While occasionally a bank is deficient in the amount of reserve required, the aggregate requirement for all banks is rarely deficient. . . .

The entire reserve required to be held by central reserve city banks is in lawful money with the exception of the redemption fund, which averages approximately one-fourth of 1 per cent. In other reserve city banks the lawful money reserve slightly exceeds 51 per cent., the amount available with reserve agents 47 per cent., and the redemption fund slightly less than 2 per cent. The reserve held in lawful money by country banks averages 45 per cent of the total reserve held, the amount available with reserve agents averaging approximately 50 per cent., and the amount in redemption fund slightly in excess of 4 per cent. Taking the country as a whole, the lawful money in bank is approximately 64 per cent of the total reserve held, amount available with reserve agents 34 per cent., and the redemption fund 2 per cent.

Profit on national-bank circulation. In computing the profit on the issuance of national-bank circulation it is assumed that the entire amount based on the bond deposit is in circulation and no deduction is made by reason of the fact that a reserve fund of 5 per cent on the issues is required to be maintained in the office of the Treasurer of the United States for the redemption of notes as presented at the department, as the redemption fund is permitted by law to be counted as a part of the bank's lawful reserve. In the calculation appearing in the appendix to this report, the profit is stated, based on the average net price of bonds, monthly, during the year ended October 31, 1910, and is computed separately on deposits of 2 per cent consols of 1930, the 4 per cent loan of 1925, and the 2 per cent. Panama Canal Loan. Money is assumed to be worth 6 per cent and the measure of profit is the difference between the net receipts from the circulation loaned at 6 per cent and interest that would be obtained on the cost of the bonds loaned at the same rate; in other words, from the interest received on the bonds at the rate provided therein, and the interest on circulation loaned at 6 per cent., are deducted the taxes on circulation, expense incident to the obtaining of circulation, i.e., plates, redemption charges, etc., together with the sinking fund and from the difference is deducted the interest on the cost of the bonds to show the profit.

During the year in question, 2 per cent consols of 1930 ranged in price from a minimum of 100.505 on November, 1909, to a maximum of 101.24 in September, 1910, and on the same dates the profit on circulation in excess of 6 per cent on the investment was 1.387 per cent and 1.313 per cent., respectively; that is to say, on the issue of $100,000 of circulation on the security of 2 per cent consols of 1930, at a cost of 100.505 the profit on circulation in excess of 6 per cent on the investment was $1349.39, and on the bonds at a cost of 101.24 the profit was $1329.31.

The highest average net price of 4 per cent bonds was 116.693 in November, 1909, and the rate on circulation secured by bonds of that class was 1.076 per cent. The lowest price on these bonds during the year was 114.875 during May, June, and July, the rate of profit being 1.225 per cent in May, 1.220 per cent in June, and 1.225 per cent in July. The rate of profit, however, reached the maximum of 1.233 per cent when the bonds in February were quoted at 114.932. The profit on circulation secured by the Panama Canal bonds is but nominally in excess of the profit on 2 per cent consols, although in November, 1909, when the Panama Canal bonds were quoted at 100.130, the rate of profit on circulation was greater than on any other class of bonds at any time during the year, being stated at 1.426 per cent.

Earnings and dividends of national banks. While the dividend periods of national banks vary, and under the law reports of earnings and dividends are required to be made to the Comptroller within ten days after the declaration of dividends, for statistical purposes the reports are abstracted for semiannual periods ending December 31 and June 30. In the appendix to this report appear the abstracts, by reserve cities and States, for the periods ended December 31, 1909, and June 30, 1910. Combining these two abstracts, for the purpose of showing results for the entire year, it appears that the average capital on which dividends were paid was $963,-457,549. The average surplus was $630,159,719 and the gross earnings $402,655,823.44 against which were charged losses and premiums aggregating $38,714,082.62, or 9.6 per cent., and expenses of $209,784,251.35 or 52.18 per cent. With these deductions the net earnings are shown to have been $154,167,489.47, from which dividends were paid to the amount of $105,898,622, or 10.99 per cent on the capital and 6.65 per cent on the capital and surplus. The net earnings were equivalent to 9.67 per cent of the capital and surplus.

The act requiring the submission of reports of earnings and dividends was not passed until 1869; hence the records begin with the year ended March 1, 1870, continuing to June 30, 1910, a period of forty-one years. The average annual net earnings of banks during this period are shown to have been $71,956,096 and the average dividends $54,198,299, or an average rate of 8.98 per cent on the capital stock. The aggregate net earnings for the forty-one years are stated at $2,950,-199,928 and the dividends at $2,222,130,367.

National-currency associations. In the annual report of the Comptroller of the Currency for 1908 the salient provisions were published of the act of May 30, 1908, providing for the formation of national-currency associations and the issue of additional national-bank currency.

Under this act national-currency associations may be formed by any number of national banks, not less than ten, with aggregate capital and surplus of at least $5,000,000, and located in contiguous territory. No national bank, however, may be a member of a currency association unless it has an unimpaired capital and a surplus amounting to at least 20 per cent of its capital. It is further provided that to be entitled to issue additional currency a national bank, a member of the currency association, shall have circulation outstanding, secured by United States bonds, aggregating not less than 40 per cent of the capital stock. Additional circulation provided by this act may only be issued upon the recommendation of the Comptroller and approval of the Secretary of the Treasury. The maximum circulation issuable by a bank on United States bonds, and under authority of the act of May 30, 1908, is measured by the capital and surplus of the bank.

The officers of a currency association, on behalf of one of the bank members, may apply for authority to issue additional circulation to an amount not exceeding 75 per cent of the cash value of the securities or commercial paper deposited with the association, and upon deposit of state, city, town, county, or other municipal bonds of the character prescribed by the act may obtain for issue circulating notes to the extent of 90 per cent of the market value of the bonds deposited. The issue of additional circulation on commercial paper, however, is limited to 30 per cent of the unimpaired capital and surplus.

The act contemplates that no additional circulation shall be permitted to be issued unless, in the judgment of the Secretary of the Treasury, conditions in the country at large, or in a special locality, warrant such action, and under section 8 of the act it is made the duty of the Secretary of the Treasury to obtain information with reference to the value and character of securities authorized to be accepted, and from time to time to furnish information to national-banking associations as to such securities as would be acceptable under the provisions of the act.

The act further provides for an issue of circulating notes and the incorporation of the statement upon their face that

"they are secured by United States bonds or other securities," certified by the written or engraved signatures of the Treasurer and Register and by the imprint of the seal of the Treasury. They shall also express upon their face the promise of the association receiving the same to pay on demand, attested by the signature of the president or vice-president and cashier. Under this requirement, circulation has been prepared for every national-banking association, and there is stored in the reserve vault of the bureau a stock of incomplete currency amounting to $500,000,000. So far, no circulating notes, other than those secured by United States bonds, have been issued, but all incomplete currency shipped to a bank bears the legend quoted.

On June 30, 1910, the number of national banks reporting was 7145, with paid-in capital of $989,567,114 and surplus of $644,857,482.82. Of these banks, 5699 had circulation secured by United States bonds equal to or exceeding 40 per cent of the capital, and 1415 circulation less than that proportion.

In less than thirty days after the passage of the emergency-currency act a national-currency association was formed in the District of Columbia, of which all of the eleven banks in the District were members. The aggregate capital and surplus of the banks at that time were $5,202,000 and $3,942,000 respectively. . . .

While the formation of other currency associations was undertaken, none was perfected in a manner acceptable to the Secretary of the Treasury until the midsummer of 1910, by reason of what were regarded as insurmountable obstacles on the part of banks interested. These obstacles, however, were in a large measure overcome by a revised construction of the law.

Banking power of the United States. The following table shows for 1910 the banking power of the United States, including the island possessions, as indicated by the volume of capital, surplus, deposits, and circulation.

Amounts in million dollars.

a Includes government deposits.

b Number of banks and amounts estimated upon statements from reporting private banks.