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Birth of a MarketThe U.S. Treasury Securities Market from the Great War to the Great Depression$
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Kenneth D. Garbade

Print publication date: 2012

Print ISBN-13: 9780262016377

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262016377.001.0001

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Treasury Cash Management: Certificates of Indebtedness

Treasury Cash Management: Certificates of Indebtedness

(p.109) 7 Treasury Cash Management: Certificates of Indebtedness
Birth of a Market

Kenneth D. Garbade

The MIT Press

Treasury officials adopted two strategies to ease fluctuations in government balances at the Federal Reserve Banks, which would have otherwise resulted from the immense flows of funds attributable to wartime tax payments and bond sales. The first was to raise (and quickly disburse) money in smaller amounts—several hundred million dollars at a time—by issuing certificates of indebtedness that could be used later to satisfy tax liabilities or to fund bond subscription payments. The second was to redeposit bond and tax receipts in Treasury accounts at commercial banks. This chapter examines the first strategy. Between April 1917 and mid-1919, the Treasury made thirty-three public offerings of bond-anticipation certificates and fourteen public offerings of tax-anticipation certificates. In view of the novelty and unprecedented scale of the operation, the certificate program worked quite well.

Keywords:   Treasury bonds, government debt, Federal Reserve Banks, short-term certificates, wartime tax payments, bond sales

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