FEDERAL BANKS AND FINANCIAL ORGANIZATION 63 



iited to stockholders out of the net profits of the Federal Reserve Bank. 

 Half the surplus profits shall be paid to the government of the United States 

 and the other shall constitute a special reserve fund. When the latter 

 has reached an amount equal to 40 per cent, of the bank's paid up capital 

 the whole balance will return to the governement. 



The property of Federal Reserve Banks — including their capital 

 shares, their reserves and all their revenue, is exempt from all taxation of 

 the United States Government or the States or other authority, except 

 the land tax. 



When the Organization Committee has accomplished its task it gives 

 place to the Federal Reserve Board which meets in Washington and is 

 the motive power of the whole system. It has seven members, namely 

 the vSecretary of the Treasury and the Comptroller of the Currency who 

 are members ex officio, and five others appointed to hold office for ten years 

 by the President of the United States with the consent of the Senate. In 

 appointing them the President has due regard to a fair representation of 

 the different commercial, industrial and geographical divisions of the coun- 

 try, and he designates one of them as governor and one as vice-governor 

 of the Federal Reserve Board, the former being the board's active execu- 

 tive officer. 



The Act also creates a Federal Advisory Council, consisting of as many 

 members as there are Federal Reserve Districts, each Federal Reserve 

 Bank sending a representative to it. This council meets at least four 

 times a year : it confers directly with the Federal Reserve Board on gene- 

 ral business conditions ; it makes oral or written representations concern- 

 ing matters within the jurisdiction of this board ; and it calls for infor- 

 mation and makes recommendations in regard to discount rates, rediscount 

 business, note issues, reserve conditions in the various districts, the pur- 

 chase and sale of gold or securities by reserve banks, open market opera- 

 tions by these banks, and the general affairs of the reserve banking sj^stem. 



Previously National Banks were obliged to have a reserve equal to 

 25 per cent, of the amount of their deposits in the reserve towns and 15 per 

 cent, in the other towns ; but the Act of 191 3 made this percentage 18 in 

 New York, Chicago and St. lyouis, 15 in other reserve towns, and 12 in non- 

 reserve towns. The excesses of available reserves should be transferred 

 in accordance with certain conditions to the Federal Reserve Bank. 



For twenty years from 1915 the member banks of a Federal Reserve 

 Bank may apply to sell "all or some of their circulating notes which they 

 desire to retire. 



The Federal Reserve Board will decide on such applications. A Fede- 

 ral Reserve Bank may not purchase more than §25,000,000 of such bonds 

 in a year. 



Upon depositing with the Treasurer of the United States bonds so 

 purchased, or any bonds with the circulating privilege acquired under this 

 Act, any Federal Reserve Bank shall receive from the Comptroller of the 

 Currency circulating notes in blank equal in amount to the par value of 

 the deposited bonds. Such notes shall be issued and redeemed on the 



