﻿THE MONEY MARKET

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accommodations, and reduction of capital require-
ments through restrictions imposed in cooperation
with the War Industries Board upon supplies of
fuel, material, labor power and transportation.33

The rediscount facilities, so provided, were suffi-
cient to remove all possibility of banking disturb-
ance or monetary dislocation in connection with the
withdrawal of government deposits traceable to cer-
tificate borrowing. Such deposits represented the
purchase by the banks of certificates, and were repre-
sented to a large extent by the presence in the
banks’ portfolios of government obligations —
available by ready and economical hypothecation
with the Federal Reserve Banks for the creation of
credit balances against which these very with-
drawals might be charged. In other words, the
banks’ government deposit liabilities on account of
certificate borrowing could be at any time met by the
creation of credit balances with its Federal Reserve
Bank through rediscount of the evidence of such
borrowing.

The question has been very acutely raised whether
this stability has not been gained at too heavy a
cost to the general banking situation. By encour-
aging Banks to transfer their war paper to the Re-
serve Banks and by tempting the business community
to use war paper as a basis of commercial loans
there has been a concentration of war paper in the
hands of Reserve Banks, leaving the liquid paper in
the portfolios of the member banks. The tentative

33	Prof. H. Parker Willis, “ Memorandum Prepared for the
Committee on War Finance of the American Economic Asso-
ciation” (MS.).