1 How extensively the banks of the country have used the direct rediscount privilege may be inferred from the following table:

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Month

1917

1918

1919

1920

1921

March.............

315

1,568

4,758

3,670

5,332

June...............

900

3,021

4,047

4,948

5,740

September..........

953

3,464

3,722

4,758

5,622

December..........

1,701

3,288

3,659

5,551

...........

dents of the banking situation, some of whom believe that a policy more nearly patterned after the European model is called for.

The success experienced in dealing with the problem of seasonal extensions of credit has, however, been much greater than that enjoyed in connection with general credit. Limitation of open market operations has been due in no small measure to the fears of member banks that they

The following table shows the distribution and size of the rediscount operations for two selected months chosen as representative at a period of special activity in operation.

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District

January

July

Average Size of Items

Number of

Items

Average Size of Items

Number of

Items

No. 1 - Boston..........

$17,990

2,723

$ 20,982

2,485

No. 2 - New York......

58,284

8,131

327,769

4,352

No. 3 - Philadelphia.....

62,092

1,833

140,199

1,425

No. 4 - Cleveland.......

24,897

1,606

20,160

2,594

No. 5 - Richmond.......

9,664

2,040

4,979

7,971

No. 6 - Atlanta.........

13,340

1,769

7,292

8,627

No. 7 - Chicago.........

20,522

5,269

16,209

12,342

No. 8 - St. Louis........

14,992

3,724

18,226

5,034

No. 9 - Minneapolis.....

9,202

1,955

5,983

6,282

No. 10 - Kansas City.....

6,947

3.873

5,156

8,289

No. 11 - Dallas..........

4,605

1,350

3,646

9,435

No. 12 - San Francisco ...........

13,638

3,415

8,646

9,607

Entire system.......

26,047

37,688

29,232

79,463

might be prevented from getting, or might lose, valuable business, or might be restricted in their rates of interest. The seasonal extension of credit presented a quite different problem and one in which the jealousies of members played no part. It involved the establishment of a plan whereby the reserve banks could deal with other reserve banks in order to get aid from them for the pur- pose of enlarging the loans granted in their own districts. In all countries which have a seasonal type of agriculture or other industry, there is a peak of credit representing very intensive demands in certain parts of the country at certain seasons of the year, these demands falling off at a later date as productive conditions change and as seasonal needs decline. In the United States in former years it was customary for banks in the cotton- and grain-growing States to rely on the banks of the North and East for special aid. This was rendered unnecessary under the Federal Reserve System, at least in large measure, through a provision which, as applied by the Federal Reserve Board, compelled reserve banks with high reserves to purchase paper from other reserve banks with low reserves, transferring the proceeds of such purchases through the gold settlement fund to the selling bank and thereby placing it in position to go on enlarging its discount accommodations. Such operations have been carried on at the express direction of the Federal Reserve Board under the terms of the Act.

Rediscounts and Sales of Paper Between Federal Reserve Banks, First Seven Months of 1920 and

[In thousands of dollars.]

District	Amount Received 1920		Amount Received 1921		Amount Furnished 1920		Amount Furnished 1921
	Sold	Redis-counted	Redis-counted	Sold	Purchased	Discounted	Discounted	Purchased
No. 1 - Boston........	20,841	0	..................	................	8,582	338,120	84,550	10,671
No. 2 - New York.....	68,008	215,000	..................	57,646	11,042	456,578	267,500	340
No. 3 - Philadelphia..........	0	371,600	..................	...............	10,014	0	5,000	6,823
No. 4 - Cleveland......	50	0	..................	...............	39,658	530,197	172,415	25,094
No. 5 - Richmond.....	0	380,000	220,000	...............	0	0	................	................
No. 6 - Atlanta........	0	67,961	27,957	...............	5,087	52,000	................	................
No. 7 - Chicago.......	10,156	225,000	..................	1,315	5,090	168,500	................	................
No. 8 - St. Louis......	6,000	164,028	..................	..............	0	13,000	................	1,000
No. 9 - Minneapolis.........	0	128,500	69,000	...............	0	40,029	................	................
No. 10 - Kansas City	0	133,074	9,008	................	5,049	20,000	................	................
No. 11 - Dallas.........	0	99,761	203,500	...............	0	143,000	................	................
No. 12 - San Francisco. .	10,258	0	..................	25	30,791	23,500	................	15,058
Total...........	115,313	1,784,924	529,465	58,986	115,313	1,784,924	529,465	58,986

This inter-reserve bank rediscounting, as it was called, served to equalize funds between different parts of the country and took the place, therefore, of the older system in which aid was extended by member banks in cities to their country correspondents. How extensively the services of inter-reserve bank rediscounting were availed of can be seen from the foregoing table which represents its volume of operations undertaken when this class of business was at the height of its activity during the period of credit strain in 1920; as compared with the corresponding situation a year later when demand had been greatly reduced.

The seasonal fluctuation in such inter-reserve bank demand may be followed in the table below, which shows from month to month the changes in sectional requirements taken in the aggregate: