s on deposit with Reserve banks. Livingston, 1986). In addition to holding reserves, the Federal Reserve System had other goals, such as the improvement of check clearing, bank supervision, and management of U.S. Treasury operations. The system was expected to operate within the international gold standard and make it function better through regulation and control monitored by a five-part administration.
Administrative structure. The Federal Reserve System consists of 12 privately owned regional Reserve banks and additional member banks subject to close coordination and control by the Board of Governors, the Federal Open Market Committee, and the Federal Advisory Council (DeRosa, 1981). The 12 Federal Reserve banks, each serve a designated geographic district. Stock in each Federal Reserve bank is owned by the member banks of its districts ((The member banks do not have voting rights as stockholders would have in a private corporation. Thus, banks do not control the policies of the system. Kettl, 1986). About 6,000 of the 13,500 commercial banks belong to the Federal Reserve System and hold approximately 85 percent of total commercial bank deposits in the United States. Member banks include national banks, chartered by the federal government, and state-chartered banks. National banks are required to become members of the Federal Reserve System even though they are regulated by the Comptroller of the Currency, an official of the Treasury Department rather than the Board of Governors of the Federal Reserve System. State-chartered commercial banks or trust companies may elect to become members of the Federal Reserve System, but are not required to join.
Since the 1950s a steady decline in the number of member banks has occurred (Livingston, 1986). Several reasons for the decline in member banks exist, such as the Federal Reserve is a strict regulatory body with rigid adherence to legal form and custom, and nonmember banks...