THE FEDERAL RESERVE BOARD Membership of the Board Our previous experience with a central national bank, in 1791 18u and again in 1816-1836, had shown that such an institution, despite its financial success, was likely to fall a victim of politics, as jealousy of the money power is too prevalent and too effective a vote-winner to be neglected by demagogic politicians. There fore in setting up the present federal reserve system Congress showed political astuteness by establishing it along regional lines, giving it a degree of local autonomy and placing it close to the people, and by naming the centralized institution "board" in stead of "bank." It is with this board that supreme control of the system is lodged.
The board is composed of seven members, consisting of the Secretary of the Treasury and the Comptroller of the Currency, who are members ex officio, and five additional members who are appointed by the President with the advice and consent of the Senate. These additional members must be chosen with due regard to a fair representation of the different commercial, indus trial, and geographical divisions of the country, not more than one coming from the same reserve district. The five mem bers must give their entire time to the services of the board and each receives an annual salary of $12,000; the Comptroller in addition to his regular salary receives $7,000 for his services on the board. In order to eliminate favoritism to banks, no members of the board are eligible, during the time they are in office and for two years thereafter, to hold any office, position, or employ ment in any member bank; nor while in office may they be an officer, director, or stockholder in any bank, banking institution, trust company or federal reserve bank. Of the five members, at least two must be persons experienced in banking or finance. The term of office is io years unless the member is sooner removed by the President; one member's term expires every two years, so that at all times the board will have an experienced majority and a continuity of policy. Of the five members, one is designated by
the President as governor and one as vice-governor of the board, the governor being the active executive officer of the board. Mem bership on the board gives the Secretary of the Treasury certain powers in addition to those previously possessed by him, and none of his powers as Secretary are qualified or limited because of his m embership on the board.
Criticism of Constitution of the Board The chief criticisms that have been brought against the con stitution of the board are: that appointment thereto is owing to government officials rather than to banks, and therefore the board is too open to political influence; that it has too few bankers and too many without banking knowledge and experience, an equip ment required for only two of the seven; that it is too powerful and arbitrary; and finally that the Comptroller should not be a member of the board. The political menace is undoubtedly the board's greatest danger, but so far in its history no charges of a political nature have been alleged against it, and the country has been fortunate in having some expert bankers and financiers as members. The contention that the Comptroller should not be a member of the board is debatable because it is he who links the supervision of the national banks as such with the general super vision of the whole system, including federal reserve, national, and member state banks and trust companies. It is also probably well to have the Secretary of the Treasury a member because of the paramount importance of government finance in its relation to banks and banking; indeed, to separate the Treasury and the board would lead to contrariety of purposes and consequent difficulties. Some prominent bankers have complained of the dominance of the Treasury in the financial policy and conduct of the board; but this dominance is largely accidental and temporary, arising out of the exigencies of war finance.