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WAR BORROWING

“ As soon as the war loan bill becomes a law he intends
to sell such amounts of Treasury certificates of indebted-
ness as may be necessary to meet the requirements of the
Treasury and the war situation pending the sale of
Government bonds ”— [for which] “ about 60 days ”
[would probably be required].10

The First Liberty Loan act of April 24, 1917,
authorized the issue of certificates of indebtedness
so foreshadowed upon a scale commensurate with
the titanic financing then inaugurated. The Secre-
tary of the Treasury was empowered “ to borrow
from time to time, on the credit of the United
States, for the purpose of this act and to meet public
expenditures authorized by law such sum or sums
as, in his judgment may be necessary ” by the issue
of certificates of indebtedness bearing not more
than three and a half per cent, interest nor of more
than one year maturity — up to an amount of $2,-
000.000,000 at any one time outstanding. Such
certificates were not to bear the circulation privilege
but were exempt from all taxation other than estate
or inheritance taxes. The provisions of the act as
to the custody of the funds so borrowed were all-
important; (a) the Secretary of the Treasury was
authorized to deposit in banks and trust companies
duly qualified as government depositaries the pro-
ceeds arising from the sale of certificates and bonds
to amounts not exceeding, in the case of each de-
positary, the sum invested by it or withdrawn from
it for investment in certificates and bonds; and
(b) the reserve requirements as to demand deposits
imposed by the Federal Reserve Act were waived as

i° Federal Reserve Bulletin, May, 1917, p. 342.