So clearly is this obligation recognized by most bankers that they will not usually refuse credit or even attempt to ration it in too narrow a way unless there is very good reason for doing so, but instead of resorting to such a method of restriction will ordinarily resort to the process known as rediscounting. Under conditions in which the rediscounting process is purely voluntary - that is, in which it grows out of an ordinary business relationship between banks - it may not be as reliable a means of relief as is necessary to meet the situation. In those countries where central banking exists, or where, as in the Federal Reserve system, there is a co-operative union of banks whose purpose is primarily that of mutual accommodation, the case is quite different. Such central or co-operative banks have the definite duty of relieving other banks through rediscounting, and if they are well managed they have endeavored to conserve their resources throughout with that purpose in mind. They are, therefore, in position to rediscount - to help the bank which applies to them by giving it credit upon its own paper with the indorsement of the applying bank. The central bank does for the individual bank what the individual bank does for its customers, and does it at a time when the individual banker needs funds. It thus enables the individual banker to avoid the necessity of rationing or restricting credit, although ordinarily rates of discount are so stated that the rediscounting process implies an element of greater cost or expense, which results in the raising of the rate to the would-be borrower.

Alternative with the idea of rediscount is that of disposal of assets. The banker may have carried in his portfolio, say, some government certificates of indebtedness or Liberty Bonds, and these he may sell outright in order to realize cash when the necessity comes. In this case he employs exactly the same method that was used when he rediscounted, except that instead of resorting to another bank he goes to the open market for what he needs.