﻿THE MONEY MARKET

141

not make such payment in Treasury certificates of indebt-
edness maturing or called for redemption on the date the
payment on bond subscriptions is due at Federal Reserve
banks.”

Starting thus from a familiar and thoroughly
accredited procedure for reducing the monetary
strain incident to public borrowing by a prompt
restoration in the form of adequately protected re-
deposits of the funds so withdrawn from the chan-
nels of trade, the Treasury succeeded in organizing
the banking strength of the country under the direc-
tion of the Federal Reserve Banks into a body of
depositary banks the prime service of which has
been the advance by or through such banks of de-
posit currency under the designation of government
deposits in consideration of the delivery of certifi-
cates of indebtedness. Such banks are government
depositaries in the sense that they retain the deposit
credits which they have created until remitted to
the Federal Reserve Banks for disbursement by the
Treasury in the course of public expenditure. But
their essential service is not the retention of such
deposit credits, but their creation.

The certificate borrowing of the Treasury, in its
first phase, thus exposed the money market to mini-
mum strain and averted all likelihood of monetary
dislocation. The government’s monetary requisi-
tions were adequately met by a fund of deposit cur-
rency, and the procedure employed — payment by
credit, redeposit of funds and exemption from re-
serve requirements — replenished this fund as re-
quired or desired, by the emission of certificates of
indebtedness without corresponding withdrawal or