152 
WAR BORROWING 
» 
March and into April. Towards the end of April, 
the Banks’ actual holding of bills discounted in im 
mediate preparation for the Third Liberty Loan, 
rose above the 900 million point, and it remained 
substantially around that amount through May and 
June. With certificate borrowing resumed on a 
larger scale in anticipation of the Fourth Liberty 
Loan very much higher levels were attained in June, 
July and August, culminating in mid-October and 
followed by materially less liquidation than in earlier 
cycles. 
In the remarkable growth of discount operations, 
“ war paper ”— member banks’ notes secured by 
Liberty bonds and certificates of indebtedness, and 
customers’ paper similarly secured — have played 
the all important part. Not only has the relative 
importance of war paper increased with the later 
progress of our war financing, but the net liquida 
tion of such bills has been sensibly less. During the 
loan flotation months there has been related rather 
than sympathetic increase in the volume of dis 
counted bills secured other than by war obligations. 
But aside from this, the movement of discounts 
traceable to commercial expansion has been within 
narrow range. 
The preponderant part which war paper has come 
to play in the discount operations of the Federal 
Reserve Banks, and the absolute volume of such 
paper now resting in the Banks’ portfolios are facts 
of the gravest importance in the nation’s financial 
present as well as in its economic future. But 
tempting as are these aspects of the situation, their 
consideration extends beyond the scope of the im-