secured was throughout the year in excess of that on the security of other acceptable collateral.

TRADE ACCEPTANCES.

The figures presented by the bank's books for the discount of trade acceptances during the year are an unsatisfactory guide as to the progress made in extending the use of this form of paper. Total discounts in this class amounted to $799,371, arising largely from the oil and lumber distributing business, but representing as well some extension of trade acceptances into flour milling and quarrying. Money conditions were such that trade acceptances did not reach this bank in any volume except in periods of unusual demand, and it is noticeable that in anticipation of the Liberty loan and crop moving financing, the amounts held showed increases, while in other months of the year the figures fell off. The advantages of trade acceptances are better known than they were a year ago, but progress in the development of general use of this form of paper is slow in consequence of the difficulty of changing established customs and of altering methods of settlement that have become thoroughly rooted through many years of use.

ACCEPTANCES.

The policy of the bank during the year was to buy both domestic and foreign acceptances at periods when the rediscounting demand was light. Domestic acceptances bought aggregated $17,730,727.71, while total acceptances purchased in the open market and from other Federal Reserve Banks amounted to $39,167,834.03.

Pursuing the same general policy that has governed the purchase of acceptances, the bank has, from time to time, on the call of the Federal Reserve Board, discounted substantial amounts of rediscounted paper of other Federal Reserve Banks. Accommodation so extended amounted to $73,551,455, consisting of paper received from the Federal Reserve Banks of Dallas, Boston, Philadelphia, Atlanta, and Richmond.

RESERVE POSITION.

Although there was an increase of approximately $23,000,000 in the gold holdings of the Federal Reserve agent and the Federal Reserve Bank during the year, as a result of continuous and successful efforts to gather in gold from both member and nonmember banks, the cash reserve against net deposits and note liabilities showed rather sharper fluctuations than during 1917. Due to moderate rediscounting it was able to maintain comparatively strong reserves during the first four months of the year, running 77.8 per cent in January, 78 per cent in February, 81.9 per cent in March,

and 73.9 per cent in April. The effect of the spring planting demand upon the rediscounts of the bank was apparent in the reduction of the reserve to 69.3 per cent in May, with a further drop to 63.2 per cent in June. In July it dropped to 48 per cent, and in August, during which the demand was heavy, it reached the low point of 43.6 per cent, rising to 44.7 per cent in September and advancing to 61.9 per cent in October, 67.8 per cent in November, and averaging 67.1 per cent in December, reflecting in the last three months of the year the effect of liquidation following the crop movement.

At the close of 1916 the combined gold holdings of the bank and the Federal Reserve agent amounted to $36,323,000. At the close of 1917 the figure had risen to $70,334,000, and at the close of 1918 the combined holdings had increased to $93,147,939. Except for the success of the bank in attracting gold, the fluctuations in the reserve percentages would have been even sharper than those experienced during the periods of very active rediscounting which occurred during the year.

MOVEMENT OF MEMBERSHIP.

The Federal Reserve Bank of Minneapolis received additions to membership during 1918 resulting from the chartering of 17 new national banks. During the same period 54 State banks acquired membership by application to the Federal Reserve Board, retaining their State charters. Nineteen additional State banks automatically acquired membership by conversion into national banks, making a net gain for the year of 90 banks. Membership at the close of the period consisted of 866 institutions, as against 776 at the end of the previous year. It may be noted in this connection that since organization a total of 68 State banks have acquired membership while 79 State banks have acquired membership by conversion, making a total of 147 State institutions now members in the Ninth Federal Reserve District.

State banks are taking a keener interest in the Federal Reserve system than before. This results in part from their closer contact with the Reserve Bank due to the multitudinous operations in connection with the Liberty loans and partly from a gradually widening appreciation of the important service that the Federal Reserve system renders to the general banking structure of the country. At the close of the year there were a number of substantial State institutions that had the question of membership under consideration and early and favorable action on their part is anticipated.

RELATIONS WITH MEMBER AND NONMEMBER BANKS.

The unusual problems of the year, and particularly those relating to Government financing, were such as to bring the Federal Reserve Bank into much closer contact with all the banking institutions in

the district than at any time since its organization. In the heavy burdens resulting from the Liberty loans no distinction was made as between member and nonmember banks, the object sought being to consolidate the banking resources of the district behind the Government in the most complete and effective way.

The check collection system has been utilized to a larger extent than before, and has shown a steady gain in importance during the

year.

Many banks have applied for and been granted fiduciary powers. These are, however, subject to certain limitations, resulting from the character of State law. In Michigan, the Federal Reserve Board has found it possible to extend these powers to approved banks in cities of 100,000 population having $150,000 capital or more, and in larger cities, to banks having a capital of $300,000 or more. In Wisconsin, banks in cities with less than 100,000 population, having $50,000 capital, are eligible, while in cities with more than 100,000 population, the minimum capital requirement is $100,000. In Minnesota, $50,000 capital is required in cities of less than 25,000 population, while in cities of from 25,000 to 100,000 population, a capital of $75,000 is required. In cities of more than 100,000 and less than 200,000 population, the capital requirement is $100,000, while in cities with more than 200,000 population $200,000 is the capital required. In South Dakota the capital required in cities with less than 5,000 population is $50,000, while in cities with more than 5,000 population $100,000 capital is required. The requirement in North Dakota is $100,000 capital irrespective of population. The law in Montana is the same.

This has somewhat restricted the number of banks privileged to apply for these powers, but still permits a large number of active and well-managed institutions to considerably broaden their functions. Applications granted by the Federal Reserve Board during 1918 included the following: Merchants National Bank, Billings, Mont.; Montana National Bank, Billings, Mont.; Commercial National Bank, Bozeman, Mont.; First National Bank, Duluth, Minn.; First National Bank, Manistique, Mich.; Northern National Bank, Ashland, Wis.; Ashland National Bank, Ashland, Wis.; Metropolitan National Bank, Minneapolis, Minn.; First National Bank, Superior, Wis.

FISCAL AGENCY OPERATIONS.

The issue of an unfamiliar form of Government obligation in the shape of certificates of indebtedness in anticipation of Liberty loan payments created a particularly difficult problem early in the year, which required a large amount of work before banks and banking institutions and the general public became familiar with the great usefulness of this form of security. Twenty-two different issues

were offered during the year with increasing participation, and the total amount of certificates sold reached $285,379,500. the respective issues are shown in Schedule 10.

TREASURY DEPOSITS AND WITHDRAWALS.

Details of

Approximately 2,500 banks in the district executed deposit agreements in accordance with the instructions of the Treasury during 1918. The plan of making payment by crediting the Federal Reserve Bank as fiscal agent was of the utmost value in adjusting the heavy load of Government financing and facilitating operations of great magnitude. Treasury deposits under agreements with the specially designated Government depositaries aggregated $411,493,795 during the year, and by the adoption of this method of making payments, the depositary banks gained an additional period of time in which to make transfers of funds to the United States Government. Α proper adjustment of their own burdens was thereby made easier and the smoothness and lack of strain with which these operations were conducted is to be credited, to a very large extent, to this method, which is responsible for the excellent financial position the district retained throughout the year in the face of very heavy withdrawals.

The details of Government deposits and withdrawals and monthly balances are given in Schedule 11.

The third and fourth Liberty loans, coming in the early summer and fall of 1918, were handled in much the same manner as the first and second loans during 1917. The subscriptions to the public were received through a largely extended and improved organization, controlled by a central committee, working under the direction of the bank, and the allotments were substantially exceeded. The details of the subscriptions to the third loan are shown in Schedule 12, the details of the fourth loan in Schedule 13, and additional data of interest in Schedules 14 and 15.

Schedule 16 shows war-savings and thrift stamp sales during the year, but includes only the figures of the Federal Reserve Bank and does not show the large volume of sales made by the post-offices throughout the district.

War-savings stamps to the value of $14,125,634 were sold through the banks, together with thrift stamps amounting to $489,185.50.

WAR FINANCE CORPORATION.

Early in August, a general circular was issued to all banks and trust companies in the western portion of the district which had suffered from dry weather and crop failure, advising them of the operations of the War Finance Corporation and the conditions under which the latter stood prepared to make advances in support of the

agricultural situation. A few days later a second circular of instructions was issued advising banks and trust companies of conditions under which crop-moving loans would be made by the War Finance Corporation. Applications were comparatively few, and advances were made to five different banks for an amount aggregating $36,000. Two of the loans were for crop-moving purposes and aggregated $14,500, and three were for agricultural purposes in the dry district, and aggregated $21,500.

CAPITAL ISSUES COMMITTEE.

Pursuant to instructions, the Federal Reserve agent early in February formed a representative committee in the Ninth Federal Reserve District to inquire into the use of funds for capital purposes and to exercise general supervision and control over security issues within this jurisdiction, acting under a central committee at Washington. Its policy was to encourage those interested in the issue of securities to present their matters to the district committee for examination and report to the national committee in Washington.

Early in July the membership of the district committee for the ninth district was increased and the work of the committee reorganized and considerably expanded. It became apparent that the greatest competition, not only with Government financing, but with all legitimate security issues, arises out of the widespread, shrewdly organized, and wholly unscrupulous operations of promoters of unsound, worthless, or fraudulent securities. The committee found many forms of evasion of the provisions of the War Finance Corporation Act. In such cases no attempt was made to issue the commonly recognized forms of securities, but in lieu thereof, participating certificates, certificates under trust agreement, memberships, contracts, service agreements, and other devices were used, and these were sold broadcast to unsuspecting investors, to whom they were represented as having value and being the equivalent of the ordinary kinds of securities.

The committee became convinced after patient investigation, and especially after it had analyzed numerous reports from its own investigation, that the sale of unsound and fraudulent securities has for several years past created a drain of not less than $15,000,000, and in all probability, $20,000,000 per year upon the ninth district.

The committee handled during the year 373 applications for security issues with the resulting investigations, many of which were involved and assumed considerable importance. It handled in addition several hundred subjects presented informally, which were disposed of by consultation or correspondence. It recommended to the Capital Issues Committee for disapproval proposed security issues aggregating $10,424,125, and secured in addition the post