The act creates a Federal Reserve Board of seven members with sweeping powers of supervision and control over the new system. The Reserve Board is composed of two members ex-officio, the Secretary of the Treasury and the Comptroller of the Currency, and five other members appointed by the President of the United States by and with the advice and consent of the Senate. The law provides that in selecting the five appointive members, not more than one of whom shall be selected from any one reserve district, "the President shall have due regard to a fair representation of the different commercial, industrial and geographical divisions of the country." The five appointive members hold office for ten years, unless sooner removed for cause by the President, but the first appointees serve for two, four, six, eight and ten years respectively. They are to devote their entire time to the duties of their office, and receive an annual salary of $12,000 and traveling expenses. The Comptroller of the Currency receives $7,000 for his services as a member of the Board in addition to the $5,000 salary paid him as Comptroller. Two of the appointive members must be experienced in banking or finance. One of these is to be designated as governor and one as vice-governor of the Reserve Board, the governor being the active executive officer. The Secretary of the Treasury is ex-ofificio chairman of the Board. The Act specifically provides that whenever any power vested by it in the Reserve Board or the Federal reserve agent appears to conflict with the powers of the Secretary of the Treasury, such powers shall be exercised subject to the supervision and control of the Secretary. The members of the Board, the Secretary of the Treasury, the Assistant Secretaries of the Treasury, and the Comptroller of the Currency are declared ineligible to hold any office, position or employment in any member bank during the time they are in office and for two years thereafter. The Board is empowered to levy semi-annually upon the Federal reserve banks an assessment sufficient to pay its expenses and the salaries of its members and employees.
As previously noted, the Federal Reserve Board has very broad and sweeping powers. Twelve of these powers are specifically enumerated in Section 2 of the Act, and others, either specifically stated or implied, are found throughout the Act. The Board is given general supervision over all Federal reserve banks. It appoints three of the nine directors of each Federal reserve bank, and may suspend any of its officers or directors. It may create new Federal reserve districts and rearrange old ones; require Federal reserve banks to write off doubtful or worthless assets; and suspend or liquidate any Federal reserve bank for violating any of the provisions of the Act. It may examine the accounts and affairs of both the reserve banks and member banks, require such statements and reports as may be necessary, and publish a weekly statement showing the condition of each Federal reserve bank and a consolidated statement for all Federal reserve banks. The Reserve Board has general supervision over rediscounting, determining the class of commercial paper eligible for rediscount and having the right to review the rates charged by each Federal reserve bank. It may permit or require reserve banks to rediscount the discounted paper held by other reserve banks, and may suspend the reserve requirements of both reserve banks and member banks. It may supervise and regulate through the office of the Comptroller the issue and retirement of Federal reserve notes. The Board supervises the open market operations of the reserve banks, granting or withholding consent to their establishing foreign branches and agencies, and making regulations for the conduct of the same. It may require any or all of the reserve banks to act as a clearing house within their own district, and may fix the rates which they may charge for this service.
The Reserve Board also has a large measure of control over the individual member banks. It may define the character of the paper eligible for rediscount at their reserve banks, and fix the charges they may collect on items cleared through the reserve banks. It may permit member banks having a capital and surplus of at least $1,000,000 to establish foreign branches, and to allow member banks to exercise certain trust company functions if not in contravention of state law. The Board may also change the number of reserve and central reserve cities or reclassify them.
This summary of the powers of the Federal Reserve Board, though incomplete, will serve to show the wide extent of their authority under the Act. It is obvious that a board clothed with such powers can exercise an enormous influence either for good or ill upon the new system. Success or failure, especially in the early years of its operation, will depend largely upon their ability, wisdom and tact.