The Act
The plan adopted in the original Federal Reserve Act called for the creation of a System that contained both private and public entities. There were to be at least eight, and no more than 12, private regional Federal reserve banks (12 were established) each with its own branches, board of directors and district boundaries and the System was to be headed by a seven member Federal Reserve Board made up of public officials appointed by the President and confirmed by the Senate (strengthened and renamed in 1935 as the Board of Governors of the Federal Reserve System with the Secretary of the Treasury and the Comptroller of the Currency dropped from the Board). Also created as part of the Federal Reserve System was a 12 member Federal Advisory Committee and a single new United States currency, the Federal Reserve Note.
In the Federal Reserve Act, Congress provided that all nationally chartered banks were required to become members of the Federal Reserve System. The Act required these banks to purchase specified non-transferable stock in their regional Federal reserve banks, and to set aside a stipulated amount of non-interest bearing reserves with their respective reserve banks. (Since 1980, all depository institutions have been required to set aside reserves with the Federal Reserve. Such institutions are entitled to certain Federal Reserve services. State chartered banks were given the option of becoming members of the Federal Reserve System and in the case of the exercise of such option were to be subject to supervision, in part, by the Federal Reserve System. Member banks became entitled to have access to discounted loans at the discount window in their respective reserve banks, to a 6% annual dividend in their Federal Reserve stock, and to other services. Section 15 of the Act also permitted Federal Reserve banks to act as fiscal agents for the United States government.
Section 25 allowed banks to establish foreign branches. Citibank became the first to do so with a branch in Buenos Aires.
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