The Federal Reserve Banks and the member banks
Federal Reserve Districts The 12 regional Federal Reserve Banks (not to be confused with the "member banks"), which were established by Congress as the operating arms of the nation's central banking system, are organized much like private corporations—possibly leading to some confusion about “ownership.” For example, the Reserve Banks issue shares of stock to "member banks." However, owning Reserve Bank stock is quite different from owning stock in a private company. The Reserve Banks are not operated for profit, and ownership of a certain amount of stock by a "member bank" is, by law, a condition of membership in the system. The stock may not be sold or traded or pledged as security for a loan; dividends are, by law, limited to 6% per year.<23> The largest of the Reserve Banks, in terms of assets, is the Federal Reserve Bank of New York, which is responsible for the Second District covering the state of New York, the New York City region, 12 northern New Jersey counties, Puerto Rico, and the U.S. Virgin Islands.<24>
The dividends paid by the Federal Reserve Banks to member banks are considered partial compensation for the lack of interest paid on member banks' required reserves held at the Federal Reserve Banks. By law, banks in the United States must maintain fractional reserves, most of which are kept on account at the Fed. The Federal Reserve does not pay interest on these funds.
The basic structure of the Federal Reserve System includes:
The Board of Governors
The Federal Open Market Committee
The Federal Reserve Banks
The member banks.
Each Federal Reserve Bank and each member bank of the Federal Reserve System is subject to oversight by the Board of Governors (see generally 12 U.S.C. § 248). The seven members of the board are appointed by the President and confirmed by the Senate.<20> Members are selected to terms of 14 years (unless removed by the President), with the ability to serve for no more than one term.<16> A governor may serve the remainder of another governor's term in addition to his or her own full term.
The Federal Reserve Banks
The Federal Reserve Districts are listed below along with their identifying letter and number. These are used on Federal Reserve Notes to identify the issuing bank for each note.
Federal Reserve Bank Letter Number Website President
Boston A 1 http://www.bos.frb.org/ Eric S. Rosengren
New York B 2 http://www.newyorkfed.org/ Timothy F. Geithner
Philadelphia C 3 http://www.philadelphiafed.org/ Charles I. Plosser
Cleveland D 4 http://www.clevelandfed.org/ Sandra Pianalto
Richmond E 5 http://www.richmondfed.org/ Jeffrey M. Lacker
Atlanta F 6 http://www.frbatlanta.org/ Dennis P. Lockhart
Chicago G 7 http://www.chicagofed.org/ Michael H. Moskow
St Louis H 8 http://www.stlouisfed.org/ William Poole
Minneapolis I 9 http://www.minneapolisfed.org/ Gary H. Stern
Kansas City J 10 http://www.kansascityfed.org/ Thomas M. Hoenig
Dallas K 11 http://www.dallasfed.org/ Richard W. Fisher
San Francisco L 12 http://www.frbsf.org/ Janet L. Yellen
The member banks
National banks are required to be member banks in the Federal Reserve System. Federal statute provides (in part):
Every national bank in any State shall, upon commencing business or within ninety days after admission into the Union of the State in which it is located, become a member bank of the Federal Reserve System by subscribing and paying for stock in the Federal Reserve bank of its district in accordance with the provisions of this chapter and shall thereupon be an insured bank under the Federal Deposit Insurance Act <. . . .>"<25>
Other banks may elect to become member banks. According to the Federal Reserve Bank of Boston:
Any state-chartered bank (mutual or stock-formed) may become a member of the Federal Reserve System. The twelve regional Reserve Banks supervise state member banks as part of the Federal Reserve System’s mandate to assure strength and stability in the nation’s domestic markets and banking system. Reserve Bank supervision is carried out in partnership with the state regulators, assuring a consistent and unified regulatory environment. Regional and community banking organizations constitute the largest number of banking organizations supervised by the Federal Reserve System.<26>
For example, as of October 2006 the member banks in New Hampshire included Community Guaranty Savings Bank; The Lancaster National Bank; The Pemigewasset National Bank of Plymouth; and other banks.<27> In California, member banks (as of September 2006) included Bank of America California, National Association; The Bank of New York Trust Company, National Association; Barclays Global Investors, National Association; and many other banks.<28>
Regulation of fractional reserve
The Fed regulates banks' fractional reserves—the portion of their deposits that banks must keep, on hand or at the Fed, as reserves to satisfy any demands for withdrawal. This directly affects the banks' ability to make loans, since loans cannot be made out of reserves. The United States' rules and oversight are within limits and guidelines set by the Bank for International Settlements, a banking agency which pre-dates the Bretton Woods financial and monetary system and its institutions.
http://en.wikipedia.org/wiki/Federal_Reserve_Board#Federal_Reserve_Balance_Sheet
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