s
constituted and altered down to 1916.[2]

[Illustration: FEDERAL RESERVE BANK DISTRICTS]

Sec. 2. #The Federal Reserve Board#. At the head of the banking system
stands the Federal Reserve Board of seven members, five of them
appointed by the President and Senate of the United States for this
purpose, and two serving _ex-officio_--the Secretary of the Treasury
and the Comptroller of the Currency. One of the five shall be
designated by the President as Governor and one as Vice-Governor of
the Board, but the Secretary of the Treasury is _ex-officio_ chairman.
The term of the appointive members is ten years and the salary is
$12,000 a year.

The powers of the board are numerous and important. The board is made
the head of a real _system_ of banking, the twelve parts of which can,
in times of emergency, and at the board's discretion, be compelled
to combine their reserves by means of lending to each other
(rediscounting), to the very limit of their resources, at rates fixed
by the board. By this means the reserves of the several district banks
may be "piped together" and thus be practically made into one central
bank under governmental control, altho centralization was in outward
form avoided by the bill. Alongside of the Reserve Board, is placed a
Federal Advisory Council, consisting of one member from the board of
directors of each of the twelve district banks. This council has only
the power to confer with, make representations and recommendations to,
and call for information from, the Federal Reserve Board.

Sec. 3. #Federal reserve banks#. The twelve Federal reserve banks which
opened for business November 16, 1914, are of a type of institution
new in our financial history. They are "banks for banks" belonging to
the system in their respective districts. Every national bank must,
and any state bank or trust company may,[3] subscribe for stock to
the amount of 6 per cent of its capital and surplus, and thus become
a "member bank." The capital of each Federal reserve bank was to be
at least $4,000,000; in fact only two of those organized (Atlanta and
Minneapolis) had at their opening less than $5,000,000 capital; the
largest (New York) had $21,000,000, and the average was $9,000,000.
The member banks are to receive dividends of 6 per cent, cumulative,
on this stock, and net earnings above that amount are to be paid to
the Government as a franchise tax.[4]

Each reserve bank has nine directors, consisting of three