51 offenders were convicted and sentenced for criminal violations of the national banking laws, including 5 presidents of national banks, 2 vice presidents, 16 cashiers, and 28 minor officers, clerks, and others. The sentences in the above cases were nearly all for 5 years in the penitentiary, although the term in three cases was for 7 years and 6 months, and in two cases for 10 years. In addition to these convictions there were several other bank presidents who died during this period and whose embezzlements and defalcations were discovered after death, the most conspicuous case being that of J. B. Martindale, for more than six years the president, and before that the vice president, of the Chemical National Bank of New York City, whose embezzlements and forgeries covering a period of years amounted to approximately $300,000, the loss falling upon the Chemical National Bank.

VACATIONS AND DESK ROTATION FOR EMPLOYEES RECOMMENDED.

An investigation showed that Martindale's embezzlements had been going on for about 16 years, and that for years past he had made it a practice to be on hand at the bank at the close of each month in order that he might personally prepare or direct statements rendered a particular depositor, through the manipulation of whose account his embezzlements and forgeries were effected.

In explanation of a request which had been made a year or two ago of national banks to furnish a list of employees who had been allowed no vacation in five years, this office had said:

"Because most men are physically and mentally in shape to perform their duties most efficiently when they have the benefit of a yearly vacation and because of other obvious advantages, including better opportunity afforded of having an impartial check made of the books and accounts of all employees while on vacation, besides the training given understudies and assistants, the Comptroller commends the granting of a vacation period to all bank employees each year."

I would respectfully recommend that the Comptroller's Office be given authority to require national banks to shift their bookkeepers and other employees from time to time from one desk or service to another so as to make it more difficult, if not impossible, for employees of banks to hide their defalcations or to manipulate the books.

EXCESSIVE INTEREST RATES.

The records show that the efforts of the Comptroller's Office to abolish and prevent the excessive and usurious interest charges which so long prevailed in certain sections of the country, and which still exist to a greatly reduced extent in many places, are securing results, and the evil is being gradually but steadily eradicated from national banks.

Communications are being received from time to time from national banks stating that they have given up the practice of charging interest rates forbidden by the national bank act and that they will hereafter adhere to the rates permitted by law. There are yet, however, a considerable number of banks which persist in their defiance of the laws against usury, and it is desirable in order to deal with them effectively to have appropriate legislation.

NEW RECOMMENDATIONS FOR LEGISLATION.

GOVERNMENT GUARANTEE OF ALL NATIONAL BANK DEPOSITS FOR $5,000 OR LESS.

I respectfully submit for the consideration of the Congress the expediency and advantage of providing for the Federal insurance or guarantee of all bona fide deposits in national banks where the balance to the credit of any one individual amounts to a sum not exceeding $5,000.

One of the beneficial effects of such a plan would be to bring out of its hiding places and into circulation the large amount of money which is being hoarded, and which the owners have been unwilling to place with any bank which is not guaranteed by the Government. Such a law would also have the advantage of furnishing-particularly to the poorer classes, whose surplus earnings are represented solely by their savings deposits-a guarantee which would contribute greatly to their peace of mind and comfort. It would give them the assurance that their funds can not be lost by bank failure or by any financial panics. There have been too many cases where the failures of banks have brought ruin to hundreds of individuals and families and have sometimes driven men and women to suicide.

By limiting the amount guaranteed to $5,000 for any one depositor, we prevent the ably, efficiently, and honestly managed bank from being placed on the same competitive plane with the bank whose management is less efficient, or less commendable; for depositors whose balances will amount to more than $5,000 will necessarily exercise the same care and discrimination in the selection of their bank depositaries that they now use when there is no such Government guarantee.

It may be well to provide that only those deposits should receive the Government's guarantee upon which the rate of interest paid by the bank shall not exceed 3 per cent per annum. It is suggested that the Government provide a fund to meet any losses which may arise under this guarantee by the imposition of a tax not exceeding one-tenth of 1 per cent per annum on the average amount of deposits affected by the guarantee, as ascertained by the banks' periodical reports to the Comptroller of the Currency.

TO EXEMPT FROM STATE TAXATION SHARES OF NATIONAL BANKS WHOSE CAPITAL IS INVESTED IN UNITED STATES BONDS.

Under existing laws all bonds of the United States Government in the hands of individuals are exempt from all direct taxation by State or Federal authorities, but if these individuals should organize a national bank association with a capital of, say, $100,000 and should invest the entire capital in Government bonds, the stock of such bank thus invested would be liable to taxation by State authorities as the property of the respective stockholders, and no exemption from taxation is secured by virtue of such investment in United States bonds.

In certain States, however, where the shareholders of national banks are subjected to the full rate of taxation, even though their entire capital may be invested in Government bonds, the banks are

allowed to deduct from their taxable assets investments which they may have made in certain State securities. This provision seems to be hardly fair to national banks holding United States bonds.

In order that the ownership of United States Government bonds by national banks may secure to these banks the benefit of the same exemption that the ownership of certain State securities in the hands of State banks gives, it is recommended that section 5219, U. S. R. S., be so amended as to provide that in determining the value of the shares of national banks for the purposes of taxation by State authorities, the par value of any bonds or other interest-bearing obligations of the United States Government owned by a national bank shall be deducted from its assets.

The passage of such an amendment would furthermore greatly increase the desirability, from an investment point of view, with all national banks, of United States Government bonds.

TO AUTHORIZE NATIONAL BANKS TO SUBSCRIBE TO THE RED CROSS FOR WAR RELIEF PURPOSES.

National banks have no authority under existing laws to subscribe for humane, benevolent, or philanthropic purposes. The expenditures of national banks are limited to expenses of operation, losses, dividends and investments which may be made in the ordinary conduct of banking business. Other appropriations of funds belonging to a bank can not be made except by the unanimous consent of the shareholders.

Many national banks throughout the country have expressed a desire to contribute to the Red Cross. In response to their inquiries to this office, they have been informed that they could not do so legally without the consent of their shareholders. On June 19, 1917, this office sent the following circular letter to national banks: "The officers of a national bank have no authority under the law to donate the funds of the bank to the Red Cross or any other similar cause, however meritorious, without the consent and approval of every shareholder of the bank.

"As it is usually difficult, if not impossible, to meet this condition, the Comptroller of the Currency suggests that, in order to facilitate contributions to the American Red Cross on the part of owners of national banks, the national banks consider the desirability of declaring a special dividend out of the undivided profits of the banks, for such an amount as the directors may think advisable for the stockholders to give; and checks for such special dividend can be mailed to stockholders with a circular letter suggesting, but not requiring, that those shareholders who are willing or desire to do so shall indorse and return the dividend checks to the bank with instructions that they be sent (along with the dividend checks of other shareholders) to the Red Cross committee. Or, if the stockholder prefers, he can send his dividend check, properly indorsed, direct to the American Red Cross as an independent contribution.

"The national banks of the country paid on their capital stock last year, in dividends, an average of about 11 per cent and earned much more. If all national banks should now declare an extra dividend of only one-half of 1 per cent on their capital stock, and their shareholders should be willing that such dividends should be

donated to the Red Cross, it would provide toward this great cause over $5,000,000."

Many national banks and other corporations throughout the country, when the Red Cross fund of $100,000,000 was being obtained in the summer of 1917, did declare extra dividends and sent the checks for them to stockholders with the suggestion that they be given to the Red Cross. A very large number of the stockholders to whom the checks and requests were sent used the checks for their own purposes and failed to comply with the suggestion as to the Red Cross. Of course there was no authority or power, aside from their own patriotism and conscience, to require the recipients to use the extra money thus allotted to them for the performance of a duty presented.

The Red Cross offers one of the few possible opportunities for serving simultaneously and directly and on a grand scale the purposes of war and the highest dictates of mercy. Unquestionable evidence tells us of the work the Red Cross is doing to afford comfort and alleviate and prevent suffering amoug our soldiers and those of our allies and to preserve their lives. The results of its achievements are not only for the present but are for the immediate and distant future. No better service can be done for any great cause than the preservation of the health and lives of the brave men who battle for it, that they may be sturdy and vigorous citizens.

As a matter of merely economic consideration the men kept off the pension rolls and saved for usefulness by Red Cross activities would far more than repay any country the cost of aiding and succoring them. Endless arguments and reasons might be presented to prove both the moral and humane obligations and the practical pecuniary advantages which should urge every American citizen to intense earnestness and the most liberal aid in behalf of this noble enterprise. I venture to suggest that any measure that Congress can enact to spur the people to help the Red Cross and its work, and to facilitate such help will be important in promoting the success of our

cause.

Therefore, I respectfully recommend the passage of an act to authorize all national banks to contribute to the Red Cross, for war relief purposes, such amounts as directors may conclude they can give wisely, justly, and prudently; that this be limited to the duration of the present war, and that the funds so contributed shall be used by the Red Cross only for war purposes, to help our soldiers and sailors at home and abroad, and for the relief, succoring and strengthening of our allies. I submit that there need be no fear of evil results in anything that, in this emergency, will make corporate patriotism easier and stimulate a benevolence which tends so strongly to hasten victory and peace.

DEPOSIT OF DORMANT DEPOSIT BALANCES WITH GOVERNMENT.

Reports made to this office show that the national banks held on March 5, 1917, $27,000,000 of money on inactive accounts, belonging to 736,000 customers who have made no deposits and who have drawn no checks on their accounts for a period of five years or more In many cases it is claimed that the banks do not know the where abouts or present address of the depositor. There is reason to believe

that in many cases depositors are not aware of these balances remaining to their credit, and as the banks consider it to their interest to hold on to deposits as long as possible, it is obvious that some banks have not used due diligence to locate the owners of these dormant balances.

In many cases it would be a great benefit and relief to the owners of these deposits, or their heirs, to get possession of them. It is, therefore, respectfully recommended that the Congress consider the desirability of passing a law requiring all national banks to pay into the Treasury of the United States all sums of money held by them to the credit of depositors who have not checked against their account or who have not added to their balance by new deposits (exclusive of items which may have been credited to those accounts by the bank itself on account of interest or other collections not made directly by the depositor) for a period of seven years or more, such sums when transferred to the Treasury by the national banks to be accompanied with all information which the bank may possess as to the whereabouts or last known address and next of kin of the depositor. It may be well to require banks, before thus turning over these dormant balances, to publish a list of them twice in a daily newspaper, in or nearest to the city or town in which the bank is located.

RESTRICTION ON USE OF "CHARGE TICKETS" OR "DEBIT SLIPS" RECOMMENDED.

The ease and freedom with which certain national bank officers are permitted to sign "charge tickets" and "debit slips" against the credit balances of depositors has been much abused, and has led to serious frauds and defalcations.

I respectfully recommend that provision be made whereby no national bank shall have the right to make a charge against the account of a depositor except on a charge ticket or order signed by at least two officers of the bank.

COOPERATION BETWEEN FEDERAL AND STATE BANKING AUTHORITIES.

I have the honor to inform the Congress that good progress has been made during the past 12 months toward securing closer cooperation between the Comptroller's Office and the banking departments of the several States, to mutual advantage. As a result of efforts in this direction the National Bank Examiners and this office have received much information of material value, especially (a) in preventing or discovering irregular practices and "kiting" between national and State banks; (b) in preventing the granting of excessive or dangerous lines of discount; (c) in minimizing the borrowing by indirect methods of national banks from State banks or State banks from national banks; (d) in determining the real value of bank stocks and other collateral; and (e) in preventing excessive borrowings by bank officers on the stocks of their banks from other banks on the strength of balances carried by the borrowing officers' bank with the lending institution.

This closer cooperation, it is believed, will prove distinctly advantageous to both national banks and State banks and will assist in the