First, why haven't the boundaries of the 12 Federal Reserve Districts
been adjusted to reflect changes in population or economic growth? Second,
do the western states receive similar central banking and research services
from the Federal Reserve, as do other areas of the country where Reserve
Banks serve smaller geographic areas and populations?
The quick answer to your first question is that the Districts were designed
to provide central banking services on a regional basis through Reserve
Banks headquartered in key financial centers. Even when they were set
up in 1913, the Districts varied widely in the population and geographic
areas they served. Second, each of the Reserve Banks has a staff of economists
who conduct research, provide current analysis, and publish reports and
papers on their District economies. That's the short answer; I'll go into
more detail in the paragraphs to follow.
The number and location of the 12 Federal Reserve District Banks was
the subject of much debate, even before final passage of the Federal Reserve
Act in 1913.
After passage, the Federal Reserve Bank Organization Committee was charged
with selecting the number and location of the Federal Reserve Banks and
defining the Federal Reserve Districts.
A variety of entities, from financial centers to rural communities, from
cities to states, vied for one of the proposed regional Reserve Banks
or Reserve Bank Branch offices. The committee held hearings in many cities
across the nation to gather input from bankers, the business community,
government officials, and the public on where to locate the new Reserve
Banks. The committee also conducted a poll of national banks.
Financial Center Locations
The Committee chose 12 cities as Reserve Bank locations, shown on the
map below, in part because of their importance as banking centers in 1913.
Most of the Districts with large geographic areas or populations or both,
also had Branch offices that were designed to provide central banking
services in other parts of the District.
As selected, the 12 cities and their Districts were not evenly divided
in terms of either population or the geographic area they were to serve.
For example, state population estimates for 1913 indicate that the Seventh
District, headquartered in Chicago, included the largest share
of the nation's population at that time. Chart A shows that the Chicago
Fed served a share of U.S. population that was close to four times
the share served by the neighboring Ninth District, with its headquarters
in Minneapolis. The San Francisco District, even though it encompassed
the largest area of the nation's landmass, accounted for only a small
share, about 6 percent, of the nation's population in 1913.
Over time, the Federal Reserve System's regional structure of banks and
branches has provided central banking services to the nation, even as
commerce, financial activity, and population have shifted. For example,
since 1913 the share of population accounted for by each Federal Reserve
District has changed. Three Districts, San Francisco, Atlanta, and Dallas,
have recorded sizeable gains in the share of population since 1913;
all but one of the other nine Districts have lost share. The Twelfth
District has experienced the largest change; its share of the nation's
population more than tripled from 1913 to 2000. By 2000 the District accounted
for nearly one of every five U.S. residents, as Chart B shows.
How Does the SF Fed Provide Central Banking Services to such a Large
Region with a Large Population?
The Federal Reserve Bank of San Francisco has four Branch offices, located
in Los Angeles, Seattle, Portland, and Salt Lake City. The Bank and its
Branches provide a variety of central bank functions, including serving
as the U.S. Treasury's bank. Payments system operations include check
processing, electronic funds transfer, automated clearinghouse, coin,
and currency services. Another important central bank function includes
supervision and regulation of financial institutions. Reserve Banks regulate
state-chartered banks that are members of the Federal Reserve System,
U.S. operations of foreign banks, bank holding companies, and financial
Fed operations have been adjusted from time to time to reflect changing
economic situations in the Twelfth District. In 1938 a Branch in Spokane
was closed. In September 2001 a new processing center will be opened to
handle the increased demand for cash services in the Phoenix area.
How Does the SF Fed Analyze the District Economy?
Analyzing conditions in the large and diverse Twelfth District does present
some challenges, but economists like challenges! About half of the San
Francisco Fed's 40 Economic Research department staff members are economists.
The research staff advises Federal Reserve Bank of San Francisco President
Robert T. Parry on national, international, financial, and regional economic
conditions. Much of their research and analysis, including analysis of
Twelfth District banking and economic trends, is available from the Bank's
- Beige Book, a survey of regional economic conditions that is
conducted eight times per year.
- Western Economic Developments, a quarterly (in 2001) analysis
of current economic conditions in the Twelfth District.
- Economic Letter, about 40 short essays on a current economic
topic, including some regional issues, are published each year.
- FedViews, a monthly overview of the current U.S. economic outlook
from the Bank's own economic forecasts.
Dr. Econ (Q1 2012): Is the Fed still in the business of processing checks?
- Fed-in-Print, a searchable index of Federal Reserve System
Economic Research publications.
Johnson, Roger T. (1995) Historical Beginnings…The Federal Reserve
System, Federal Reserve Bank of Boston, revised December 1995. http://www.bos.frb.org/about/pubs/begin.pdf
1913 Census Bureau population estimates: Historical Annual Time Series
of State Population Estimates and Demographic Components of Change, 1900
to 1990 Total Population Estimates. http://www.census.gov/population/www/estimates/st_stts.html
2000 Census Bureau Resident population, U.S. Census Bureau. http://www.census.gov/population/www/cen2000/respop.html
Twelve Banks: The Strength of the Federal Reserve, Thomas M. Hoenig,
President and Chief Executive Officer Federal Reserve Bank of Kansas
City (PDF - 30KB)