The Federal Reserve Act provides that moneys held in the general fund of the United States Treasury, except the 5 per cent redemption funds against national bank notes and federal reserve notes, may, upon the direction of the Secretary of the Treasury, be deposited in federal reserve banks, which banks, when required by the Secretary, shall act as fiscal agents of the United States. The revenues of the government in whole or part may be so deposited and disbursements made by checks drawn against such deposits.

On January 1, 1916, the Secretary began to use the reserve banks as depositories. He commenced by transferring part of the government deposits from banks in federal reserve cities to the reserve banks. Not until the United States began the sale of treasury certificates of indebtedness and Liberty Loan bonds, however, did this item become important or considerable. In announcing the first Liberty Loan in April, 1917, the Secretary also announced that each federal reserve bank would be constituted a central agency in its district for the organization of a bond campaign, for receiving subscriptions and payments, making deliveries, and managing the necessary details. Through these duties the reserve banks were brought into intimate contact with the Treasury and with the member banks of their districts, and together they proved invaluable agents of the Treasury in war financing.

The duties of a fiscal agent are numerous. They include the handling of all details connected with the sales, subscriptions, allotments, redemptions, conversions, and distribution of government loans and certificates of indebtedness; the collection of all bond and certificate payments, and the redeposit of these funds with designated depositories, whence they are withdrawn upon request of the Treasury; the payment of due coupons; the operations connected with the treasury savings certificates, the war savings stamps, and the thrift stamps. The expense of the fiscal agency function is kept separate from the other expenses of the reserve bank and is reimbursed from the Treasury.

The average government daily balance with the depositories during 1919 was $738 million; the number of depositories designated by the Treasury through the federal reserve banks was 7,632 on December 31, 1919; as security for these deposits, the federal reserve banks received and cared for the collateral of $1,338 million. During the year the reserve banks handled 33 million government checks, amounting to $14.5 billion. The government balance in the federal reserve banks averaged $99 million, though it fluctuated widely because of the constantly changing requirements of the Treasury and the seasonal character of the collections of the internal revenues. By means of inter-district settlements through the gold settlement fund, the Treasury is able to leave the funds with the designated depository banks throughout the country until actually required, transfer being made by telegraph to federal reserve banks in cities where government disbursements are made.