REDEMPTION OF NATIONAL BANK CURRENCY.

In the year ended October 31, last, in addition to national bank notes amounting to $378,661,158, there were received for redemption at the National Bank Redemption Agency, Treasury Department, Federal reserve notes to the amount of $50,596,780, and Federal reserve bank notes to the value of $1,726,855, making the total receipts at the redemption agency $430,984,793.

Practically 80 per cent ($334,164,550) came from the 12 Federal reserve bank cities, the receipts from all other sources being only $96,820,243. The receipts from the city of New York were nearly one-third of the total, and from the three central reserve cities, New York, Chicago, and St. Louis, over $215,000,000, or one-half of the total receipts.

National bank currency to the amount of $40,500,000, being fit for use, upon receipt was redeemed and returned to the banks of issue.

The expenses incident to the redemption of national and Federareserve bank circulation during the year ended June 30 last, aggrel gated $420,160.42.

In the following tables are shown the monthly receipts of each class of bank circulation, together with the amount of receipts from the principal sources and from all other sources.

INCREASE OR DECREASE OF NATIONAL BANK CIRCULATION.

The amount of the increase or decrease of national bank circulation issued and retired since January, 1875, and the changes quarterly during the last year are shown in the following table:

Yearly increase or decrease in national-bank circulation from Jan. 14, 1875, to Oct. 31, 1916, and quarterly increase or decrease for the year ended Oct. 31, 1917.

National-bank circulation on hand and available for shipment to national banks at the close of business on October 31, 1916, amounted to $413,977,860.

The amount received from the Bureau of Engraving and Printing during the year was $261,705,870, making the total amount to be accounted for $675,683,730.

During the year shipments to the banks aggregated $325,570,430, and the withdrawals for destruction by reason of liquidations, etc., $9,024,970. The withdrawals, therefore, aggregated $334,595,400, leaving stock on hand October 31, 1917, of $341,088,330. Currency available for issuance to national banks includes $16,842,340 deposited in subtreasuries in 1914 under authority of the act of 1908. In 1914 the national bank currency deposited in subtreasuries for convenience in expediting shipments to banks aggregated $243,505,090, all of which, except the $16,842,340 above mentioned, was delivered in accordance with the orders of the Comptroller.

DENOMINATIONS OF NATIONAL-BANK CIRCULATION.

While the issue of $1 and $2 national-bank notes was authorized by the act of 1864, it was provided that the issuance should be discontinued after the resumption of specie payments in 1879.

Up to the latter date $1 notes to the amount of $23,169,677 and $2 notes to the amount of $15,495,038 were issued. Of these denominations there were outstanding on October 31, 1917, $342,072 in ones and $163,392 in twos.

With a view to assisting in relieving the scarcity in notes of the smaller denominations which exists in many sections of the country, the President, on October 5, 1917, approved an act which authorizes the issuance by national banks of notes in the two denominations mentioned to the extent of not more than $25,000 by each national banking association.

As there were 7,671 national banks in existence on October 31, 1917, it is evident that it will be possible to add to the bank circulation the sum of $191,775,000 in notes of the denominations of $1 and $2.

The act of March 14, 1900, provided that no national bank should issue more than one-third of its notes in the denomination of $5. This limitation has been removed by the act of October 5, 1917, and as a result a national bank may issue any or all of its circulating notes in the denomination of $5.

In the following table is shown the amount of each denomination of national-bank notes outstanding at the close of business on March 13, 1900, and October 31, 1917:

SHIPMENTS OF NATIONAL BANK CIRCULATION.

Prior to August 15, 1915, all shipments of national bank currency to banks were made by this office by express at contract rates. Subsequently arrangements were made for the shipment of the currency by registered mail. At the same time it was also determined to discontinue the shipment or delivery of incomplete currency to anyone other than the banks or their duly authorized agents in Washington, and at the present time practically all currency is shipped by mail to the banks direct. As such shipments facilitate prompt delivery, and as the Government has the advantage of a parcel post rate on notes of the denominations of one, two, and five dollars, the changes referred to have resulted in economy of both time and expense to the department and to the banks. Postage, registration, and insurance of the shipments are prepaid, and the expense subsequently assessed against the banks.

Losses in shipments of currency resulting from theft or otherwise are promptly adjusted and paid by the insurance companies.

PROFIT ON NATIONAL BANK CIRCULATION.

In volume 2 of the report of the Comptroller of the Currency will be found a computation by the Government Actuary, relating to the profit on national bank circulation, based on cost of bonds in each month from November, 1916, to October, 1917. The computations are confined to the profit on circulation based on 2 per cent consols, 2 per cent Panama Canal bonds, and 4 per cent bonds of 1925.

In the computation, the tax on circulation and expenses for plates and redemptions (after taking into consideration premium or discount), are deducted from the gross receipts—that is, interest on the bonds, and interest at 6 per cent on 95 per cent of the amount of circulating notes received. It is assumed that the banks receive and have available for loaning circulation to the extent of 100 per cent of the par value of the bonds deposited, less 5 per cent, the amount required to be maintained as a redemption fund with the Treasurer of the United States.

The price of 2 per cent consols and the 2 per cent Panama Canal bonds has been approximately the same during the year-that is, the market price of each has advanced or declined to approximately the same extent. The consols declined from the high point of 99.787 in March, 1917, to 96.280 in June, closing in October at 96.837. Hence the profit in March was the least during the year, namely, 1.165 per cent; the maximum in June, 1.616 per cent; and in October, last, 1.549 per cent; over 6 per cent on investment in the securities. The 4 per cents of 1925 declined from the high point of 110.500 in January, 1917, to the low point of 104.580, in July, closing in October at

105.500.

TAXES

ON NATIONAL BANK CIRCULATION, REDEMPTION CHARGES, EXAMINERS' SALARIES, ETC., AND EXPENSES OF THE CURRENCY

BUREAU.

During the year ended June 30, 1917, the taxes paid by national banks on their outstanding circulation aggregated $3,533,631.28. The net revenue to the Government from this source after deducting the expenses of the Currency Bureau was $3,006,897. The banks were charged and paid $420,160.42, the cost of the redemp

tion of their circulation; $21,660, the cost of plates for the printing of circulation; and also $849,815.96, for salaries and expenses incident to the examination of national banks; making a total payment for the year for taxes, etc. (other than internal-revenue tax, of which no separate account is kept by this department), of $4,825,267.66. From 1864 to 1917 the Government derived $140,390,850 from the tax on national bank circulation. The expenses of the banks incident to the redemption of their circulation from 1874, the date of the establishment of the National Bank Redemption Agency, to June 30, 1917, was $10,161,896; and for plates from which circulating notes were printed, $1,517,720. Fees paid for the examination of banks, under the provisions of the national bank act, and salaries paid in conformity with the Federal reserve act up to and including June 30, 1917, totaled $11,042,929.81.

Exclusive of contingent expenses paid from the general appropriation for the expenses of the Treasury Department, the expenses of the Currency Bureau for the year aggregated $1,405,178.08, of which $158,001.81 was for salaries of the officials and employees of the bureau at Washington; $299,174.14 for dies, plates, paper, printing, etc.; $42,980.86 for salaries of the employees engaged in redemption of circulating notes, reimbursed by national banks and covered by the item herein before mentioned, "the cost of redemption of circulation," and $905,021.27 for the maintenance of the corps of national bank examiners (including salaries and all expenses), this charge being met by assessment on the banks examined. The records indicate that the total expenses of the bureau from 1863 to 1917, exclusive of salaries and expenses of national bank examiners, were $18,052,986.72.

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Section 5173, United States Revised Statutes, provides that the expenses of the Bureau of the Currency shall be paid out of the proceeds of the taxes or duties assessed and collected on the circulation of national banking associations. As stated above, during the existence of the national banking system taxes collected on circulation have exceeded $140,000,000; the expenses of the bureau have amounted approximately to $18,000,000, leaving a profit to the Government from that source of about $122,000,000.

NATIONAL AND FEDERAL RESERVE BANK CIRCULATION ISSUED, REDEEMED, AND OUTSTANDING, ETC.

While there was a decrease of $9,792,915 in the amount of national bank circulation outstanding during the year ended October 31, 1917, there was an increase of $690,346,800 in the volume of Federal reserve bank issues, this increase being due mainly to the issuance of notes against deposits of gold and gold certificates with the Federal reserve agents, these gold deposits amounting approximately to $600,000,000. There was therefore a net increase in bank circulation during the year of $680,553,885, offset mainly by the gold and gold certificates withdrawn from circulation and deposited with the Federal reserve agents.

In the following statement is shown the amount of national and Federal reserve bank circulation printed and delivered by the Bureau of Engraving and Printing, issues to banks, redemptions, increases and reductions, amount outstanding, together with vault balances for the year ended October 31, last: