(a) To afford advice and financial assistance to British commercial and industrial undertakings from their inception and generally to further the developments of British trade industry and commerce. (b) To make advances for the enlargement of works and the extension of plant and for the amalgamation and coordination of works and business with a view to effecting economies in the cost of production.

(c) To render financial assistance in connection with transactions involving long periods of credit.

(d) To assist in obtaining orders from abroad for British manufacturers and traders and to grant financial facilities for the execution of such orders, especially when such orders are intended to be executed in the United Kingdom.

(e) To undertake credit operations and to draw and accept bills. (f) To acquaint themselves with the conditions of trade and with the business requirements of all countries of the world and to enter into banking-agency arrangements in such countries with Colonial or British foreign banks or where necessary to open up branches and agencies in such countries.

(g) To establish, equip, and maintain information bureaus in close touch with the Department of Commercial Intelligence of the Board of Trade for furnishing British merchants and manufacturers and the business community generally with reliable data and information upon openings for trade, new contracts, State and other loans, and issue proposals, and generally upon all matters relating to foreign trade and business and to undertake the examination of industrial projects.

(h) To act as an agent for carrying through overseas commercial and financial transactions in which the British Government may be interested and to receive official recognition and assistance.

(i) To undertake trading operations and business on their own account or jointly with others either through the medium of syndicates or otherwise.

There does not seem to be anything to prevent American foreign banks from engaging in the operations above outlined with the possible exception of undertaking trading operations in business on their own account or jointly with others in such operations, through the medium of syndicates, but in the opinion of the Board all charters granted to banks engaging in such extensive operations should be uniform, and uniformity can best be assured through a Federal charter.

DIVISION OF ANALYSIS AND RESEARCH.

At the time of its organization, the Board created a Division of Reports and Statistics, which has collected and tabulated information. from all available sources relating to economic and financial questions.

Due to the constantly increasing volume of business of the Federal Reserve Banks, this division has necessarily been more and more occupied in the compilation of figures which relate to the operations of the Federal Reserve Banks rather than to banking questions in general. For some time it has been evident that the work of the statistical division should be supplemented, and that the Board should have some agency to assist it in the work of scientific research. Accordingly, the Division of Analysis and Research was created on September 1, 1918.

While much of the work which would ordinarily fall to this division is now being handled in an administrative way by the Division of Foreign Exchange, the active operations of that division will cease when peace has been officially proclaimed.

The principal work which has been carried on by the Division of Analysis and Research since its inception is

(a) Collection, classification, analysis, and interpretation of regular data relating to the condition of the Federal Reserve System, including both Federal Reserve Banks and member banks, and to business and other conditions affecting the banking and business situation, such work, however, not superseding or taking over that done by the Division of Reports and Statistics.

(b) Planning and outlining of inquiries into banking, financial, and other conditions, such inquiries being intended to throw light upon the general management and administration of the Federal Reserve System.

(c) Undertaking of special inquiries on topics referred by the Board to the division for special investigation and report.

(d) Preparation of data for the Federal Reserve Bulletin and making provision for collecting additional material from outside.

sources.

(e) Compilation of statistics shoving changes in business conditions and in volume of production.

The headquarters of the division are at the offices of the Board at Washington, but a working office is maintained in New York. Its work is supervised by Dr. H. Parker Willis, formerly secretary of the Board, as director.

The director has been able to obtain the assistance of graduate students in economics and finance, to whom a nominal compensation is paid. The work at present is on a comparatively small scale, and may be regarded merely as a nucleus of what may eventually be undertaken by the division. The total cost of the division, including the Board's business index reporting system, is less than $1,300 per month.

The Board does not contemplate any rapid expansion of the work of the division, believing that it should be developed gradually as the results obtained appear to justify the effort and cost.

NEW BANKING STATISTICS.

Through its Division of Reports and Statistics, the Board has added to its statistical information by procuring, each week, figures showing the more important items on the balance sheets of member banks in leading centers throughout the country. It is also securing through various clearing house associations, figures which are published every week showing the total of checks paid by clearing house members. The Board believes that the balances as reported by the clearing house associations do not always furnish a true index of banking conditions, while the aggregate of checks paid, including a separate statement of customers' checks, and those drawn by banks and bankers, will, it is thought, portray more accurately the trend of business and will furnish a better basis for comparison month by month and year by year.

CAPITAL ISSUES COMMITTEE.

In his annual report to Congress for the year 1917, the Secretary of the Treasury referred to the importance of avoiding unnecessary capital expenditures in both public and private enterprises. While no specific authority had been conferred upon the Secretary or upon the Federal Reserve Board to approve or disapprove new undertakings, a number of corporation executives, bankers, and municipal officials submitted plans for new enterprises, and thereupon the Secretary of the Treasury requested that all persons contemplating offerings of securities for sale or subscription, first submit them for an expression of opinion as to the compatibility of the proposed issues with the national interest. Tentative offerings increased to such an extent that it became evident that an organization of some kind would be necessary to pass upon them, and in a letter dated January 11, 1918, Secretary McAdoo requested the Federal Reserve Board as another patriotic service, to assume the responsibility of passing upon such proposals as may be submitted, both in respect to capital expenditures or issues of new securities."

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The Board appointed Messrs. Paul M. Warburg, chairman, Frederick A. Delano, and Charles S. Hamlin a committee of its members to undertake the work. The committee enlisted the services of a voluntary advisory committee to assist in its work. This advisory committee consisted of the following: Allen B. Forbes, chairman, senior partner of Harris, Forbes & Co., New York; Frederick H. Goff, president Cleveland Trust Co., Cleveland, Ohio; Henry C.

Flower, president Fidelity Trust Co., Kansas City, Mo.; Stephen L. Selden, executive secretary; James Q. Newton, assistant executive secretary; Bradley W. Palmer, counsel. To complete its organization for nation-wide work, the committee appointed in each Federal Reserve district an auxiliary committee of five members, including the Federal Reserve agent acting as chairman, and the governor of the Federal Reserve Bank. Members of the advisory committee and all auxiliary committees served without compensation.

In beginning its work on February 1, 1918, the committee announced that, for the time being, it would undertake to pass upon industrial and public utility issues of not less than $500,000 and municipal issues of $250,000 and over. Subsequently, it reduced the minimum for both classes to $100,000, pointing out that the committee earnestly invited the cooperation of everyone in reducing and eliminating issues of even smaller amounts for purposes incompatible with the national interest.

The test applied to security issues was (1) whether the offer was timely with respect to the financial operations to be undertaken by the Government and (2) whether the objects for which the funds were to be raised by the sale of securities were compatible with the public interest. The committee in no instance undertook to pass upon the security or legality of issues.

Notwithstanding its purely voluntary nature and the absence of specific legal authority, the committee, by reason of the hearty cooperation of other governmental agencies and of bankers' associations, as well as of leading stock exchanges, was able, during its brief existence, to effect a considerable stoppage of nonessential security issues. The following is a record of issues actually considered:

In addition to these tangible results, it is safe to assume that the committee's existence and the campaign of education conducted by it stopped at the source a great many commitments for capital ex

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penditures, thereby conserving material, labor, and credit for essential industries and use of the Government.

Article II of the War Finance Corporation act of April 5, 1918, provided for the appointment of a Capital Issues Committee by the President, and the committee which was appointed in accordance with the terms of the act automatically superseded the voluntary committee of the Federal Reserve Board. The new committee adopted the general plan of organization which had been followed by the old committee, and appointed local committees in each Federal Reserve district to perform their functions through the Federal Reserve Bank's organization in each district.

LAW DIVISION.

In the exercise of its functions, the Board is called upon to consider many intricate legal problems which frequently involve the interpretation of State as well as Federal laws. Subject to the provisions of the Federal Reserve Act and the regulations of the Board, State banks and trust companies becoming members of the Federal Reserve System retain their full charter and statutory rights as such and continue to exercise all corporate powers granted to them by the States in which they are created. There is lack of uniformity both in the powers vested in State banking corporations and in the laws regulating the operations of such corporations. The law division of the Federal Reserve Board is therefore called upon to analyze carefully many of the laws of the 48 States which affect banking operations; to pass upon the legality of many banking operations under State and Federal law; to prepare legal papers, and in general, to render various legal services to the Federal Reserve Board and the several Federal Reserve Banks.

While each Federal Reserve Bank has its own counsel, it is, of course, important that rulings on legal questions should be uniform in all districts and the general counsel of the Board, therefore, acts in close cooperation with the counsel for the several Federal Reserve Banks.

In addition to the normal or routine work of the legal division every effort has been and is being made to cooperate with the several State authorities and with the various agencies interested in bringing about a standardization of banking laws and a coordination of banking powers, and this has involved much work in connection with both State and Federal legislation.

The activities of the law division may be briefly summarized as follows:

FEDERAL LEGISLATION.

The Federal Reserve Act, since its passage, has been amended in many particulars by the acts of A 4, 1914, August 15, 1914,