The discount operations of the federal reserve banks are of three classes:

1. For Member Banks.

2. Open-Market Purchases And Sales.

3. For Other Federal Reserve Banks.

Paper that is eligible for rediscount is defined by Section 13 of the Federal Reserve Act and by Regulation A of 1917 of the Federal Reserve Board. Paper eligible for purchase in the open market is defined in Section 14 of the act and in Regulation B of 1917. In general terms the definitions limit these operations to paper based on commercial origin having short maturity, and bearing the indorsement of a member bank (if it is for rediscount). During the war it was found advisable to admit to discount "war paper" (i.e., notes of a member bank in favor of the federal reserve bank and accompanied by United States securities as collateral). War paper is not commercial, and the proceeds may or may not be used to extend loans for commercial purposes.