it became clear that the department of finance had neither men nor methods of installing and controlling departmental accounts. Therefore the Bureau submitted a report of some 250 pages describing clearly the present organization, books and methods, showing present defects and suggesting remedies that have proved successful in the accounting world. This report was published by the department of finance in March, 1908. It will undoubtedly take an important place in the permanent literature of accountancy, together with the Bureau's reports on "Making a Municipal Budget" and "A Department of Municipal Audit and Examination" (suggested reorganization of the commissioners of account's office). At the same time, these reports will quite as certainly find place on the reference shelves of universities and civic organizations that are teaching the elements of efficient citizenship.

4. Special studies have been made of the departments of water supply, gas and electricity, parks, street cleaning, health, tenement house. For the Charter Revision Commission report to Governor Hughes (pp. 131-464) the Bureau "charted the functions of the city government," showing the present organization, the powers and duties of each bureau, division and post. There are diagrams showing for some twenty departments the distribution of authority and responsibility.

5. Reorganization of the Commissioner of Accounts office under the efficient leadership of John Purroy Mitchell and E. G. Gallaher, it is equipped for educational and corrective work of great magnitude.

Constructive coöperation by informed private citizens meets with little opposition from city officials, first because most city officials really want to make a record that will gain the respect of their fellow-men, and second because few city officials are willing to advertise that they put a premium on efficiency or dishonesty. Not only have heads of departments granted the Bureau permission to obtain facts, but many of them, including the mayor, comptroller, commissioner of street cleaning, president of Bellevue and allied hospitals, commissioner of parks and the commissioners of accounts have requested coöperation, and used departmental facilities and men for research and reorganization. We believe that similar coöperation will be obtained wherever private bodies or especially trained accountants approach the problem of muni

cipal business with the sole motive of advancing the interests of the general public, and not with a desire to do sharpshooting, to turn up a scandal or to turn out the rascals.

As the director of the Bureau said when questioned by a Boston audience regarding men shown by records to be dishonest, "Given light, capable of but one interpretation, the demise of the guilty official is practically automatic." In proof may be cited from the Bureau's experiences: the removal of the borough president of Manhattan for gross inefficiency; the removal of the superintendent of combustibles; the resignation of the commissioner of accounts, in anticipation of dismissal for using city. employees on private accounting business; the resignation of his successor to give way to an efficient, aggressive accountant, able to reorganize that important auditing department along lines of efficiency laid down by the Bureau in August, 1907.

Whether in New York or elsewhere, the Bureau firmly believes that inefficient and even dishonest officials and employees have hitherto been the victims as well as the exploiters of a vicious system. No hero has ever possessed virtues so compelling as to be able, with the business mechanism now used in New York City's central and departmental offices, to prevent either incompetence or dishonesty. The reorganization once completed, on which the Bureau is now working with Comptroller Metz, Mayor McClellan and their subordinates, it will not only be possible to be efficient and honest, but vastly easier than to be inefficient and dishonest. Given such a system, we know from experience that the inertia of mechanisms and habits that tell the truth clearly is quite as great as the inertia of mechanisms and habits that fail to tell the truth. Just as medicine makes its profits from patients intelligent enough to know the value of health, so the accounting profession will benefit largely when American cities come to realize the benefits of businesslike methods.

To give New York City an efficient working machine will mean a benefaction greater than any that has yet been made by a private philanthropist. Mr. Rockefeller has given to the general education board a fund that yields about two millions annually. If Comptroller Metz during his term gives to his city business methods that tell the truth clearly about costs and results, he will have effected an annual saving almost as great as the principal of America's greatest educational endowment; in addition, he will have made self-government a possibility.

Measures for Banking Reform.

BY CHARLES W. MIXTER,

Professor of Political Economy in the University of Vermont. PART III.

DIGRESSION ON BRANCH BANKING.

It is necessary to emphasize in taking any full survey of our subject that without a properly organized system of large banks with branches, the financial needs of this country can never be well served. This matter of the introduction of branch banking is not a second or third step, but a first step in the progress of reform.

When this paper was first begun it seemed as if branch banking was a convenience rather than a necessity; that it was something for the attainment of which we might well wait until the opinion of the country gradually grew up to it. But it is not so; the country must be educated up to it now. There cannot be an adequate provision for reserve under our present system of many independent banks; and adequate reserve is the essential of essentials. Some businesses, notably insurance in all its branches, cannot be carried on safely upon a small scale. The risks-the necessary inevitable risks-must be spread over a broad basis. Moreover, in any business, anything operating in a manner at all similar to a bank reserve produces an effect increasing in an accelerated ratio with its size. Our many, independent country banks cannot, I repeat, maintain each in severalty a sufficient real reserve; it would be far and away too expensive. And this means that they cannot exist at all, many of them, unless the present practice of pyramiding reserves is suffered to continue. This practice enables the small independent country banks to live and to be safe enough in ordinary times. But we now see that what is needed is to make our banking system as a whole absolutely safe at all times, and to enable the general business of the country to live and to be carried on in reasonable security even in times of crisis.

Our present so-called system of national banks is in effect a

*

patched-up survival of the system of state banks which came in after the Jacksonian overthrow of our original centralized system. Just as we need to get rid of bond-secured notes; just as we need to throw over the remainder of the independent treasury system; so also we need to rid ourselves absolutely of this last survival of the "cornfield" economics of frontier days. The existing conglomeration of many independent banks cannot be further vamped up to any useful purpose whatever. There should be established at once, not a new central United States bank, as is suggested by many, but a system embodying the principle of that suggestion. A new United States bank, to amount to anything, would have to be a very large and powerful institution; and, in the present state of public opinion, the people would be very jealous of its power. They would insist on a considerable degree of governmental control, and our Government is not fitted to exercise such control. All advocacy of a central bank is, therefore, a confusing and diverting side issue. By reason of the present temper of the people, the overwhelming force of tradition, and the genius of our political institutions, its establishment is quite out of the question. Reserve, adequate reserve, is the one thing needful, and that we can secure through a system of large banks with branches. Our existing 6 per cent. real cash reserve country banks are in effect (in a way they should not be) branches of their "approved reserve agent" banks already. The only way for our banks to become so strong and well managed that they will deserve the freedom they ought to have; the only way for them to regain the confidence of the people so that the dangerous movement for Government guaranteeing will be headed off, is to have fewer of them.

To disarm in advance some of the inevitable hostility to branch banking, it is suggested that the law enabling its introduction require any bank wishing to establish a branch in a place where there are already one or more banks of the existing "country class, to buy out one (but only one) of these existing local banking interests. Other banks in establishing branches shall do the same, and thus in the end competition will be preserved (and increased)

*Attempts to adjust leading features of reform (looking toward really scientific bank ing) to our system of many independent banks, always result in some vitiating inclusion or omission. For example, the Fowler bill of the present congress (H. R. 12677) does not contain the necessary rule for elastic currency, that none of it shall be paid out by any bank except the issuing bank. The reason for this omission is obvious; it is designed that New York banks shall convert the deposits of interior banks into notes at crop-moving time, these notes ("interchangable " with deposits, as it is called) to be paid out to the public and put in circulation by the interior banks.

and the personal and financial disturbance in passing from one system to the other be minimized. It is to be further observed

that the new scheme is not at all a proposal for the substitution for the present system of "chains of banks." The law should provide that no bank may own stock in any other bank, or its officers be connected with any other bank; and this provision ought to be enforced rigorously. Finally, to further forestall opposition, it ought to be provided that the branches of a bank (at least at first in the experimental stage) should be confined to a certain designated section or district in which the bank itself is situated. In the end we might adopt the Canadian system outright; and in Canada the branches may be established anywhere within the Dominion. The Canadian system just as it is serves well both as medicine and as daily food; but we shall have to take it up with some caution and adapt it to our conditions, part of which are political.

FALSE HOPES RESPECTING THE BENEFITS OF A FLEXIBLE CREDIT

CURRENCY.

Among the alleged advantages which will not be realized from any plan of elastic currency is the following: "It will lower and equalize the rates of interest throughout the United States." (No. 1 of the advantages enumerated in the Fowler report.) Apparently the experience of Canada is here drawn upon. But in Canada it is not their credit bank note currency which equalizes the rate of interest throughout the Dominion, but the system of branch banking. In point of time, not space, seasonally, not geographically-Canadian credit currency does steady and equalize the rate of interest or bank discount. (See Fowler report enumerated advantage, No. 2.) Springs on a cart being good for a certain purpose, our financial wagon builders think that spoke and felly wheels (albeit, made without tires) will serve that same purpose. Wheels properly made, springs, draw-bars, axles, side-boards, tail-boards, dash-boards, thills, whiffletree, whipsocket-all, all are useful parts of a vehicle; but they are not in the least interchangeable.

Again, credit currency will not have the effect enumerated as advantage No. 6 in the Fowler report. There one reads: "It will almost invariably prevent any panic whatever, and will always avert serious crises." Apparently the popularization of the theory