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March 18, 19142, Boar Dan: this Is a copy of the randua received this morning from Allan Sproul relative to the Treasury financing program which wo discussed with you yesterday* 1 believe that it expresses In general the viemof the Executive Coronittoe of the Open Market Coaaittee. Sincerely yours, Honorable Beniel W. Bell, Under Secretary of the Treasury, Washington, $• C. Enclosure MSE :VE :b COPY . Form >F. R. 5 11 TO Governors LleKee, Draper, and Evans # % FROM Chairman E REMARKS: This is a copy of the memorandum covering financing which I requested Mr. Sproul on yesterday to send down to us, I should like to send this over to the Treasury as promptly as possible, advising them that this in general expresses the views of the Executive Committee of the Open Market, Let me know if you have any objection to my doing this, M.S.E. CHAIRMAN'S OFFICE £££1 e/o IMS of GOVOTKW t h i s It the iMMWMi i«hieh you request«d I tend to font •Th# g@f»r&l .' 1*0 fram® migrated by tito ?r*ft*vtry n»«ss t© u» to be lneonpfttable with the primary obj#©iiv<g of obtaining the snonmt of ftmdts <nst»id« of th# b«?jklag ^fai«s« B3r Nt a low? L«NMl or inerefttinf the w^l«a# of f f it' would in<sr#ii®« th« lnditooeMBit to tli# to invoftt In Qovonumnt *Muriti«8 #«d l«»»«n th« t© ether luve«tor«« Thi» i s IM nsirtrse of whfct M Mre trying I f the Tre&»«ry Is not yet ready to d&ei&t «,p«m a eonplete for finimeiBf the m&r effort^ and idshe» to pr©e#«d, ote^ by iMpg iwi fe«*Xt«¥!» i t shotild &Told tskiB-f steps s«eh • • those wow ?ropo«*d9 which i s ecabin^tion ^nd by l»plieftti«n wemld &wm to eoasnlt i t to a progr»a ! • w i l t Ml A p#iX«d ffhort rat<* of interest Ml a lour I f i i U Tut postiag of a b i l l r*te of #26 p€rc.«fit by eMh of the 12 ?«i4#r&l te^erv® Bwka «Mld fe« mieh oper&tlon* (B) lt«inten«no« of a large volume of K^o«n A© *tteiapt to 5,ner#ti@® Qx&m® r^mrvm in I@w fort almost inevlt&bly InimlT® the staintenamMi in lorte sud ix% the ©otmiry of & larger val«m« of then i s si#c«s»®.ry or (C) Us® of open market issues rather than tap issues In seeking funds from investors other U M I banks, A tt&tmmt in connection with an issue of certifi- cates of Indebtedness, strewing the fact that tfetti certificate© are offered as a M A U M of in* vestment for Idle business funds would imply that this If th© way which has been chasm to reach non-b&nk Investors* We would suggest that, for the present, and until a raore complete program of financing hae been determined by th© Treasury, the most appropriate next step wsuld b® to incrsaee th© weekly offering of Treasury bills to at leajit |2CX),0CX)|.O00 per week. If this were &<m®, we are siir© that the Federal Knaerre Syst^ia, through it® f#d#rsl Open Market Cc^ffiittee, would begin building up its portfolio of bills as soon as the rste reached *-25 percent and would increase its buying preisiire until the r&ta ,r©aehed #375 percent» at which rate it would hold the market, if necessary, until there had been a further determination of procedure in consultation with th© Treasury* The explanation of the increased offering of Treasury bills would be the simple one that it is designed to give increased fluidity to the ssoney market and to make excess reserves effective wherever they are located. An offering of certificates of indebtedness could then be m&de in due course nhen additional funds are needed bf the Tre&sury# If, hot*- ever, the Treastiry wishes to sake sos»® announcement concerning & future issue of certificate® of indebtedness* at the s&ma time that the Treasury bill offerings are increased, this could b@ done. Ie think it would b» b#it#r not to saiao tfct raia «nd JWfct«rityf how#if#rf but th«t the eertifiefcta* of lfti«h4«AMM vould mip;>l«m«nt b i l l lasiaft in pPOTMttag th# ^on^|r smrk^te of th« ©oyntrj -with pt of obligtttlan now l&ekioi IK luwffloifitit TO1W»» to pfovid^ th« in oar V&t* that until th«r« has b#«n & further 3/17/U i S
@FedFRASER