How Survey Data Helped the Federal Reserve Make a Regional Map of the United States

Among the many interesting ways to regionally divide the United States, one particularly intriguing division stands out: the districts of the Federal Reserve Bank. Conceived a hundred years ago, the U.S. was divided into twelve regions, each anchored by a regional city bank:

While the divisions seem a bit odd and rather uneven, there is a logic to this map's construction and it was conceived, at least partly through the application of some survey data. When the Federal Reserve Act was passed in 1913, the Federal Reserve System was defined somewhat vaguely, at least when it came to the districts of the Reserve Banks:

As soon as practicable, the Secretary of the Treasury, the Secretary of Agriculture and the Comptroller of the Currency, acting as "The Reserve Bank Organization Committee," shall designate not less than eight nor more than twelve cities to be known as Federal reserve cities, and shall divide the continental United States, excluding Alaska, into districts, each district to contain only one of such Federal reserve cities. The determination of said organization committee shall not be subject to review except by the Board of Governors of the Federal Reserve System when organized: Provided, That the districts shall be apportioned with due regard to the convenience and customary course of business and shall not necessarily be coterminous with any State or States.

The structure was left undefined, and even the number of banks was not specified exactly, with only the range of between 8 and 12 given. So how did we get the map above?

A short book released by the Boston Fed Historical Beginnings…The Federal Reserve provides a great overview of process by which the Federal Reserve Act was enacted and implemented (the Minneapolis Fed and St. Louis Fed also have some great information). The creation of districts and the choice of Federal Reserve Banks fell to primarily to two members of President Woodrow Wilson's cabinet: William McAdoo and David F. Houston. After visiting over a dozen cities, they decided to choose the Bank cities via a survey: they polled more than 20,000 national and state banks and trust companies and asked them their first, second, and third choices for a reserve bank location. From Historical Beginnings:

Early in 1914 the committee polled all the national banks in the country on their preference for a Federal Reserve city with which they would be affiliated, giving them the opportunity to make a first, second, and third choice. The banks, of course, had no idea what the final Federal Reserve district lines might be, so several of them selected as their choice of location of a Federal Reserve bank city that was not in their final district. (Indeed, four banks in California listed New York City as their second choice.) There is strong reason to believe that this poll of national banks was the most important single factor in determining the cities that received Federal Reserve banks.

Many minor cities received only a scattering of votes (Sioux City, Iowa and Springfield, Massachusetts, for example). By weighing each national bank’s preferences as to first, second, and third choice, the committee finally came up with a list of the 12 cities with the most substantial support: Atlanta, Boston, Chicago, Cincinnati, Dallas, Kansas City, Minneapolis, New York, Philadelphia, Richmond, St. Louis, and San Francisco.

All of these twelve cities received Federal Reserve Banks, except Cincinnati, which was replaced with Cleveland. And based on these cities, it seems that "the district lines were drawn around them."

While it appears that the process of constructing the details of the district boundaries were quite complicated, I can imagine it being akin to making maps of sports fandom using more modern datasets: the banks voted on which cities they wanted to be aligned with, and based on which cities were most popular in each location, a rough district boundary could be constructed. This is similar to how we can map out the contours of everything from Red Sox Nation to which parts of the United States root for which NFL team:

Just as sports fandom maps can be generated by where there is a preponderance of fans for a certain team, the Federal Reserve districts likely used similar kinds of considerations. This is borne out by looking at the shape of the district for the Kansas City Federal Reserve Bank, with the bank being located near the eastern edge of the district. This seems odd, but not if you look at the polling data:

As for Kansas City, the committee again pointed out that it, far more than any other city in the district, had been the choice of the national banks. None of the other major cities in the district—Denver, Omaha, or Lincoln—even came close to the banking resources of Kansas City.

Ultimately, the Federal Reserve Bank system was constructed through the analysis of some great Medium Data.

Thanks to Debra Miller Arbesman for her pointing this amazing regional map out to me. And for more on regional borders, check out this article.

Top image:rlinger/Flickr/CC