THE  MONEY  MARKET

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with  existing  procedure  as  to  payment  by  credit  and
redeposit  of  funds;  and  the  revision  of  the
Treasury's  administrative  regulations  on  September ­
  21,  1918,  in  immediate  preparation  for  the
flotation,  effected  no  material  changes.  But  the  extraordinary ­
  increase  of  “  war  paper  ”  in  the  portfolios ­
  of  the  Federal  Reserve  Banks,  consequent
upon  the  largely  prevailing  use  of  payment  by
credit  in  settlement  of  the  certificates  of  indebtedness ­
  by  subscribing  banks,  was  giving  concern  to
the  Federal  Reserve  Board  and  to  those  responsible
for  the  nation’s  financial  affairs.  On  July  8,  1918,
the  Governor  of  the  Federal  Reserve  Board  addressed ­
  a  letter,  through  the  Federal  Reserve  Banks
to  every  national  bank,  state  bank  and  trust  company
urging  among  other  things,  in  the  interest  of  credit
conservation  and  with  a  view  to  checking  inflation
and  rising  prices,  that  payment  for  certificates  of  indebtedness ­
  be  made  by  subscribing  banks  in  so  far
as  possible  from  their  own  funds  instead  of  through
rediscounting  at  the  Reserve  Banks:  28
“  The  Federal  Reserve  Banks  will  be  prepared  to  place
their  facilities  —  directly  or  indirectly  —  at  the  disposal
of  such  subscribing  banks  as  may  legitimately  need  assistance ­
  in  taking  their  allotments.  The  Board,  however,
feels  in  duty  bound  to  reiterate  that  the  banks  can  render
a  greater  service  to  the  country  in  this  connection,  not
merely  by  subscribing  their  allotments  and  by  using  the
rediscounting  facilities  of  the  Federal  Reserve  Banks  in
making  payments,  but  by  providing  the  necessary  funds
for  meeting  payments  for  certificates  of  indebtedness  purchased, ­
  by  employing  for  this  purpose  the  accretion  of  new
deposits,  and  by  utilizing  the  funds  that  may  be  made
28  Federal  Reserve  Bulletin,  August  1918,  p.  686.