66 
WAR BORROWING 
short-term certificates. This method was prudently 
rejected by the Treasury as tending to defeat the de 
sired ends of keeping the banking resources of the 
country in so far as possible liquid, and of securing 
the widest popular absorption of the bonds. 43 
The actual procedure has been for each loan 
flotation to take the form of an intensive popular 
campaign in which bonds were subscribed by in 
dividuals through banks and by banks on their own 
behalf, such subscriptions being forwarded to the 
Treasury through the Federal Reserve Banks acting 
as the fiscal agents of the Treasury. In due course, 
allotments have been made by the Treasury through 
the Federal Reserve Banks to the subscribing banks 
for the amounts taken in their own behalf and for 
their clients. Individual subscribers have made 
payment for bonds through their banks by drawing 
upon existing deposit accounts, by creating new 
loans and deposit credits and drawing directly or 
indirectly thereon, and by tendering cash items — 
withdrawn (unless taken from hoards) from cir 
culation or from savings or from other banks but 
coming ultimately from the liquid resources of the 
banks, that is, from cash in vault in the first in 
stances and from Federal Reserve notes obtained 
by rediscount thereafter. In turn, subscribing 
banks have made payment, over-payment or pay 
ment in full through the Federal Reserve Banks for 
bonds allotted to them for themselves and for their 
customers, in three forms — by tender of certifi 
cates, by credit, by cash items. These modes of 
payment have figured in the heavily over-paid first 
43 Federal Reserve Bulletin, April, 1918, p. 251.