Opinion ID: 218449
Heading Depth: 2
Heading Rank: 1

Heading: Overview of Federal Reserve System

Text: The Congress created the Federal Reserve System in 1913 to serve as the nation’s central bank. It is not a single entity “but rather a composite of several parts, both public and private, organized on a regional basis with a central governmental supervisory authority.” Reuss v. Balles, 584 F.2d 461, 462 (D.C. Cir. 1978). Two of the parts are relevant here—the Board and the Federal Reserve Banks (Reserve Banks). The Board, composed of seven members appointed by the President and confirmed by the Senate, is the central supervisory authority of the Federal Reserve System. 12 U.S.C. § 241. There are currently twelve Reserve Banks, each located and operating 3 within a specific region of the country.1 A bank organized under the laws of any State or the District of Columbia may apply to the Board to join the Federal Reserve System. 12 U.S.C. § 321. On joining, the bank purchases stock of the Reserve Bank responsible for the region of the country where the bank is located and thereby becomes a member bank. Id. Additionally, all national banks, that is, banks chartered under the National Bank Act of 1864 (formerly Act of June 3, 1864, ch. 106, 13 Stat. 99) (codified as amended in scattered sections of 12 U.S.C.); see Indep. Ins. Agents of Am., Inc. v. Hawke, 211 F.3d 638, 640 (D.C. Cir. 2000) (“The National Bank Act of 1864 . . . , as amended, provides for the chartering of national banks.”), must join the Federal Reserve System by purchasing stock of the Reserve Bank located in its district. 12 U.S.C. § 222. The Reserve Banks, then, “are private corporations whose stock is owned by the member commercial banks within their districts.” Comm. for Monetary Reform v. Bd. of Governors of Fed. Reserve Sys., 766 F.2d 538, 540 (D.C. Cir. 1985). Accordingly, they have the power to make contracts, to sue and be sued, to appoint a president and vice presidents, to prescribe bylaws and to perform other acts consistent with a private corporation. 12 U.S.C. § 341. Notwithstanding the foregoing powers, the Board exercises significant supervisory authority over the Reserve Banks. For example, the Board appoints three of the nine directors of each Reserve Bank, 12 U.S.C. § 302; the Board approves the compensation a Reserve Bank pays to its directors, id. § 307; the Board approves each Reserve Bank’s selection of its president and first vice president, id. § 341; the Board can suspend or remove any officer or director of a Reserve Bank, id. § 248(f); 1 The Board can readjust the federal reserve districts, subject to the requirement that there be at least eight and no more than twelve. 12 U.S.C. § 222. 4 and the Board can “examine at its discretion the accounts, books, and affairs of each Federal reserve bank and of each member bank and . . . require such statements and reports as it may deem necessary,” id. § 248(a)(1). The Reserve Banks are authorized to lend money to member banks. Id. § 343. “In unusual and exigent circumstances, the [Board] . . . may authorize any Federal reserve bank” to lend money to a nonmember institution. Id. § 343(A). Before doing so, however, the Reserve Bank must “obtain evidence that [the institution] is unable to secure adequate credit accommodations from other banking institutions.” Id.