The Federal Reserve Board is not a bureau of the Treasury Department like the office of the Comptroller of the Currency. It is a part of the banking system of the country and not of the Government. If it were a bureau of the Treasury Department the Government then would be in the banking business. It is not the function of Government to engage in such business, and, therefore, inasmuch as the board is not a Government bureau it should be located in a building of its own outside of the Treasury Department.

The principal functions of the Federal Reserve Board were intended to be to provide, through the Federal Reserve Banks, a circulating medium sufficiently elastic to meet readily the periodical demands for additional currency incident to the movement of the crops and increased industrial and commercial activities by making it possible for the banks to convert quickly their assets into cash to meet unexpected contingencies or extraordinary demands upon them, and to automatically retire such currency when no longer nedcd.

The principal defect in the national bank currency was its inelasticity. It was unresponsive to the demands of trade and commerce, and the Comptroller of the Currency was powerless to make it otherwise.

In addition to providing an elastic currency, the duty was imposed upon the Federal Reserve Board of prescribing regulations for the Federal Reserve Banks, governing the rates of discount, and, incidentally, to conserve the country's stock of gold as a material basis for Federal Reserve issues of currency.

The Federal Reserve Board is the head of the Federal Reserve Banking System. The members of the board, with the exception of the Secretary of the Treasury and the Comptroller of the Currency, who are ex-officio members, are not officers of the Government, like the heads of bureaus, although appointed by the President and confirmed by the United States Senate. They are a part of the Federal Reserve Banking System.

The Comptroller of the Currency is an official of the United States Government. He is the representative of the Government and not of the banks. He is charged with the duty of administering the banking laws and the supervision of the banks. He represents no part of the banking system and his relations with the banks are entirely independent and disinterested, except so far as seeing that the laws are faithfully administered and properly observed by the banks in the conduct of their business. To abolish the office of Comptroller would remove the only safety link between the Government and the depositors upon which the latter have relied confidently for more than a half century, as to the solvency of the banks and the security of their deposits. And the banks have exploited the Comptroller's supervision by advertisement and otherwise, as their strongest recommendation for the confidence of the banking community in soliciting and retaining their business. The right to advertise the institution as being under the supervision of the Government of the United States always has been regarded by national banks as one of their most valuable assets, and this fact has been prominently displayed and extensively advertised from the day the banks first opened their doors for business in competition with other banking institutions in their respective communities.

Supervision of the member banks by the Federal Reserve Banks would be equivalent to supervision by the system of which the member banks are a part, and not by an independent, impartial and disinterested officer of the United States Government, like the Comptroller of the Currency. The officers in charge of the Federal Reserve Banks would not have the same solicitude for the interests of the depositors that the Comptroller has. Nor would the depositors have the same degree of confidence in this character of supervision as they have in supervision by an impartial and wholly disinterested official of the United States Government, especially in the liquidation of banks in which the supervising authorities would have a substantial and secured interest.

which they would proceed to satisfy first, as has been done in every instance of a suspended bank owing the Federal Reserve Bank money.

The Federal Reserve Act was a most excellent piece of constructive banking legislation, and it was enacted at a very opportune time, although it did not begin to function until November 16, 1914, over four and a half months after the outbreak of the great World War. Fortunately, however, it contained the provision extending the life of the Aldrich-Vreeland emergency currency act for the period of one year. This enabled the Comptroller of the Currency, under authority of the Secretary of the Treasury, to make use immediately of the several hundred millions of emergency currency which had been accumulated in the vaults of the Treasury Department for just such a contingency.

The prompt issue of this circulation to currency associations that had been hastily formed under authority of the Aldrich-Vreeland Act supplied the banks in all parts of the country with all the money they required and enabled them to continue currency payments without interruption, thus relieving a very menacing situation and inspiring confidence in the soundness of business and of our financial institutions and averted a threatened panic such as the country never had experienced.

Notwithstanding all that may be said in favor of the Federal Reserve Act, it was not and is not a perfect banking measure. It had and still contains many imperfections. Fundamentally it is sound, but many of its provisions can be improved upon, some by legislative amendments and others by judicious administration more in harmony with the spirit and intent of the act than has been displayed in many instances. Some of its provisions should be entirely repealed and some of its weak features strengthened and safeguarded so as to prevent extravagances, wastefulness in expenditures and oppressive abuses through the enforcement of policies of administration not contemplated by the act, but arbitrarily assumed and exercised by administrative officers of the Federal Reserve Banks.

Politics, the arbitrary exercise of power and the improper and extravagant use of money were some of the principal charges made against the United States Bank which finally led to its downfall. The Federal Reserve Banks should profit by the history of that institution.

If misfortune or failure ever overtakes the Federal Reserve System, it will arise through opposition to objectionable and oppressive policies and methods of administration of the Federal Reserve Banks as affecting disastrously the interests and business of the member banks. Therefore, it would be an exceedingly dangerous experiment to abolish the office of Comptroller of the Currency and to transfer to the Federal Reserve Banks the power to examine and supervise the member banks, as time would very soon prove, if this fact has not been sufficiently demonstrated already by the experiences which a number of the member banks have had in the sections covered by the incidents heretofore related.

It will be noted that throughout this entire volume the pronoun "I" has not been used in a single instance, except on the introductory pages, when it could not well be avoided.

I hope I may be excused, therefore, if in these concluding paragraphs I make some allusions to myself in the first person.

It may be the impression of some of the readers of this volume that my views in regard to the inadvisability of transferring to the Federal Reserve Board and the Federal Reserve Banks any of the supervisory powers heretofore exercised by the Comptroller of the Currency are influenced by personal or selfish interests as affecting the position which I have continuously occupied for more than twenty-three years.

To remove any thought of this nature from the mind of anyone who might entertain such an impression, it may be stated that the position of Deputy Comptroller of the Currency is a classified civil service place and the occupant is subject to the provisions of the retirement act. I passed the maximum retirement age some time ago and am now holding the position under a second extension of time for the limited period of two years. I was willing and anxious to retire from office at the end of the first period of extension, but I concluded to remain for a while longer at the urgent request of Comptroller Crissinger, in the following letter addressed by him to the Secretary of the Treasury under date of May 27, 1922:

The purpose of this letter is to advise you that this office has requested the retention in the service for a period of two years from August 20, 1922, of Mr. Thomas P. Kane, Deputy Comptroller of the Currency.

Mr. Kane is one of the most indispensable men connected with the Bureau of the Comptroller of the Currency. He is willing to continue in the Government service and I recommend that by all means his services should be retained.

Mr. Kane is senior Deputy Comptroller and during my absence from the office, acts in my stead, performing all the duties appertaining to the Comptroller.

Mr. Kane's knowledge of the National and Federal reserve banking laws and the rules, regulations, and precedents of the office peculiarly fit him for the position he now holds and which he has held for many years, the duties of which he has discharged with the highest diligence, intelligence and fidelity. He has attained a proficiency in his work which makes him of exceptional value to the Treasury Department.

Mr. Kane's long experience in the office makes his service peculiarly valuable at the present time, and if he were to retire from the service at this time, it is doubtful whether another man of his experience and ability in handling these difficult problems could readily be secured. His services are such as I should very much regret to dispense with now. While he is a man seventy-two years of age, he has accurate and keen possession of all his faculties and is capable of rendering a greater amount of service in the position in which he is serving the Government than many younger men. Therefore I request that the time of his services be extended for such period as is permitted by law. In my opinion the mental and physical condition of Deputy Comptroller Kane at this time is excellent, and his services would warrant the payment to him by the Government of a much larger salary than he now receives.

It should be understood, therefore, that my views as declared in the foregoing paragraphs are not influenced in the slightest degree by selfish or personal reasons, but express my honest convictions, based upon long experience, of what I believe to be for the best interests of the public service and of the national banks of the country which I have had the honor to assist in supervising for more than a quarter of a century.

But it matters not whether I am in the Government service or out of the service, my earnest prayer shall ever be that the Federal Reserve System may continue to grow in strength and wisdom and steadily improve with age, and that when the history of the system is finally written it shall be a realization of the fondest hopes and expectations of those who framed the measure, and not become, through faulty, incompetent or oppressive administration, another "Romance and Tragedy of Banking".