Federal Reserve Redistricts
The Federal Reserve Bank was created in 1913 after a financial crisis in 1907 where almost 2/3 of all banks could not redeem deposits into cash. The Federal Reserve Act created the Federal Reserve Bank. The choice of location for the banks was driven by the population density of 1914 and politics as well. St. Louis and Kansas City are both located in Missouri, yet there are two banks located in Missouri. Champ Clark was the Democratic Speaker of the House in 1913 and hailed from Missouri, so this is why Missouri has two banks. Richmond is also home to a Fed Bank since Carter Glass was the architect of the Bill in the House and was from Virginia.
The Federal Open Market Committee is made up of 7 Board of Governors which serve 14-year terms, the president of the Federal Reserve Bank of New York, and four other rotating Federal Reserve Bank presidents. The FOMC then makes monetary policy based on recommendations from the members. The economies of the Federal Reserve Bank presidents affect the policy changes that each recommends.
The populations of each district were somewhat comparable in 1913, but they are currently way out of proportion.
This affects the policy recommendations since the banks rotate with the exception of New York. San Francisco’s district makes up 19% of the population which is more than the current districts of Cleveland, St. Louis, Kansas City, and Boston combined! The skew in representation restricts how the monetary policy is implemented because the economies in the West do not get fair representation. The Atlanta and Chicago banks are also being squeezed by having to rotate in and out of the FOMC.
New York should be represented every year since New York deals with foreign exchange rates the most. New York also makes up for almost 70 percent of Federal Reserve Bank deposits!
I propose to change the current twelve districts into districts that much better represent the current population shifts. The West and the South have grown in population significantly while the Midwest and Northeast have much smaller gains in population. The United States had almost 310 million people in the 2010 Census, so I decided to use these numbers in creating new districts. 310 million divided by 12 districts equates to about 26 million per district. I also wanted to create similar economies within districts since mining communities in Colorado would not have the same policy recommendations as a surfing community in Orange County, California.
These are my proposed 12 districts that shift the population to similar to sizes in addition to having similar economies. I also didn’t want a state to have its own district since they would be more likely to tailor monetary policy that would only serve its own interests. Monetary policy would be more difficult to decide since there would be extreme viewpoints.
- Boston
Area: Maine, Massachusetts, Vermont, New Hampshire, Rhode Island, Upstate New York, and Eastern Connecticut
Branches: N/A
Population: 20.182 million
Boston represents New England, so this district remains relatively the same. Upstate New York is also added to this district, but no other cities are big enough to require a branch which is the same as the current Boston district.
2. New York
Area: New York Combined Statistical Area (NYC, Long Island, Hudson Valley, Northern and Central NJ, Western Connecticut, and Lehigh Valley)
Branches: N/A
Population: 21.497 million
The New York district loses upstate New York to better focus on its metropolitan area while also maintaining its annual status on the FOMC.
3. Philadelphia
Area: Pennsylvania (with the exception of Lehigh Valley), Maryland, Delaware, Northern VA, and West Virginia
Branches: Baltimore, Washington DC, Pittsburgh
Population: 25.31 million
The Mid-Atlantic region is represented in this district, and Philadelphia is still the home of its district.
4. Charlotte
Area: Virginia with the exception of northern VA, North Carolina, South Carolina, East TN (Knoxville and Chattanooga), and Savannah, GA
Branches: Richmond, Raleigh
Charlotte replaces Richmond because Charlotte is home to the United State’s second largest financial center. Bank of America and Wachovia are based in Charlotte, so it would be a much better district center as opposed to Richmond. East Tennessee is home to the Appalachian Mountains and will be better served by being in this district.
Population: 22.279 million
5. Atlanta
Area: Georgia and Florida
Branches: Jacksonville, Miami, Tampa
Population: 28.141 million
Atlanta still maintains its federal bank while becoming much smaller in size and population. Florida would gain more influence which would help it as well.
6. Columbus
Area: Michigan, Ohio, Indiana
Branches: Cincinnati, Detroit, Indianapolis
Population: 27.244 million
Columbus is the 15th-largest city in the United States in addition to being one of the fastest-growing. These states are part of the Rust Belt, so they would have similar economic interests and recommendations.
7. Nashville
Area: Central and West Tennessee, Alabama, Mississippi, Kentucky, Arkansas, Louisiana, and Missouri
Branches: St. Louis, Memphis, New Orleans, Louisville
Population: 28.676 million
The central Southeastern states are better represented instead of being in the large conglomerate that the Atlanta district was.
8. Chicago
Area: Illinois, Wisconsin, Minnesota, and Indiana’s Lake County and Porter County
Branches: Milwaukee, Minneapolis
Population: 27.527 million
This district is comprised of the central part of the Midwest. Lake County and Porter County are part of the Chicago metropolitan area, so they are in this district.
9. Dallas
Area: Texas and Oklahoma
Branches: Houston, San Antonio, and Oklahoma City
Population: 29.166 million
Texas could support its own district, but it would create monetary policy to serve its best interests. Oklahoma will help to balance this out while also gaining a more significant influence.
10. Phoenix
Area: Utah, Colorado, New Mexico, Arizona, Montana, Wyoming, Nebraska, Kansas, Kansas City metro area, North Dakota, South Dakota, and El Paso metro area
Branches: Denver, Salt Lake City, Omaha, El Paso
Population: 25.952 million
The Phoenix district is largest in land area, but this is needed because the population of most of these states are small. Kansas City loses its status as a district bank and is relegated to a Fed branch.
11. San Francisco
Area: Northern California, Oregon, Washington, Alaska, Idaho
Branches: Seattle, Portland
Population: 27.434 million
The Pacific Northwest is represented in this district, and San Francisco maintains its status as district bank.
12. Los Angeles
Area: Southern California, Nevada, Hawaii
Branches: San Diego, Las Vegas
Population: 26.688 million
Southern California is better represented since it would not share the same views as the western Mountain states or the Pacific Northwest. Hawaii
The highest population district is Dallas with 29 million people while Boston has the lowest with 20 million people. There is a range of 9 million people, so the districts are much more proportionate in population. Changes to the Fed system would have to go through Congress, so politics would play a major role just like 1913. Change is unlikely to occur, but maybe one day they could be changed.
