Full text: Referendum on the report of the Special Federal Reserve Committee

System as Whole The federal reserve system has demonstrated such success as to 
meet with widespread public endorsement of most of its basic fea- 
tures. Its structure and its fundamental powers are well designed to 
serve the need of our nation for a reserve banking agency adapted to 
our business and financial requirements and to our wide expanse of 
Importance of 
While particular transitory policies have been called into ques- 
tion, in the main the administrations of the reserve banks, under the 
general supervision of the Federal Reserve Board, have shown ca- 
pacity and skill. The continued devotion of men of ability and influ- 
ence to the affairs of the system as members of its governing bodies 
is fully as important for its future welfare as any alteration in struc- 
ture or method of operation. The system is a growing organism. It 
must be adapted with care to our country’s needs as those needs ac- 
tually appear. This adaptation may be expected more confidently 
from a steady development of skill in administration than from any 
legislative overhauling of its powers and methods of operation. 
The conception of a system of regional banks of autonomous 
character is sound. The idea of a single, highly centralized reserve 
bank which was advocated for a while has come to be recognized 
as impracticable. Our political traditions, the immense area of the 
country, the wide variations in the economic development of its sec- 
tions, and the proved values of the regional system, all lend support 
to the rejection of the one central bank idea. 
A fundamental necessity for the proper functioning of a central 
banking system in this country is the development of a high degree 
of cooperation between the reserve institutions and the member 
banks. The wholehearted support of the member banks must be had 
if for no other reason than that they make the direct contacts with the 
business public. A system that is not based upon the principle of co- 
peration must fail. The reserve banks, as even our brief history has 
shown, must depend upon something more than their own activities 
and resources to achieve the needed progress in improving credit 
Regional Banks 
Dne Central 
Bank Rejected 
Dependence of 
Reserve Banks 
on Member 
Regional System 
Promotes Close 
The regional system makes the administration of each reserve 
bank more amenable to sentiment in its district and thus serves to 
emphasize the idea of cooperation. In particular the regional banks 
make the actual credit contacts with member banks, two-thirds of 
their directors are chosen by members banks, and the member banks 
provide all of their stock capital: While the same provisions might 
be utilized in the organization of a single central bank, the relation- 
ships of any one member bank to the central institution would be far 
less intimate and complete. If it be argued that a central bank could 
make use of branches to establish contacts with member institutions. 
[Continued on page 8)

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