Introduction of the System; Effect. - This new system of banking was introduced and accepted by a number of institutions throughout the country in the belief that its purposes would in the end prove to be more beneficial to them. They had for more than half a century performed a useful service to American commerce and trade, and it was evident that, no matter how thorough a system the Federal Reserve purported to be, it could not, by its immediate introduction, destroy that system of American banking with its prestige of so long a time of growth and usefulness. The Federal Reserve, therefore, was introduced gradually, and its benefits were made to be realized by the banks of the country step by step.

Organization of the Federal Reserve; Centralized Banking.-The Federal Reserve Act provides for the establishment of twelve Federal Reserve banks, each of which operates in one of the Federal Reserve Districts-twelve in all into which the country is divided. The minimum capital of each of such banks required by law is four million dollars, and the subscriptions to stock of the Federal Reserve banks are required to be taken up by member banks to the extent of six per cent, of their capital and surplus.

The Federal Reserve System is on the whole a democratic one, brought out most strongly by the fact that no more than one vote is accorded any one member institution.

National banks are practically compelled to become members. Various laws to this effect, viz., non-recognition of any such national bank as a satisfactory government depository, should it refuse, within thirty days, to become a member of the System, and still further, a provision in the law suspending its charter in the event it failed to become a member within one year from the passage of the Act, virtually forced them into the System. While this is true of national banks, many State institutions have voluntarily become members.

The Federal Reserve; Organization and Management.- Each Federal Reserve bank is managed by a board of directors, consisting of nine, elected in the following manner : Every Federal Reserve District comprises a number of banks, which, by gradition, are divided according to their capital, into three groups, consisting of as many member banks the capitalization of which may be similar. The largest bank in the group of little banks, is, therefore, normally smaller than the smallest one in the group of middle-sized banks, and the largest one in the group of middle-sized banks is normally smaller than the smallest one in the group of big sized banks. One vote only being accorded to any one bank, each group is required to elect two directors, one of whom shall be a banker "representing stockholding banks," while the other shall be a business man representing the business community. The first are denominated directors of class A, and the second, directors of class B. To these six directors so elected, are added, through appointment by the Federal Reserve Board at Washington, three others known as class C directors, who are required to be of tested banking experience. Each Federal Reserve bank has, therefore, a board of nine directors, and their terms of office run for three years, one-third of which expire yearly.

Federal Reserve Board Heads System

The Federal Reserve Board at Washington is the head of the system and manages and supervises the operations of the different Reserve banks to a large extent. Its organization includes the Secretary of the Treasury and the Comptroller of the Currency, who are members ex-officio, five others being appointed by the President of the United States, with the advice and consent of the Senate, the latter holding office for a period of ten years. The Chairman of the Federal Reserve Board is the Secretary of the Treasury. An advisory head is appointed by the board of directors of each Federal Reserve bank, making up the so-called "Federal Advisory Council." A minimum of four conferences are required to be held yearly, at which time objects of general discussion are taken up and settled.