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BOARD OF GOVERNORS DF THE FEDERAL RESERVE SYSTEM Office C o r r e s p o n d e n c e Xo Chairman Eccles Date my 27.19U7— Subject: Bill Retirement on June 5 Richard A. Mas grave l l # Eeffelfinger, in Mr. Barteltfs absence, called with respect fr 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oA reserves asfiindswould be returned to the market through financing of expenditures to the same extent that they are withdrawn from the market on bill retirement* (3) Also, it is desirable to keep the balance at about 500 million in view of very substantial uncertainties regarding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»
