THE  MONEY  MARKET

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have  prevented  monetary  dislocation  at  the  second
and  third  stages.
With  the  absorption  of  each  successive  issue  of
certificates  of  indebtedness  by  the  lending  banks,
the  Treasury  has  found  itself  in  possession  of  the
borrowed  funds  or  credits  in  the  form  of  government ­
  deposits  held  in  an  increasing  number  of
national  banks,  state  banks  and  trust  companies,
qualified  as  special  depositaries.
As  required  in  the  probable  course  of  public  expenditure ­
  such  funds  have  upon  notification  been
remitted  to  the  Federal  Reserve  Banks  and  thence
disbursed  in  payment  of  public  accounts.  The  actual ­
  procedure  followed  in  making  such  withdrawals ­
  has  been  as  follows: 30  About  five  days  before
the  Treasury  desires  to  withdraw  funds  from  special
depositaries  each  bank  is  notified  by  the  Federal
Reserve  Bank  of  the  amount  that  it  will  be  expected
to  pay  on  account  of  its  government  deposits.  On
the  day  the  payment  is  to  be  made  the  bank,  if  a
member  of  the  Federal  Reserve  System  and  not
holding  sufficient  funds  for  that  purpose,  may  discount ­
  its  own  note  with  the  Federal  Reserve  Bank
and  use  the  funds  so  obtained  to  pay  the  amount
required.  In  the  case  of  a  non-member  bank  the
loan  must  be  made  through  a  member  bank.  The
member  bank’s  note  may  be  secured  by  the  certificates ­
  which  had  been  previously  used  as  collateral
for  its  government  deposits,  but  which  have  now
been  released  by  payment  on  this  account.  When
these  certificates  mature  or  are  used  to  pay  for  bonds
30  Memorandum  of  Mr.  Frederic  H.  Curtiss,  of  the  Federal
Reserve  Bank  of  Boston.