Reply #2: In the early days of the Fed, the district banks had much more autonomy.

[roamer65]

The district system was used to confuse the American people as to what the Fed really was...a central bank. The "central bank" name was specifically avoided in the beginning. Eventually the battle for Fed control came down to two districts, B-2 (New York) and G-7 (Chicago). NY Fed President Benjamin Strong eventually won and the NY Fed basically became the master of the system.

On a side note, NY Fed president Benjamin Strong was a very close personal friend of Bank Of England chief Montagu Norman. With Norman, much of the groundwork was laid for the Great Depression in their dealings to manipulate the dollar-pound exchange rate in the 1920's, specifically the 1927 Fed easing to bolster the pound.

Strong was also one of the Jekyll Island bunch, btw.