THE  MONEY  MARKET

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not  make  such  payment  in  Treasury  certificates  of  indebtedness ­
  maturing  or  called  for  redemption  on  the  date  the
payment  on  bond  subscriptions  is  due  at  Federal  Reserve
banks.”
Starting  thus  from  a  familiar  and  thoroughly
accredited  procedure  for  reducing  the  monetary
strain  incident  to  public  borrowing  by  a  prompt
restoration  in  the  form  of  adequately  protected  redeposits
  of  the  funds  so  withdrawn  from  the  channels ­
  of  trade,  the  Treasury  succeeded  in  organizing
the  banking  strength  of  the  country  under  the  direction ­
  of  the  Federal  Reserve  Banks  into  a  body  of
depositary  banks  the  prime  service  of  which  has
been  the  advance  by  or  through  such  banks  of  deposit ­
  currency  under  the  designation  of  government
deposits  in  consideration  of  the  delivery  of  certificates ­
  of  indebtedness.  Such  banks  are  government
depositaries  in  the  sense  that  they  retain  the  deposit
credits  which  they  have  created  until  remitted  to
the  Federal  Reserve  Banks  for  disbursement  by  the
Treasury  in  the  course  of  public  expenditure.  But
their  essential  service  is  not  the  retention  of  such
deposit  credits,  but  their  creation.
The  certificate  borrowing  of  the  Treasury,  in  its
first  phase,  thus  exposed  the  money  market  to  minimum ­
  strain  and  averted  all  likelihood  of  monetary
dislocation.  The  government’s  monetary  requisitions ­
  were  adequately  met  by  a  fund  of  deposit  currency, ­
  and  the  procedure  employed  —  payment  by
credit,  redeposit  of  funds  and  exemption  from  reserve ­
  requirements  —  replenished  this  fund  as  required ­
  or  desired,  by  the  emission  of  certificates  of
indebtedness  without  corresponding  withdrawal  or