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BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM Office Correspondence To Chairman Eocles Frnm Woodlief Thomas Date November 28, 1947 Subject! Secretary Snyder1 s testimony Attached is a summary by Alfred Sherrard of Secretary Snyderfs testimony before the House Banking and Currency Committee and also a clipping from the American Banker bringing out some other important points about t h etestimony. C > J X J ^ (K41 U U ^ J Apparently Mr* Snyder agrees that something should be done about inflation* He thinks that some restraint should be put on bank lending and particularly on consumer credits He is not willing to have interest rates on public debt rise, but he is opposed to the Board1s proposals for restraining credit without a rise in rates on Government securities* Ihere does this leave him? It appears from the American Banker report that Mr. Snyder made a more complete statement on gold sterilization than I had previously seen in the press* He mentioned not only the holding of idle gold by the Treasury but also offsets by Federal Reserve sales of Government securities* Sherrard tells me that Mr* Snyder1s remarks on this subject were not too clear but that he did indicate that gold sterilization would interfere with debt retirement, which is the correct view* An interesting feature of the Sherrard report is in the last paragraph regarding Congressman Patmanfs proposal that the Reserve System purchase 50 billion dollars of Government securities and that bank reserve requirements be raised to offset these purchases* This would mean increasing member bank requirements by nearly four times the existing amounts and also imposing the same requirements on nonmember banks, i.e., an average of about 67 per cent would have to be required against demand deposits and 23 per cent against time deposits* It would reduce gross earnings of banks by 600 million dollars or more* Perhaps if faced with this alternative, the banks would be glad to accept the Board's proposals*
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