Each Federal reserve bank is to be conducted under the supervision and control of a board of nine directors holding office for three years and divided into three classes, designated as classes A, B, and C. The three members of Class C are to be appointed by the Federal Reserve Board, and must have been for at least two years residents of the district in which the Federal reserve bank is located. None of them shall be an officer, director, employee, or stockholder of any bank. One member of this class, who must be "a person of tested banking experience," is to be named as chairman of the board of directors of his district reserve bank, and will be known as "Federal reserve agent.' He will maintain a local office of the Federal Reserve Board and act as its official representative in the district. Another member of Class C shall also be an experienced banker and shall act as deputy chairman and deputy Federal reserve agent.
Directors of Class A and Class B are chosen by member banks. Directors of Class A are to represent the member banks and presumably will be officers or directors of these banks. Directors of Class B must at the time of election "be actively engaged in their district in commerce, agriculture, or some other industrial pursuit." They may not be officers, directors, or employees of any bank, though they may be stockholders. No Senator or Representative in Congress may be an officer or director of a Federal reserve bank or a member of the Federal Reserve Board. It appears, then, that "Class A consists of representatives of the banks or those who are intrusted with the funds of the business public for investment; Class B consists of representatives of the public who are furnishing the funds; and Class C consists of the representatives of the Government, which undertakes to supervise the proper and conservative investment of such funds."1
The plan of electing the six directors of Classes A and B is as follows: In each district the chairman of the board of directors of the Federal reserve bank, or, pending his appointment, the organization committee, shall classify all the member banks of the district into three groups, each group containing as nearly as possible one-third of the total number and consisting of banks of similar capitalization.
1 Address of Mr. Milton C. Elliott, Secretary of the Organization Committee, at the convention of member banks of the Fifth Regional District, held at Richmond, May 18, 1914.
Then the board of directors of each member bank chooses a district reserve elector and certifies his name to the Federal reserve agent of the district. The agent makes lists of the electors thus chosen by all the banks in the three groups of the district and sends a list to each elector in each group. Each member bank may nominate a candidate for director of Class A and another for Class B, and a list of these nominees is furnished by the reserve agent to each elector. On a ballot form furnished by the agent each elector certifies his first, second and third choice for three directors of Class A and three of Class B. A candidate having a majority of the total votes cast in the column of first choice is declared elected. If no candidate have a majority, votes cast for second choice candidates are added to those of the first choice, and if no candidate then have a majority the votes for third choice are to be added.
At the first meeting of the board of directors of each Federal reserve bank the directors of each of the three classes shall designate one member of each class whose term shall expire in one year, one in two years, and one in three years from the first of January nearest to the date of such meeting. Thereafter all directors are chosen for three years. Vacancies that may occur are to be filled in the same way as in the original selections and such appointees are to hold office for the unexpired term of their predecessors. Directors of Federal reserve banks may receive compensation for their services, subject to the approval of the Federal Reserve Board, and in addition a reasonable allowance for all necessary expenses in attending board meetings, such compensation and allowance to be paid by the respective reserve banks. An exception to this rule is the Federal reserve agent, whose compensation is determined by the Federal Reserve Board but paid by the reserve bank.
Each Federal reserve bank is directed to establish branch banks within its district, and may do so in the district of any other reserve bank that may have suspended. These branches are to be operated by a board of seven directors under rules and regulations approved by the Reserve Board. Branch directors shall possess the same qualifications as directors of the Federal reserve banks. Four are to be chosen by the reserve bank and three by the Reserve Board, and one of them is to be designated as manager by the reserve bank. All hold office during the pleasure of the parent bank and the Reserve Board.