Two hundred and eight, or over one-third, of the 566 failures of national banks were attributable to criminal acts. In 41 of the 208 instances defalcation of officers was the cause; in 125 fraudulent management; and in 42 the banks were wrecked by cashiers or subordinate officers. Unlawful loans-that is, loans in excess of the statutory limit were the principal causes of 111 of the failures. In 59 of the 111 instances excessive loans were made to officers and directors and in 52 to others than officers and directors. Depreciation in the value of assets was the primary cause of 82 of the failures. Injudicious or careless banking was the cause of 136, or nearly onefourth of the total number, and the remaining 29 failures were ascribed to insolvency of large debtors, "runs," nonliquidity of assets, etc.

In the following tables are shown the number and percentages of failures from principal causes, together with the number of times the principal causes figured:

Principal causes of failures of national banks.

Number of times principal causes figured in the failures of national banks.

BONDS AND OTHER SECURITIES AND CIRCULATION SECURED THEREBY AT THE END OF EACH MONTH FROM NOVEMBER 30, 1914, TO OCTOBER 31, 1915.

On

At the close of November, 1914, the total amount of national bank circulation outstanding was $1,111,999,076, of which $740,500,821 was secured by United States bonds, $270,078,236 by miscellaneous securities, and $101,420,019 by deposits of lawful money. By reference to the following table it will be noted that circulation secured by miscellaneous securities was very rapidly retired. The law providing for the issue of that currency expired by limitation on June 30, 1915, and while the table indicates that on that date there was still outstanding circulation of that character to the amount of $719,561, as a matter of fact provision had been made for the retirement of all the circulation but some $200,000 issued to a bank that subsequent thereto had been placed in charge of a receiver. June 30 the total amount of circulation outstanding was $819,273,593, of which $725,313,141 was secured by United States bonds, $719,561 by miscellaneous securities, and $93,240,891 by lawful money. At the close of the year in question bond-secured circulation amounted to $722,754,924; that secured by lawful money, $56,991,554; and the remainder, $171,203, by miscellaneous securities held on account of the insolvent bank heretofore mentioned. From the table in question it will be noted that there was a decline in the volume of United States bonds on deposit to secure circulation from $744,641,550 on November 30, 1914, to $734,975,540 on October 31, 1915, and that during the same period deposits of miscellaneous securities declined from $272,535,691 to $171,203.

Bond and circulation accounts at the close of each month of the year ended October 31, 1915, are summarized in the following table:

While the Federal reserve act provided that banks organized thereafter would not be required to deposit United States bonds as a prerequisite to being authorized to begin business, the law in question is not construed as prohibiting newly organized banks from depositing bonds and becoming banks of issue. The records show that of the 327 banks chartered since December 23, 1913, 152 deposited Government bonds and obtained circulation thereon, while 175 did not avail themselves of the privilege. Of the 144 banking associations authorized to begin business during the year ended October 31, 1915, 49 deposited bonds and became banks of issue, while 95 did not deposit bonds. The amount of the bonds deposited by newly organized banks as security for circulation during the year was $2,905,510. The total amount of bonds deposited during the yearthat is, by newly organized banks and those increasing their circulation-was $16,357,810. In the same period withdrawal of bonds by banks reducing their circulation and by banks placed in voluntary liquidation and on account of those placed in charge of receivers totaled $26,122,870, hence an excess of withdrawals over deposits of $9,765,060.

The transactions during each month of the year are shown in the accompanying table:

United States bonds deposited as security for circulation by banks chartered and by those increasing their circulation, together with amount of bonds withdrawn by banks reducing circulation and by those closed, during each month.

I With the exception of $15,000, all of these bonds were deposited subsequent to the issuance of charters.

SALE OF UNITED STATES BONDS BY NATIONAL BANKS TO FEDERAL RESERVE BANKS.

Included in the powers of Federal reserve banks is that of purchasing United States bonds in the open market and the depositing of such bonds with the Treasurer of the United States as security for circulation. It is also provided by section 18 of the Federal reserve act that:

After two years from the passage of this act

*

any member bank desiring to retire the whole or any part of its circulating notes may file with the Treasurer of the United States an application to sell for its account, at par and accrued interest, United States bonds securing circulation to be retired.

The Treasurer shall, at the end of each quarterly period, furnish the Federal Reserve Board with a list of such applications, and the Federal Reserve Board may, in its discretion, require the Federal reserve banks to purchase such bonds from the banks whose applications have been filed with the Treasurer at least ten days before the end of any quarterly period at which the Federal Reserve Board may direct the purchase to be made: Provided, That Federal reserve banks shall not be permitted to purchase an amount to exceed $25,000,000 of such bonds in any one year, and which amount shall include bonds acquired under section four of this act by the Federal reserve bank.

Provided further, That the Federal Reserve Board shall allot to each Federal reserve bank such proportion of such bonds as the capital and surplus of such bank shall bear to the aggregate capital and surplus of all the Federal reserve banks.

This provision will become effective December 23, 1915, and the end of the first quarterly period following that date is December 31. The Federal Reserve Board announced in October last that—

The board has now determined that it will not undertake to require banks to purchase any bonds for the retirement of circulation prior to the end of the quarterly period closing March 31, 1916. It will, however, permit banks to begin filing applications as soon as they see fit, notwithstanding that assignments will not be made until the date heretofore indicated.

Subsequently the board adopted the following resolution:

Resolved, That until further notice, in requiring Federal reserve banks to purchase United States bonds offered for sale by member banks under the provisions of section 18, the Federal Reserve Board will not allot to any one Federal reserve bank in any one quarter more than one-fourth of its pro rata share of the bonds to be purchased during the calendar year under the provisions of this section.

In answer to this inquiry

In case the applications received exceed the amount to be allotted will the allotments be based upon the order of receipt of the applications or upon the pro rata share of each applying bank?—

the board advised:

It would seem that if the applications filed with the Treasurer exceed the amount to be allotted in any one quarter, the allotments should be based not upon the order of receipt of such applications but rather upon the pro rata share of each applying bank. The act evidently contemplates that any bank which has its application on file 10 days prior to the end of the quarterly period will be on an equal footing with any other bank which has filed a similar application, and the order in which such applications are received would seem to be immaterial as long as they are filed before that 10-day period.

The board also states that banks whose applications have not been granted in full at one-quarter day should reapply.

As to the date from which the accrued interest on the bonds that are sold will be figured, it is stated that:

There is nothing definite in the act to indicate what date shall be fixed to determine the amount of accrued interest on the bonds sold under section 18, but all provisions of that section, as read together, would seem to justify the conclusion that the accrued interest should be figured as of the date on which the lawful money to cover the purchase price of such bonds is deposited with the Treasurer of the United States.

Bonds made eligible for sale by member banks under the section in question are not limited to 2 per cent bonds, but to any United States bonds which are on deposit to secure circulation, which are as follows: Two per cent consols, 2 per cent Panama Canal bonds, 3 per cent bonds of 1908-1918, and 4 per cent bonds of 1925.

BONDED DEBT OF THE UNITED STATES AND NATIONAL-BANK INVESTMENTS THEREIN.

The bonded debt of the United States on October 31, 1915, was $970,624,590, an increase over the corresponding period in 1914 by only $1,799,040, the amount of postal-savings bonds issued during the last year. Of this debt, $730,882,130-the 2 per cent consols and Panama loans of 1936-1938-bear 2 per cent interest. The postal-savings bonds, aggregating $7,307,100, bear 24 per cent; the loans of 19081918 and 1961, amounting to $113,945,460, 3 per cent; and the loan of 1925, 4 per cent. The aggregate interest charge was $22,958,279.90, the average rate being 2.3653.

All of these bonds with the exception of the Panama 3's of 1961, and postal savings bonds, are available as security for national bank circulation. At the close of the year in question the Treasurer of the United States held in trust as security for national-bank circulation government bonds to the amount of $734,975,540, and to secure government deposits, $33,525,650. On September 2, 1915, the national banks' investment in government bonds, including nominal amount of premium, amounted to $781,726,220, hence their invest