THE  MONEY  MARKET

149

viduals  elected  to  make  direct  payment  there  was
reduction  or  depletion  of  reserves.  But  easy
remedy  lay  in  recourse  to  the  Federal  Reserve  Banks
for  discounts  or  advances.
In  the  second  stage  —  government  withdrawals
and  Liberty  Loan  flotations  —  the  outright  reduction ­
  in  consequence  of  such  withdrawals  of  balances
with  the  Federal  Reserve  Banks  kept  by  the  depositary ­
  banks  as  reserves  and  excess  reserves,  and  the
subsequent  transformation  of  “  government  deposits ­
  free  of  reserves,  into  individual  reserves,  requiring ­
  reserves  ”—  induced  similar,  though  perhaps ­
  prompter  and  larger  recourse  to  the  Federal
Reserve  Banks  for  the  repair  of  balances  and  reserves ­
  by  the  discount  of  member  banks’  notes
secured  by  Liberty  bonds  and  certificates  of  indebtedness, ­
  and  to  a  minor  extent  by  the  rediscount
of  customers’  paper  likewise  secured.
In  the  following  table  are  shown  the  course  of  the
discount  operations  of  the  Federal  Reserve  Banks,
as  well  as  the  relative  importance  of  the  Banks’  holdings ­
  of  war  paper  during  the  period  studied.
The  obvious  disclosure  of  the  detailed  exhibit  is
the  increasing  extent  to  which  the  member  banks
have  availed  themselves  of  the  discount  facilities  of
the  Federal  Reserve  Banks  —  evidenced  by  the  number ­
  of  banks  accommodated  through  discounts  and
rediscounts  during  each  month  since  our  entry  into
the  war.  Starting  with  384  discounting  members
in  April,  1917,  the  number  rose  to  900  in  June,  1917,
to  1574  in  November,  1917,  to  2693  in  May,  1918,
to  3462  in  July,  1918,  to  3671  in  August,  1918.
This  increase  has  been  rhythmical  rather  than  uni-