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o S °z t CD 3 ~ 03 O ~ £ 03 C/3 3" 00 2 c 03 Organization of the Banks "0 5' Federal Reserve System Map ~ 03 < 0 3 2 . 03 Each Federal Reserve Bank has a nine m em ber Board o f c D ire cto rs w h ic h oversees its o p e ra tio n s under the general 03 03 supervision o f the Board o f G overnors. M em ber Banks elect w CO three Class A d ire c to rs (representing m em ber banks) and o o three Class B d ire c to rs (representing th e p u b lic ) in each CO r-¥- od o CD CL T | O CD O 3 « D O ro J3 3 CD o CO 71 CD W -1 < 01 CD cn 0 3. Federal Reserve Banks A SERIES ON THE STRUCTURE OF THE FEDERAL RESERVE SYSTEM (S) Reserve B ank's d is tric t. T hree Class C d ire c to rs (also rep re GO senting the p u b lic ) are a p p o in te d b y th e Board o f G overnors CD o f th e Federal Reserve System . 3 Federal Reserve Banks generate th e ir o w n incom e p rim a rily fro m in te rest earned on G o ve rn m e n t securities th a t are * acquired in th e course o f Federal Reserve m o n e ta ry p o lic y actions. Federal Reserve Banks are n o t operated fo r a p r o fit, — B o u n d a rie s o f F e d e ra l R e s e rv e D is tric ts and each year th e y re tu rn to th e U n ite d States T reasury all • F e d e ra l R e s e rv e B a n k C itie s • B o a rd o f G o v e rn o rs o f th e F e d era l R e s e rv e S y s te m earnings in excess o f Federal Reserve op e ra tin g and o th e r • expenses and s ta tu to ry d ivid e n d s paid on stock ow ne d by m em ber banks. In 1980, fo r exa m ple, th e Federal Reserve re tu rn e d alm ost $ 1 2 b illio n to th e U.S. Treasury o u t o f F e d e ra l R e s e rv e B ra n c h e s B u ffa lo , C in c in n a ti. P itts b u rg h . B a ltim o re . C h a rlo tte , B irm in g h a m . J a c k s o n v ille . M iam i, N a s h v ille . N e w O rle a n s . D e troit. L ittle R o c k , L o u is v ille , M e m p h is . H e lena , D e n v e r, O k la h o m a C ity , O m aha. El P aso, H o u s to n , San A n to n io , L o s A n g e le s , P o rtla n d , Salt L a k e C ity, a n d S e a ttle a b o u t $ 1 3 b illio n in gross earnings. ^ n ■■■ ■ r + O (/) 0) Revised June 1981 '?^ e O CD "O ° O 3 a» w CD CL ~ I*2. 03 ® 0) <o S' C3 ® O 03 0 )< 3 ~ Q_ 3) 3 a>0 m CO-i (D 2 05 < CD C/3 co CD 03 "0 CL 03 I * * * V c- $ * Federal Reserve Banks w ere established by Congress as the operating arms o f th e nation's central banking system. M any o f the services perform ed by this n e t w o rk fo r d epository institutions and the G o vern m en t are sim ilar to services perform ed by banks and th rifts fo r business customers and individuals. Reserve 3anks hold the cash reserves o f depo sito ry in stitu tio ns and m ake loans to them . T h e y move currency and coin into and o u t o f c ircu latio n , and collect and process m illions o f checks each day. T h e y provide checking accounts fo r th e Treasury, issue and redeem G overnm ent securities, and act in o th e r ways as fiscal agent fo r the U .S. G overnm ent. T h e y supervise and exam ine m em ber banks fo r safety and soundness. T h e Banks also take part in the p rim a ry responsibility o f the Federal Reserve System , th e setting o f m o netary po licy. Monetary Policy Role The p rim a ry re s p o n s ib ility o f th e ce n tra l bank is to in flu e n c e the cost and su p p ly o f m o n e y and c re d it, and th e Federal Reserve Banks are in volve d in th is fu n c tio n in several ways. F irs t, five o f th e tw e lve Presidents o f th e F ederal Reserve Banks serve, along w ith th e seven m em bers o f th e B oard o f G ove rn ors, as m em bers o f th e Federal O pen M a rk e t C o m m itte e . T he President o f th e Federal Reserve B ank o f New Y o r k serves on a c o n tin u o u s basis; th e o th e r Presidents serve on a ro ta tin g basis fo r one year te rm s. The F O M C meets p e rio d ic a lly in W ash in g to n , D.C. and de te rm in e s p o lic y w ith respect to purchases and sales o f G o v e rn m e n t securities in the open m a rk e t w h ic h a ffe c t th e a v a ila b ility o f m o n e y and c re d it in th e e c o n o m y . Reserve B ank Presidents c o n trib u te to these m eetings th e ir special kno w le dg e o f regional e c o n o m ic c o n d itio n s and needs. Second, th e Boards o f D ire c to rs o f th e Federal Reserve Banks For the purpose o f ca rryin g o u t these day-to -d ay operations o f th e System , the c o u n try has been d i vided in to 12 Federal Reserve d is tric ts , w ith Banks in Boston, New Y o rk , P hiladelphia, Cleveland, R ic h m ond, A tla n ta , Chicago, St. Louis, M inneapo lis, K an sas C ity , Dallas, and San Francisco. There are also tw e n ty -fiv e branches o f these Banks to serve p a rtic u lar areas w ith in each d is tric t. The lo catio ns o f the Reserve Banks and branches and the d is tric t b o u n d aries are shown on the accom panying map. In establishing th is regional arm o f th e Federal Reserve System, Congress had several purposes in m in d : th a t all parts o f th e U nite d States w o u ld have access to the Federal Reserve; th a t regional econom ic developm ents and needs w o u ld be represented in m o n e ta ry p o lic y ; and, as reflected in the o rg an izatio n o f th e Banks, th a t there w o u ld be p a rtic ip a tio n by p riva te in d iv id uals, w h ile governm ent w o u ld have th e fin a l a u th o r ity over national p o lic y . sortin g m achines, th e Federal Reserve Banks process these checks, ro u te th e m to th e d e p o s ito ry in s titu tio n s upon w h ich th e y are w r itte n , and tra n s fe r p a y m e n t fo r th e checks th ro u g h accounts th a t d e p o s ito ry in s titu tio n s m a in ta in w ith th e Supervision and Regulation — Some o f th e Federal Reserve's Federal Reserve Banks. supervisory re sp o n sib ilitie s fo r S tate-chartered m em ber banks and bank h o ld in g com panies are delegated to th e Federal Wire Transfers — The Federal Reserve Banks are p a rt o f the Reserve Banks b y th e Board o f G overnors. These fu n c tio n s Federal Reserve C o m m u n ic a tio n s System o r " F e d w ir e ," an include, fo r exam ple, th e c o n d u c t o f fie ld e xa m in a tio n s o f e le c tro n ic n e tw o rk th ro u g h w h ic h d e p o s ito ry in s titu tio n s State-chartered m em b er banks and the a u th o r ity to approve can tra n sfe r fu n d s and securities n a tio n w id e in a m a tte r o f certain type s o f bank and bank h o ld in g co m p a n y a p p lica tio n s. m in u te s. Loans — E lig ib le d e p o s ito ry in s titu tio n s may b o rro w fro m A utom ated Clearinghouses — Federal Reserve Banks and th e ir the Federal Reserve B ank serving th e ir d is tric t, subject to branches op era te A u to m a te d Clearinghouses (A C H s). These co n d itio n s prescribed by th e B oa rd. T his f a c ility fo r e x te n d c o m p u te riz e d fa c ilitie s a llo w fo r exchange o f pa ym en ts among ing c re d it is referre d to as th e "d is c o u n t w in d o w .” p a rtic ip a tin g d e p o s ito ry in s titu tio n s e le c tro n ic a lly ra th e r than by check. A C H s are p rim a rily used to e ffe c t re c u rrin g tra n s Safekeeping — Federal Reserve Banks p ro vid e safekeeping a ctio n s, such as d ire c t d e p o sit o f p a y ro lls o r m ortgage p a y fa c ilitie s fo r th e securities held by d e p o s ito ry in s titu tio n s , m ents. co lle ctin g in te re st p a ym en ts fo r th e m and, at m a tu r ity , c re d it Services Performed for the Government (Fiscal Agency Services) in s tru c te d . in itia te changes in the d is c o u n t rate, th e rate o f in te re st on loans m ade b y Reserve Banks to d e p o s ito ry in s titu tio n s . D is c o u n t rate changes are subject to approval by th e Board o f G ove rn ors. Payments Mechanism Functions T he Federal Reserve Banks p la y a m a jo r role in th e n a tio n 's pa ym en ts m echanism th ro u g h co in and c u rre n c y d is trib u tio n , check processing, and e le c tro n ic fu n d transfers. ing pa ym e n t o f th e securities to th e ir reserve accounts if so T he Federal Reserve System , th ro u g h th e Reserve Banks, acts as th e G o v e rn m e n t's banker. O p e ra tin g accounts o f th e U.S. T reasu ry are held by the Federal Reserve Banks. Each year b illio n s o f d o lla rs are de po sited to and w ith d ra w n fro m these accounts by various G o ve rn m e n t agencies. Currency and Coin — T he Federal Reserve Banks d is trib u te T he Federal Reserve Banks receive fo r d e p o sit to th e T re a paper m on ey and co in to d e p o s ito ry in s titu tio n s to m eet th e sury's accounts item s such as Federal u n e m p lo y m e n t taxes, p u b lic 's need fo r cash. D u rin g pe rio d s o f heavy cash d e m an d, in d iv id u a l in com e taxes w ith h e ld by p a y ro ll d e d u c tio n , c o r such as C hristm as shopping season, in s titu tio n s o b ta in larger Other Federal Reserve Bank Services and Functions p orate in com e taxes, and ce rta in Federal excise taxes. T h e y a m o un ts o f cash fro m th e Federal Reserve Banks. W hen p u b lic pay all checks d ra w n on the U.S. T re a su ry, in c lu d in g V eterans dem and fo r cash is lig h t, in s titu tio n s d e p o sit excess cash w ith B en efits and Social S e c u rity checks. th e Federal Reserve Banks fo r storage. C u rre n cy and co in Research — Each Federal Reserve Bank has a research s ta ff to gather and analyze a w id e range o f e co n o m ic data and in te r p re t c o n d itio n s and de ve lo p m e n ts in the e co n o m y. T his research assists th e Federal O pen M a rke t C o m m itte e in th e fo rm u la tio n and im p le m e n ta tio n o f m o n e ta ry p o lic y , and it also c o n trib u te s to in fo rm e d d e cisio n -m a kin g by th e Federal Reserve Banks in bank sup ervisory m atters and o th e r areas. M ost Reserve Banks p u b lish a m o n th ly o r q u a rte rly jo u rn a l devoted to basic research and analysis o f c u rre n t e co n o m ic issues. Charges fo r Services — T he M o n e ta ry C o n tro l A c t o f 1980 made Federal Reserve services available to m any d iffe re n t kinds o f fin a n c ia l in s titu tio n s besides those banks th a t are mem bers o f th e Federal Reserve S ystem . The A c t also req uire d received at th e Federal Reserve Banks is sorted and co u n te d . T he Federal Reserve Banks also issue and redeem in stru m e n ts the Federal Reserve to charge fo r ce rta in o f these services U n fit paper m o n e y and coins are d e stro ye d and replaced w ith o f th e p u b lic d e b t, such as Savings Bonds and T reasu ry secu w h ich p re vio u sly were free. B o th th e new a v a ila b ility o f ser new c u rre n c y and c o in o b ta in e d fro m th e T reasu ry D e p a rt ritie s. T h e y have ce rta in re sp o n sib ilitie s fo r a llo tm e n t and vices and the a p p lica b le fees are being phased in. m e n t's Bureau o f E ngraving and P rin tin g and Bureau o f th e d e live ry o f G o ve rn m e n t securities and fo r w ire tra n s fe r o f M in t. securities. In a d d itio n , th e Reserve Banks m ake p e rio d ic Check Processing — T he Federal Reserve serves as a cen tra l T reasu ry, Federal agencies, and G o ve rn m e n t sponsored check-clearing system , h a n d lin g a large percentage o f th e m ore c o rp o ra tio n s . paym ents o f in te rest on o u ts ta n d in g o b lig a tio n s o f th e U.S. tha n 24 b illio n checks w r itte n a n n u a lly . Using high-speed
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