The act provides that "the districts thus created (that is, by the Organization Committee) may be readjusted and new dis tricts may from time to time be created by the Federal Reserve Board, not to exceed twelve in all." As the Organization Com mittee fixed twelve districts at the beginning, the board has no power to create new districts, but only to readjust boundaries of those already existing. In making such readjustments the board has transferred certain banks in Louisiana from the Dallas dis trict to the Atlanta district, and certain banks in the new county Humphreys from the Atlanta to the St. Louis district, and in Fairfield County, Connecticut, from the Boston to the New York district. Appeals for transfer by other areas have been denied by the board, and it is probable that the districts are now quite permanently fixed. Appeals by Pittsburgh to be made a federal reserve city instead of Cleveland, and by Baltimore to supersede Philadelphia, and by bankers and others to abolish certain dis tricts, have been denied by the board on the ground that it has no power to change the federal reserve cities or to abolish any of the districts.
The districts are numbered and each reserve bank is named after the city in which it is situated, as the Federal Reserve Bank of Boston, and the like.
The boundaries of the districts and the federal reserve cities are given on Figure 4.
Domestic Branches of Federal Reserve Banks The Federal Reserve Act, as amended June 21, 1917, provides that the board may permit or compel a federal reserve bank to establish branches within its district or within the district of any reserve bank which may have been suspended. Such branches, subject to such rules and regulations as the Federal Reserve Board may prescribe, are operated under the supervision of a board of directors, consisting of not more than seven nor less than three members of whom a majority of one are appointed by the federal reserve bank of the district, and the remaining direc tors by the Federal Reserve Board.
The volume of business done by a branch may sometimes equal or even exceed that of the parent bank. The establishment of branches makes it possible for the board to appease local jealousy against a federal reserve city and to bring the facilities of the reserve bank nearer the member banks, such proximity being particularly desirable in the larger western districts. The board has also found it advisable to establish branches for the purpose of specially catering to the state banks and inducing them to join the federal collection system.
Under the authority of the board branches have been estab lished as follows: In addition to their branches the reserve banks establish temporary or permanent agencies in such cities in their districts as may require special services, such as collecting checks or mak ing loans on warehouse receipts. The St. Louis reserve bank, for instance, established such an agency in Memphis in 1915 as a convenience to the banks of that area in handling cotton redis count paper. Such agencies are less expensive to operate than branches with their completely equipped offices, vaults, and full staff of officers; moreover an agency is usually the forerunner of a branch to be opened when the volume of business warrants the expense.
Two types of organization exist among the branches. The older, like the New Orleans branch, has a definite area allotted to it; the capital subscriptions by the member banks of this area are regarded as the theoretical capital of the branch, upon which its earnings are estimated; and the members within that area are required to deal with the branch. The later type, like the Spo kane branch, has no definite area or capital assigned to it, but is regarded rather as an office of the reserve bank; members are not required to deal solely with this branch. A collection zone is allotted to each branch, and checks drawn upon banks in this zone may be sent to the branch by any member bank, thus saving time in transit and reducing the float. The resulting credit is reported by the branch to the parent bank. Member banks send their collections either to the parent or to the branch. They send their offerings for discount, however, to the parent bank, but upon application a member who is in the allotted collection zone may send discount offerings to the branch. Daily reports of each member's account are forwarded to the parent by the branch.' Foreign Branches of Federal Reserve Banks The Federal Reserve Act authorizes any reserve bank, with the consent of the Federal Reserve Board, to establish banking accounts, appoint correspondents, and set up agencies in such foreign countries as it may deem best for the purpose of purchas ing, selling, and collecting bills of exchange, and further authorizes the reserve bank to buy or sell, with or without indorsement, through such correspondents or agencies, bills of exchange arising out of actual commercial transactions, and to open and maintain banking accounts for such correspondents or agencies. These powers are ample for carrying on foreign business.