﻿THE MONEY MARKET

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viduals elected to make direct payment there was
reduction or depletion of reserves. But easy
remedy lay in recourse to the Federal Reserve Banks
for discounts or advances.

In the second stage — government withdrawals
and Liberty Loan flotations — the outright reduc-
tion in consequence of such withdrawals of balances
with the Federal Reserve Banks kept by the depos-
itary banks as reserves and excess reserves, and the
subsequent transformation of “ government de-
posits free of reserves, into individual reserves, re-
quiring reserves ”— induced similar, though per-
haps prompter and larger recourse to the Federal
Reserve Banks for the repair of balances and re-
serves by the discount of member banks’ notes
secured by Liberty bonds and certificates of in-
debtedness, and to a minor extent by the rediscount
of customers’ paper likewise secured.

In the following table are shown the course of the
discount operations of the Federal Reserve Banks,
as well as the relative importance of the Banks’ hold-
ings of war paper during the period studied.

The obvious disclosure of the detailed exhibit is
the increasing extent to which the member banks
have availed themselves of the discount facilities of
the Federal Reserve Banks — evidenced by the num-
ber of banks accommodated through discounts and
rediscounts during each month since our entry into
the war. Starting with 384 discounting members
in April, 1917, the number rose to 900 in June, 1917,
to 1574 in November, 1917, to 2693 in May, 1918,
to 3462 in July, 1918, to 3671 in August, 1918.
This increase has been rhythmical rather than uni-