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Bonds which in all other respects are found to be legally acceptable as security under the postal savings act, and these regulations will be construed, as a matter of law, to conform to those provisions of section 8, paragraphs (c) and (d), respectively, which relate to term of existence and nondefault, under the following conditions:

(1) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district in the United States which was, subsequently to the issuance of such bonds, consolidated with, or merged into, an existing political division which meets the requirements of these regulations, will be deemed to be the bonds of such political division: Provided, That such bonds were assumed by such political division under statutes and appropriate proceedings the effect of which is to make such bonds general obligations of such assuming political division, and payable, either directly or ultimately, without limitation to a special fund, from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (2) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district in the United States which was, subsequently to the issuance of such bonds, wholly succeeded by a newly organized political division, whose term of existence, added to that of such original political division, or of any other political division so succeeded, is equal to a period of 10 years, will be deemed to be bonds of such succeeding political division: Provided, That during such period none of such political divisions shall have defaulted in the payment of any part of either principal or interest of any funded debt authorized to be.contracted by it: And provided further, That such bonds were assumed by such new political division under statutes and appropriate proceedings the effect of which is to make such bonds general obligations of such assuming political division, and payable, either directly or ultimately without limitation to a special fund, from the proceeds of taxes levied upon all the taxable real and personal property within its territorial limits. (3) Bonds issued by or in behalf of any city, town, county, or other legally constituted municipality or district in the United States which, prior to such issuance, became the successor of one or more, or was formed by the consolidation or merger of two or more, preexisting political divisions, the term of existence of one or more of which, added to that of such succeeding or consolidated political division, is equal to a period of 10 years, will be deemed to be bonds of a political division which has been in existence for a period of 10 years: Provided, That during such period, none of such original, succeeding, or consolidated political divisions shall have defaulted in the payment of any part of either principal or interest of any funded debt authorized to be contracted by it.

The board of trustees reserves the right to reclassify the securities acceptable for deposits and to change the valuation at which they will be accepted. Under no circumstances will securities of other classes than those above named be accepted.

POSTAL-SAVINGS BONDS AND INVESTMENTS THEREIN.

The trustees of the Postal Savings System, under a general authority in the postal-savings law, have arranged to take over at par any of the postal-savings bonds that depositors may wish to turn back.

The first investment in these bonds was made on December 9, 1911, when they were quoted in the open market at 92 cents on the dollar. Under the arrangement made by the trustees they have taken over at par all of the bonds offered by the depositors, and at the close of the fiscal year 1917 the Treasurer of the United States held $2,301,680 of such bonds, which are registered in the name of the board of

trustees.

WITHDRAWAL OF BONDS TO SECURE CIRCULATION.

Under the provisions of section 18 of the Federal reserve act national banks filed with the Treasurer of the United States applications to sell for their account United States bonds securing circulation as follows:

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The Federal Reserve Board allotted and required the Federal reserve banks to purchase from the national banks only the bonds offered for the quarter ended March 31, 1917, thus necessitating deposits of lawful money to the amount of $10,877,500 for the retirement of bank circulation.

The deposits on the several accounts during the fiscal year 1917 may be studied from the statement following:

Money deposited in the Treasury each month of the fiscal year 1917 for the redemption of notes of national banks failed, in liquidation, and reducing circulation; also the amount of national-bank notes outstanding.

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NATIONAL BANKS DESIGNATED AS DEPOSITARIES OF THE UNITED

STATES.

The Secretary of the Treasury determines the number of such depositaries and the amount of public money required in each for the transaction of the public business, fixes the amount of balances they may hold, and requires the banks thus designated to give satisfactory security, by the deposit of United States bonds and otherwise, for the safe-keeping and prompt payment of the public money deposited with them, and for the faithful performance of their duties as financial agents of the Government. The regular depositaries receive and disburse the public moneys, while the special depositaries hold only the moneys transferred to them from the Treasury. All of the national-bank depositaries are required to pay interest at the rate of 2 per cent per annum on the average monthly amount of public deposits held.

The number of national-bank depositaries at the close of the fiscal years 1916 and 1917 are here stated:

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PUBLIC MONEYS IN DEPOSITARY BANKS.

At the close of the fiscal year 1916 the Federal reserve banks held to the credit of the general fund $113,480,576; the amount to like credit in national banks was $32,255,429.17, and to credit of postmasters and judicial officers $7,264,772.63, making a total in the depositaries of $153,000,777.80.

On July 10, 1916, the Secretary of the Treasury recalled from the Federal reserve banks at Richmond, Atlanta, and Dallas $5,000,000 each that had been deposited with them on September 8, 1915, to aid in handling the cotton situation.

The balances in the depositary banks declined rapidly during the first quarter of the fiscal year, owing to the heavy disbursements that usually are made at this period, and at the close of September, 1916, the public deposits in banks were, in Federal reserve banks to the credit of the general fund, $39,064,474.66; in national banks to like credit $34,428,703.55, and to credit of postmasters and judicial officers $6,099,757.48.

During the second quarter of the year the balance in the Federal reserve banks was gradually reduced and at the close of December, 1916, it became $28,233,105.82, while the national banks held to credit of the general fund $32,416,512.65, and to credit of postmasters and judicial officers $6,769,118.93.

The ordinary disbursements were largely in excess of the ordinary receipts during the months of January and February, 1917, and resulted in a reduction of the balance in Federal reserve banks to $13,382,366.56 by the close of February, but the holdings of the

national banks remained about the same as at the close of December, 1916.

The Secretary of the Treasury near the close of the month of March disposed of $50,000,000 in certificates of indebtedness bearing interest at the rate of 2 per cent per annum, through the Federal reserve banks, their member banks, and other financial institutions in the respective Federal districts. Of the $50,000,000 realized and placed to the credit of the general fund in the Federal reserve banks, $25,000,000 was paid for the Danish West Indian Islands, and at the close of the month the balance in such banks to the credit of the general fund was $50,268,598.10; the national banks held for like credit $32,540,550.26, and to the credit of postmasters and judicial officers $6,357,874.26.

There was a break in the diplomatic relations between the United States and the Imperial German Government in February. On March 21 the President called Congress into extraordinary session on Monday, April 2, 1917, and at a joint session of the two Houses of Congress on the evening of that date he delivered a message in which he asked Congress to declare the recent course of the German Government "to be in fact nothing less than war against the United States," and "that it formally accept the status of belligerent which has been thrust upon it." In response to the President's recommendation Congress adopted a resolution declaring that a state of war exists between the United States and the Imperial German Government, and directed the President to employ all the resources of the country to carry on the war and to bring the conflict to a successful conclusion. Congress provided ways and means of raising the necessary revenues, and made appropriations to meet the required expenditures.

The Secretary of the Treasury disposed of certificates of indebtedness through the Federal reserve banks, their member banks, and other banks in the respective Federal districts, on the following dates: April 25, $268,205,000; May 10, $200,000,000; May 25, $200,000,000; and June 8, $200,000,000. Also on May 14 the Secretary called for subscriptions to the Liberty loan bonds to the amount of $2,000,000,000, the payments therefor to be made through the Federal reserve banks. At the close of the fiscal year $1,466,335,094.61 had been paid on account of subscriptions.

The depositary banks held public moneys at the close of the fiscal year as follows: Federal reserve banks, $299,871,632.42; national banks, $39,395,650.24; and special depositaries on loan account, $783,922,759.51; making a total of $1,123,190,042.17.

GENERAL ACCOUNT OF THE TREASURER OF THE UNITED STATES.

The Treasurer receives and keeps the moneys of the United States and disburses the same upon warrants drawn by the Secretary of the Treasury, countersigned by the Comptroller of the Treasury, and not otherwise. He takes receipts for all moneys paid by him and gives receipts for all moneys received by him; and all receipts for moneys received by him are indorsed upon warrants signed by the Secretary of the Treasury, without which warrant, so signed, no

acknowledgment for money received into the Public Treasury is valid. He renders his accounts quarterly, or oftener if required, and at all times submits to the Secretary of the Treasury and the Comptroller of the Treasury, or either of them, the inspection of the moneys in his hands.

As a matter of information, it may be said that all public moneys paid into any subtreasury office, national-bank depositary, or other depositary, are placed to the credit of the Treasurer of the United States and held subject to his draft. The public moneys in the hands of any depositary of public moneys may be transferred to the Treasury of the United States or may be transferred from one depositary to any other depositary, as the safety of the public moneys and the convenience of the public service shall require.

The public moneys in any subtreasury, mint, or other depositary are subject to special examination and count whenever it is deemed advisable by the Secretary of the Treasury. Such examinations of the moneys in the subtreasuries are frequently made by committees representing the Secretary and the Treasurer. Annual examinations of the public moneys in mints are made by committees selected by the Director of the Mint, but as these moneys are a part of the general account, it is suggested that the Treasurer of the United States should have a representative on all such committees.

GOLD SETTLEMENT FUND, FEDERAL RESERVE BOARD.

At the close of the fiscal year 1917 the balance in the gold settlement fund was $526,295,000, an increase of $370,785,000 as compared with that of 12 months earlier. The deposits therein during the year were $567,925,000 and the withdrawals $197,140,000.

The act approved June 21, 1917, amending the Federal reserve act contains provisions for simplifying the manner of keeping this account and places the funds in the physical custody of the Treasurer of the United States. Deposits of gold coin or gold certificates are received by the Treasurer or any Assistant Treasurer of the United States when tendered by any Federal reserve bank or Federal reserve agent for credit to its or his account with the Federal Reserve Board. Deposits so made are held subject to the order of the Federal Reserve Board and are payable in gold coin or gold certificates on the order of the Federal Reserve Board to any Federal reserve bank or Federal reserve agent at the Treasury or at the subtreasury of the United States nearest the place of business of such Federal reserve bank or such Federal reserve agent. All expenses incident to the handling of such deposits are paid by the Federal Reserve Board and included in its assessment against the several Federal reserve banks.

The balance to the credit of the gold settlement fund is shown on the Daily Statement of the United States Treasury.

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