The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Internal Memoraiidm Re: February "IS-/ 1954- Interview with Dr. Williams, Febru&ry 29 1954- Heading Suggestions:1. Bopp, Karl R.: Thfee Deeades of Federal Reserve Policy 2. Burgess, ¥. R.: The Reserve Banks and the Money Market 3.- Keimererj E. ¥. and Donald Keiamerer, The ABG of the Federal Reserve 4« Burgess, W. R.t Interpretations of Federal Reserve Policy in the Speeches and Writings of Benjamin Strong. 5. Federal Reserve Board publications: a. Banking Studies; b. Postwar Economic Policy series 6. Goldenweiser, E. A.: American Monetary Policy. 7. Hardy, C* 0., Credit Policies of the Federal Reserve System. Dr. Williams suggested that we should get hold of major topics: (1) Development of the System (2) The Federal Reserve Act (3) Laying out Districts (4) First job to strengthen the System—get banks to come in. Section I: Amendments of 1917 intended to strengthen and bring in banks. History of financing World War I: First problem one of money supply. Fractional reserve principle Mistake made—to finance on rising rates of interest: psychology bad. Did not do this in World War II, which was financed on falling rates. Structure of interest rates was frozen—but bankers began "playiisg the pattern"—Morgenthau. 1920-21 found it all to easy Section II: Beginning about learning about problem of monetary control. Boom and bust of 1921. Had to learn and re-learn. Religion on "commercial loan could do no wrong." Banks rediscounted on huge scale. All that credit got frozen. No credit 4^t I& &W particular kind of loan. Section III: Development of Open Market Operations Influx of gold Reserve banks worried about how they could pay way; began to huff Government securities. Did not know this would offset reserves. Began small committee in Boston — Governor Strong on it. Section International, 1922-29, brought us too much of world1s gold IV: Famous conference of 1927 •— Montagu (note his grandson did book recently Reserve policy! his son, Leonard is at World Bank) and Hjalmar Schacht. under those of other countriesj got speculation. Section V: Norman and Charles Rist on postwar (ll) Federal head of Economic Division Put down interest rates rid of gold but fanned What to do about speculative boom in stocks and real estate? Did not want to injure "legitimate business." New tools came outj margin requirements, loans to customers1 money. Many people though System too small, slow, late. Needed more tools. Stock market lilywhite since then. No speculative credit in market, highly liquid. •} ^^t^^m* Today's problem: how to recapture the discount rate. Tiy to bring it back as a weapon. It was important in the 1920*sj but skills have been lost, cannot fit it in with open market operations. Now thinking is that when the banks need short-term help they should f1use the discount window.f! Banks need to be taught. Had important chapter: j /4 War --y^how to supply money, but no sense of control. Boom and bust -- sense of responsibility, but no virtue in any special type of loan. Act of 1935 — liberation from coismercial bank theory. 1922-1927 International phase faced with international problems: Daves Plan, etc. In 1925, the Bank of England went back on gold. N.Y. Federal Reserve Bank arranged credits for England and for Poland. Central banking was paramount in this decade. Now central bank is tiying to get back dominant role in monetary policy, - 3 Great Depression stripped it of strenih. There were really two depressions: in 1931* abroad; panirf flows of "hot money"; Federal Reserve tried to help, but Britain was forced off gold. The Federal Reserve lost 3/4 billion of gold in five weeks. 193Ofs: Development of excess reserves. Federal tried to pump gold into banks but banks would not take it. Banking Act of 19355 increased reserve requirements. Depression of 1937-33: Sound economic conditions vs.#^«* ; "* ° support Government bond market. Accord of March 1951 smoothed over Treasury-Federal Reserve differences. Broiaght understanding; Treasury very careful now not to tell Federal what to do. (j.H. Williams retired officially July 1952^ 1920!s Washington Board's function judicial — one of review; not enough power. But Banking Act of 1935 cured this. Strong^dominant figure in System —both at home and abroad. Went to Washington and wore them out. First Board was good, but not later. Now back somewhere in the middle. But N.Y. is still the greatly dominant bank in System Other District banks: Very good as regional reporters. Chief contribution — regional reporting. Only aa*si»l N.Y. bank A- national and international problems. Foreigners A come in to N.X. bank •tt-^l 1+ ^^ H'k^W* ke^c fr^s^ ~iu "tfar* C
@FedFRASER