The Federal Reserve Act provides for an advisory council consisting of as many members as there are districts. The board of directors of each federal reserve bank elects one member and determines his compensation subject to approval by the board. The meetings of this council are held at Washington at least four times a year, and oftener if called by the board. The council may meet elsewhere at such other times as it pleases. It elects its own officers and determines its own procedure. It has power to call for information regarding discount rates, rediscount business, note issues, reserve conditions in the various districts, the purchase and sale of gold and securities by the reserve banks, open-market operations by said banks, and the general affairs of the system, and to make recommendations concerning them; it can make oral and written representations regarding matters within the jurisdiction of the Federal Reserve Board, and it can confer directly with the board on general business conditions.
The council was created in response to the feeling that in the administration of the system the banks should be given an avenue of direct access to the responsible heads. It is wholly advisory. The practice has been for the reserve bank to elect some very prominent banker of its district, making membership on the council honorary and without compensation. Though composed of experts in banking, the council may not be able to give expert advice upon the operation of the reserve bank mechanism, for it has not the experience or information gained from conferences of the federal reserve agents or governors of the reserve banks, and most of the members' time is necessarily devoted to interests outside the reserve system. The term of office is but one year, although members may be re-elected. Even with such eligibility for re-election, however, the terms are likely to be short, and therefore the policies of the council tend to be less consistent and permanent and its work less efficient than if terms were long and there were rotation in office. The law does not confer clear and definite responsibilities upon the council nor provide opportunities for broad usefulness. Nor is the authority granted to it necessarily exclusive, since other bodies may also advise with the board, as for instance, the officers of the American Bankers' Association, as well as the federal reserve agents and the governors of the reserve banks.