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. 131 BDARD OF GOVERNORS DF THE FEDERAL RESERVE SYSTEM Office Correspondence To Chaiiman Eccles From Lauchlin Currie DafP Subject: June 5,1957. Further thoughts on reserves against foreign deposits 1. It would be possible to apply the suggestion either to foreign deposits in all banks or to foreign deposits in member banks alone, while providing that only a member bank could hold foreign deposits. I did not mention the latter possibility in my memorandum as it appeared too difficult of attainment• It has since occurred to me that it would be an effective argument to use in securing the first alternative• We could either first propose that only member banks could receive foreign deposits and then compromise on the original suggestion, or we could propose that the power apply to foreign deposits in all banks and, if we met with much opposition, suggest that it apply only to member banks, provided non-member banks could not hold foreign deposits. 2# In connection with the timing of action, it would be possible for us to raise requirements at any early date without such action having a restrictive effect, if at the same time the Treasury de-sterilized some of its inactive gold account* This, however, should only be done under the understanding that the excess reserves released by a subsequent utilization of these deposits should be absorbed by Treasury action* GOLD AND CAPITAL INFLOW TO DOTTED STATES Strictly Confidential (In millions of dollars) Capital inflow In securities Gold inflow Total In Be turn of Increase in brokerage American Foreign American securities securities foreign balances balances from balances here abroad 1,1^9 1,708 1,381 1935 1936 1937 to Hay 26 - 25 2U9 86 106 320 601 155 131 215 56U 360 6 186 356 106 29 6 — 5,678 1,051 781 1,255 601 12 1,131 1,195 65S Total 4,645 In banking funds 686 267 — Period of international currency arrangement Sept. 30, 193° - May 26 2/ 6 weeks ending Nov. 11 21 • • Apr. 7 7 • " May 26 Week ending Apr. 14 21 28 May 5 12 19 2/ 26 2/ Days May 27 28 29 June 1 2 5 1,105 1,012 419 287 512 - 10 3l6 23U 225 29 - 36 32 428 561 446 225 552 - 51 220 58 86 262 79 97 57 44 52 41 25 67 .8 4.7 5.2 JB/12.1 75 54 58 57 48 59 61 9 12 25 9 5 9 Stocks (SEC) - .5 .8 1 4 18 2 4 5 45 58 55 15 55 25 55 - 16 - 6 51 12 18 5 11 21 9 8 - 1 14 5 2 6 - 5 5 - 1 Mote; Figures of gold inflow represent all gold acquired from foreigners. Figures for capital inflow have been adjusted on the assumption that foreign funds set aside for redemption of foreign securities have already been applied to redemption, 2/- .4 jg/ Preliminary
@FedFRASER