148

WAR  BORROWING

conclusion  arrived  at  by  the  most  competent  student
of  the  subject  has  been  that  “  while  the  policy  of
rationing  is  effective  and  probably  has  a  more
universal  and  effective  influence  than  the  mere
raising  of  rates  of  discount,  it  is  probable  that  a
more  rapid  advance  in  rates  conservatively  handled
would  have  exerted  a  desirable  effect.”  34
Here  again,  however,  it  seems  necessary  in  the
present  connection  to'  confine  our  attention  to  the
task  immediately  at  hand  and,  waiving  the  problem
of  wider  consequence,  to  recognize  that  the  direct
and  immediate  effect  of  the  discount  policy  of  the
Federal  Reserve  Board  has  been  to  reduce,  if  not  to
avert,  the  monetary  strain,  normally  incident  to  certificate ­
  borrowing.
The  operations  outlined  above  have  been  reflected
in  the  course  of  the  discount  operations  of  the
Federal  Reserve  Banks  and  more  specifically  in  the
course  of  such  Banks’  holdings  of  member  and  nonmember ­
  banks,  collateral  notes  secured  by  Liberty
bonds  or  Treasury  certificates  of  indebtedness,
and  of  rediscounted  customers’  paper  likewise
secured.
In  the  first  stage  —  certificate  buying  —  the  general ­
  use  of  payment  by  credit  made  it  possible  for  depositary ­
  banks  to  acquire  certificates  without  strain
upon  their  ordinary  resources  for  their  own  account
and  for  their  customers,  as  well  as  for  non-member
banks.  To  the  extent  that  interior  banks  made  payment ­
  by  drafts  on  the  reserve  city  banks,  or  to
the  extent  that  depositary  or  other  banks  or  indi-34
  Prof.  H.  Parker  Willis,  “  Memorandum.”