give intelligent federal aid and stimulation to industrial and vocational education, as we have long done in the large field of our agricultural industry; that, at the same time that we safeguard and conserve the natural resources of the country we should put them at the disposal of those who will use them promptly and intelligently, as was sought to be done in the admirable bills submitted to the last Congress from its committees on the public lands, bills which I earnestly recommend in principle to your consideration; that we should put into early operation some provision for rural credits which will add to the extensive borrowing facilities already afforded the farmer by the Reserve Bank Act adequate instrumentalities by which long credits may be obtained on land mortgages; and that we should study more carefully than they have hitherto been studied the right adaptation of our economic arrangements to changing conditions.

Many conditions about which we have repeatedly legislated are being altered from decade to decade, it is evident, under our very eyes, and are likely to change even more rapidly and more radically in the days immediately ahead of us, when peace has returned to the world and the nations of Europe once more take up their tasks of commerce and industry with the energy of those who must bestir themselves to build anew. Just what these changes will be no one can certainly foresee or confidently predict. There are no calculable, because no stable, elements in the problem. The most we can do is to make certain that we have the necessary instrumentalities of information constantly at our service so that we may be sure that we know exactly what we are dealing with when we come to act, if it should be necessary to act at all. We must first certainly know what it is that we are seeking to adapt ourselves to. I may ask the privilege of addressing you more at length on this important matter a little later in your session.

In the meantime may I make this suggestion? The transportation problem is an exceedingly serious and pressing one in this country. There has from time to time of late been reason to fear that our railroads would not much longer be able to cope with it successfully, as at present equipped and coördinated. I suggest that it would be wise to provide for a commission of inquiry to ascertain by a thorough canvass of the whole question whether our laws as at present framed and administered are as serviceable as they might be in the solution of the problem. It is obviously a problem that lies at the very foundation of our efficiency as a people. Such an inquiry ought to draw out every circumstance and opinion worth considering and we need to know all sides of the matter if we mean to do anything in the field of federal legislation.

No one, I am sure, would wish to take any backward step. The regulation of the railways of the country by federal commission has had admirable results and has fully justified the hopes and expectations of those by whom the policy of regulation was originally proposed. The question is not what should we undo? It is, whether there is anything else we can do that would supply us with effective means, in the very process of regulation, for bettering the conditions. under which the railroads are operated and for making them more useful servants of the country as a whole. It seems to me that it might be the part of wisdom, therefore before further legislation in this field is attempted, to look at the whole problem of coordination and efficiency in the full light of a fresh assessment of circumstance and opinion, as a guide to dealing with the several parts of it.

For what we are seeking now, what in my mind is the single thought of this message, is national efficiency and security. We serve a great nation. We should serve it in the spirit of its peculiar genius. It is the genius of common men for self-government, industry, justice, liberty and peace. We should see to it that it lacks no instrument, no facility or vigor of law, to make it sufficient to play its part with energy, safety, and assured success. In this we are no partisans but heralds and prophets of a new age.

REPORT OF THE SECRETARY OF THE TREASURY.

ANNUAL REPORT ON THE FINANCES.

TREASURY DEPARTMENT, Washington, December 6, 1915.

SIR: I have the honor to make the following report:

FINANCIAL AND BUSINESS CONDITIONS.

It must be a source of profound satisfaction to the people of the United States, regardless of political affiliations, to contrast the conditions to-day with those prevailing in this country in December, 1914. Then the country was just recovering from the terrific shock of the European disaster. We had gone through months of serious, if not critical, experiences. A country-wide panic of appalling proportions was threatened but averted. We had emerged with our credit not only unimpaired but strengthened. Our sound economic foundation had been preserved and fortified, and we were fully prepared to meet the exigencies of the future because we had recovered our confidence and were conscious of our power. The European war produced inevitable suffering in this country as well as in Europe. Our industrial situation was, for a time, seriously hurt, and the cotton-growing States of the South sustained heavy losses through declines in the price of cotton. Every power of the Government was exerted to mitigate the situation, and I believe that it is not inexact to say that but for the active agency of the Government in protecting and conserving the business interests of the country during that critical period grave disaster would have resulted. It is a pleasure to acknowledge that the efforts of the Government were seconded and supported by the earnest and patriotic cooperation of the business interests of the country.

What extraordinary results have been achieved in the brief period since December, 1914! During the year there has been a steady, healthy, forward movement in every line of activity, until now prosperity has been firmly established throughout the country.

Mr. A. W. Ferguson, general manager of the mercantile agency of R. G. Dun & Co., in a special report he was courteous enough to make November 12, 1915, upon request of the Secretary of the Treasury, says:

That the business boom has become nation-wide is a fact made clear by reports from the leading centers in every section. Previously the area of

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favorable conditions was restricted, but now the tide is rising rapidly in all parts of the country and has already reached high-water mark in some quarters. Even the South, which was prostrate a year ago, has emerged from the depths of depression and is once more an important factor in the movement toward new positions of economic strength. On the Pacific slope the last three months have brought a noticeable improvement in trade conditions, with some betterment in the export lumber situation and a more general disposition to provide for forward requirements. In the East prosperity is noted in many directions, the phenomenal development of over-sea commerce and the consequent increase in the amount of money in circulation stimulating consumptive demands in practically all channels. Viewing the future outlook in all its broader aspects there seems ample reason to hope for and to expect an era of the greatest commercial activity in the history of the Nation.

Mr. Henry E. Dunn, president of the well-known commercial firm of Bradstreet's, courteously made the following special report November 13, 1915, upon request of the Secretary of the Treasury:

Industry has gained steadily through the year, an especially marked surge forward being noted as the fall advanced, resulting in many new monthly records of production and a whipping into line of laggard trades, seeming to guarantee the setting up of new records in a year beginning in hardship and gloom. Of late, domestic demand, which had seemed to lag behind export trade, has expanded; bank clearings, railway traffic, iron production, and wheat exports have all set up new guideposts; unfilled orders have banked up in our barometric industry; car shortages are already present; rail and ship terminals are congested with freight shipments; failures and liabilities are decreasing; commodity prices are at the highest level ever known, with a minimum of complaint as to high cost of living; optimism is well-nigh universal, and what was apparently at its inception a prospect of threatening import to the world's progress has become a stimulant such as never before was witnessed to this country's productive energies. Contrary to nearly all prediction, the money markets remain easy, perhaps too much so, considering the temptations the year's events have extended to loose and unbridled speculation.

Mr. Roger W. Babson, president of Babson's Statistical Organization, kindly made a special report November 13, 1915, upon the request of the Secretary of the Treasury, in which he says:

The present business situation is very healthy in most respects. Irrespective of war orders, our industries are receiving a large volume of domestic orders. The fact that the shoe and lumber trades are reviving, while their export field remains in large part cut off, shows conclusively that domestic conditions are very much better. The moving of our record-breaking crops and the interchange of manufactured goods in different parts of the country are taxing our railroads to the limit. This is shown by the great reduction in the number of idle cars, which were exceedingly plentiful only a few months ago.

The improved condition of the masses of our people is evidenced by the better retail trade throughout the country. Unemployment is not a problem to-day, and probably will not be this winter. In fact, labor, both skilled and unskilled, is already becoming scarce. Even real estate, in many parts of the country, is recovering from its three-year period of liquidation and depression. The Babson Index of industrial commodities now stands at $1.22 as compared with $1.03 in January of this year and $1 in the latter part of 1911. With the

exception of cotton and pork, nearly all the commodities are in greater demand to-day than for some time.

With all our increased activity and higher commodity prices, money rates have continued low, thanks to the new banking system and the policy of the Treasury Department at Washington. Certainly the number of failures this winter should be much smaller than last winter, as the banking situation is so sound that all legitimate needs of merchants can be taken care of in all parts of the country.

The special reports of these three well-known agencies are so interesting that I have incorported them in Exhibits A, B, and C to this report.

The railroad situation shows extraordinary improvement and strength. Increases in gross and net earnings have been marked, in some cases being above the highest point ever before recorded. As recently as June 1, 1915, there were 300,000 idle cars, with a corresponding surplus of idle locomotives. Now there are no idle cars or idle locomotives in the country, and the railroads are buying new equipment. A summary of a recent statement shows that the railroads have placed orders in the months of September and October for 683,500 tons of rails, 260 locomotives, 18,000 freight cars, 60 passenger cars, besides lumber and fabricated steel and iron, valued at more than $48,000,000. Since that time other large orders for railway equipment have been placed, showing that the railroads have entered upon another great period of prosperity. In the basic industry of iron and steel the conditions are phenomenal. This great industry is said to be on a veritable boom. For the month of October, 1915, according to the Iron Age, the pig-iron production was 3,125,491 tons, the greatest on record for a single month's production. Every blast furnace in the country is in operation or is preparing to go into operation, and the demand for steel and iron products has so broadened that the mills throughout the country are working to full capacity. One of the most healthy and encouraging features about the demand for iron and steel products is that it comes more from domestic than from foreign sources.

The country has been blessed again with great crops, following the plentiful years of 1913 and 1914. Even the cotton States, which suffered so much in the year 1914, are experiencing prosperity from the diversification of crops and the higher prices for cotton. The enormous value of our crops offers a positive basis for prosperity.

The financial situation of this country has never been so strong and so favorable as now. Our financial resources are the greatest in our history, and our banking system, through the creation and operation of the Federal reserve system, is now the strongest in the world. We have, at last, a system of elastic credits responsive to the demands of legitimate business, assuring an ample supply of credits at reasonable rates of interest. As the operations of the Federal reserve