the eurosystem moves to a pooled system of printing banknotes. even though the eurosystem contains the central banks of sovereign nations, the unified treatment of euro banknotes recognizes the unifying force of a single currency. clearly, then, as one considers currency, the history of the federal reserve supports and reflects the truth of tommaso ’ s statement. as our economy evolved from regional to national, our currency moved more completely in that direction. i would argue that the euro reflects a different perspective, with the currency playing a catalytic role in the development of a continental economy as well as reflecting developments in that regard. regions and the center in 1913, the very idea of a central bank was contentious in the united states. the result of the federal reserve act was a compromise, with regional reserve banks owned by their member commercial banks and a board in washington to provide oversight. although the integration of u. s. financial markets was considerable by the time the federal reserve act was passed, remaining segmentation made it possible to have different prices for reserve bank credit in different regions during the system ’ s early years. to be sure, these differences were not huge - basic discount rates differed by as much as 1 - 1 / 2 percentage points, with differences of 50 to 100 basis points persisting for long periods. in tommaso ’ s terms, monetary policy operations - that is, discount policy - reflected both the regional nature of the system ’ s charter and the partial segmentation of the financial environment. further integration of the money market over time shifted the focus of policy from twelve regional discount policies to a single national policy. in addition, concern about operational efficiencies and about the level of borrowing led to a move from discount rates to open market operations as the policy instrument of choice. this shift may also have been aided by the expansion of the government bond market during and after world war i. the use of open market operations accelerated the desire for coordination of policy at the national level, so that one reserve bank was not draining liquidity at the same time that another was adding liquidity. again, the financial environment contributed to developments in policy implementation. the balance of policy power shifted from the regions to the center, when the banking act of 1935 established the federal open market committee in its modern form, with the board having the majority of votes. from the perspective of monetary policy, it was at that point that the federal reserve system became a single central bank rather than a confederation of

crafts a policy action that all members can agree on. yet, if one looked only at the final vote, one would miss the lively and wide - ranging debate that goes on within the meetings themselves. we try to give the flavor of this debate in the minutes released three weeks after each meeting, and we do release detailed transcripts with a lag of five years. my understanding is that the ecb ’ s governing council operates by consensus, although a procedure is in place for a majority vote to determine the course of monetary policy. so far, the ecb has maintained the principle of one member, one vote, with the six executive board members and the twelve national central bank presidents voting equally regardless of the economic size of the country that they represent. the ecb has had to wrestle with how to adjust voting as the euro area expands over the next decade or so. the european council has accepted a proposal from the ecb to cap the number of voting national central bank presidents at fifteen and to begin rotational voting once the number of countries in the euro area exceeds fifteen. the voting rotation would look a bit like that initially established by the federal reserve, with the frequency of voting by individual members depending in part on the economic and financial size of their regions. the big difference, however, is that the national central bank presidents would have fifteen votes versus the six votes of the executive board members, whereas federal reserve board members have a seven - to - five voting advantage over regional fed presidents. clearly the system that we follow, with strong regional representation but a majority in the center, reflects the judgment made in 1935 regarding the primacy of political appointees with a national mandate. i would argue, although those closer to the scene might correct me, that the ecb ’ s approach to its regional representation reflects an evolving compromise that attempts to balance the ongoing legitimacy of national monetary authorities with the need for a practical solution to the challenges posed by the increasing number of nations within the eurozone. mandates and approaches to monetary policy the original federal reserve act contained almost no explicit macroeconomic goals for the system to follow. the gold standard was thought to be sufficient to produce price stability, and the central bank ’ s lending to meet the needs of trade ( “ real bills ” ) was seen as fostering financial stability and the smooth functioning of the economy. nonetheless, fairly early in its history, the federal reserve interpreted its mandate to be the promotion of monetary and credit conditions that would foster sustainable growth at any given time