﻿THE MONEY MARKET

133

tinued thereafter to dominate our anticipatory bor-
rowing.

With the widening use of payment by credit in
settlement of bond subscriptions and certificate bor-
rowings, the qualification and designation of lending
banks as government depositaries took on a new sig-
nificance. Instead of serving in the traditional way
as the device whereby funds withdrawn from the
channels of trade and otherwise impounded could
be immediately returned — a government deposi-
tary came to mean in practice a bank by or through
which after proper qualification a short-term loan
might be granted to the Treasury in the form of a
retained deposit account, the loan being evidenced
on the part of the bank by ownership of certifi-
cates of indebtedness, and the deposit being secured
for the benefit of the Treasury by the hypothecation
of such certificates or of other banking collateral.22

The Second Liberty Loan Act had again pro-
vided for the deposit of the proceeds accruing from
the sale of bonds, certificates of indebtedness and
war savings certificates in such incorporated banks
and trust companies and subject to such terms and
conditions as the Secretary of the Treasury might

22	The distinction is clearly apparent in the later measures
taken by the Treasury (May 29, 1918) to avoid unnecessary
dislocation of funds incident to the payment of income and ex-
cess profits taxes, due and payable on June IS, 1918. Un-
expended cash proceeds arising from the payment of such taxes
were to be deposited through the Federal Reserve Banks with
qualified depositaries, “ as nearly, as may be, . . . simultane-
ously with the payment of checks drawn upon such deposi-
taries, respectively, in payment of such taxes” (see p. 138,
below). But specific notification was given that “payment of
income and excess profits taxes cannot be made by credit.”