The Federal Reserve system consists of a series of Federal Reserve banks, located in major cities across the country, which is responsible for maintaining the value of American currency and controlling bank credit. The impetus was the appointment of the National Monetary Commission in 1908. The Federal Reserve System was established in accordance with the Federal Reserve Act of December 23, 1913.
According to the act, there would be between eight and twelve Federal Reserve banks, each functioning as the central bank for its district. The policies of the system were to be overseen by the Federal Reserve Board, which was situated in Washington, DC.
All national banks were required to join the system, while state banks and trust companies were allowed to join if they met certain requirements. At first, state banks showed almost no interest in joining, but over time most of them did. The "member banks" of the system held the stock of the Federal Reserve banks, for which they subscribed 6% of their capital and surplus and from which they were to earn a cumulative 6% dividend.
Each Federal Reserve bank was to be managed by a board of nine directors, six of whom were to be elected by the member banks and three appointed by the Federal Reserve Board. One of the federal appointees was to be named chairman of the bank`s board. The Banking Act of 1935 changed the title to president.
The first Federal Reserve Board took office on August 10, 1914. There were seven members. The Secretary of the Treasury and the Comptroller of the Currency were members ex officio, with five more presidential appointees. Under the Banking Act of 1935, changed name to the Board of Governors and switched the two ex officio members to additional appointees.
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