This section is from the book "Elementary Banking", by John Franklin Ebersole. Also available from Amazon: Elementary Banking.
The Federal Reserve Board, under authority conferred by the Federal Reserve Act, has established a plan of clearing and settlement of balances through a central fund in the hands of the Federal Reserve Board at Washington, D. C, known as the "Gold Settlement Fund." When this plan was established, each Federal Reserve bank was required to deposit with the Federal Reserve Board gold or United States gold certificates of one million dollars in excess of the net balances then due from it to other Federal Reserve banks, and each Federal Reserve bank is required to maintain a minimum balance of one million dollars in this fund, although the balances actually carried total several hundred million dollars. The net balances arising from clearings are settled by book entries in the gold settlement fund account. The operations of the Federal Reserve System have been more successful than could have been hoped for and with the exception of some very few minor defects, which are being gradually remedied, it is apparent that the System is the best in the world and one which has saved the United States from serious financial difficulties in the last few years.