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WAR BORROWING

These preferential rates have been from time to
time increased with the progress of war financing
and the increase of the interest rate upon war obli-
gations. But the general principles of easy redis-
count and preferential rates have been maintained.
It has throughout been possible for member banks
to obtain without net cost adequate accommodations
for themselves, and for non-member banks acting
through them, by the discount of paper collateralled
by certificates of indebtedness or by Liberty bonds,
and for customers to obtain similar accommodations
from member banks on approximately the same
terms as those granted by the Reserve Banks to the
member banks.

This stabilizing effect has been further extended.
Since the entry of the United States into the war
the deliberate policy of the Federal Reserve Board
has been to adjust its rates of discount to the rates
of interest fixed by the Treasury for certificates of
indebtedness and Liberty Loan bonds, and thereby
“ to keep rates of rediscount probably considerably
lower than they would otherwise have been, and
also to commit the system to the maintenance of
rates which would otherwise have been altered from
time to time, as circumstances seemed to require.”
In order to attain the restrictive effect upon credit
expansion thus partially lost by reason of the
adoption of a system of stable rates correspond-
ing to the rates borne by government war obliga-
tions, the Federal Reserve Board has resorted to
various expedients for “ the rationing of credit ”—
refusal of credit to non-essential industries, restric-
tion of credit to enterprises employing it for capital