While the Organization Committee originally established twelve districts, it did not succeed in drawing the lines between them altogether satisfactorily. Recognizing that such might be the outcome of unavoidably hasty work in the new field, the Federal Reserve Act had provided for appeals from banks desiring to transfer from one district to another, such appeals to be filed with the Federal Reserve Board under regulations to be framed by that body. During the years 1915 - 16 a number of such appeals were filed and minor changes were made in the district lines. The Federal Reserve Board at one time contemplated the idea of reducing the number of districts and of making very extensive changes in the composition of those which remained, but these plans were never matured. The outcome was to leave the general division of the country into districts subject to but little modification and practically on the same basis which had been outlined by the organization committee. Closely connected with this question of districting was found to be a matter which is ordinarily treated apart from it. This was the question of branches. When the Federal Reserve Act was first under consideration it had been thought that a number of banks corresponding roughly to the reserve cities of the country - then about fifty in number - might not be too many. Further discussion determined the reduction of the number to a maximum of twelve, but with the provision that any reserve bank might establish branches within its own district. Eventually the result of the exercise of this power was to create some twenty-three branches, leaving the total number of banks and branches thirty-five. It was seen from the outset that the power to establish branches was to render not only the exact conformation of the districts but also the location of the parent banks a matter relatively of secondary importance owing to the fact that with a thorough branch system in effect, the mere location of the actual points of redis-counting or holding reserves would be of no primary significance. This in fact turned out to be the case, and save for the psychological atmosphere and local influences which always affect the personnel of every institution, it is probable that the exact site of Federal Reserve Banks or the exact conformation of their districts has become a secondary matter. Certainly it is one which dropped from view within a comparatively short time after the organization of the system.

As thus finally developed the system with its districts and branches assumed by the close of 1921 the form indicated in the accompanying map:

Selection of directors has continued to be made throughout succeeding years after substantially the manner provided in the original Federal Reserve Act, although at a later time some modifications were introduced into the method of voting.

On the whole, the plan of choosing directors in such a way as to give representation to the smaller banks "one bank, one vote" has not served to inspire these institutions with a very much greater sense of responsibility, but it has undoubtedly tended to avoid criticism. The real control of the reserve banks has remained in the hands of the more influential banks of the country. A striking illustration of this fact is seen in the action of the country banks in some districts in not choosing one of their own number but inviting a city banker to represent them. The Federal Reserve Act had made only very general provisions regarding the organization of the reserve banks themselves, and this therefore remained for the Board to work out in conjunction with the several directors. A standard set of by-laws was developed and agree-ment was reached that the chief executive officer of each bank should be chosen by the directors and designated as the "Governor" of the institution.' As the organization later developed itself this governor came to be assisted by one or more deputy governors and virtually became the head of the institution. Although the Federal Reserve Act had contemplated an institution in which the Federal Reserve Agent appointed by the Board as one of the three Government directors would be, by virtue of his commanding position as chairman, the leading factor in the management of the bank, this has in few, if any, cases actually turned out to be true. The Federal Reserve Agent in almost all instances has allowed himself to fall under the direction or control of the governor of the bank and in some has performed practically the functions of a deputy governor although himself the chairman of the board of directors. This anomalous situation has perhaps been the most conspicuous failure of the administrative machinery of the Federal Reserve System.

The first payment of capital and reserves had left the reserve banks at the month of November, 1914, with cash funds approximating $248,000,000, and thus able to undertake practically any work that was likely to be assigned them. At the outset, however, the direct activity of the system was small and the first months of its history were spent in helping to clear away the emergency currency issues which the bank suspension at the opening of the war had necessitated, in preparing its own internal staff and organization, and in putting into operation regulations designed to control and direct the relations between the reserve and member institutions.

As the later installments of capital and reserves were paid into the system, the reserve banks naturally increased in power and resources. Their natural growth was accelerated by action of Congress in 1916 which terminated the installment process of reserve payment and called for full transfer at once, It was again greatly increased by the act of June 21, 1917, which increased the percentage of reserves required to be kept in reserve banks, raising it to 13 per cent. of demand deposits for banks in central reserve cities, 10 per cent. for banks in reserve cities, and 7 per cent. for other banks. Members gradually fell into the habit of placing all their funds with the reserve institutions and at one time their combined assets were more than $6,000,000,000. At the close of 1921 the combined position of the twelve banks of the system was as shown in the statement given below.