The Federal Reserve Banks

The 1913 Federal Reserve Act divided the United States into 12 districts and established a separate Federal Reserve Bank for each district. One reason for this move was that the framers of the Act feared a centralized banking authority. Although other nations already had centralized their banking operations (the Bank of England, for example, was founded in 1694), Americans did not wish to place all their banks under one central power.

The map in Figure 12-2 shows the bound­aries of each of the 12 districts. The Federal Reserve Banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, At­lanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. Some of the 12 Federal Reserve Banks have branch offices so that transactions between the Federal Reserve Banks and member banks can be carried out more speedily. The activities of the 12 Federal Reserve Banks are coordinated, by the Board of Governors, although the Board may allow indi­vidual Federal Reserve Banks to adopt policies designed to deal with special economic condi­tions existing within their districts.

The Federal Reserve Banks do not deal directly with the public. You cannot open an account or cash a check &t a Federal Reserve Bank. They are "bankers' banks" that deal only with financial institutions and the government. Each Federal Reserve Bank is owned by the member commercial banks in its district, which are required to buy shares of stock in their Federal Reserve Bank when they become members of the Fed. Although they are privately owned, the primary objective of the Federal Reserve Banks is to carry out the monetary policies established by the Board of Governors. In fact, most of the earnings of the Federal Reserve Banks are returned to the U.S. Treasury each year.

Date: 2014-12-28; view: 881