r their security. Subsequently the discretionary
power of the Secretary in this direction was extended so that at the
present time he is authorized at his discretion to deposit in national
banks surplus funds derived from any source, trust funds alone
excepted, and to accept as security therefor other securities than
government bonds. Other laws have made national bank notes acceptable
for certain public dues, and have given the Secretary authority to
issue gold and silver certificates against gold coin and silver
dollars deposited in corresponding amounts, and to redeem United
States notes in gold coin and to keep on hand for that purpose a gold
reserve of $150,000,000.

In its operation, this independent treasury system affects the
reserves of the banks and through them their discounts and the
commerce of the country. Whenever the receipts of the government
exceed its expenditures, money accumulates in the treasury and the
reserves of the banks are diminished; and, under opposite conditions,
they are increased. The return of accumulated surplus funds to the
banks is possible when the Secretary of the Treasury decides that such
return is desirable or necessary and when the banks are able and
willing to supply the bonds demanded as security. In case a deposit is
agreed upon the funds go to a relatively small number of national
banks selected as depositories by the Secretary of the Treasury, the
amount allowed each depository also being determined by him.

Through its ability to issue gold and silver certificates, its
obligation to redeem United States notes in gold on demand, its
administration of the United States mints and assay offices and the
laws regulating the supply and distribution of subsidiary coin, the
United States Treasury cooperates with the banks in the supply and
distribution of the circulating medium of the country. The people
apply to the banks for the forms of money and currency desired and
these institutions meet the demand by means of the funds deposited
with them or by their exchange at the various subtreasuries, if the
forms of money deposited do not correspond with these demands.

_4. The Interrelations of These Institutions_

Under the operation of the national banking act, New York, Chicago,
and St. Louis have been designated as _central reserve_, and
forty-seven other cities as _reserve_ cities. The national banks in
these reserve cities act as reserve agents for national banks in the
c