become a member bank: California, Idaho, Iowa, Kentucky, Louisiana, Maine, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, South Carolina, South Dakota, Texas, Utah, Virginia and Washington.

SEMI-ANNUAL ASSESSMENT BY FEDERAL RESERVE BOARD

June 19, 1915, the Federal Reserve Board sent to each of the twelve federal reserve banks copies of a resolution levying an assessment against them of a tenth of one per cent. on their gross capital, to meet the estimated general expenses in connection with the work of the board.

The expenses of the office of Comptroller of the Currency in salaries alone during the past fiscal year were $136,000, according to the last annual report of the comptroller. The expenses of dies, etc., incurred in the comptroller's office amounted to $543,000 more. The expenses of the Federal Reserve Board are but slightly in excess of the expenses of the comptroller's office. The first assessment was made November 2, 1914, for $431,768.40. This amount carried the expenses for printing the federal reserve notes. Since then arrangements have been made whereby each bank pays for its own notes. The basis of estimate is the capital stock allotted to member banks figured at its full value of about $108,390,000.

FIRST BRANCH AUTHORIZED BY THE FEDERAL RESERVE BOARD

June 24, 1915, the first branch authorized by the Federal Reserve Act was established by the Federal Reserve Board. This was done at the request of the Federal Reserve Bank of Atlanta to open a branch at New Orleans. No definite assignment of territory to the branch is made, but the board's statement is that it is intended to assign the

branch to member banks in Louisiana, Mississippi and Alabama.

The branch is authorized to conduct only operations in the discount and purchase of commercial paper and acceptances and those relating to clearing collections and exchange transactions, and transfer of funds. Transactions will be considered as the transactions of the Reserve Bank of Atlanta and reported in the statements of the latter.

"While the board," says the statement, "has carefully considered the principles which should be observed in opening a branch, it is not ready at this time to promulgate any general rules applicable to other points, as it regards the proposition as somewhat experimental. It is felt that the experience gained in this case will have an important bearing upon the future development of the branch bank idea."

The New Orleans Clearing House Association has undertaken to make good for the first year of operation of the branch any difference between expenses and revenues.

PROPOSED RESTRICTION UPON USE OF FEDERAL RESERVE NOTES

June 30, 1915, the Labor's National Peace Council asked, through its general counsel, the Federal Reserve Board, to place a restriction upon the use of federal reserve bank notes. This request was to the effect that no federal reserve notes shall be issued to a bank which may issue them in connection with any transaction involved with the sale of munitions of war. It was stated that the immediate problem was connected with the placing of a war loan of $50,000,000 to France and another of $150,000,000 for Great Britain. It was claimed that as international law forbids a neutral nation to issue a war loan to any belligerent or to supply instruments of war, the federal reserve banks, as branches of the United States Government, would involve our country in a breach of neutrality should their notes be used in financing war loans or contracts for

supplies of a military character. It was urged on the Federal Reserve Board that its regulations in regard to discounts be amended so as to forbid advances of money in any form where it is certain that such advances are in the interest of any belligerent power and where the amount involved is in excess of $50,000 to require an affidavit as to the uses to which the money is to be put. It was also asked that a circular be sent to all reserve banks and member banks making plain that the Federal Reserve Board disapproves of making discounts or loans in any manner for war purposes.

It was not understood that the request of the National Peace Council concerns itself in any way with acceptance or that a federal reserve bank had been called upon to discount an acceptance arising out of a sale of military supplies to belligerents. The case may, however, be regarded as analogous to one in which the Government should pay its bills only upon the express stipulation that the money received by the creditor should be devoted only to certain purposes.

A second issue of a considerably larger scope is involved in the question whether a federal reserve bank is a government institution. With the exception of such deposits as the Government may make with federal reserve banks, every dollar involved in their transactions is owned privately. To a material degree member banks are private institutions. The capital of the regional banks is all supplied by the member banks and of the Board of Governors of each bank the member banks select six and the Federal Reserve Board appoints three. While the members of the Federal Reserve Board are appointed by the President, only two out of seven, the Secretary of the Treasury and the Comptroller of the Currency, are ex-officio members.

It may be added that the National Peace Council claimed that the federal reserve banks by section 7 of the

Federal Reserve Act are constituted a part of the Government, because the Government is entitled to the profits of the banks above six per cent. as a franchise tax.

1END OF ALDRICH-VREELAND ACT

June 30, 1915, the Aldrich-Vreeland Emergency Currency Law ended. It was enacted May 30, 1908, as an amendment to the National Bank Act. It was reenacted by section 27 of the Federal Reserve Act. This amendment provided the country with a temporary means of financial protection, pending the adoption of the Federal Reserve Act, and it was to have expired on June 30, 1914, after an existence of seven years. During these seven years its use was never once required. The foregoing mentioned section was extended for one year by section 27, to the end that the new banking law should not be entirely unsupported when it came into existence. Undoubtedly the Aldrich-Vreeland Act saved the country from a disastrous panic following the outbreak of the European war.

The original bill for this act, as drawn by Senator Aldrich, provided only for the issue of emergency currency by the Secretary of the Treasury, against deposits of mumunicipal and State bonds. The House amended it by providing for other issues through currency associations, based upon commercial paper, the idea that had been illustrated by the clearing house issues of 1907. Neither Senator Aldrich nor Mr. Vreeland, who, as chairman of House Committee on Banking and Currency, drafted the amendment, regarded the act as anything more than a temporary expedient, and the act carried a provision for a National Monetary Commission to devise a system. Wiseacres who aim to oppose everything that the bankers favor, were violently opposed to the Aldrich-Vreeland law. A desperate effort

1 Paine's National Banking Laws (7th Ed.), pp. 15, 16, 185, 210.

was made to talk the measure to death in the Senate, and it was denounced as the sum of all financial villainies, but as has been stated, upon the one occasion when it was used the law rendered very great service to the country.

Immediately after the Secretary of the Treasury's memorable conference with the bankers of New York City, August 1, 1914, the notes authorized by the statute began to be issued.

Under the terms of the law, $500,000,000 of notes had been placed in the Treasury at Washington. Printed on large uncut sheets, the notes were stored in vaults, which, it was expected, would not be opened until the time when the notes would be destroyed in accordance with the statute. The same were taken out August 2, 1914, and distributed to the National banks. Some of the clerks, whose only idea was speed, cut the sheets very hastily on which the notes were printed and rubber-stamped them with the bank officers' names; this is the reason that so many of them had oblong shapes and were insufficiently dried.

This

August 8 the amount approved by the Secretary of the Treasury for issuance had reached $100,068,350. amount was increased on September 5 to $240,979,960, on October 3 to $344,779,640, on November 7 to $379,060,715. February 13, 1915, the aggregate approvals had reached $386,444,215, but by that time $341,067,073.22 of the total amount issued had been retired, leaving the net amount outstanding at that date only $45,377,141.78. The maximum amount outstanding at any time was reached the latter part of October; the redemptions began in the middle part of that month. November 28, $101,602,066 had been retired; December 26, 1914, redemptions had amounted to $217,101,614; January 2, 1915, the total redemptions had amounted to $238,698,483; February 6, $326,203,992; March 6, $354,597,268; April 3, $368,987,024; May 1, $376,097,462, and $380,701,044 on June 5, 1914.