that a vastly greater amount of money is needed in time of war than of peace. Bewildered by this notion, than which none could be more absurd, the public are easily induced to sanction a whole class of measures that would be generally recognized as injurious in ordinary times, but are imagined to have some virtue to bring out a greater amount of money to meet the supposed emergencies of war. The truth is, if we suppose no extra importation of foreign material for consumption (and nineteen-twentieths of the expenditure of all wars are for domestic labor and material) there is no larger production, no more services to be rewarded, and consequently no more occasion for the use of money, but the Government now becomes the great operator."

In reflecting on the money expenditures in the present war we must confine ourselves to the sums spent for the exportation of foreign material of which we are the principal bucksters. We must further narrow our calculations down to the credit of the nations which are buying goods from us in quantity and this practically excludes the Teutonic allies.

Why Comparisons and Precedents Furnish
No Sure Guide

Before bringing this article to a conclusion, I am constrained to anticipate a criticism which is certain to appear. It is that the present war cannot be compared with any former struggle. "This is the greatest war in history," says the non-conformist. "The loss in capital and lives and the expenditure in money is infinitely greater than in any former combat. Therefore, any deductions drawn from precedent or comparison are idle."

To this the reply may be made, borrowing the forcible style of Bastiat: This is what you see; what you do not see is that the supply of capital, lives and money are also infinitely greater. More capital is destroyed because there is more capital to be destroyed and more men to destroy it. Turn back for example to the last general European war and count the offsets-balance up your comparisons. The Crimean war was a small affair by comparison with the present war, but it was to those involved, the greatest war in history when it occurred. It lasted from 1853 to 1856, and brought England, France, Russia and Turkey to the point of exhaustion. It was a small affair by comparison unless both sides of the proposition are weighed. As a single influence examine the money and credit conditions. The world's visible supply of gold in 1853 was $1,795,360,000. In 1912 (the last official figure) it was $8,480,000,000 and is no doubt above nine billions now. That is not all. The world's

A Federal Corporation

Union Trust Company

OF THE DISTRICT OF COLUMBIA
Capital
$2,000,000.00
Surplus and Undivided Profits 475, 153.99
EDWARD J. STELLWAGEN, President
GEORGE E. HAMILTON,

1st V. Pres't, Att'y and Trust Officer
GEORGE E. FLEMING,

2nd V. Pres't and Ass't Trust Officer WALTER S. HARBAN, 3rd Vice-President EDSON B. OLDS, Treasurer'

EDWARD L. HILLYER, Secretary

W. FRANK D. HERRON, Ass't Treasurer
WILLIAM L. CRANE, Ass't Secretary

annual production of gold in 1853 was about $135,000,000, it is now about $465,000,000. Also the amount of work a gold dollar can do as a basis for credits is much greater than in 1853. In commodities the contrast is even more startling. For example, the world's annual production of pig iron in 1834 was less than 6,000,000 tons as compared with about 80,000,000 tons at present. I might go on piling up such statistics but it is unnecessary. No thinking man will fail to recognize the force and validity of the argument.

Successful Branch Bank Policy of the
Chatham & Phenix National

In accordance with authority granted by the Comptroller of the Currency under the provisions of the National Bank Act the Chatham & Phenix National Bank of New York was the first National bank to establish domestic branches in this city last year. Last January the bank absorbed the Mutual Alliance Trust Company and last September the Century Bank with its eleven branches were taken over. As a result of these absorptions and its own rapid growth deposits increased from about $24,000,000 to $66,464,000 at the close of 1915. Aggregate resources are $74,259,058 with capital of $3,500,000, surplus $1,500,000 and undivided: profits of $563,196.

Regardless of the intent responsible for those sections of the Clayton Amendment to the Anti-Trust Law forbidding "interlocking" bank directorates, effective in October next, there can be no escape from the conclusion that in its present form the act will be productive of more evil than good.

Whether the change be attributed to the Congressional belief that paucity of loans to commercial houses-and assumed "niggardliness" of banking institutions generally in dealing with those requiring funds-if such situation was ever a fact-was or is due to too closely-knit relations between the larger institutions, is beside the point inasmuch as such contention avails nothing under existing circumstances.

Tearing Down the Standard of Directorates The result of the law will be that banks with more than $5,000,000 in capital, deposits, surplus, etc., and which by reason of that very fact will require, the ablest and most astute business brains at their command, will find their field of selection not only very much restricted, but for all practical purposes completely obliterated. A banking institution of today which cannot be classed with the $5,000,000-and-over group is not in reality a "big" bank-one whose connections, resources, assets and power generate confidence; it is not an institution which can as well stand the shocks of great adversity, and which in times of panic or financial distress is able, by the mere exertion of those creative forces which spell success in modern life; the union of brains, ability and sound judgment-accomplish results of incalculable value to the entire business structure of the country.

When Concerted Effort and Mature Judgment is Needed

It has been conceded that it was such judgment and co-operation that pulled us through the panic of 1907-the concerted efforts of bankers with scores of connections and the control of millions; the "switching" of currency from a stronger to a weaker institution, the unity of purpose in reinforcing the position of a smaller by concentrating the assets of a larger bank. The same was in large degree true in

August, 1914; who knows when a similar pressing necessity will face the country?

And yet, after October next, no employee, official or director of one National bank can act in any capacity for a similar institution where one of them has assets, etc., of over $5,000,000; nor can any director in a State bank or trust company with similar (or larger capitalization) serve on the board of a National bank. The consequence will be that, while the law can hardly accomplish good, it may be the parent of much evil. It will of necessity reduce the number of men available for directors of most of the banks to a mere corporal's guard or executive committee of five or six; not that there will not be a plethora of "willin' Barkises," but desirable individuals will be strikingly noticeable by their absence.

The

Banking Service Will be Impaired Experience, the association with others in similar capacities, the interchange of ideas, disciplined minds due to constant consideration of questions of policy, credit and investment, contribute largely to the make-up of bank directors; the Clayton law will effectually unmake them. The banks will be the initial sufferers, its customers the second on the ladder, then the stockholders, and lastly the public. bank, itself, will probably yield to a stiff, inelastic, non-progressive policy, due to the absence of new blood, new ideas, new theories; the customers will not be accorded treatment similar to that extended now for the reason that the isolated status of the directors and their ignorance of the customers' connections with other financial institutions, knowledge whereof is now an aid, will prove a stumbling block. The stockholders' equity will be affected for all of these reasons-he will not have as many or as able, or as aggressive managers for his business, while the public will have lost those benefits which accrue to every community by reason of the concerted effort, the businessbuilding progress, and the hearty assistance and co-operation which banks and business and commerce rear upon foundations of integrity, intimate association of men and ideas, and interwoven financial interests.

Shall a National bank hold its 2 per cent. bonds securing its circulation account, or shall said bank surrender them at par, as rapidly as it can arrange redemption by the Federal Reserve institutions?

This dilemma now confronts all the National institutions. The market situation with respect to the bonds, in consequence of such action as the National banks may take, is not likely to be seriously affected or disturbed either way. Any time prior to March 21st, this year, the National banks may make their first application to have any amount of their bonds now securing circulation accepted for redemption at par by the Federal institutions. The total amount so redeemed by the Federal banks may not exceed $25,000,000 each year, although any additional amount may be purchased by them in the open market. These redemptions are permissible in quarterly periods each year for 20 years. The only exception rests with the Federal Reserve Board which "at its discretion" may not, in some years, order the Federal Reserve banks to act. No opportunity is granted to the public holders of the bonds to participate in such retirements.

Why the 2 Per Cents. Continue to be Sought

If the full force and effect of this section of the Bank Act should be applied to the retirement of 2s, whereby $25,000,000 bonds annually are retired by the Federal banks during the next 20 years, it is apparent that only $500,000,ooo bonds would be accounted for. Inasmuch as the National banks now own about $730,000,000 2s, it is obvious that a substantial amount of the bonds would still remain in the hands of the National banks. If a National institution feels that there is any question respecting the continued efficacy of the Bank Act or that its endurance will not prove eminently satisfactory to the country's needs, and also if a National bank lacks confidence that regular annual redemptions of 2s will be ordered by the Federal Board, it would, of course, appear advisable for the National banks to seize every

opportunity possible to liquidate as many of their bonds as they are permitted to surrender at par. Similarly, if the market price of 28 should advance to a premium, there might seem to be an irresistible temptation to liquidate the bonds. However, it is our opinion that this is not the correct or proper analysis, nor the proper attitude to assume. The identical reasons which caused 2 per cent. bonds to be sought for by the National banks even when the price of the bonds was at a premium level, exist today the same as heretofore. The reasons why a National bank created and carried a circulation account in the past secured by 2s were, in the first place, to obtain the local prestige of issuing its own bank notes bearing its name, and in the second place, to make possible the transfer of its balances from the reserve city correspondents to its own vault at periods when currency stringencies existed throughout the country, and in the third place, to obtain the unquestioned profit to be derived from the circulation account each year.

Circulating Profits and Market Fluctuations The first mentioned advantage will continue, although the second reason for maintaining the account is no longer important. On the other hand, the third reason, which is the one most likely to appeal vitally to National institutions, will continue to be just as much factor in the future as it has been in the past. This privilege of obtaining the circulation profit by maintaining a full, or even a partial circulation account is not in any way to be taken away from the National banks, who will be permitted to enjoy and receive the profit each year as long as the 2 per cent. bonds are retained for that purpose. The Government and the Federal banks must recognize the right of National banks to continue the use of the bonds for circulation purposes until either the Government or Federal banks have acquired them with the consent of the National banks. If a National bank, for any reason, surrenders a portion of its bonds and terminates a

like amount of its circulation account, there is nothing to prevent the bank from repurchasing the bonds again in the open market and reinstating its circulation account at its pleasure. The privilege will still remain whereby a National bank may buy the necessary bonds and issue the offsetting amount of circulation up to the full amount of its capital whenever it wishes to do so. Thus it is apparent that if the bank makes application to surrender some of its 2s for redemption today at par, it may watch its opportunities to reacquire an equivalent amount of the bonds at a later date in the open market whenever they may be purchaseable at a discount price, and repeat the operation as often as it is possible to liquidate the bonds at par and. reacquire them again at a lower price and profit. In other words, National banks may continue to speculate in market fluctuations to the same degree as is granted to the Federal banks,

Note Issuing Privilege Not Abolished

In general, this would seem to be one of the Iweak points in the Bank Act since it is generally supposed that the Federal bank redemption feature is primarily embodied for the sole purpose of gradually eliminating the bond-secured currency of the National banks and coincidently creating a means of doing so while at the same time protecting the banks in making it possible for them to obtain par for their bonds. There is little doubt but that the ultimate result, so far as supporting the price of the bonds is concerned, has been most satisfactorily provided for, but it is also entirely apparent that the elimination of the note issuing privilege by the National banks has not been accomplished. Instead there has merely been added a further note issuing privilege for the Federal institutions. As a matter of fact, a National bank can well afford to pay at present even a price of 102 in order to obtain the use of Government bonds for the purpose of obtaining an annual profit of about 1 per cent. per annum. This per cent. profit if applied for only two years to an extinguishment of the 2 point premium on the bonds, would be sufficient in that short period of time to amortize and extinguish the entire premium and thereafter the bonds would stand on the bank's books at par and continue to yield a circulation profit of about 14 per cent. per annum. In no other way, with the same amount of money involved, can this profit be obtained.

Federal Reserve Bank Operations in Open Market

Up to the present time the Federal banks have primarily acquired 2 per cent. bonds, in the open market, for, their own use, in order to invest their idle funds, thereby obtaining an investment income of over 2 per cent. per

annum. If at any time in the future the Federal Reserve institutions wish to use these 2 per cent. bonds in order to create bank notes for the country's use, said Federal institutions will enjoy the same added circulation profit which now accrues to the National institutions. Therefore, if there is an attractive profit to the Federal institutions from using the bonds in that way, there is, manifestly, a continuous and like profit which will accrue to the National banks if they retain their bonds and continue their circulation account. Consequently, unless a National bank wishes to forego this profit, from altruistic motives or otherwise, it is difficult to understand upon what basis or for what reason a National bank should not continue this very profitable account, since the supporting influence of the Federal institutions has virtually eliminated all market risk with reference to the value of the 2s. There would seem to be more reason why a National bank should desire to carry a full circulation account. Some Investment Considerations

In order for a National bank to obtain an annual circulation profit of 1 per cent., or $10 from each $1,000 bond, 2s could be acquired at a price of 102, 3s at a price of 10134 and 4s at a price of 1114. On the other hand, if the same Government bonds were considered solely on their investment merits, on a similar basis as has prevailed for many years, there would be produced an income return of 2.05 per cent. per annum when 2s were acquired at 99% and 38 at 1022 and 4s at 116%. Nevertheless, if some bonds are purchased by Federal institutions for investment use and other bonds by National banks for the circulation profit, it is not possible to reconcile the two uses or the resulting market influence and at the same time have the bonds command the same price level. In consequence the floating supply of bonds and the market value of them, will always be dependent upon the volume of the supply and demand, irrespective of the purpose for which they are to be used. So long as there are outstanding approximately $1,000,000,000 United States bonds, there is destined to be a constant interchange of the securities between the public and banking institutions, with varying price fluctuations.

Wachovia Bank & Trust Co., Winston-Salem, N.C. The Wachovia Bank and Trust Company of Winston-Salem, N. C., of which F. H. Fries is president, makes the following excellent statement of condition at close of business: Loans and investments, $6,776,478; cash and due from banks, $2,243,565; total resources, $9,358,771; deposits, $7,646,639. The capital is $1,250,000, surplus and profits $472,131.

JUDICIAL CONTROL OF TESTAMENTARY

TRUSTEES

In the case of In re Clark (1915) (154 N. W. 759), trustees under a will contended that they alone had authority to make payments out of the trust fund, and that the court could not compel them to make a payment for a beneficiary's interest, unless they chose to do so. The Supreme Court of Iowa concluded that these trustees were wrong and that there were circumstances under which they could control their action. They said: "It cannot be that the creator of a trust by will can absolutely exclude the courts from controlling any and all expenditures from the trust fund, or from making any allowances from such fund except upon the consent of the trustees, unless the citizen. of the State has the power to set aside its laws. To give the maker of a will the prerogative of completely ousting the courts of jurisdiction in the premises is to allow him to nullify the statute provision which gives control of trustees appointed by will, even to the extent of removal. If the king can do no wrong, there is no need of law to punish him if he do wrong. If whatever the trustee by will does is final, and may never be the subject of judicial challenge, it was idle to make statutes permitting him not only to be controlled, but to be removed. If he is the absolute and final judge of what may or may not be done with the trust fund or expended therefrom, when could a case arise in which the court could exercise control over him and his administration; when could there be occasion to use the power to remove him? In fewer words, the testator cannot make a will which makes the trustee created by the will the sole judge of the propriety of expenditures from the trust fund, without thereby making nugatory the statutes which allow the courts to control the adminis

tration of trustees by will, and on proper occasion to remove them."

STATUTE OF LIMITATIONS AS APPLIED TO
TRUSTEES

In Spallholz vs. Sheldon (216 N. Y. 205), the New York Court of Appeals has held that where an executor made yearly accountings in the Surrogate's Court up to the time of his resignation and then transferred the estate to the general guardians of the plaintiff, an action brought to vacate the accountings and to reclaim excessive payments for commissions is barred after ten years from the last accounting. The opinion states: "While an express trust subsists and has not been openly renounced, the Statute of Limitations does not run in favor of the trustee (Kane vs. Bloodgood, 7 Johns Ch. 90; Lammer vs. Stoddard, 103 N. Y. 672). But after the trust relation is at an end, and the trustee has yielded the estate to a successor, the rule is different (Clarke vs. Boormans' Exrs., 18 Wall, 493,509; Gilmore vs. Hans, 142 N. Y., 10). The running of the statute then begins, and only actual or intentional fraud will be effective to suspend it."

MORTGAGE TO SECURE BOND ISSUE

The effectiveness of a reference in a bond to provisions of the mortgage as notice to purchasers of the bonds, is illustrated by the recent decision of the St. Louis Court of Appeals in Brinsmade vs. Johnson (1915) (179 S. W. 967). The bonds in this case recited that they were subject to all of the terms of a mortgage or deed of trust dated September 30, 1897. Of this the court said: "When corporate bonds of the character here involved thus aptly refer to the deed of trust and recite that they are