fed's national director of cash operations and business continuity. Each bundle holds 1,000 bank notes. Iowa banks that request the bags are required to deposit damaged and contaminated bank notes into the bags. The Fed does not accept coins at all. Damaged notes are cleaned and put back into the system, but the Fed destroys contaminated notes tainted by chemicals, Owens says. "I don't know how many bags have been requested. We receive requests from banks, so I can't tell you how many are for their ATMs," Johnson says. The Fed developed it own bags for damaged and contaminated bank notes following hurricanes Katrina and Rita, whose waters flooded parts of New Orleans and suburbs in 2005, Johnson says. The Iowa flooding affected Cedar Rapids, Iowa City and other towns, but Johnson predicts the Fed will replace fewer bank notes there than in New Orleans. "New Orleans banks deposited damaged and contaminated bank notes with us for a year following Katrina and Rita," says Robert Musso, branch manager of the Federal Reserve Bank of New Orleans. "We replaced $75 million to $100 million in contaminated bank notes, and contaminated currency is still trickling in," Musso says. Banks are still cleaning up from Katrina and Rita, and during their cleanup, banks are finding lost ATMs under mountains of debris left by the floods, he adds.