| The conventional wisdom regarding the founding and development of the Federal Reserve System is that it was designed to be an altruistic institution, structured and administered for the common welfare. To that end, the System was composed of a number of regional banks, each with great power and autonomy in determining monetary policy for their district. The location of the reserve banks was generally considered to be unimportant, since they were designed to serve the needs of their entire district. Today, the regional structure, which is virtually identical to its original arrangement in 1914, is justified on public policy grounds pertaining to the provision of services and banking supervision. This dissertation challenges the conventional wisdom regarding the establishment and operation of the regional structure of the System. First, it argues that competing private interests, rather than some notion of public welfare, dictated much of the organization of the Federal Reserve's regional structure. Second, it presents empirical evidence that shows the location of the reserve banks was not insignificant; those cities that hosted reserve banks experienced accelerated short-term growth. Finally, following an examination of the current costs and benefits of the regional structure, it argues that the regional structure of the System can no longer be justified on public policy grounds. |
