The Federal Reserve Act, signed on December 23, 1913, called for the Reserve Bank Organization Committee (RBOC) to select eight to 12 cities and draw boundaries for the newly established Federal Reserve System. In April of 1914, 12 cities were selected to be the homes of the newly established Federal Reserve Banks. In this edition of Fed Facts, we will explore how these cities were chosen.
The decision-making process
A total of 37 cities applied to have Reserve Banks. Undaunted, the RBOC travelled around the country for six weeks meeting with numerous representatives who pitched their prospective cities.
Public hearings were held in 18 cities, including Atlanta, Austin, Boston, Chicago, Cincinnati, Cleveland, Denver, El Paso, Kansas City, Lincoln, Los Angeles, New Orleans, New York, Portland, St. Louis, San Francisco, Seattle, and Washington, D.C. These hearings produced over 5,000 pages of testimony, covering topics such as banking conditions, economic statistics, location, trade, transportation and communication links, and population growth. Additionally, the committee polled the national banks on their first, second and third choices for the cities.
Announcing the selected cities
On April 2, 1914, the committee announced its decision to choose the following cities: Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco. The committee cited the following criteria for their determination:
- The ability of the member banks within the district to provide the minimum capital of $4,000,000 required for the Federal Reserve Bank, on the basis of 6 percent of the capital stock and surplus of member banks within the district
- The mercantile, industrial and financial connections existing in each district and the relations between the various portions of the district and the city selected for the location of the Federal Reserve Bank
- The probable ability of the Federal Reserve Bank in each district, after organization and after the provisions of the Federal Reserve Act shall have gone into effect, to meet the legitimate demands of business, whether normal or abnormal, in accordance with the spirit and provisions of the Federal Reserve Act
- The fair and equitable division of the available capital for the Federal Reserve Banks among the districts created
- The general geographical situation of the district, transportation lines and the facilities for speedy communication between the Federal Reserve Bank and all portions of the district
- The population, area and prevalent business activities of the district, whether agricultural, manufacturing, mining or commercial, its record of growth and development in the past and its prospects for the future
The Federal Reserve System has seen many changes over the years, but since the boundaries were originally established, district lines have seen only minor changes.