The Federal Reserve Board (FED) is often praised or condemned by many, both in the General Public and in Government. But, few actually know what the FED’s Mission is, what it does or how it manages the Economy. As we saw during the Great Recession (2007-2009), the FED might have saved the Economy–of both the U.S. and the World. Forget about Lehman’s bankruptcy, if the U.S. went down, surely Armageddon might have followed. That could have truly been worse than 1929.
As I have Posted before, the FED is actually part of the Federal Government; but, the twelve Federal Reserve Banks are each independently-owned. The geographic organization of the FED, established 100 years ago, is apparently somewhat outdated. Somehow or other, however, all the parts do seem to work well together.
The linked WonkBlog article, by Neil Irwin, in the Washington Post, shows the composition of the twelve Federal Reserve Districts as they are today–just as they were when the FED was established by Congress in 1913. It also reflects how the organization appears, given today’s demographic, http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/09/the-federal-reserve-system-is-nuts-heres-how-we-could-remake-it/.
As the article points-out, there are two reasons for the idiosyncrasies in the organization: Time and Politics. Granted, New York City should always play a key role at the FED due to its position as the Nation’s Financial Capital. Likewise, Chicago would always be in the mix due to its regional population as well as its role as a secondary center of financial activity. But, why doesn’t Florida, as one of the most populace states not have a regional Bank, or Charlotte rather than Richmond?
Back in 1913, the FED’s San Francisco Bank represented just six percent of the Nation’s population. Given the Westward expansion, however, that’s now approximately 19%. The Minneapolis Bank currently represents just three percent, down from four percent in 1913. It’s still the smallest Federal Reserve District. Are changes due?
Josh Zumbrun, at Bloomberg, took a crack at updating the current map of the FED Districts. Also, let’s assume that we do not need to provide for further population shifts or inconsistencies. Now, consider the Politics: is Senate Majority Leader Harry Reid (D-NV) going to permit the Zumbrun-proposed FED Bank, for the Southwest Region, going to be in Phoenix, rather then Las Vegas? Likewise, would Speaker John Boehner (R-OH) allow the closure of Cleveland’s Bank. So, Politics is still in the mix.
Lastly, in this Electronic Age of \Video-conferencing and the Internet, does it really matter whether a colleague is down-the-hall or across-the-Country? In the Corporate World, people on different continents collaborate on projects. And hey, as much as I hate airline travel nowadays, face-to-face meetings can still be arranged easily enough. Also, FRB branch offices can always be opened to fill-in for new centers of population or economic activity that are underrepresented.