other Government agencies, work out plans to protect the power supply against hostile acts.

Pursuant to the President's letter, and in order to carry out promptly the instructions contained therein, the Commission, at a special meeting on June 15, 1940, authorized its Chairman to organize the staff for national-defense duties. Under authority of the Federal Power Act, a specially qualified National Defense Power Unit was set up within the organization to survey defense-power needs and provision for meeting those needs, and to cooperate with the National Power Policy Committee and the Advisory Commission to the Council of National Defense in assuring an adequate and dependable power supply in case of emergency.

NATIONAL DEFENSE POWER UNIT

The Director's office. This office supervises the investigation and the preparation of reports. It coordinates the work of the various sections and directs the national-defense work of the regional offices, including the maintenance of the necessary field contacts with the utility systems and industrial plants throughout the country.

Power Requirements Section.-Composed of a load analysis branch and statistical branch, this section is responsible for the preparation of forms and the compilation of returns. It maintains current information on the power requirements of vital industries, on the loads of utility systems, on orders for generating equipment, and on existing stocks of transmission and distribution equipment. It translates the national-defense orders of the War and Navy Departments and other Government agencies into demands for power. From its compilations, this section makes estimates of prospective utility loads.

Power Supply Section.-The adequacy of power supply for national defense is checked by this section. It makes plans to meet any shortages that may exist or be anticipated. In cooperation with the utility industry, it plans for the most economical use of existing steam and hydro capacity, and for the curtailment of less essential loads. Where necessary, it requests the utilities to make interconnections between systems and with industries, and to construct additional generating capacity. Where utilities are unable or unwilling to undertake such construction, it prepares recommendations to the President as to the arrangements necessary to finance and construct the facilities. This section also assists equipment manufacturers to arrange priorities in delivering generating equipment, and requests them to keep supplies of transmission and distribution equipment at an adequate level.

Liaison Section.-This section maintains contacts with the War and Navy Departments and other Government agencies concerned with national-defense orders. It keeps the other sections apprised of the activities of such Government agencies. It cooperates with the utilities and with other Government agencies to protect the facilities required for an adequate power supply against sabotage and other hostile acts.

Regional offices. In a number of industrial centers the regional offices carry out the field work of the National Defense Unit. They maintain constant contacts with the utility systems and vital industries in their area. By local contacts, they assist the Power Requirements Section to secure current information on power needs, the Power Supply Section to carry out its plans to insure an adequate power supply, and the Liaison Section to make arrangements for protection of power facilities against sabotage.

Cooperation with the National Power Policy Committee and the Council of National Defense. The staff of the Commission does most of the technical work of the National Power Policy Committee, which superseded the National Defense Power Committee, by direction of the President in his letter to the Secretary of the Interior dated October 13, 1939.

In its national-defense work the Federal Power Commission cooperates with the Advisory Commission to the Council of National Defense. The chairman of the Federal Power Commission serves on a power subcommittee to counsel the Advisory Commission on questions involving electric power.

NATURAL GAS ACT

Exportation or importation of natural gas.-After 6 months from the date on which the act took effect, exportations from the United States to a foreign country or importations from a foreign country to the United States must be authorized by the Commission, when found to be consistent with the public interest.

Control over rates and charges.--Natural gas companies are required to file schedules showing the rates charged for any transportation or sale subject to the jurisdiction of the Commission, and may not change such rates or charges without its approval. The Commission may order changes in rates, but may not order an increase in the rate charged by any natural gas company unless the increase is embodied in a new schedule filed by the company.

Cost of property.-The Commission is authorized to ascertain the actual legitimate cost of the property of every natural gas company and the depreciation in such property.

Extension of facilities; abandonment of service. The Commission may order a natural gas company to extend or improve its transportation facilities and to establish physical connection of its transportation facilities with the facilities of, or sell natural gas to, any persons or municipalities engaged, or legally authorized to engage, in the local distribution of natural or artificial gas to the public, if the Commission finds that no undue burden will be placed upon the natural gas company. In ordering such an extension of facilities, the Commission may not impair the ability of the company to render adequate service to its customers.

Natural gas companies may not abandon interstate facilities or service without the approval of the Commission, and cannot extend their facilities without securing a certificate of public convenience and necessity from the Commission. In issuing such certificates, the Commission is required to give due consideration to the applicant's ability to render and maintain adequate service at rates lower than those prevailing in the territory to be served.

State compacts.-The Commission is required to report to Congress information in connection with any compacts proposed by two or more States dealing with the conservation, production, transportation, or distribution of natural gas.

Joint boards. Provision is made for the creation of boards representing any States which may be concerned in connection with any matter coming before the Commission, and full cooperation is available to State commissions.

Officials dealing in securities.-Personal profit by an official or director of a natural gas company through the negotiation, hypothecation, or sale of any security issued by the company is unlawful.

Uniform system of accounts.-The Commission has prescribed a uniform system of accounts, effective January 1, 1940, for natural gas companies subject to the provisions of the Natural Gas Act, which covers accounting details of the property of such companies for the production, transportation, or sale of natural gas. Incidental powers.-The Commission may require such reports as may be necessary in the administration of the act. In general, it is given administrative powers similar to those provided in the Federal Power Act.

DUTIES IN CONNECTION WITH ISSUANCE OF PRESIDENTIAL PERMITS

Pursuant to Executive Order No. 8202, the Commission is directed to receive applications for the issuance of permits for the construction, operation, maintenance, or connection at the borders of the United States, of facilities for the transmission of electric energy, and for the transportation of natural gas, between the United States and foreign countries, and, after obtaining the recommendations of the Secretary of State and the Secretary of War thereon, to submit such applications to the President with a recommendation as to whether such permits should be granted, and if so, upon what terms and conditions.

DUTIES IN CONNECTION WITH TVA

Prescribes TVA accounts system. The board of directors of the Tennessee Valley Authority is required to keep accounts of its cost of generation, transmission, and distribution of electric energy according to the system prescribed by the Commission for public utilities. Other physical data and operating statistics of the Authority are also made available to the Commission.

Approval of certain contracts.-The approval by the Commission of contracts for the extension of credit by the Tennessee Valley Authority to public agencies and nonprofit organizations for acquiring, improving, and operating existing distribution facilities and interconnecting transmission lines, is a prerequisite to the issuance of bonds by the Authority to obtain funds for that purpose.

DUTIES IN CONNECTION WITH BONNEVILLE DAM

Advisory board.--The Administrator of the Bonneville Power Administration is required to act in consultation with an advisory board composed of representatives

designated by the Secretary of War, the Secretary of the Interior, the Secretary of Agriculture, and the Federal Power Commission. The Commission has designated its chief engineer as its representative on this advisory board.

Bonneville rate schedules.-Schedules of rates and charges for electric energy produced at the Bonneville project are prepared by the Administrator and become effective upon confirmation and approval by the Federal Power Commission. The rate schedules may be modified, subject to confirmation and approval by the Commission.

Allocation of cost.-The Commission makes the allocations of cost of facilities for power and other purposes upon which rate schedules are based.

Accounts of Bonneville Power Administration.-The Administrator is subject to the requirements of the Commission with respect to the accounts of operations of the Bonneville project, including all funds expended and received in connection with transmission and sale of electric energy generated at the project.

DUTIES IN CONNECTION WITH FORT PECK DAM

Rate schedules.-Schedules of rates and charges for electric energy produced at the Fort Peck project are prepared by the Bureau of Reclamation under the supervision and direction of the Secretary of the Interior, and become effective upon confirmation and approval thereof by the Federal Power Commission. The rate schedules may be modified, subject to confirmation and approval by the Commission.

Allocation of costs.-The Commission makes the allocations of cost of facilities for power and other purposes upon which the rate schedules are based.

Accounts.-The Bureau of Reclamation is subject to the requirements of the Commission with respect to the accounts of operations of the Fort Peck project, including all funds expended and received in connection with transmission and sale of electric energy generated at the project.

DUTIES IN CONNECTION WITH FLOOD CONTROL PROJECTS

Under the Flood Control Act of 1938, the Commission makes recommendations to the Secretary of War concerning the installation of penstocks or similar facilities adapted to possible future use in the development of hydroelectric power in dams constructed under the act.

FEDERAL RESERVE SYSTEM

The Federal Reserve System was established pursuant to authority contained in the act of Congress approved December 23, 1913, known as the Federal Reserve Act, the purposes of which, as stated in the preamble, are "To provide for the establishment of Federal Reserve banks, to furnish an elastic currency, to afford means of rediscounting commercial paper, to establish a more effective supervision of banking in the United States, and for other purposes." The System comprises the Board of Governors, which exercises supervisory functions; the Federal Open Market Committee, consisting of the members of the Board of Governors and five representatives of the Federal Reserve banks, which directs the System's open market operations; the 12 Federal Reserve banks situated in different sections of the United States; the Federal Advisory Council, which acts in an advisory capacity to the Board of Governors; and about 6,400 member banks, which include all national banks in the United States and such State banks and trust companies as have voluntarily applied to the Board of Governors for membership and have been admitted to the System.

The Federal Reserve banks are located in Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco. There are also in operation 24 branches and 1 agency of the Federal Reserve banks, all of which are located in other cities of the United States.

The capital stock of the Federal Reserve banks is entirely owned by the member banks and may not be transferred or hypothecated. Every national bank in existence in the United States at the time of the establishment of the Federal Reserve System was required to subscribe to the capital stock of the Federal Reserve bank of its district in an amount equal to 6 percent of the subscribing bank's paid-up capital and surplus. A like amount of Federal Reserve bank stock must be subscribed for by every national bank in the United States organized since that time and by every Štate bank or trust company (except mutual savings

banks) upon becoming a member of the Federal Reserve System; and, when a member bank increases or decreases its capital or surplus, it is required to alter its holdings of Federal Reserve bank stock in the same proportion. A mutual savings bank which is admitted to membership in the Federal Reserve System must subscribe for Federal Reserve bank stock in an amount equal to six-tenths of 1 per centum of its total deposit liabilities; and thereafter such subscription must be adjusted semiannually on the same percentage basis. One-half of the subscription of each member bank must be fully paid and the remainder is subject to call by the Board of Governors of the Federal Reserve System; but call for payment of the remainder has not been made.

After all necessary expenses of a Federal Reserve bank have been paid or provided for, its stockholding member banks are entitled to receive an annual dividend of 6 percent on the paid-in capital stock, which dividend is cumulative. After these dividend claims have been fully met, the net earnings are paid into the surplus fund of the Federal Reserve bank. In case of liquidation or dissolution of a Federal Reserve bank, any surplus remaining after payment of all debts, dividends, and the par value of its capital stock becomes the property of the United States Government. Federal Reserve banks, including the capital stock and surplus therein and the income derived therefrom, are exempt from Federal, State, and local taxation, except taxes upon real estate.

The board of directors of each Federal Reserve bank is composed of nine members, equally divided into three classes, designated class A, class B, and class C. Directors of class A are representative of the stockholding member banks. Directors of class B must be actively engaged in their district in commerce, agriculture, or some other industrial pursuit, and may not be officers, directors, or employees of any bank. Class C directors may not be officers, directors, employees, or stockholders of any bank. The six class A and B directors are elected by the stockholding member banks, while the Board of Governors of the Federal Reserve System appoints the three class C directors. The term of office of each director is 3 years, so arranged that the term of one director of each class expires each year.

One of the class C directors appointed by the Board is designated as chairman of the board of directors of the Federal Reserve bank and as Federal Reserve agent, and in the latter capacity he is required to maintain a local office of the Board on the premises of the Federal Reserve bank. Another class C director is appointed by the Board as deputy chairman.

Each Federal Reserve bank has as its chief executive officer a president appointed for a term of 5 years by its board of directors with the approval of the Board of Governors of the Federal Reserve System. There is also a first vice president appointed in the same manner and for the same term.

Federal Reserve banks are authorized, among other things, to discount for their member banks notes, drafts, bills of exchange, and bankers' acceptances of short maturities arising out of commercial, industrial, or agricultural transactions, and short-term paper secured by obligations of the United States; to make advances to their member banks upon their promissory notes for periods not exceeding 90 days upon the security of paper eligible for discount or purchase and for periods not exceeding 15 days upon the security of obligations of the United States and certain other securities; to make advances upon security satisfactory to the Federal Reserve banks to member banks for periods not exceeding 4 months at a rate of interest at least one-half of 1 percent higher than that applicable to discounts and advances of the kinds mentioned above; in certain exceptional circumstances and under certain prescribed conditions, to make advances to groups of member banks; under certain prescribed conditions, to grant credit accommodations to furnish working capital for established industrial or commercial businesses for periods not exceeding 5 years, either through the medium of financing institutions or, in exceptional circumstances, directly to such businesses, and to make commitments with respect to the granting of such accommodations; in unusual and exigent circumstances when authority has been granted by at least five members of the Board of Governors, to discount for individuals, partnerships, or corporations, under certain prescribed conditions, notes, drafts, and bills of exchange of the kinds and maturities made eligible for discount for member banks; to make advances to individuals, partnerships, or corporations upon their promissory notes secured by direct obligations of the United States for periods not exceeding 90 days; to purchase and sell in the open market bankers' acceptances and bills of exchange of the kinds and maturities eligible for discount, obligations of the United States, and certain other securities; to receive and hold on deposit the reserve balances of member banks; to issue Federal Reserve

notes and Federal Reserve bank notes; to act as clearing houses and as collecting agents for their member banks, and under certain conditions for nonmember banks, in the collection of checks and other instruments; to act as depositaries and fiscal agents of the United States; and to exercise other banking functions specified in the Federal Reserve Act.

Federal Reserve notes are a first and paramount lien on all the assets of the Federal Reserve banks through which they are issued and are also obligations of the United States. They are issued against the security of gold certificates and of commercial and agricultural paper discounted or purchased by Federal Reserve banks, and, until June 30, 1941, when authorized by the Board of Governors, may also be secured by direct obligations of the United States. Every Federal Reserve bank is required to maintain reserves in gold certificates of not less than 40 percent against its Federal Reserve notes in actual circulation and is also required to maintain reserves in gold certificates or lawful money of not less than 35 percent against its deposits.

Broad supervisory powers are vested in the Board of Governors of the Federal Reserve System, which has its offices in Washington. The Board of Governors is composed of seven members appointed by the President with the advice and consent of the Senate. In selecting these seven members, the President is required to have due regard to a fair representation of the financial, agricultural, industrial, and commercial interests, and geographical divisions of the country. No two members may be from the same Federal Reserve district.

Among the more important duties of the Board of Governors is the review and determination of discount rates charged by the Federal Reserve banks on their discounts and advances. Each member of the Board of Governors is also a member of the Federal Open Market Committee, whose membership, in addition, includes five representatives of the Federal Reserve banks, each such representative being elected annually by the boards of directors of certain specified Federal Reserve banks. Open-market operations of the Federal Reserve banks are conducted under regulations adopted by the committee with a view to accommodating commerce and business and with regard to their bearing upon the general credit situation of the country; and no Federal Reserve bank may engage or decline to engage in open-market operations except in accordance with the direction of and regulations adopted by the committee.

In connection with its supervision of Federal Reserve banks the Board of Governors is also authorized to make examinations of such banks; to require statements and reports from such banks; to require the establishment or discontinuance of branches of such banks; to supervise the issue and retirement of Federal Reserve notes; and to exercise special supervision over all relationships and transactions of the Federal Reserve banks with foreign banks or bankers.

For the purpose of preventing the excessive use of credit for the purchase or carrying of securities, the Board of Governors is authorized to regulate the amount of credit that may be initially extended and subsequently maintained on any security (with certain exceptions) registered on a national securities exchange. Certain other powers have been conferred upon the Board which are likewise designed to enable it to prevent an undue diversion of funds into speculative operations.

The Board of Governors also passes on the admission of State banks and trust companies to membership in the Federal Reserve System and on the termination of membership of such banks; it has the power to examine member banks and affiliates of member banks; it receives condition reports from State member banks and their affiliates; it limits by regulation the rate of interest which may be paid by member banks on time and savings deposits; it is authorized, in its discretion, to issue voting permits to holding-company affiliates of member banks entitling them to vote the stock of such banks at any or all meetings of shareholders of the member bank; it may issue general regulations permitting interlocking relationships in certain circumstances between member banks and organizations dealing in securities or, under the Clayton Antitrust Act, between member banks and other banks; it has the power to remove officers and directors of a member bank for continued violations of law or unsafe or unsound practices in conducting the business of such bank; it may, in its discretion, suspend member banks from the use of the credit facilities of the Federal Reserve System, for making undue use of bank credit for speculative purposes or for any other purpose inconsistent with the maintenance of sound credit conditions; it may, within certain limitations and in order to prevent injurious credit expansion or contraction, change the requirements as to reserves to be maintained by member banks against deposits; it passes on applications of State member banks to