How were the Federal Reserve Bank locations selected?

Abstract: The Reserve Board Organization Committee decision to locate 12 Federal Reserve Banks is reviewed. Probability choice models estimate a city’s selection probability for a Federal Reserve Bank location. Results of predicted selections show reserve cities were selected for their spatial economic characteristics, including information contained in bankers’ preferences, infrastructure development, population and recent National Banking System growth, rather than Democratic Party politics. The Reserve Board Organization Committee placed Federal Reserve Banks in preeminent financial and commercial centers, and relied upon bankers’ preferences for the remaining non-obvious selections. Given 12 cities were to be selected, the conclusion drawn is the decision was in the public interest. [Copyright &y& Elsevier]