The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
F o r m F. R. 511 ( a) TO FROM REMARKS: This material was to remain confidential a slip reading "The attached is SUPEKCQNFIDESTIAL and is NOT to be released to general files" was attached to the original. The original was turned over to Mr. Carpenter by Miss Egbert on 2/5/52 GOVERNOR ECCLES' OFFICE © STKICTLY r0 RO OF GOVKKKQRS CF THE January 15, 1944 Chairman Eccles J. P. Dreibelbis and L. M. Plser This memorandum Is prepared in response to your request for a stuteaent concerning tne dual role now occupied by Fr. House, the difficulties that it produces, &a& a solution to the problem. e should like to point out that the problem la not peculiar to Mr. House as an Individual. It has existed with other occupants of that position and is inherent in the present organisation of the Federal Reserve Bank of Kew York, STRICTLY BQkliD OF GOVERNORS OF THE FEDKKAJL KE3ERVE SYl TEM January 13f 1944 The difficulty in Mr* House's situation is that he holds two jobs. As Manager of the System Open Market Account, his ultimate responsibility is to the Federal open Market Committee. As the officer of the New York Reserve Bank designated to exercise certain of its fiscal agency functions, his ultimate responsibility is to the Treasury Department. As Manager he is an important advisor to the Committeo on not only open market policy but closely related policies, such as Treasury financing, which are of concern to the Conusittee. A3 fiscal agent, ne is an important advisor to the Treasury on not only Treasury financing policy but the closely related open market policy. In the latter capacity, he consults frequently with the Secretary and the Under Secretary on Treasury financing and open market policies. Ee discussed the terms of the drive with the Under Secretary for several weeks and attended a number of the preliminary meetings. It was In this period that the terms of the drive gradually developed into final form* In these discussions, he was acting as a repreaantitive of the fiscal agent and not of the Open Market Cocs&ittee and consequently felt free to express opinions that might be contrary to the policy of the Committee. It is obvious that such an arrangement cannot be made to work satisfactorily. The lines of responsibility must inevitably become hopelessly tangled unless either the Treasury or the Open Market Committee relinquish all interest in the other's field or unless there are no differences of opinion between them. Ho person can advise first one and then the other of two parties that niust frequently compromise differences of opinion in conducting their activities. The solution of the problem would seem to lie in the separation of the two positions. The Kew York Reserve Bank should appoint one person to be Manager of the Account and another to perform fiscal agency functions, f^i Manager of the Account, as well as other employees of the Committee, would be required to express no opinions that are at variance with the policy of the Committee on any subject. The fiscal agent would be free to perform any fiscal agency service for the Treasury and to give advice to the Treasury on fiscal agency matters, but would have no connection whatsoever with the Open Market Committee •
@FedFRASER