place of business not later than March 1, failure to observe this time limit to be punished with fines ranging from $20 to $1,000.

Refusal or neglect to file returns, except in case of sickness or absence, will result in an addition of 50 per cent to the tax assessed.

Sickness Permits Extension. -An extension of 30 days from March 1, in case of sickness or absence, may be allowed by the proper collector, provided an application is made by the individual concerned.

False or Fraudulent Returns. In case of false or fraudulent return 100 per cent will be added to the tax assessed, and any person required to make, sign, or verify such return who makes a false or fraudulent statement with intent to defeat or evade the tax, will be guilty of a misdemeanor and subject to a fine of not more than $2,000 or imprisonment for one year or both such fine and imprisonment.

Returns must be accompanied by oath or affirmation. When Assessments Must be Paid.-All assessments shall be made by the Commissioner of Internal Revenue and all persons shall be notified of the amount for which they are respectively liable on or before the first day of June of each successive year, and said assessment shall be paid on or before the thirtieth day of June.

Investors having a taxable income should consult their bankers as to the necessary steps to be taken in making their returns, as most of the banking firms, especially the investment bankers, have employed lawyers to make a special study of the new income tax law and regulations, and are ready to supply all required information relating thereto without charge to their patrons. Many of the banks will attend to the details of making the proper returns to the Government, executing certificates of ownership for the collection of coupons or registered interest, verifying the deductions "at the source," and the payment of the tax.

THE NEW BANKING AND
CURRENCY SYSTEM

ESTABLISHED BY THE FEDERAL RESERVE ACT OF DEC. 23, 1913.

The title of the Act providing for the new banking and currency system reads: "An Act to provide for the establishment of Federal reserve banks, to furnish an elastic

President

currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." Need and Purpose of the System Explained. Wilson, in his currency message which he read to the two Houses of Congress in joint session June 24, 1913, declared: "We must have a currency, not rigid as now, but readily, elastically responsive to sound credit, the expanding and contracting credits of every-day transactions, the normal ebb and flow of personal and corporate dealings. Our banking laws must mobilize reserves; must not permit the contraction anywhere in a few hands of the monetary resources of the country or their use for speculative purposes in such volume as to hinder or impede or stand in the way of other more legitimate, more fruitful uses. And the control of the system of banking and of issue which our new laws are to set up must be public, not private, must be vested in the Government itself, so that the banks may be the instruments, not the masters, of business and of industrial enterprise and initiative."

Commended by Investment Bankers.—At a meeting of the board of governors of the Investment Bankers' Association of America, held at Philadelphia in January, 1914, the following resolution commending the currency act and bespeaking its acceptance by the entire country, was adopted:

"Resolved, That the board of governors of the Investment Bankers' Association of America hereby congratulate the government and the people upon the passage of a currency bill which is, on the whole, calculated to restore confidence and prevent panics, at the same time introducing a certain elasticity into our currency which has always been lacking.

"We believe it to be the patriotic duty of every banker and citizen to co-operate with the government for the common good. We hereby pledge ourselves to use our best efforts in this direction.

"It is unnecessary to point out that the crux of the whole matter is the personnel of the National Reserve Board. High character, experience in business and banking should control in the appointments to the National Reserve Board if the new system is to command the confidence of the country."

MAIN FEATURES OF THE ACT.

Federal Reserve Districts.—The act provides that the Secretary of the Treasury, the Secretary of Agriculture and the Comptroller of the Currency, acting as the Reserve Board organization committee, shall designate not less than

eight nor more than twelve cities to be known as federal reserve cities, and shall divide the continental United States, excluding Alaska, into districts, each district to contain only one of such Federal reserve cities. (See page 146.)

National Banks Must Subscribe to Capital Stock. —When the organization committee shall have designated the cities in which Federal reserve banks are to be organized, and fixed the geographical limits of Federal reserve districts, every national banking association within that district shall be required within thirty days after notice from the organization committee to subscribe to the capital stock of such Federal reserve bank in a sum equal to six per centum of the paid-up capital stock and surplus of such bank.

Capital Required. No Federal reserve bank shall commence business with a subscribed capital less than $4,000,000.

Branch Offices. Each Federal reserve bank shall establish branch banks within the Federal reserve district in which it is located and may do so in the district of any Federal reserve bank which may have been suspended. Such branches shall be operated by a board of directors under rules and regulations approved by the Federal reserve board. Directors of branch banks shall possess the same qualifications as the directors of the Federal reserve banks. Four of said directors shall be selected by the reserve bank and three by the Federal Reserve Board. The reserve bank shall designate one of the directors as manager.

Stock Issues. The capital stock of each Federal reserve bank shall be divided into shares of $100 each. The outstanding capital stock shall be increased from time to time as member banks increase their capital stock and surplus or as additional banks become members, and may be decreased as member banks reduce their capital stock or surplus or cease to be members. When a member bank increases its capital stock or surplus it shall thereupon subscribe for an additional amount of capital stock of the Federal reserve bank of its district equal to six per centum of the said increase.

State Banks as Members.-Any bank incorporated by special law of any State, or organized under the general laws of any State or the United States, may make application to the reserve bank organization committee, pending organization, and thereafter to the Federal Reserve Board for the right to subscribe to the stock of the Federal reserve bank organized or to be organized within the Federal reserve district where the applicant is located.

The organization committee or the Federal Reserve Board may permit the applying bank to become a stockholder in the Federal reserve bank of the district in which the applying bank is located.

Advantage to State Banks. By becoming "member banks" the State banks become part of the general banking and currency scheme provided by the act, thus being placed in a better position to meet the demands of their patrons and the people of their locality for more adequate banking facilities.

A Federal Reserve Board is created by the act, consisting of seven members, including the Secretary of the Treasury and the Comptroller of the Currency, and five members appointed by the President of the United States, which board is to exercise general supervision over the Federal reserve banks.

Federal Advisory Council. The act provides for a Federal advisory council, consisting of as many members as there are Federal reserve districts. The council shall have power, by itself or through its officers, (1) to confer directly with the Federal Reserve Board on general business conditions; (2) to make oral or written representations concerning matters within the jurisdiction of the board; (3) to call for information and to make recommendations in regard to discount rates, rediscount business, note issues, reserve conditions in the various districts, the purchase and sale of gold or securities by reserve banks, open-market operations by said banks, and the general affairs of the reserve banking system.

POWERS OF FEDERAL RESERVE BANKS.

To Receive Deposits. Any Federal reserve bank may receive from any of its member banks, and from the United States, deposits of current funds in lawful money, national bank notes, Federal reserve notes or checks and drafts upon solvent member banks, payable upon presentation; or, solely for exchange purposes, may receive from other Federal reserve banks deposits of current funds in lawful money, national bank notes, or checks and drafts upon solvent member or other Federal reserve banks, payable upon presentation.

To Discount Notes, Drafts and Bills of Exchange. -Upon the indorsement of any of its member banks, with a waiver of demand, notice and protest by such bank, any Federal reserve bank may discount notes, drafts and bills of exchange arising out of actual commercial transactions; that

is, notes, drafts and bills of exchange issued or drawn for agricultural, industrial, or commercial purposes, or the proceeds of which have been used, or are to be used, for such purposes, the Federal Reserve Board to have the right to determine or define the character of the paper thus eligible for discount within the meaning of this act. Nothing in this act contained shall be construed to prohibit such notes, drafts, and bills of exchange, secured by staple agricultural products, or other goods, wares, or merchandise, from being eligible for such discount; but such definition shall not include notes, drafts, or bills covering merely investments or issued or drawn for the purpose of carrying or trading in stocks, bonds or other investment securities, except bonds and notes of the Government of the United States. Notes, drafts and bills admitted to discount under the terms of this paragraph must have a maturity at the time of discount of not more than ninety days: Provided, That notes, drafts, and bills drawn or issued for agricultural purposes or based on live stock and having a maturity not exceeding six months, may be discounted in an amount to be limited to a percentage of the capital of the Federal reserve bank, to be ascertained and fixed by the Federal Reserve Board.

To Discount Acceptances.—Any Federal reserve bank may discount acceptances which are based on the importation or exportation of goods and which have a maturity at time of discount of not more than three months, and indorsed by at least one member bank. The amount of acceptances so discounted shall at no time exceed one-half the paid-up capital stock and surplus of the bank for which the rediscounts are made.

The aggregate of such notes and bills bearing the signature or indorsement of any one person, company, firm or corporation rediscounted for any one bank shall at no time exceed ten per centum of the unimpaired capital and surplus of said bank; but this restriction shall not apply to the discount of bills of exchange drawn in good faith against actually existing values.

Any member bank may accept drafts or bills of exchange drawn upon it and growing out of transactions involving the importation or exportation of goods having not more than six months sight to run; but no bank shall accept such bills to an amount equal at any time in the aggregate to more than one-half its paid-up capital stock and surplus.

Open Market Operations.—Any Federal reserve bank may, under rules and regulations prescribed by the Federal Reserve Board, purchase and sell in the open market, at home or abroad, either from or to domestic or foreign banks, firms, corporations, or individuals, cable transfers