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WAR BORROWING

conclusion arrived at by the most competent student
of the subject has been that “ while the policy of
rationing is effective and probably has a more
universal and effective influence than the mere
raising of rates of discount, it is probable that a
more rapid advance in rates conservatively handled
would have exerted a desirable effect.” 34

Here again, however, it seems necessary in the
present connection to' confine our attention to the
task immediately at hand and, waiving the problem
of wider consequence, to recognize that the direct
and immediate effect of the discount policy of the
Federal Reserve Board has been to reduce, if not to
avert, the monetary strain, normally incident to cer-
tificate borrowing.

The operations outlined above have been reflected
in the course of the discount operations of the
Federal Reserve Banks and more specifically in the
course of such Banks’ holdings of member and non-
member banks, collateral notes secured by Liberty
bonds or Treasury certificates of indebtedness,
and of rediscounted customers’ paper likewise
secured.

In the first stage — certificate buying — the gen-
eral use of payment by credit made it possible for de-
positary banks to acquire certificates without strain
upon their ordinary resources for their own account
and for their customers, as well as for non-member
banks. To the extent that interior banks made pay-
ment by drafts on the reserve city banks, or to
the extent that depositary or other banks or indi-
34 Prof. H. Parker Willis, “ Memorandum.”