The Federal Reserve Act provides for the division of the country into not less than eight nor more than twelve Federal reserve districts, each with its own reserve bank, "individually controlled and holding the fluid funds of the region in which it is organized, and each ordinarily dependent upon no other part of the country for assistance." The factor of centralization is the Federal Reserve Board.

The regional idea is a fundamental feature of the system, and was hotly debated in Congress. Those in favor of the idea maintained that no area the size of the United States was or could be under one central bank without prejudice to some areas, since such wide diversities of banking needs existed, and that the regional plan would provide greater adaptation to regional characteristics and would give local control and responsibility, thus not only serving local financial needs better but being politically expedient since local control would allay jealousy of Wall Street and other distant money marts. The central banks of England, France, Germany, etc., correspond with the several federal reserve banks so far as area and local adaptations are concerned. Undoubtedly one deep-seated motive behind the federal reserve legislation was a decentralization of the money power centering in New York. The federation of the reserve banks in the Federal Reserve Board clothes the system with ample powers to give uniformity and unity of action where needed, and at the same time local autonomy enough to remove the system from politics, which defeated our two earlier attempts to found central banks.

The opponents of the regional plan argued that it could not effect uniformity of interest rates, equal facilities for discounting, nor uniform banking practice; that the banks would not work together; that, as the system would be unreasonably expensive, member banks would not get dividends on their stocks; that there were too many reserve banks; and so on. These arguments have since been disproved by actual operation.

Although the federal reserve system is regional, some complaint has been raised that because the reserve banks are bankers' banks, which do not deal directly with individuals, the system is still too highly centralized and too remote from the people. This contention has some basis of fact, in so far as the depositors and customers of the reserve banks are mostly banks and the only direct dealings of the reserve banks with the people are the open-market transactions in commercial paper, gold, and securities. Certain European central banks, it may be noted, allow direct access to the public. In actual practice, however, the privilege is infrequently used in the case of those European banks, and the great bulk of private business is done with local banks. The competition of our reserve banks with the local banks extends the benefits of a central bank to the public, for by going into the market the central bank can break any temporary obstacles to the flow of benefits from the local banks.