Every student of American political history, and I think I may say, even the man on the street, is familiar with the differentiation of the three great functions exercisable under our Constitution, i. e., the legislative, the judicial and the executive. There have been frequent determinations, emphasizing the distinction to be kept in mind always between the functions of these three departments of government; and barriers of judicial construction have been erected upon which appears-so that he who runs may read-the notification to the other two departments confronting the barrier separating them from the third: "Thus far shalt thou go and no farther."

Now the first conspicuous fact that everyone is aware of by this time in the attempt to work out the provisions of the Income Tax statute is, so far as collection at the source is concerned, that persons having no position under the Government, occupying no Governmental office, receiving no compensation from the Government, are required by the act, under penalties, to exercise two Governmental functions: i. e., assessment and collection of the tax at the

source.

Take a trust company which, as an incident of its business, has been confronted with the labor and expense of attending to the collection of coupons of bonds; is there any regulation of the Treasury Department which provides for the trust company's being indemnified for the expense to which it shall be put in assessing and collecting this tax at the source? It makes no difference in the theory of the case whether the tax which the trust company assesses and retains is one per cent., or whether it is on a sliding scale and may be one or two or three or more per cent. Assuming it was invariably and upon any amount one per cent., nevertheless the trust company must compute this one per cent.; that is, it must assess a tax. Second, it must collect the tax and it is accountable therefor to the Treasury Department just as much as though it were a collector appointed, sworn to the discharge of

his duties and in the receipt of that munificent emolument which our paternal Government bestows upon such functionaries of government.

The man on the street needs no argument to persuade him that the assessment and collection of a tax is in the exercise of a Governmental function. It is to be hoped that members of Congress may also become capable of appreciating this fact. I am informed on the best authority that there are trust companies who have been put to an expense computed to amount to over $15,000 per annum in order to comply with the provisions of this law without incurring penalties. In other words, instead of receiving payment from the Government as assessors or collectors of the tax, they are subjected to a tax of $15,000 per annum, not based upon any benefit received by them, not based on their income even from the business transacted incidental to the work that is thus involved. True, it is a tax which the trust company can regulate to a certain extent, but even if it were one dollar it is an unjust payment and the payment of it ought to be resisted on the ground that it is an unconstitutional exaction. It is an exaction that is necessarily incident to carrying out the provisions, but is one that it was not within the intention of Congress anyone should be exposed to. While it is in effect a tax upon the trust company, it isn't a tax that goes into the Treasury of the United States; it doesn't benefit the public; there is no reciprocal benefit conceivably resulting to the trust company for the payment. I confess that I have been surprised that the various persons charged with the duty of collecting at the source have not refused poink blank to discharge these Governmental functions, and that a test case has not been presented for judicial determination as to whether the Government could compel any particular person to assess and collect and retain, and finally account to the Government for, and pay over the tax of the holder of the coupon or of a landlord or of anyone else whose tax is sought to be reached in this way.

The spirit of change which animates the present transition period of social and economic readjustment, found interesting expression during 1913 in the activities of the American Bankers' Association.

New organic relations were established by the adoption, at the Boston convention in October, of a revised constitution which centralizes administrative control, assembles the affiliated sections and federates the State Bankers' Associations into a more homogeneous whole. The constitution, however, simply gives external form to a unity of co-operative effort through which the Association has attained its growth to a present membership of 14,100 banks and trust companies, so that constitutional regulation will chiefly serve to prevent the retarding of collective achievement by individual self-seeking.

The Association's efforts to secure a reform of the banking and currency system began in 1906, with the appointment of a Currency Commission. The educative effect upon bankers themselves of constant agitation and discussion of the subject, reflected into public opinion by the press, further impressed by the work of the National Monetary Commission and followed by the activities of the National Citizen's League, resulted in proposed legislation which has finally culminated in the new Federal Reserve law, upon which attention has been focused for the past six months.

The Currency Commission of the American Bankers' Association, at a meeting in Atlantic City, June 18, 1913, went carefully over a questionnaire of thirty-three questions issued by a sub-committee of the Senate Banking and Currency Committee relative to the proposed bill, and the replies were sent in printed form to the Prèsident, both houses of Congress and to the membership of the Association. Following this meeting a conference with Senator Owen, chairman of the Senate Committee, was held in New York, June 22-23, and the amendments to the original Glass bill there

suggested were afterward informally presented at Washington by four members of the Currency Commission.

The bill as later submitted to the House caucus contained radical and repressive features which led to the calling, by the Currency Commission, of a conference at Chicago, August 22-23, between members of the American Bankers' Association, the State Bankers' Associations and the various Clearing House Associations. Discussion there by the three hundred bankers present resulted in the preparation, and distribution to all banks in the United States, of an amended form of the bill embodying suggested changes which were considered either desirable or essential to render the Federal Reserve plan acceptable and feasible. A committee of seven then submitted the recommended changes, with explanations of their reasons, in a series of hearings before the Senate Banking and Currency Committee in Washington.

At the Boston convention of the Association in October, opposition on the part of bankers to the coercive injustice and impractical provisions of the bill as it then existed, was voiced both by a special conference of country bankers, who later presented their objections before the Senate Committee, and by the passage of resolutions expressing the opinion of the Association as a whole. These resolutions endorsed the efforts being made to secure banking and currency reform, but clearly implied the necessity of making legislation which could be successfully put into operation, such as "to command the approval and enlist the co-operation of the banks of the country, both State and National."

Continued criticism of the bill by individual bankers and the force of their collective condemnation, gradually led to a modification of some of its most objectionable provisions, to a degree which made the law, as passed in its final form, one which might obviously have been improved by a more adequate knowledge of its practical applica

tions, but which establishes a sufficiently safe basis of long needed reform to warrant its trial by banks which could not have entered the Federal Reserve system as at first proposed.

The principle of asset currency embodied in the note-issuing provisions of the bill, was first advocated from A. B. A. platforms during the nineties. In 1906 it was incorporated in an Association measure, known as the "asset currency" bill, which was introduced into Congress in 1907 and 1908, and it has appeared in the best currency legislation proposed since that time.

The National Reserve Association, or socalled Aldrich plan, upon which the Federal Reserve system is based, resulted from the work of the National Monetary Commissior, appointed by President Taft at the suggestion of the American Bankers' Association. Although fundamentally different as to principles of management, the two plans are practically analagous in many features which were perfected by the aid of the Currency Commission of the American Bankers' Association, and by individual members who were called into consultation during its preparation. So that the new law is, in many respects, directly descended from previous Association work upon currency reform.

The fact that our commercial paper, under existing laws, is safe enough to be used as the basis of note issue by Federal re. serve banks, is due in larger measure than is generally understood to the efforts of the Association, through its Law Committee, in furthering the enactment of such laws as the Uniform Negotiable Instruments Act, and in securing the passage of special protective measures drafted by the General Counsel, Thomas B. Paton. Significant of the Association's influence is the passage, in the last six years, of more than two hundred measures safeguarding instruments arising from commercial transactions. In 1913 alone, thirty-six laws covering ten subjects of legislation recommended by the Association, chiefly relating in some way to credit instruments, were placed on the statute books of twenty States. Typical of the work along these lines was the support given to campaigns which resulted in the passage of the Negotiable Instruments Act by five additional States; the adoption of the Uniform Warehouse Receipts Act by six States; and the work of the Bills of Lading Committee for Federal legislation through the Pomerene and Stevens bills, suppleniented by the distribution of a pamphlet prepared by the general counsel, giving the

history and indicating the benefit of the Uniform Bills of Lading Act.

Features of the new Federal Reserve system relating to Clearing House examination, check collection and exchange processes between member banks, reflect policies and incorporate practices established by tné Association through its Clearing House Section. In view of the estimate of the secretary of that Section that "for every dollar of Federal reserve notes used to pay debts there will be $30 of checks employed," it is interesting to note that fifty per cent. of the checks used in commercial transactions now bear the universal transit numbers devised by the Section, which has also brought about, during the year, a new method of reporting total bank transactions rather than total clearings, and is at present working to perfect a standard form of bank check and a uniform code of check collection laws.

In addition to the changes resulting from the new banking system, Federal legislation has imposed burdens upon banks and trust companies by the income tax provisions of the tariff law, and these were the subject of active propaganda by the Trust Company Section of the Association, which clarified certain phases of that uncertain subject, and rendered some of the income tax collection duties less complex. In connection with the income tax law the general counsel of the Association was also instrumental in securing the exemption of mutual savings banks from taxation.

The closer relations established between banks and the Government under the new Federal Reserve system, will increase the long recognized need of better understanding of banking services by the general public. It is difficult to estimate the educative effect of the work of the trust company and Savings Bank Sections in this respect, during the past year.

The efforts of the Trust Company Section took the successful form of nineteen ably written articles on the nature and value of trust company functions, which were given widespread publicity in the press throughout the country and will unquestionably impress the growing importance of such institutions upon public consciousness.

The Savings Bank Section has instituted a National Thrift Campaign, with the result that societies have been formed in different parts of the country to perpetuate the growing popularity of the savings and thrift idea, and nearly five hundred sets of specially prepared "Thrift Talks" are being issued monthly in galley form to the press, and to

bankers who have them printed in local papers in connection with efforts to develop the saving habit in their communities. Four courses of lectures on how different types of financial institutions may be used as an aid to saving, have been arranged as part of the free lecture system of New York City. The extension of school savings systems, especially in large cities, is being encouraged, and assistance given to banks in the installation of savings departments, by the suggestion of proper methods and systems. The Section is also active at present in opposing proposed legislation which would make for dishonesty, unfairness to savings banks, and possible danger to banks not Government depositaries, in the event of financial disturbance, by increasing the interest bearing amounts which may be deposited in Postal Savings Banks to $1,000, and by removing the limits upon non-interest bearing postal savings deposits.

That the standard of education established by the American Institute of Banking through its chapter and correspondence courses in banking and commercial law, as proven by the success of its graduates, makes such knowledge an increasingly desirable part of the qualifications essential to advancement in the banking profession, is more strongly evidenced each year, as it was during 1913, by the growing number of bankers who are working for its certificate of graduation. There are now nearly 14,500 student-members of the Institute.

In 1911 the Association recognized its economic responsibility toward the building up of agriculture as an industry commensurate with the country's needs, by the appointment of a standing Committee. At the Boston convention this Committee was developed into an Agricultural Commission, with B. F. Harris, of Champaign, Ill., as chairman. A monthly publication, known as "The Banker-Farmer," began issue in December, 1913, both as a chronicle of the work being done by the Association's Agricultural Commission and thirty-eight agricultural committees of State bankers' associations, and to define the economic, social and educational relations of bankers to the agricultural problem. The campaign which they have undertaken has already established a new sense of community of interest between the banks and the people, which is educative to both and significant of new social and economic adjustments.

Protection of its members against criminal offenders continues to be one of the Association's strongest features. The last annual report of the Protective Department

shows that, in the past year, three times as many crimes, with losses more than four times as great, were committed against nonmembers as against members of the Association.

A new cipher code is being prepared by a special committee, a book of Forms for National and State banks has been compiled, and a new form of "American Bankers' Association Standard Fidelity Schedule Bond" has recently been copyrighted.

During 1913 the Association suffered not only the unprecedented loss of a president in office, through the death of Charles H. Huttig, but also the death of an unusual number of prominent members, including Mr. James T. Howenstein, who first proposed the organization of the American Bankers' Association; an ex-president, Mr. M. M. White; Mr. Robert E. James who was chairman of the constitutional revision committee; and Mr. W. B. Greene, a former secretary of the Association.

With the exception of Rhode Island, there is now a bankers' association in every State, Delaware and New Hampshire having lately organized. The loyal co-operation of these forty-eight State Associations has helped the American Bankers' Association to influence many of the economic changes of 1913, and will make possible the fulfillment of the new opportunities and responsibilities of its fortieth year of effort.

State Trust Company of Plainfield, N. J.

The statement rendered by the State Trust Company of Plainfield, N. J., at the close of business December 31, 1913, reflects a prosperous year. The total resources amount to $757,139 of which $23,324 is cash on band, $124,281 cash in bank, $339,732 bills purchased and loans, $103,456 investment securities and $144,800 mortgages. The capital stock is $100,000, surplus and profits $50,163, deposits belonging to 2,000 depositors $606,551.

The State Trust Company has adopted the commendable plan of issuing statements which have explanations subjoined to each item of resources and liabilities.

The officers are as follows: R. Henry Depew, president, E. F. Feickert and M. C. Van Arsdale, vice-presidents, and H. C. Nash, secretary and treasurer.

The International Trust Company of Denver, Colo., reports under date of Jan. 13, 1914, total resources of $8,074,658, with $2,465,910, loans on security $3,459,201 and bonds $2.7. Deposits aggregate $6,999.435, with capital of $350,000, surplus and undivided profits of $708,923.

What has the Savings Bank Section done during the past year? Who can say? Possibly the small bankers in various sections of the country who have been aided in establishing savings departments by the Savings Bank Section might be able to say, if it were possible to get them together, or other bankers in remote communities who have received material for attractive advertising might be willing to testify. Perhaps the newspapers in forty different States that have received matter of interest to their readers upon the subject of Thrift, would say a word, or possibly some individuals who undoubtedly have been turned from habits of extravagance to lives of thrift and happiness through reading of the "Thrift Talks" sent out by the Savings Bank Section or through hearing some of the Thrift lectures arranged. under its direction, would acknowledge these agencies as responsible for the change, or better yet, possibly some of the hundreds of school children who have already acquired the thrift habit and extended its influence to their parents through school savings banks organized as a result of efforts of the Savings Bank Section, if it were possible to assemble them, would tell of some of the happiness that they have enjoyed and been able to give, as a result of the pennies saved. But it is impossible to assemble these various classes of people and ask them for their testimony. All we may point to is an encouraging letter now and then expressing appreciation of our efforts, and all we can say of the past year's work is that we have been earnestly striving to help these people and all others who have in any manner indicated that we might be of assistance.

Someone may ask, "Of what value is such work to the American Bankers' Association?" True, it cannot be measured in dollars and cents, but surely as a constructive effort it is worth while. The banker is indeed shortsighted who does not realize that his own prosperity depends upon that of the people and that any improvement in the thrift of the nation means future business of a permanent character. Hence, the Savings Bank

Section has bent most of its energies during the past year toward expanding its Campaign of Education in Thrift which was instituted over a year ago.

After considerable experiment, with a full realization of the size of the task, three principal methods were adopted in this work. First, the developing of the school savings system; second, the presenting of the manner in which our various financial institutions may be used as aids to thrift, by means of lectures by financial men to the people, and third, the sending of short articles termed Thrift Talks to newspapers and other periodicals throughout the United States for weekly publication. The first method reaches the children, and the other two reach the "grown-ups."

While accurate statistics of the school savings system are not available to date, figures that were gathered some time ago by Mrs. S. L. Oberholtzer of Philadelphia, indicated nearly a million of dollars upon deposit by about 200,000 children in the schools heard from at that time. Probably another year, through co-operation with the comptroller's office at Washington, accurate statistics will be obtained, and they will undoubtedly show a large increase over the above figures, for constant requests are received for the School Savings Bank pamphlet, issued by the Savings Bank Section, which contains several methods of operating the system, together with laws of various States relating thereto. This pamphlet is sent to anyone upon request, and contains among others, a description of one method of operating the school saving system, which entails no additional labor upon the part of banks or teachers and takes no time from the regular school hours of the pupils. The school savings system is not an immediate money-maker for banks, but as a foundation for future business and an advertising medium, it is unsurpassed; and educators in cities where the system is in successful operation, contend that it has a distinct educational value.

While the second method has been used by individual bankers here and there in