﻿THE MONEY MARKET

139

with existing procedure as to payment by credit and
redeposit of funds; and the revision of the
Treasury's administrative regulations on Septem-
ber 21, 1918, in immediate preparation for the
flotation, effected no material changes. But the ex-
traordinary increase of “ war paper ” in the port-
folios of the Federal Reserve Banks, consequent
upon the largely prevailing use of payment by
credit in settlement of the certificates of indebted-
ness by subscribing banks, was giving concern to
the Federal Reserve Board and to those responsible
for the nation’s financial affairs. On July 8, 1918,
the Governor of the Federal Reserve Board ad-
dressed a letter, through the Federal Reserve Banks
to every national bank, state bank and trust company
urging among other things, in the interest of credit
conservation and with a view to checking inflation
and rising prices, that payment for certificates of in-
debtedness be made by subscribing banks in so far
as possible from their own funds instead of through
rediscounting at the Reserve Banks: 28

“ The Federal Reserve Banks will be prepared to place
their facilities — directly or indirectly — at the disposal
of such subscribing banks as may legitimately need assist-
ance in taking their allotments. The Board, however,
feels in duty bound to reiterate that the banks can render
a greater service to the country in this connection, not
merely by subscribing their allotments and by using the
rediscounting facilities of the Federal Reserve Banks in
making payments, but by providing the necessary funds
for meeting payments for certificates of indebtedness pur-
chased, by employing for this purpose the accretion of new
deposits, and by utilizing the funds that may be made

28	Federal Reserve Bulletin, August 1918, p. 686.