will be, experience must show; and when the time comes to make them, an important constructive function of the board will be that of determining when and how they shall be introduced. Already the board has granted a few petitions for readjustment of boundary lines between districts.

Of the same general character is the provision of the Act which calls for the establishment of branches, and which practically invests the board with the authority to oversee the establishment of such branches of Federal Reserve banks. The operation of the law in this particular intrusts to the board one of its most important duties of a constructive nature.

3. Educative Functions.

Among the implied or educative duties of the board is undoubtedly that of bringing about general and harmonious action among the several districts and of welding the different parts into a consistent, united whole. In order to do its work well the board must necessarily be in close touch with the several districts and know what is going on in them, and, with this purpose in view, direct communication with the different districts has been intrusted to the several members of the board in order that they may keep themselves and their colleagues advised of any developments in these districts which call for special attention.

An annual report to Congress was required by law and must be formulated by the board, which was also intrusted with the duty of keeping the country advised of the condition of the system. It has undertaken to carry out this duty in part by the establishment of a publication known as the Federal Reserve Bulletin, in which are collected notices and statements about the work undertaken and the results accomplished in the operation of the system. Much more might be said of the detailed work of the board in the task of educating the public to a knowledge of its operations and of standardizing banking practice, but the statements already made practically cover the ground in its most essential aspects.

II. ORGANIZATION OF THE BOARD.

The Federal Reserve Act imposes practically no limitations upon the methods by which the board performs its own work. In accordance with the provision of the law which authorizes the Secretary of the Treasury to provide quarters for the board in his department, the main offices at Washington have been located in the Treasury Building. While there is no rigid practice, it has been customary to hold meetings from three to five times a week, usually each day, although two meetings a day have not been uncommon.

A set of by-laws defining the organization of the board was early adopted, and these provide for an executive committee whose function it is to transact all necessary business not involving any new plans or policy. Other committees may meet occasionally as convenience dictates. Sessions of the board are held in private, and thus far no public sessions, with the exception of the hearings on appeals from decisions of the Reserve Bank Organization Committee, have been appointed.

When a decision has been arrived at with reference to a proposed change in the discount rate, or the adoption of any new policy or method of business, the Federal Reserve agents are at once advised by telegraph or letter, and then the decision is communicated to the various Federal Reserve banks. The Federal Reserve agent is regarded by the board as its representative on the ground, and, as such, the official medium of communication between it and the bank to which he is accredited; although the board may, and frequently does, hold direct communication with the governor of the Federal Reserve bank as being the active operating officer.

The Comptroller of the Currency is a member of the Federal Reserve Board. The Federal Reserve Act did not change his previous function as chief of the national banking system, or his responsibility to the Secretary of the Treasury and to Congress. These relationships, therefore, continue, and his presence on the board simply serves to establish a connecting link between the supervision of the

national banking system as such, and the general supervision of the Federal Reserve system, including Federal Reserve banks and such non-national banks as may have become members.

In the same way the Secretary of the Treasury's membership in the board in no way alters his other relationships or duties. The fact that he presides over the board enables him to communicate to it necessary information with reference to the policies of the Treasury Department on financial and banking questions, and to receive from it advice and information concerning the work of the Reserve system. Under the Federal Reserve Act the placing of public deposits in the Reserve banks is left entirely in the hands of the Secretary of the Treasury. The membership of the Secretary of the Treasury in the Federal Reserve Board should, under these conditions, be much more than merely formal, and includes much more than the mere rendering of advice and suggestions. It is of necessity a practical working participation on the part of the Secretary of the Treasury in the affairs of the board, and, conversely, a participation on the part of the board as a conservator of the banking resources of the country in the management of one set of the activities of the Treasury Department.

In organizing its staff at Washington for the performance of the duties already enumerated and others incidental to them, the Federal Reserve Board found it desirable to recognize several distinct divisions. The task of examining member banks (not national) and of making periodic examinations of Federal Reserve banks has been committed to a distinct bureau or division known as the Bureau of Audit and Examination, headed by a chief under whom is organized a small corps of examiners and assistant examiners. The task of examining the twelve Federal Reserve banks would not in itself be a heavy one, but, as state banks enter the system, the duty of ascertaining whether they are in suitable condition for admission, and of making sure that they continue to be so, involves a considerable amount of labor.

Another of the main divisions into which the board's work

is divided was that of reports and statistics. When the Federal Reserve Act was drawn, provision was made for a weekly report of the condition of all Federal Reserve banks and of each bank, showing the main items in their accounts. This is prepared in the Division of Bank Operations from data which are weekly telegraphed to the board, and are combined to make up the final statements. Provision was also made when the Federal Reserve banks were organized for regular reports by the several banks of paper purchased, with name of purchaser, maturity, rate, etc. Complete lists showing all these items of information, and giving data as to the daily condition of the several banks, are daily forwarded to Washington by each one of the institutions. It is the duty of the Division of Bank Operations to combine and analyze them and to prepare the result of the study in such form for examination by members of the board as will aid them in forming conclusions regarding the business of member banks, as indicating necessary changes in rates of discount, and as otherwise determining the policy to be pursued in the general conduct of the banking system. A later modification of this part of the board's work was made by the appointment of a statistician in general charge of the statistical work of the organization, while the routine work of compiling reports was left to the Division of Bank Operations under an independent head. In 1918 a Division of Analysis and Research was organized. To it was given the general scientific work of the board and the supervision of the monthly Bulletin and other scientific publications. This later became the present Division of Research and Statistics and a realignment of work was effected between it and the Division of Bank Operations.

In the Federal Reserve Act it was specified that each Federal Reserve bank might act as a clearing house for its members, but that the Federal Reserve Board might act as a clearing house for the Federal Reserve banks, or might designate one of the Federal Reserve banks thus to act. In pursuance of this authority, the board has established a system of clearing in Washington for the pur