﻿THE MONEY MARKET

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have prevented monetary dislocation at the second
and third stages.

With the absorption of each successive issue of
certificates of indebtedness by the lending banks,
the Treasury has found itself in possession of the
borrowed funds or credits in the form of govern-
ment deposits held in an increasing number of
national banks, state banks and trust companies,
qualified as special depositaries.

As required in the probable course of public ex-
penditure such funds have upon notification been
remitted to the Federal Reserve Banks and thence
disbursed in payment of public accounts. The ac-
tual procedure followed in making such withdraw-
als has been as follows:30 About five days before
the Treasury desires to withdraw funds from special
depositaries each bank is notified by the Federal
Reserve Bank of the amount that it will be expected
to pay on account of its government deposits. On
the day the payment is to be made the bank, if a
member of the Federal Reserve System and not
holding sufficient funds for that purpose, may dis-
count its own note with the Federal Reserve Bank
and use the funds so obtained to pay the amount
required. In the case of a non-member bank the
loan must be made through a member bank. The
member bank’s note may be secured by the certifi-
cates which had been previously used as collateral
for its government deposits, but which have now
been released by payment on this account. When
these certificates mature or are used to pay for bonds

30	Memorandum of Mr. Frederic H. Curtiss, of the Federal
Reserve Bank of Boston.