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BDARD DF GDVERNDRS
DF THE

FEDERAL RESERVE SYSTEM
WASHINGTON 25, D. C.
ADDRESS OFFICIAL CORRESPONDENCE
TO THE BOARD

November 16, 194-8.

CONFIDENTIAL

Dear Sir:
Attached is a copy of the letter which Chairman
McCabe handed to Secretary of the Treasury Snyder following
the meeting of the Federal Open Market Committee yesterday*
You will have noted that the Secretaiy today announced that
the December and January refunding would be on a 1^ per cent
basis.
Very yp&±y yours,

S. R.^Carp£q/t&r, Assistant Secretary,
Federal Open Market Committee.
Enclosure

TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS
(With copy marked for Mr. Rouse)




BOARD OF GOVERNORS OF THE FEDERAL RESERVE CTSTEM
November 15, 1948.
CONFIDENTIAL
Honorable John W. Snyder,
Secretary of the Treasury,
Washington, D. C.
Dear John:
In a meeting of the Federal Open Market Committee today I reviewed the informal discussions which we have had with you since isy letter
of October 13, 194-8, outlining the views and recommendations of the Federal Open Market Committee with respect to Treasury debt management and
Federal Reserve open market policies• While Mr* Sproul was not able to
attend today's meeting, because of illness, I have discussed these matters
with him and he concurs in the views expressed in this letter.
It is the opinion of the Committee that, notwithstanding the
recent slackening in the public's sales of bonds to the Federal Reserve
and some evidences of hesitation in business plans and commitments, the
basic forces in the credit situation and the necessity for flexibility in
Federal Reserve open market operations continue unchanged•
You have indicated a desire to make an immediate announcement of
the December and January refunding without change in rates. It is the
unanimous judgment of the members of the Committee that a decision and
therefore an announcement would be premature at this time for the reason
that it is not now possible to forecast market conditions with sufficient
accuracy to justify a conclusion. We understand that an announcement of
specific rates on the securities to be issued in a refunding operation can
be deferred until a date early in December. In the meantime, we will continue the present support policy and will have the benefit of market
developments and can review them at the next meeting of the Federal Open
Market Committee which had already been set for November 30.
If notwithstanding this recommendation it is your decision to
announce immediately a refvoiding on an unchanged rate basis, I can assure
you that it will be the policy of the Committee, as heretofore, to support
the current one-year issuing rate for Treasuiy certificates through the
refunding period. At the sarae time the Committee will continue the policy
stated in our letter of October 13 permitting flexibility in the Treasury
bill market up to the limit imposed ty the support of the current certificate rate.
The suggestion has been made that between now and the end of the
year the Treasuiy draw upon its balances for the purpose of continuing




Honorable John W. Siiyder

-2-

pressure on bank reserves. These funds would be used most effectively if
the Treasuiy were to purchase long-term securities from the System account
or, in the event the System is purchasing securities in the market to
support the long-term rate, if the Treasury were to purchase lon^-teiras
directly from the market. The Committee is in agreement with this suggestion and recommends its adoption by the Treasuiy •
The Committee is of the opinion that it has becorae more necessary than ever to determine upon a comprehensive long-term program looking
toward the refinancing of the public debt including the refunding of some
of the outstanding debt into issues and maturities that the market will
carry without undue reliance upon Federal Reserve support. We would like
to discuss this matter with you at your earliest convenience.




Sincerely,
(Signed) Thomas B. McCabe
Thomas B. McCabe, Chairman,
Federal Open Market Committee.