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Office C o r r e s p o n d e n c e

Chairman Eccles

Date my 27.19U7—

Bill Retirement on June 5

Richard A. Mas grave

l l # Eeffelfinger, in Mr. Barteltfs absence, called with respect
to the bill retirement on June 5*
Bill retirement during the month of May has amounted to 600
million dollars as recommended in the Executive Committee's letter on
Ifey 2. Also, in concurrence with the Committee's recommendation, there
will be no retirement on May 2$ of bills and 1 billion retirement of
certificates on June 1* The letter also racommended 200 million retirement for June 5*
Mr* Heffelfinger feels that the June 5 retirement will not be
feasible* The current level of war loan balances is $QQ million dollars
after adjustment for calls already announced, including a call of 266
million for May 28 and a call of 1.3 billion for June 2* An additional
call of 300 million will have to be announced by Thursday for June 3, to
cover expenditures in the first half of the month, assuming that the
Treasury balance with the Federal Reserve will remain at its present
level of 550 million.
Mr. Eeffelfinger1 s three points against bill retirement on
June 5
(1) It will not be possible to raise the call above 300 million
because this would reduce war loan deposits below 200 million and practically wipe out deposits at the ftBfl banks.
(2) While it would be possible technically to retire 100 or 200
million of bills on June 5 without increasing the call but instead drawing
down the Treasury's balance with the Federal Reserve, this would serve no
good purpose in terms of pressure oA reserves asfiindswould be returned
to the market through financing of expenditures to the same extent that
they are withdrawn from the market on bill retirement*
(3) Also, it is desirable to keep the balance at about 500
million in view of very substantial uncertainties regarding requirements
especially during the third week of the month when expenditures will be
heavy due to interest payments» Also, British and French drafts on their
loans may be higher than had been figured*
Mr. Heffelfingerfs argument seems to make good sense. It might
be just as well to pass over the June 5 "bi11 maturity and then to resume
the retirement program on June 19 when the expenditure peak of the month
is passed and tax receipts will begin to flow in.
Mr. Thomas is in agreement and I understand that Mr* Rouse also
takes the same view»