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May 26,
Chairman Eccles

In looking bacjc through the records one is impressed by the
fact that a large part of the present war financing program was initiated by the Federal Reserve System. Equally impressive is the record of hesitation and delay, many times extending over a period of
months, in the Secretary's acceptance of Federal Reserve proposals.
The record shows patient cooperation by the Federal Reserve with the
Treasury. The following is not a complete list, but I thought it might
be pertinent to current discussions.

!• The System has assured and reassured the
Treasury that it will provide banks -with sufficient
reserves to take care of bank purchases of Government
securities. Experience has proved the wisdom of the
Federal Reserve position that large amounts of excess
reserves are not only unnecessary but are detrimental
to the program.
2* Series C tax savings notes are the result of
Federal Reserve initiation and patient negotiation.
3* The restricted 2 l/2 per cent bonds were proposed by the Federal Reserve as a compromise on a System
proposal for a long nonnegotiable security.
U* The bill and certificate programs are largely
the result of Federal Reserve efforts.
5« Full allotments on subscriptions of Treasury
bills up to #100,000 at a fixed price of 99*905 was a
recommendation of the Federal Reserve. The Treasury
for some time contended that they had no legal authority
to issue Treasury bills at a fixed price although the
Board's lawyers took a different position.
6. The System established the buying rate on
Treasury bills with repurchase option in support of the
financing program.
7» The System recommended various open-market
issues at financing operations, which were justified by
results, and gave the Treasury assurances that the System
would underwrite the success of the issues.
8. The System offered its services to the Treasury
to assist in selling securities and have long advocated
a single sales organization to handle sales of all Government securities. Combination of the Victory Fund Committees and of the War Savings Staff under the Presidents
of the Federal Reserve Banks in the April drive came about
as a result of Federal Reserve leadership in this matter.