The central feature of the act was found in the plan it presented for changing the re serve organization of the country. The old reserve requirements were to be abolished, reserves being transferred, during a period of three years, to the new institutions. Event ually they were to be held only in the member own vaults or in the reserve banks. By the Act of 21 June 1917 all reserves were transferred to the reserve banks and cash on hand with members was left to the latter's discretion. It was provided that reserve cred its with reserve banks could he obtained not merely by depositing money, but by discount ing paper of specified kinds with the new in stitutions. The act made full provision for foreign exchange business, clearance of checks, regulation of commercial paper and other es sentials.
It was provided that the governing body of the new system be entitled the Federal Re serve Board and consist of five members (two of them bankers) to be named by the Presi dent and confirmed by the Senate, together with the Comptroller of the Currency and the Secretary of the Treasury ex officio. This body was duly appointed and took office on 10 Aug. 1914. The Secretary of the Treasury had been authorized by the act to name the date for the opening of the banks and after pre liminaries of organization had been com pleted by the Board the Secretary accordingly opened the banks on 16 Nov. 1914. Prior to this date the capital of the banks had been duly paid in, largely in gold, and the transfer of a first instalment of reserves quickly fol lowed. The act had offered to State banks and trust companies the option of member ship, but only a few availed themselves of the opportunity until after the entry of the United States into the European War. The movement then became much more rapid and by the end of 1917 between $4,000,000,000 and $5,000,000,000 of banking assets belonging to State institutions had been brought into the system.
In each Federal Reserve bank the control and operation of the institution is entrusted to a board of directors consisting of nine members. Of these nine, three AD) are representative of the member banks and three ("Class BD) are business men (non bankers), although chosen by the member banks. In voting for these directors the banks are divided according to capitalization into three groups, so that each group is represented on the Board by one Class A and one Class B director. The remaining directors, three in number (uClass CD), are chosen by the Fed eral 'Reserve Board. Each director is chosen for three years and their terms are so ar ranged as to have three such terms expire at the close of each year.
Of the three government directors one, under the law, is designated by the Federal Reserve Board as Reserve and as chairman of his local board of direc tors. As chairman, he presides over meet ings and as Federal Reserve Agent he dis charges all local duties assigned him by the Board in the operation of the bank. The ac tual management and conduct of the institu tion is left to the Board of Directors which names such executive officers as it sees fit. Of these the chief, corresponding to the pres ident of a commercial bank, is called ernor.* Under his direction there is developed at each bank the usual staff, including admin istrative, accounting and credit officers. The Federal Reserve Agent has a separate depart ment under his own jurisdiction, including one or more assistants and a clerical force. He takes charge of the function of note issue and is entrusted with the custody of commercial paper and gold held to protect notes.
Regulations issued from time to time by the Federal Reserve Board, and binding upon all reserve banks, constitute the operating ba sis of the system and ensure harmony of prac tice. Under the terms of the act each local board proposes rates of discount which are passed upon by the Federal Reserve Board and go Onto effect only after being approved by it. Full reports are transmitted daily by each bank and the Board issues a weekly condition report Every Federal Reserve bank has its own office arranged much like that of an ordinary bank; and several have purchased or are erecting buildings of their own. Six Fed eral Reserve banks have established branches equipped like a Federal Reserve bank. Some of these are assigned a sub-district or part of the Federal Reserve district, while others have no definite assignment of territory, but are merely offices for the convenience of member banks. The accompanying tabulation shows the location, capital and chief items of resources of the several banks at a recent date.
The outlines of the 12 districts into which the system is divided are presented in the foregoing map which shows the condition at the close of the year 1917. During 1915-16 several changes in boundaries were made by the Board upon petition of member banks and the lines at first drawn by the Organization Committee were accordingly altered; but none of these changes was of much importance to thegeneral structure of the system.