32

WAR  BORROWING

i°  Federal  Reserve  Bulletin,  May,  1917,  p.  342.

“  As  soon  as  the  war  loan  bill  becomes  a  law  he  intends
to  sell  such  amounts  of  Treasury  certificates  of  indebtedness ­
  as  may  be  necessary  to  meet  the  requirements  of  the
Treasury  and  the  war  situation  pending  the  sale  of
Government  bonds  ”—  [for  which]  “  about  60  days  ”
[would  probably  be  required]. 10
The  First  Liberty  Loan  act  of  April  24,  1917,
authorized  the  issue  of  certificates  of  indebtedness
so  foreshadowed  upon  a  scale  commensurate  with
the  titanic  financing  then  inaugurated.  The  Secretary ­
  of  the  Treasury  was  empowered  “  to  borrow
from  time  to  time,  on  the  credit  of  the  United
States,  for  the  purpose  of  this  act  and  to  meet  public
expenditures  authorized  by  law  such  sum  or  sums
as,  in  his  judgment  may  be  necessary  ”  by  the  issue
of  certificates  of  indebtedness  bearing  not  more
than  three  and  a  half  per  cent,  interest  nor  of  more
than  one  year  maturity  —  up  to  an  amount  of  $2,-000.000,000
  at  any  one  time  outstanding.  Such
certificates  were  not  to  bear  the  circulation  privilege
but  were  exempt  from  all  taxation  other  than  estate
or  inheritance  taxes.  The  provisions  of  the  act  as
to  the  custody  of  the  funds  so  borrowed  were  allimportant;
  (a)  the  Secretary  of  the  Treasury  was
authorized  to  deposit  in  banks  and  trust  companies
duly  qualified  as  government  depositaries  the  proceeds ­
  arising  from  the  sale  of  certificates  and  bonds
to  amounts  not  exceeding,  in  the  case  of  each  depositary, ­
  the  sum  invested  by  it  or  withdrawn  from
it  for  investment  in  certificates  and  bonds;  and
(b)  the  reserve  requirements  as  to  demand  deposits
imposed  by  the  Federal  Reserve  Act  were  waived  as