Then in the line designated above that

The CHAIRMAN (interposing). Line 13?

Secretary BAKER. Yes; the next of kin in the order named, if such can be found by the court, or to the beneficiary named in the will of the deceased. Soldiers have sometimes made wills. There is a special provision in the statute for a soldier's will, which can be made verbally.

Mr. CRAGO. Should not the beneficiary named in the will precede all the others? Secretary BAKER. It ought, as a matter of fact.

Mr. CRAGO. Leaving it the way it is there, it will only be construed as a beneficiary in case none of the others are found?

Secretary BAKER. I doubt that. I think the courts would say if there was a beneficiary designated by will that that beneficiary would take precedence of the others. Mr. CRAGO. I think it would have to be the first thing.

*

*

Secretary BAKER. It would have to go clear back to the beginning, we would have to say, beginning in line 5: "And as soon as practicable * at Government expense, to the beneficiary named in the will, to the widow or legal representative of the decesaed," and so forth.

Mr. CRAGO. That would be first, and then go ahead and enumerate the others. Secretary BAKER. Then go ahead and enumerate the others.

The CHAIRMAN. Those are the only changes proposed in the existing law?

Secretary BAKER. Those are the only changes proposed in the statute. We found cases like this. I happen to know of one that has been called to my attention. I do not know the person.

A young man was raised by foster parents, who practically adopted him. They took him in as a child; they had provided for his maintenance and education. He called the man of the family "father" and the woman of the family "mother," but they were not his parents. When he died, so far as the disposition of his effects was concerned, according to existing law we would have to search out through all sorts of existing traces that were designedly lost to find who his natural parents were, when, as a matter of fact, his whole relation of parent and child had been with the persons who had adopted him in childhood. Those are the only changes we have to propose in the existing statute.

The text of article 112 of the Articles of War as it now reads is as follows:

ART. 112. EFFECTS OF DECEASED PERSONS-DISPOSITION OF.-In case of the death of any person subject to military law, the commanding officer of the place of command will permit the legal representative or widow of the deceased, if present, to take possession of all his effects then in camp or quarters, and if no legal representative or widow be present, the commanding officer shall direct a summary court to secure all such effects; and said summary court shall have authority to collect and receive any debts due decedent's estate by local debtors; and as soon as practicable after the collection of such effects said summary court shall transmit such effects, and any money collected, through the Quartermaster Department, at Government expense, to the widow or legal representative of the deceased, if such be found by said court, or to his son, daughter, father, mother, brother, or sister, in the order named, if such be found by said court, or to the beneficiary named by the deceased, if such be found by said court, and such court shall thereupon make to the War Department a full report of its transactions; but if there be none of the persons hereinabove named, or such persons or their addresses are not known to, or readily ascertainable by, said court, and the court shall so find, said summary court shall have authority to convert into cash, by public or private sales, not earlier than 30 days after the death of the deceased, all effects of the deceased, except sabers, insignia, decorations, medals, watches, trinkets, manuscripts, and other articles valuable chiefly as keepsakes; and as soon as practicable after converting such effects into cash said summary court shall deposit with the proper officer, to be designated in regulations, any cash belonging to decedent's estate, and shall transmit a receipt for such deposits, any will or other papers of value belonging to the deceased, any sabers, insignia, decorations, medals, watches, trinkets, manuscripts, and other articles valuable chiefly as keepsakes, together with an inventory of the effects secured by said summary court, and a full account of its transactions to the War Department for transmission to the Auditor for the War Department for action as authorized by law in the settlement of the accounts of deceased officers and enlisted men of theArmy.

The provisions of this article shall be applicable to inmates of the United States Soldiers' Home who die in any United States military hospital outside of the District of Columbia where sent from the home for treatment.

CONGRESS

AMENDING THE FEDERAL RESERVE ACT.

OCTOBER 23, 1919.-Committed to the Committee of the Whole House on the state of the Union and ordered to be printed.

Mr. PLATT, from the Committee on Banking and Currency, submitted the following

REPORT.

[To accompany S. 2472.]

The Committee on Banking and Currency, to which was referred the bill (S. 2472) to amend the act approved December 23, 1913 (known as the Federal reserve act), by inserting a new section to be known as section 25 (A), having considered the same, reports the bill back to the House with sundry amendments, herewith described, with the recommendation that the bill as amended do pass.

This is a bill to provide a general act, similar in some respects to the national banking act, for the Federal incorporation of financial institutions "principally engaged in international or foreign banking" or "principally engaged in such phases of international or foreign financial operations as may be necessary to facilitate the export of goods, wares, or merchandise from the United States, or any of its dependencies or insular possessions to any foreign country." The language quoted is from the amendment to section 25 of the Federal reserve act, approved September 7, 1916, and from the amendment to the same section approved September 17, 1919.

It will be remembered that in order to furnish American banking facilities for financing our growing foreign trade the Federal reserve act, as originally passed, provided in section 25 that any national banking association having a capital and surplus of $1,000,000 or more might establish branches in foreign countries or in our insular possessions, with the approval of the Federal Reserve Board. Under the authority so granted only a few very large banks established branches and the only bank taking extensive advantage of the opportunity was the National City Bank of New York City, which now has some 70 branches throughout the world.

As it was felt that the financing of foreign trade should not be left wholly to a few very large banks the amendment of September 7,

1916, was passed giving national banks with a capital and surplus of $1,000,000 an opportunity to cooperate in the establishment or ownership of foreign banking institutions by permitting them to invest an amount not to exceed 10 per cent of their capital and surplus in such institutions "chartered under the laws of the United States or of any State thereof." A Federal incorporation act was proposed by the Federal Reserve Board soon after the passage of this amendment, and a bill was drawn which was passed in the Senate of the Sixty-fifth Congress, but was not taken up in the House. The present bill, so widely known as the Edge bill, because introduced and strongly advocated by Senator Edge, is substantially in its original form the same as the bill which was passed by the Senate last year.

In the absence of a Federal incorporation act eight international banking institutions have been organized under State charters and are now doing business. Some of them have grown to be institutions of considerable size and importance with connections in many countries where they are in active competition with foreign banking institutions and with the branches of the National City Bank. These corporations are doing generally speaking a banking business, largely in acceptances, but some of them have very broad powers under their State charters. They are brought under partial control of the Federal Reserve Board where national banks contribute to their capital, as they are required to agree to restrict their operations and conduct their business "in such manner and under such limitations as the said board may prescribe;" but control through agreement is plainly not as satisfactory as control through incorporation under a Federal act, and it is hoped that all or most of these institutions will reincorporate under the provisions of this bill when it becomes a law. These institutions are as follows: American Foreign Banking Corporation, Asia Banking Corporation, First National Corporation, French American Banking Corporation, International Banking Corporation, Mercantile Bank of the Americas (Inc.), Park-Union Foreign Banking Corporation, and the Shawmut Corporation.

During the past summer the question of maintaining our foreign trade export became acute through the break in the European exchanges. The English pound sterling, worth in our money at par $4.865, fell as low as $4.135 on August 20 and French, Belgian, Italian and German exchange lost a still greater percentage. The effect of this was to greatly increase the price of American goods, already high, to purchasers in these countries. It constituted a tremenduous brake upon exports and in like proportion a tremendous inducement toward imports, and nothing but the fact that European factories could not get started sufficiently to produce any considerable surplus of goods has prevented them from flooding our markets. Our Government itself had been loaning enormous sums, or credits, to these countries for the purchase chiefly of foodstuffs, and Congress had authorized the War Finance Corporation to advance a round billion dollars for financing export trade, but it is the general opinion that Government advances should stop and that the business should be financed by private capital.

With the purpose of aiding in the formation of institutions "to be principally engaged in such phases of international or foreign financial operations as may be necessary to facilitate the export of goods,

wares," etc. S. 2395, identical with H. R. 6806, was passed and became law on September 17, 1919, as a further amendment to section 25 of the Federal reserve act. National banks by this amend ment were permitted to subscribe to the capital of these export finance institutions to an amount not exceeding 5 per cent of their capital and surplus. In this amendment again the phrase was used "chartered or incorporated under the laws of the United States or of any State thereof," and this bill is designed to give these institutions, as well as those already organized under the amendment of September 7, 1916, opportunity to be chartered "under the laws of the United States."

The committee has given this bill long and careful consideration, beginning with several hearings during which every paragraph was discussed with representatives of the Federal Reserve Board. The result has been a large number of amendments, which show plainly in the text as printed, making detailed description unnecessary. The committee felt that the financial institutions to be brought under national incorporation and supervision should be prevented from becoming monopolies and should at the same time not be hampered in their competition with foreign banking institutions which have very broad powers. Also that investors should be safeguarded. Hence it has inserted some of the safeguards of the national banking

Others were considered but rejected because clearly unnecessary. These are not to be banks of deposit, and it is therefore unnecessary to seek to safeguard miscellaneous depositors who usually have little opportunity for knowing the character of business done by the banks to which they intrust their money. The only deposits allowed are those strictly incidental to foreign transactions.

As already indicated two classes of institutions are to be incorporated under this act, though there may not always be a very clear line of demarcation between them-one doing principally a banking business, like that done by the eight international banking corporations already organized, and the others doing principally an investment business, taking long-time paper, including bonds and mortgages, and issuing their own debentures against them. The Federal Reserve Board is therefore given broad powers of regulation and supervision. The so-called export finance corporations are new and experience must show just what regulations are necessary for them. One amendment the committee desires to call particular attention to is that requiring the use of the word "Federal" in the name of any institution incorporated under this act, and prohibiting the use of this word by any financial corporation hereafter organized under any law other than an act of Congress. It has been brought to the attention of the committee that corporations have been organized in which the word "Federal" and even the words "Federal Reserve" have been used with apparent intent to create the impression that the institutions had some connection with the Government at Washington. Your committee believes this should be prohibited in the future. It is hoped that as a result of the passage of this bill, supplementing the amendments of September 7, 1916, and September 17, 1919, above mentioned, much of our great foreign trade can be retained to the benefit of American manufacturers, farmers, cattle growers, and merchants.

H R-66-1-vol 2-33

The financial institutions, which this bill proposes to incorporate under Federal charters, can, it is true, operate under State charters, but without the same measure of regulations and supervision. Federal charters and supervision will doubtless give the investor greater confidence, and insure certainty of great usefulness. A very large part of our prosperity as a nation now depends upon foreign trade, upon holding and extending foreign markets for our surplus products. If our export trade should collapse because of the utter inability of our chief customers to pay in cash or by the usual terms of drafts and bills of exchange the consequences would be disastrous to many of our industries. If on the other hand the passage of this bill and the amendments to section 25 of the Federal reserve act preceding it results in a certain measure of ownership of foreign transportation or industrial agencies we shall be but reinvesting in Europe, the capital which the people of the older countries formerly invested in our railroads and industries at a time when we of the United States needed capital. In a word, we shall have become in our turn a creditor Nation, having purchased securities that will bring us a continued income with a part of our surplus of commodities.