Member
Banks
The nation’s commercial banks can be divided into three types according
to which governmental body charters them and whether or not they are members of
the Federal Reserve System. Those chartered by the federal government (through
the Office of the Comptroller of the Currency in the Department of the Treasury)
are national banks; by law, they are members of the Federal Reserve System.
Banks chartered by the states are divided into those that are members of the
Federal Reserve System (state member banks) and those that are not (state
nonmember banks). State banks are not required to join the Federal Reserve
System, but they may elect to become members if they meet the standards set by
the Board of Governors. As of March 2004, of the nation’s approximately 7,700
commercial banks approximately 2,900 were members of the Federal Reserve
System—approximately 2,000 national banks and 900 state banks.
Member banks must subscribe to stock in their regional Federal Reserve
Bank in an amount equal to 6 percent of their capital and surplus, half of which
must be paid in while the other half is subject to call by the Board of
Governors. The holding of this stock, however, does not carry with it the
control and financial interest conveyed to holders of common stock in for profit
organizations. It is merely a legal obligation of Federal Reserve membership,
and the stock may not be sold or pledged as collateral for loans. Member banks
receive a 6 percent dividend annually on their stock, as specified by law, and
vote for the Class A and Class B directors of the Reserve Bank. Stock in Federal
Reserve Banks is not available for purchase by individuals or entities other
than member banks.