Headquarters of the division were established in the Treasury Building in Washington, but the main office for the conduct of the work was located in New York City. This was necessary in order to enable the division to act promptly upon applications of "dealers " for permission to carry out certain operations required under the Executive order and the regulations issued in connection with it, as probably 95 per cent of the applications are made by New York "dealers." This arrangement has necessitated weekly trips by the director between Washington and New York, but the expeditious service required, because of the nature of the financial operations involved, could not have been rendered otherwise.

Upon receipt of their registration certificates, "dealers,” with a few exceptions, were authorized to carry on their foreign exchange transactions without reference to the Division of Foreign Exchange, provided reports were made on the prescribed forms. As the war progressed, however, it became necessary to require the approval of the director before a number of operations could be carried out, such as transactions in certain exchanges, the issuance of letters of credit, or the making of transfers of funds to cover the shipment of goods from one foreign country to another, the issuance of travelers' letters of credit in excess of $5,000, the issuance of credits to cover goods to be warehoused, which could not be exported or imported because licenses were unobtainable from the War Trade Board, the investment of American funds in foreign countries, action upon confirmations of cablegrams where the cables themselves had never been received, and arbitrage transactions.

At the outset, rulings under the Executive order were required in great number, in cases which called for immediate decisions in order to allow the continuance of legitimate business without interruption. As these requests also came largely from New York institutions, the establishment of the main office in New York City was found to be fully warranted.

"Dealers" desiring to consummate transactions where approval is required beforehand, make application by letter, in duplicate, through the Federal Reserve Banks of their districts, or direct to the Division of Foreign Exchange. Where approval can be given, it is stamped upon the duplicate letter, which is returned by the messenger from the "dealer" presenting the application. As such a large percentage of applications are made in New York, and practically all of such applications come from "dealers" situated in cities where there are Federal Reserve Banks which can communicate with the director by telephone or telegraph, this system has enabled transactions to be consummated without delay, wherever approval could be given without extended investigations made necessary by the national interest. When enemies or allies of enemies have been

involved, delays have been unavoidable, but even in such cases, where the interests of the United States were not jeopardized, nor the enemy benefited through the carrying out of the transactions applied for, and when it has been of value to our nationals to have them consummated, authority to operate has been extended after receipt of license from the War Trade Board or proper release from any other department of the Government which might be concerned.

RESEARCH BUREAU.

A research bureau has been established and developed as an aid to all bankers and other dealers" who have been desirous of following the letter and spirit of the Executive order of the President and of the trading with the enemy act, and who otherwise would have been unable, in many cases, to determine with certainty whether or not it was in order for them to transact business with many foreign and American houses which had approached them, or where transactions for unknown persons were going through them. To protect such "dealers," and also the interests of the country, the research bureau has been developed as a sort of clearing house for all other governmental research bureaus, in so far as the work of these agencies concerned persons or institutions attempting to carry out financial transactions. Frequently, reports in the files of different Government bureaus, when compared, have been found to be contradictory. In all such cases efforts were made to ascertain the facts, and the bureau having incorrect information has been notified.

The research bureau has access to all source books published by the allied Governments, and is also in direct touch with all United States Government departments of information and research.

Direct private telephone and telegraph wires connect the bureau with several of the Government agencies and bureaus, and personal representatives of the Division of Foreign Exchange are stationed with others. The division also has personal representatives in all of the cable censorship offices in the country. The representative of the division in the New York office of the cable censor is also the head of the financial division of the censorship, and he is called into conference in the Division of Foreign Exchange daily.

In addition to these regular connections, consultation has been had, when necessary, with the Shipping Board, the War Industries Board, the War Trade Board, and the Departments of State and Treasury; also with representatives of foreign governments.

With these connections the research bureau has been in position at all times to obtain immediately the latest information bearing on persons or institutions in all parts of the world whose transactions have been brought before it. The administrative department has thus been enabled to make prompt decisions on important financial

transactions in all cases except where further research was necessary before suspected parties could be cleared or proved to have enemy connections or interest.

The information received from all other governmental departments is brought together in the research bureau of the Division of Foreign Exchange and filed. Under this system it has been possible to stop many transactions which might have been of value to the enemy and to afford constant protection to bankers and other "dealers" in the United States who might otherwise have inadvertently carried out transactions for enemy account. It has also been possible to turn over many cases to the Alien Property Custodian.

When cablegrams are suppressed, it is essential, if such suppression is to be effective, that their confirmations also be suppressed, and all confirmations of cablegrams from "dealers " in the United States have been censored through the research department. Such confirmations have averaged about 2,000 a day. Under the regulations "dealers" in the United States are obliged to apply to the director of the Division of Foreign Exchange for approval before they can act upon any confirmations of cablegrams which are received by them and which refer to cablegrams that have never reached them. Copies of all suppressed cablegrams concerning financial matters are delivered to the head of the research bureau each day, and all names of senders, receivers, beneficiaries, or others mentioned in the cablegram are investigated at once. Application is made to the proper department for release of cablegrams before receipt of the confirmations, if it is found that the transactions themselves can not be harmful to the national interest, even though some of those connected with the transfers may have been of doubtful standing, and the work of obtaining proof in doubtful cases is well under way long before "dealers" receive their confirmations and apply for permission to act under them. Through this system it has been found possible to release great numbers of cables covering important transactions, whose temporary suppression might have been fully justified, but where later investigations showed that their delivery was not incompatible with the interests of the country.

The concentration in the research bureau of intercepted letters received from the postal censorship, and intercepted cables from the cable censorship, together with information from the other sources outlined, has been of great value in determining the status of many persons and institutions whose names have come up because of their participation in foreign financial transactions.

In cases where those concerned in a cablegram can not be cleared 90-day postponement notices are served on "dealers" applying for permission to consummate the transactions, and if when the time has 100823°-194

elapsed it is still impossible to clear all names, a prohibition notice is issued by the Federal Reserve Board.

The activities of the administrative and research departments are indicated by the fact that an average of 400 pieces of mail are handled in the filing room each day, and that more than 40,000 letters of correspondence and 12,000 letters concerning credits or remittances are on file.

Under the Executive order, all foreign correspondents of American "dealers " are obliged to sign a declaration agreeing not to carry on any business through or for their American correspondents for account or benefit of an enemy or ally of enemy. Such declarations, when received by American "dealers," have been filed with the Division of Foreign Exchange, and all names have been researched for the purpose of checking up the standing of the foreign correspondents of American "dealers " in connection with their attitude toward transactions for account of enemies or allies of enemies. More than 150,000 of such declarations have been received, checked, and filed for ready reference in addition to more than 50,000 declarations of nonenemy interest in securities.

A large number of foreign correspondents did not forward declarations. From intercepted correspondence and reports received from "dealers," it was found that in a large percentage of cases the declarations were not signed because the foreign correspondents were allies themselves, and seemed to look upon the matter as one not concerning them, apparently not understanding that this requirement has been written into the law of the United States. Steps have been taken to correct this misunderstanding, in order that no injustice may be done to anyone who may have ignored the request of "dealers" for declarations in good faith, based on the thought that they were not concerned.

Another form of declaration has been required from foreign holders of American securities desiring to collect dividends, interest or maturing principal, or to sell their securities in the United States. In addition to covering the usual statement regarding noninterest of enemies or allies of enemies, this form included the statement that foreign-held securities had not been enemy owned since February, 1917. These declarations are also filed with the Division of Foreign Exchange, and the names of the signers of the declarations are researched in the same manner as those of the foreign correspondents of American "dealers." This requirement has unquestionably deterred many enemy nationals owning American securities from endeavoring to sell them or collect income upon them.

Another regulation which required careful checking in the research department covered deposits made with American banks in

dollars for account of foreign correspondents. Transfers of funds for enemy account could be accomplished so easily through the deposit of money to the credit of foreign correspondents with American banks or other "dealers," for account of some neutral cloak in a foreign country, that all such deposits are required to be accompanied with information as to the name of the original party requesting the deposit, the purpose of the deposit, the name of the foreign beneficiary, and the party for whose account it is to be received in the foreign country. This information has been filed with the Division of Foreign Exchange daily by American "dealers," and the names of all persons concerned are researched for the purpose of uncovering enemy connections or interest, in case of their existence.

While there is no doubt that, through the use of cover names and other means, enemy transfers have been constantly made, yet there is every reason to believe that the regulations of the Division of Foreign Exchange have resulted in their being reduced to a minimum, and that any extended operations for enemy account have been made impossible.

Through its ambassadors and ministers the State Department has been constantly informed of the operations of American "dealers" with foreign institutions, where enemies or allies of enemies have been involved. All such operations have been investigated through the research department, after which proper action has been taken by the administrative department. It speaks well for bankers andother "dealers" in the United States to be able to report that investigation has shown conclusively, with few exceptions, that since the United States entered the war there has been no intent or purpose on the part of Americans involved to act contrary to the letter and spirit of the law, nor to carry out transactions which might be of benefit to the enemy.

STATISTICAL DEPARTMENT.

"Dealers " holding registration certificates authorizing them to do a foreign exchange business are required to make weekly reports at the close of business each Wednesday of all their foreign operations, giving balances due them from each country of the world and balances held by them for account of each country of the world.

Records of "dealers" registrations are made in the statistical department. On December 1, 1918, 13,653 banks, bankers, exporters and importers, and others had applied for and received registration certificates. Of this total 10,208 are "dealers" of class A, who are authorized to do a regular foreign exchange business with the public, 2,087 are "dealers" of class B, under which authority is extended to carry accounts with foreign correspondents, but not to sell, exchange, or deal with the public, and 1,358 are "dealers" of class C,