Banker Preferences, Interbank Connections, and the Enduring Structure of the Federal Reserve System

51 Pages Posted: 19 Aug 2015 Last revised: 6 Mar 2019

See all articles by Matthew Jaremski

Matthew Jaremski

Utah State University - Huntsman School of Business; National Bureau of Economic Research (NBER)

David C. Wheelock

Federal Reserve Bank of St. Louis - Research Division

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Date Written: 2015-06-09

Abstract

Established by a three person committee in 1914, the structure of the Federal Reserve System has remained essentially unchanged ever since, despite criticism at the time and over ensuing decades. This paper examines the original selection of cities for Reserve Banks and branches, and placement of district boundaries. We show that each aspect of the Fed’s structure reflected the preferences of national banks, including adjustments to district boundaries after 1914. Further, using newly-collected data on interbank connections, we find that banker preferences mirrored established correspondent relationships. The Federal Reserve was thus formed on top of the structure that it was largely meant to replace.

Keywords: Federal Reserve System, Federal Reserve Banks, Reserve Bank Organization Committee, interbank networks, correspondent banking.

JEL Classification: E58, N21, N22

Suggested Citation

Jaremski, Matthew and Wheelock, David C., Banker Preferences, Interbank Connections, and the Enduring Structure of the Federal Reserve System (2015-06-09). FRB St. Louis Working Paper No. 2015-11, Available at SSRN: https://ssrn.com/abstract=2646150

Matthew Jaremski (Contact Author)

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322-3500
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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David C. Wheelock

Federal Reserve Bank of St. Louis - Research Division ( email )

P.O. Box 442
St. Louis, MO 63166-0442
United States

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