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A p r i l 1 3 , I9I4I4

Chairman Eccles

Supplementary memorandum on bills

L. M. Piser
I talked with Mr. Rouse and Mr. Harris this morning regarding
the proposal for issuing three-month and five-month bills* The technical difficulty that Mr. Sproul mentioned apparently is the fact that
the amount of maturities each week would vary to some extent• In any
one week, the maturity of three-month bills would be the amount of the
System's maturity that had been replaced three months previously. The
amount of five-month bills would be the amount that was sold to the
public five months previously, which in turn would equal the total
amount sold five months previously less the System's maturity at that
time. In checking over the figures, however, it seems to me that the
differences in weekly maturities would be relatively minor, perhaps not
more than 100 million dollars from week to week, and these differences
could be adjusted either by variations in the weekly offerings or in
the outstanding amount of bills. This difficulty does not seem to me
to be sufficiently important to argue against the proposals
A more fundamental objection that Mr. Rouse mentioned and that I
had mentioned to you on the phone last Friday is that dealers would be
requested each week to place bids for three-month bills not in accordance
with a request by the System as fiscal agent but in accordance with the
maturities in the System Account and the views of the executive committee
as to money market conditions• Considerable stress was placed by the
executive committee upon the desirability of confining requests to dealers
to place tenders as a fiscal agency operation handled under instructions
from the Treasury. The executive committee was insistent that it have no
part in such an arrangement. Under the proposed program, however, the
executive committee would either determine the amount of replacements
each week or would delegate to the Treasury a money market function. If
you still feel that this objection is not important, however, I can see
no technical reason to abandon the idea.