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FE D ER AL R E SE R V E BAN K O F D A L L A S
F I S C A L A G E N T O F T H E U N IT E D S T A T E S

Dallas, Texas, November 24, 1912

IMPORTANT

PAYMENT FOR GOVERNMENT SECURITIES BY CREDIT TO
A WAR LOAN DEPOSIT ACCOUNT

To Incorporated Banks and Trust Companies
in the Eleventh Federal Reserve District:
In view of the Treasury’s present and prospective large requirements in connection
with the financing of the war effort, and the increasingly important part which banks
are being called upon to take in such financing, it would appear desirable for all incorported banks and trust companies to apply for designation as War Loan depositaries,
in order that they may make payment through a “ War Loan Deposit Account” for
Government obligations allotted to them or to their customers. Payment by credit to a
special account designated “ War Loan Deposit Account” makes it unnecessary for a
bank to provide immediately available funds at the time subscriptions are allotted, as the
proceeds of subscriptions can be retained on deposit at the banks until called for by the
Treasury.
This manner of payment has distinct advantages to a bank and its community, the
importance of which will become more apparent as the size of Treasury offerings of secur­
ities is increased and the cash resources of banks are decreased through purchases of
Government securities. If Government securities are paid for in cash at the time allot­
ments are made, a bank may have to make payment for its own allotment simultaneously
with withdrawals of cash by depositors who pay directly for the securities allotted to
them, thereby causing a drain upon the bank’s cash resources. Such a drain could be
minimized if payments should be made by credit to a War Loan Deposit Account, since
the proceeds received by the Government from security sales would remain in the bank
as a Government deposit until the funds are needed by the Treasury to meet expenditures.
Since the Treasury sells a large amount of securities that must be paid for on specific
dates, and then disburses the proceeds over a period of several weeks, withdrawals from
a War Loan Deposit Account are usually made gradually, enabling a bank to make
provision for payments prior to the time that withdrawals are effected. Moreover, Gov­
ernment disbursements in the community may actually return funds to the bank in the
form of customer deposits before the original Government deposit is withdrawn in its
entirety. Thus, the use of a War Loan Deposit Account in paying for allotments of Gov­
ernment securities prevents an immediate drain upon a bank’s cash resources, permits
the retention of proceeds of Government security sales in the community for a consider­
able period, assures an orderly withdrawal of such funds, and enables the bank to use
more effectively its cash resources.
(Over)

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

On August 11, 1942, banks were advised that consideration would be given to the
qualification of depositaries in any amount which in the opinion of the Federal Reserve
Bank may be justified to meet the depositary’s requirements, provided that all deposits
in War Loan accounts in excess of 100 per cent of the combined capital and surplus of
the depositary bank were collaterally secured by the pledge of United States Government
securities. Such requirement has now been withdrawn by the Treasury, and, accordingly,
deposits in War Loan accounts may now be secured entirely by any of the types of
collateral provided by the existing terms of Treasury Department Circular No. 92.
The following information will be helpful to incorporated banks and trust companies
which have not qualified as War Loan depositaries:
Designation as a War Loan depositary will be made for a definite amount, pursuant
to the bank’s application, and the authorizing resolution of its board of directors. The
designation constitutes a maximum amount which a bank may have in its War Loan
Deposit Account at any one time, but collateral is required to be pledged only in an
amount sufficient to cover the actual balance in the account.
When a bank has been designated as a War Loan depositary and has qualified by
pledging collateral, it may pay by credit for Government securities allotted, and also may
pay by credit for Series E, F, and G War Savings Bonds and Tax Savings Notes which
it may sell.
The War Loan Deposit Account of a depositary bank originates exclusively from
credit entries on its own books in payment of Government obligations. No deposit is
made in a War Loan account from funds originating otherwise. Payments made by credit
must be credited by the depositary bank to an account on its books, entitled “ Federal
Reserve Bank of Dallas, Fiscal Agent of the United States, War Loan Deposit Account.”
Each payment is required to be evidenced by a certificate of credit on a form which will
be provided. Collateral to support the aggregate balance in the account must be under
pledge with this bank on the date of each certificate of credit.
War Loan deposits earn no interest and are payable on demand, without notice,
although banks are usually notified in advance of withdrawals in the form of a request
by this bank for the remittance of a definite amount. Each withdrawal by the Treasury
is based on its current need for funds, and each depositary bank is asked to remit a
specified percentage of its War Loan Deposit Account. When a remittance has been made
a proportionate amount of collateral may be withdrawn at the option of the depositary
bank.
Any incorporated bank or trust company which has already qualified as a War
Loan depositary and desires to increase its maximum designation, or which has not
been designated and desires to qualify as a War Loan depositary, should make applica­
tion to the Federal Reserve Bank of Dallas for appropriate forms. Prompt action is
necessary in order that the applying banks may be prepared for the forthcoming Treas­
ury financing.
Further details as to the operation of the account and a copy of Treasury Depart­
ment Circular No. 92 will be furnished upon request.

Yours very truly,
R. R. GILBERT
President


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102