Banker preferences, interbank connections, and the enduring structure of the Federal Reserve System

Abstract

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The Founding of the Federal Reserve, the Great Depression, and the Evolution of the U.S. Interbank Network

“…16 The evidence reported in Table 6 supports and extends the evidence reported in Table 5 for all banks. Across both windows (1910)(1911)(1912)(1913)(1914)(1915)(1916)(1917)(1918)(1919) 15 Jaremski and Wheelock (2017) show that a survey of national banks was highly influential in determining the boundaries of Federal Reserve districts and selection of cities for a Federal Reserve office. The results of that survey, in turn, largely reflected pre-existing correspondent links.…”

“…Jaremski and Wheelock (2017) examine the selection of cities for Reserve Banks and branches and discuss the more controversial selections.14Myers (1931) describes the emergence of New York City as the nation's principal money market during the nineteenth century and the importance of the City's banks in government finance.…”

“…Jaremski and Wheelock (2017) examine the selection of cities for Reserve Banks and branches and discuss the more controversial selections.…”

“…Jaremski and Wheelock (2017) show that a survey of national banks was highly influential in determining the boundaries of Federal Reserve districts and selection of cities for Federal Reserve office. The results of that survey, in turn, largely reflected pre-existing correspondent links.…”

The Historical Evolution of Central Banking

“…The new organization was conceived as a user-owned facility, held by the very commercial banks which joined the System. Because interstate branching was a political taboo, the banking system continued to be fragmented; in order to bring the new facility as close as possible to its users, twelve fully independent Federal Reserve Banks were created, whose areas of competence closely followed the structure of the pyramidal reserve system designed by the Acts of 1863-1865 (Jaremski and Wheelock 2017). Moreover, as a substantial share of state banks did not find it worthwhile to join, the dual regulatory system put in place during the Civil War remained unscathed: as it had been the case for clearinghouses, access to the Fed's payment and lending facilities remained restricted to members (Calomiris et al 2016).…”