reserve banks in this fund are counted as legal reserve. On September 8, 1915, the board authorized accounts to be opened with the twelve federal reserve agents. The fund is now divided as follows: Balances to the credit of federal reserve banks, $69,240,000; balances to the credit of federal reserve agents, $33,380,000.

"These amounts are now held by the board in gold order certificates in denominations of $10,000. Deposits in the fund are, through the courtesy of the Treasury Department, made by federal reserve banks through the sub-treasuries. When a deposit is made at a sub-treasury advice is wired to the Treasurer of the United States at Washington, who then causes gold certificates to be issued to the Federal Reserve Board. When payments are made from the fund the operation is, of course, reversed. Transfers are, however, for the most part on the books of the Gold Settlement Fund by credits and debits between the twelve banks or between banks of the federal reserve agents.

"The Gold Settlement Fund is administered for the board by officers connected with its organization, who do the work in addition to their other duties. Its cost of administration during the first six months of its existence has been slightly in excess of $1,000. During this period balances of $719,688,000 have been settled."

It may be added that the process stripped of its technicalities is simply that of issuing federal reserve notes against a deposit of gold. This is what every central banking organization of the world is doing. Right here it may be stated that the Bank of England is authorized to issue a certain fixed amount of currency against the debt of the English Government and other securities. All additional currency, however, that it issues is based upon a deposit of gold.

It may also be stated that the European war has changed the United States from a debtor to a creditor nation. The country possesses more gold than ever has been held by any other country.

We now possess the strongest banking organization in the world. In the federal reserve system we have tested machinery as well as adequate means and the gold will leave the country to settle adverse balances not in the form of destructive tidal waves but in a rational mode of action.

PROTEST OF THE AMERICAN

BANKERS' ASSOCIATION

AGAINST COMPTROLLER'S "USURY" CIRCULAR November 18, 1915, the National Bank Section of the American Bankers' Association, through its executive committee, adopted resolutions of protest against a recent circular sent out by the Comptroller of the Currency in which National banks were charged with exacting interest at usurious rates. The resolutions, which were adopted at a meeting held in the city of New York, attended by all the members, called upon him to modify and correct his statement.

The comptroller stated that the highest rates have been charged in portions of the West and South where money is known to be scarcest, but the records show more or less numerous instances in the East and North and Northwest. Out of a total of 7,615 banks, 1,022 in different sections of the country admit that they have been receiving an average of ten per cent. or more-some an average of eighteen per cent.-on all their loans.

He also stated that 771 of these banks were in States where the rates they charged involved a direct violation of the usury laws. Nine banks in the State of New York, he declared, admitted charging an average of twelve per cent. or more on their loans.

Here are the resolutions:

Whereas, The Comptroller of the Currency has, under date of October 27, addressed each National bank in the United States on the subject of interest rates charged by some of the banks of the country; and,

Whereas, In the opinion of the executive committee of the National Bank Section, American Bankers' Association, the practices complained of by the Comptroller are confined only to some sections of the country and are not general; and that, as a matter of fact, millions of dollars are loaned by the banks at much less than legal rates; and,

Whereas, The letter of the Comptroller was given very wide publicity and has created a bad impression and has done a great injustice to the great majority of bankers throughout the country. It is therefore

Resolved, That this executive committee respectfully asks the Comptroller of the Currency to make such modifications and corrections of his statement as will do justice to the great number of banks which have not violated the statutes relating to rates of interest.

COMPTROLLER OF THE CURRENCY ISSUES NEW RULES FOR CALCULATING RESERVES

November 24, 1914, the Comptroller of the Currency published a decision construing section 27 of the Federal Reserve Act, relating to the extension of the Aldrich-Vreeland Act of May 30, 1908, in which he holds that so much of the act as modified the provisions of 5191, R. S., regarding National bank reserves was not extended, and has expired by limitation. This makes it necessary for National banks to maintain reserves against United States deposits. In the author's opinion the decision conforms with the statute. It is as follows:

TO THE CASHIER:

Washington, November 24, 1914.

In reference to the form for calculating reserve, issued November 16, 1914, you are advised that—

(1) This form is for your guidance in calculating reserve under section 19 of the Federal Reserve Act, as amended, which went into effect upon the opening of the federal reserve banks on November 16,

1914.

(2) Section 5191, U. S. R. S., requires reserves to be held by National banks against the aggregate amount of their deposits. Section 14 of the Act of May 30, 1908, which amended this section and exempted the deposits of public moneys of the United States in designated depositaries from the reserve requirements, was repealed by section 27 of the Federal Reserve Act. Therefore the National banks are now required to carry reserve against such deposits, and in calculating the reserve all deposits of public moneys must be included in item 4 of the aforesaid circular sent you by direction of the Secretary of the Treasury under date of November 16, 1914.

In other words, no deposits are now exempt from reserve requirements, and the lawful reserve must also be maintained against all United States deposits, including postal savings funds, deposits of United States disbursing officers, Canal Zone and Philippine deposits, and all other Government funds.

(3) Section 19 of the Federal Reserve Act provides that in estimating reserve the net balance of amounts due to and from other banks shall be taken as the basis for ascertaining the aggregate deposits against which reserves shall be maintained.

(4) If the amount carried with reserve agents exceeds the amount which the law permits to be counted as reserve with such agents, such excess may be counted as "due from banks" and added to the amount due "from banks other than reserve agents" as a deduction from the amount "due to banks" in calculating the reserve. This necessitates, of course, a further computation.

(5) The five per cent. redemption fund deposited by your bank with the Treasurer of the United States cannot be counted as part of your lawful reserve. (Section 20. Federal Reserve Act.)

(6) National bank notes are not to be treated as an offset, and are not to be taken into consideration in any way in the computation of your reserve.

ATTORNEY GENERAL'S OPINION AS ΤΟ THE BOARD'S AUTHORITY

November 24, 1915, the following carefully considered opinion of the Attorney General was published. It was prepared at the request of the President, the Secretary of the Treasury and the Governor of the Federal Reserve Board. It is as to the power of the board to abolish any of the existing districts or banks created by the federal reserve statute. The ground is taken that the board does not possess such power. This is in the face of a clause of the Federal Reserve Banking Act, which says that the districts created "may be readjusted and new districts created by the Federal Reserve Board not to exceed twelve in all."

The effect of the opinion is that the Federal Reserve Board is held not to have the power to remove the federal reserve bank from the city in which it was originally placed by the organization committee of the reserve banking system to another city in the reserve district. The board may have the power, however, to change the boundaries of a district.

The Attorney General holds that Congress did not confer in express terms the power to abolish a reserve bank, and that the record of committee hearings and congressional debates shows that there was no intent to confer such power.

It is his opinion that not only does nothing in the reserve bank act contain an indication that such power was intended to be conferred, but there is evidence that Congress intended not to confer such power because of the language of section 4 of the act, which guarantees to the reserve bank for a period of twenty years the right to exist subject only to the consequence of some violation of the law or the enactment by Congress of a law that should deprive it of its existence.

The opinion cites the changes made by the reserve board in northern New Jersey and says they are valid, as the board clearly had the power to make them. The board, however, cannot remove the reserve bank, for instance, in the fifth reserve district from Richmond to Baltimore. Congress alone has the power to do that.

TEXT OF THE DECISION

The text of the Attorney General's opinion is as follows:

DEPARTMENT OF JUSTICE

Washington, Nov. 22, 1915.

SIR: I have your letter transmitting a request from the Governor of the Federal Reserve Board for my opinion as to the power of the board to abolish any of the existing federal reserve districts or federal reserve banks. The Secretary of the Treasury, who is ex officio chairman of the board, united with the Governor in making this request; and you ask that I comply with it.

The act creating the federal reserve system (38 Statute 251, chapter 6) provided for an organization committee to be composed of the Secretary of the Treasury, the Secretary of Agriculture, and the Comptroller of the Currency (Section 2).

The act also established a permanent body known as the Federal Reserve Board (Section 10).

A reading of the act shows at once that the organization committee was created not merely for the purpose of attending to the formalities of organization or to serve as a stop-gap until the Federal Reserve Board should come into existence, but that it had an independent function to perform, and to that end was invested with wide powers. That is to say, its function was to organize the system as contradistinguished from the function of the Federal Reserve Board, which was primarily to administer the system.

This being the general scheme, the act provided that the organization committee, as soon as practicable, *** 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,