THE  MONEY  MARKET

in

keep  the  Treasury  in  funds  until  the  administrative
delays  reasonably  incident  to  a  loan  flotation  were
overcome.  In  an  accompanying  statement  of  the
Secretary  of  the  Treasury  of  April  20,  1917,  this
purpose  was  first  clearly  set  forth  in  a  form  conveniently ­
  described  as  the  money  market  argument;  1
“  The  Secretary  appreciates  the  desirability  of  avoiding
any  derangement  of  the  money  market,  and  in  the  financial
operations  in  which  the  Government  is  about  to  engage  it
will  be  his  purpose  to  adjust  receipts  and  disbursements  in
such  a  way  that  as  far  as  possible  money  paid  in  will  be
promptly  returned  to  the  market.  The  contemplated  sale
of  Treasury  certificates  is  in  line  with  this  policy.  Should
the  banks  during  the  next  few  weeks  absorb  several  hundred ­
  million  dollars  of  these  certificates,  the  proceeds  being
paid  out  in  the  course  of  business,  the  banks  will  possess
ready  means  with  which  to  meet  withdrawals  made  later
by  depositors  in  paying  for  bond  subscriptions.  The  result ­
  of  this  method  will  be  a  gradual  anticipation  of  payment ­
  on  account  of  bonds  with  a  steady  and  continuous
return  to  the  banks  of  the  moneys  paid  in.”
The  same  consideration  appeared  in  the  assurance
given  at  this  time  by  the  Federal  Reserve  Board  to
the  member  banks:  2
“  The  Federal  Reserve  Banks  may  be  counted  upon  by
offering  liberal  terms  of  rediscounting  to  do  their  utmost
in  counteracting  any  effect  of  temporary  dislocation  of
banking  funds.”
The  plan  recommended  by  the  Treasury  on  May
16,  1917,  for  the  payment  of  subscriptions  to  the
First  Liberty  Loan  by  the  use  of  credit  and  the  tender ­
  of  certificates  of  indebtedness  was  designed  “  to
1  Federal  Reserve  Bulletin,  May,  1917,  p.  342.
2  Federal  Reserve  Bulletin,  May,  1917,  p.  342.