No member of Congress may be a director of a federal reserve bank. No class B director may be an officer, director, or employee of any other bank. No class C director may be an officer, director, employee, or stockholder of any other bank. These provisions against interlocking directorates were designed to insure impartiality and to prevent the control of the policy of a reserve bank from falling into the hands of persons with adverse interests.
Election of Directors Directors of class A and class B are chosen as follows: The banks of the district are classified by the chairman of the board of directors into three groups, each containing about one-third of the banks and consisting of banks of similar capitalization. Each group elects one A and one B director every third year. If vacancies occur they are filled in the same manner as the original election, and such appointees hold office for the unexpired term. The board of directors of each member bank elects a district reserve elector and certifies his name to the chairman of the reserve bank board, who prepares lists of the electors thus named in each group and sends one list to each elector in the group. Each member bank may nominate to the chairman one candidate for class A and another for class B, and a copy of the list of these nominees is sent to each elector. The electors vote by preferen tial ballot.
The method of election has been criticized, first, because of its awkwardness and the fact that few member banks are sufficiently interested to participate in the election, and, secondly, because the "one bank, one vote" equality provided by the act gives the preponderating power to the smaller banks. But this last objec tion is probably more than counterbalanced by avoidance of the opposite criticism that would arise if the larger banks were given plural voting, namely, that the system was run by and in the interests of the larger institutions.
Directors of class C at the time of their appointment shall have been for at least two years residents in the district for which they are appointed. One of them is designated by the Federal Reserve Board as "Chairman of the Board of Directors of the Federal Reserve Bank" and as "Federal Reserve Agent." Another class C director is designated as "Deputy Chairman," to exercise the powers of the chairman when necessary. In case of absence of
both the chairman and deputy chairman, the third class C direc tor presides at meetings of the board.
The Federal Reserve Agent The federal reserve agent must be a man of tested banking experience. As indicated by his other title mentioned above, he acts as chairman of the board of directors of the reserve bank and maintains the office of the board on the premises of the reserve bank. He makes regular reports to the Federal Reserve Board, and acts as its official representative for the performance of its functions. His compensation is fixed by the Federal Reserve Board but paid by the reserve bank. Subject to the approval of the Federal Reserve Board he may appoint assistants, who must likewise be persons of tested banking experience, and who assist him and act in his name and stead during his absence or disability. The assistants are put under such bonds as the Federal Reserve Board may deem necessary for the protection of the United States, and receive a compensation fixed by the Federal Reserve Board but paid by the reserve bank. The minimum bonds fixed by the Federal Reserve Board are $ ioo,000 for the federal reserve agents and $5o,0oo for the assistant federal reserve agents, but the board of directors of the reserve bank may require higher bonds if they deem it desirable.
One of the most important duties of a federal reserve agent is to issue federal reserve notes to the reserve banks, holding gold and commercial paper against the issue of such notes and handling a portion of the gold settlement fund. These moneys, of course, reach into millions. The duties of the official may be described by enu merating the four departments among which the federal reserve agent of the New York bank has divided his functions, as follows: 1. The member bank relations department, which seeks to promote better relations between the reserve bank and the member bank, and handles the state bank member ship affairs.
2. The note issues department, which issues the federal reserve notes to the reserve bank, and cares for the collateral to secure these notes, and has the custody of the commercial paper of other federal reserve banks and federal reserve agents.