﻿THE MONEY MARKET

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the discretion granted him by the law, would de-
posit his funds in a large and increasing degree in
federal reserve banks.” • The practice of the
Treasury tended in this direction up to the entrance
of the United States into the war. The actual
course of events has been lately described with great
clearness by the Governor of the Federal Reserve
Bank of New York:14

“ The first deposit of government funds made by the
treasury with the federal reserve banks was on Septem-
ber 4, 1915, when certain special deposits were made in
a number of banks. Later, arrangements were made to
have the collectors of customs and collectors of internal
revenues in the twelve federal reserve bank cities deposit
all of their funds in the federal reserve banks and as a
matter of fact, for a long period prior to the passage of
the bond act of April 24, 1917, which altered the status
of public deposits, the federal reserve banks had been
receiving the principal revenues of the Government outside
of postal funds and had been paying a very large propor-
tion of government checks and warrants. The limitation
of this fiscal agency service in the collection of revenues
and payment of checks to the twelve federal reserve bank
cities was, of course, due to the inconvenience of extend-
ing these operations to places where federal reserve banks
had not yet established branches. The plan therefore of
actively employing the federal reserve banks as fiscal
agents had been put into operation some time before
the first bond bill was passed and was an important and
very active part of the work of the reserve banks almost
immediately after the arrangement was established.”

A clause of the First Liberty Loan act con-
tained the important proviso that all existing stat-
utes with reference to the reserve required to be

14 Ibid., pp. 85-6.