Under the terms of the act every officer and enlisted man enjoys automatic insurance, without cost, until February 12, 1918, when the 120 days from the date of the publication of the contract of insurance will expire. This insurance yields in case of disability a monthly installment of $25 for the entire period of the man's life, and in case of death a monthly payment of $25 to his widow. (until remarriage) or children or widowed mother, for a period not exceeding 240 months.

(b) Division of Marine and Seamen's Insurance.

The amount of insurance written during the fiscal year 1917 on the hulls and cargoes of American vessels was $472,579,383, the premiums for the same totaling $26,151,291.71. The losses amounted to $10,512,620, and the expenses were $31,219.09.

From the commencement of its business, on September 2, 1914, to October 31, 1917, the bureau has written 11,728 policies, covering a total insurance of $856,270,337 on the hulls and cargoes of American vessels. Premiums for this period were $33,393,476.53, and the total expenses of organizing, printing, stationery, and the salaries of the force were but $94,296.38.

The original act carried an appropriation of $100,000 for expenses and $5,000,000 for the payment of losses. The March 3, 1917, amendment increased the appropriation for the payment of losses from $5,000,000 to $15,000,000, and the June 12, 1917, amendment increased the appropriation for expenses from $100,000 to $250,000 and the appropriation for the payment of losses from $15,000,000 to $50,000,000.

Comparison of bureau's operations for the fiscal years ending June 30, 1916 and 1917.

Operation of the bureau for period September 2, 1914, the date of

The lives of seamen sailing on American vessels to the war zone are in jeopardy because of the ruthless use of the mine and submarine, and it is manifestly just that these men be protected by insurance.

Up to and including October 31, 1917, 317 policies were written, 271 on the crews of steam vessels, and 46 on those of sailing craft and auxiliaries. These policies provided protection for 20,757 men in the sum of $34,988,067.

As the life of the Marine and Seamen's Division of the bureau will expire on September 2, 1918, I respectfully recommend that its functions be extended to continue during the period of the war with the further authority for a period of two years within which to settle outstanding claims.

PAYMENT FOR THE DANISH WEST INDIAN ISLANDS.

On March 31, 1917, the Secretary of the Treasury paid to the envoy extraordinary and minister plenipotentiary of Denmark the sum of $25,000,000 gold, in full payment of the obligation of the Government of the United States to the Government of Denmark for the cession of the Danish West Indian Islands to the United States. This payment was authorized by the act approved March 3, 1917, and was made in pursuance of article 5 of the convention between the United States and Denmark signed at the city of New York on August 4, 1916, and ratified by the Senate of the United States on September 7, 1916.

The following is a copy of the receipt given this Government by the minister of Denmark for the payment:

Received from the Secretary of the Treasury of the United States of America the sum of $25,000,000 gold, in warrant on the Treasury of the United States, numbered 13223, and dated March 31, 1917, the same being in full payment of the obligation of the Government of the United States to the Government of Denmark as set forth in article V of the convention between the United States and Denmark for the cession of the Danish West Indian Islands to the United States, signed at the city of New York on August 4, 1916, the ratifications of which were exchanged at Washington on January 17, 1917; the payment being provided by an act of Congress approved March 3, 1917, entitled "An act to provide a temporary government for the West Indian Islands acquired by the United States from Denmark by the convention entered into between said countries on the fourth day of August, nineteen hundred and sixteen, and ratified by the Senate of the United States on the seventh day of September, nineteen hundred and sixteen, and for other purposes." C. BRUN,

(Signed)

Envoy Extraordinary and Minister Plenipotentiary of Denmark.

WASHINGTON, D. C., March 31, 1917.

AUDITING OF GOVERNMENT ACCOUNTS ABROAD.

The audit of disbursements made abroad by the Military Establishment presented a serious problem, involving the necessity for a prompt audit and the safety of original vouchers. After careful consideration I recommended to the Congress that legislation be enacted authorizing the proper accounting officers of the Treasury to perform their duties away from the seat of government. By the

act approved September 24, 1917, the Secretary of the Treasury is authorized during the war to direct the Comptroller of the Treasury and the Auditor for the War Department to exercise either in person or through others the powers and perform the duties of their offices at any place or places away from the seat of government in the manner that is or may be required at the seat of government. Under this authority a force has been organized and sent to France for the purpose of auditing the accounts of disbursing officers of the Military Establishment abroad. These accounts will be audited in the same manner as accounts are audited in these offices in Washington, but all vouchers will remain in the custody of the assistant comptroller and the assistant auditor in France until after the war is over.

THE FEDERAL FARM LOAN SYSTEM.

The history of the Federal Farm Loan System for the past year has been one of constant and accelerating development. For the first six months after the establishment of the bureau the work of the Farm Loan Board was necessarily confined to the great task of investigation and organization. This work was done with great care, the board always having in mind the fact that a financial system which must for all time serve the financial needs of the farmers of the greatest agricultural nation in the world must be built safely, soundly, and with all possible regard for the permanent welfare of that industry which it is declared in the title of the Federal farm loan act it was the intention of the Congress to develop.

In as short a time as was possible the board divided the continental United States, excluding Alaska, into 12 land-bank districts and located the 12 land banks within their boundaries. It is believed that this division will stand the test of time, and that every bank will be able to do an adequate volume of business.

In selecting the directors and registrars of the banks the board has been guided by the principle of fitness, and has placed in every bank men who know the farm-loan business in their respective districts, who understand the needs of the farmers, and who know the science of applying to agriculture the stimulus of money.

At the time the banks were organized, during the months of February and March, 1917, they found a great volume of accumulated business awaiting their attention. A great many national farmloan associations had been formed, nearly all of which had to be reorganized in conformity with the provisions of the law. The banks themselves confronted this great task with no experience in the working of the new law, without forms, without a system, with nothing except a willingness to work and authority to proceed.

The foundation stone of any farm-loan system is appraisement. The banks were obliged to attack this vast mass of accumulated and

constantly increasing business with a force of appraisers with whom the bank directors were no more acquainted than they were with each other. These appraisers themselves had to be appraised by the banks, to be educated in the system, to be trained, broken in, and their work checked up. Safety required that these things be done slowly, and such delays have resulted that the patience of borrowers has in many instances been severely tried. I am convinced, however, that the Farm Loan System has been built solidly, soundly, and on broad lines, and that the constructive work of these long months will bless the farmers of the United States through all future generations. The day that the Federal Farm Loan Board established a flat rate of 5 per cent on Federal farm-loan mortgages all over the United States was a great day for the American farmer, for this action not only took from the shoulders of borrowers from the Federal land banks a burden of excessive interest which they had carried too long, but it established a rate which can not be very much exceeded by other lenders. All statistics as to interest rates on farm loans in the United States became obsolete on that day. Interest rates on farm loans are now lower than ever before, except in certain favored regions, at a time when general interest rates show a tendency to advance. No one doubts that this decrease is a result of the operations of the Federal farm-loan act.

The speed with which the system is operating in taking care of loans is constantly accelerating, and it is expected that it will before long overtake the demands upon it. At this time over 1,700 national farm-loan associations have been chartered, and the organization movement shows no signs of slackening. This proves that there was an urgent demand for the inauguration of the Federal Farm Loan System, and the progress reported in the report of the bureau to the Speaker of the House of Representatives shows the gratifying extent to which the present system is meeting the demand.

The Farm Loan Board, when it came to marketing the Federal farm-loan bonds, faced an unusual financial situation with a new . low-rate security of undoubted soundness, but one with which the investing public was not acquainted. Moreover, the situation was such as to render the capital of some of the banks entirely too small for the volume of business. Not only must the bonds be sold, but they must be sold almost on the very day of issue, or the banks are obliged to stop loaning until bond sales can be made. Under these conditions an arrangement was made with a group of bond houses scattered all over the United States to assist in placing the bonds on the market. This arrangement has been perfectly successful. It is clear, however, that if the system is ever to be self-reliant in the marketing of its securities some provision must be made for the absorption of bonds when first issued. The St. Paul bank during

November, which is a month in which many farm mortgages fall due in that district, faced on November 7, 1917, cash demands for $1,117,000 before November 14, and a total of $2,838,000 for actual disbursements in the month. This obviously can not be done without help by a bank having less than $800,000 in capital. Other land banks are similarly embarrassed by the volume of business, and all of them will be similarly and constantly so affected. The market for Federal farm-loan bonds has been found, but a reservoir of capital should in some way be provided to carry the bonds while in process of marketing.

Activities of the Federal Farm Loan Bureau for the year may be briefly classified as follows:

First. Division of the Continent of the United States, exclusive of Alaska, into 12 Federal land bank districts, according to their farm-loan needs. This task involved a great deal of research and study, the holding of 53 hearings in 44 States, and the traveling by the board of over 20,000 miles. At those hearings the farmers were given the first chance to be heard, after which the meetings were open to all persons with pertinent matters to lay before the board. Oral presentations of the act by members of the board and others were made to over 30,000 persons, many of these attending the hearings in a representative capacity.

Second. Location of the 12 Federal land banks, as follows:

First Federal land bank district, consisting of the States of Maine, New Hampshire, Vermont, Massachusetts, Connecticut, Rhode Island, New York, and New Jersey, with the bank located at Springfield, Mass.

Second Federal land bank district, consisting of the States of Pennsylvania, Virginia, West Virginia, and Delaware, with the bank located at Baltimore, Md.

Third Federal land bank district, consisting of the States of North Carolina, South Carolina, Georgia, and Florida, with the bank located at Columbia, S. C.

Fourth Federal land bank district, consisting of the States of Tennessee Kentucky, Indiana, and Ohio, with the bank located at Louisville, Ky. Fifth Federal land bank district, consisting of the States of Louisiana, Mississippi, and Alabama, with the bank located at New Orleans, La. Sixth Federal land bank district, consisting of the States of Illinois, Missouri, and Arkansas, with the bank located at St. Louis, Mo.

Seventh Federal land bank district, consisting of the States of North Dakota, Minnesota, Wisconsin, and Michigan, with the bank located at St. Paul, Minn.

Eighth Federal land bank district, consisting of the States of South Dakota, Wyoming, Nebraska, and Iowa, with the bank located at Omaha, Nebr.

Ninth Federal land bank district, consisting of the States of Colorado, New Mexico, Kansas, and Oklahoma, with the bank located at Wichita, Kans.

Tenth Federal land bank district, consisting of the State of Texas, with the bank located at Houston, Tex.