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10# 1949 Chairman Ifr. Tfcer« Is attached « ajeaomndua ccnUiaing *y rmmrkn end n connection vlth /->ur proposed »t«t«acBt to b« aidt b«for« th« Joint Com<toc on th« Keoooatlo B#portf vfcieh mne sent to us br Mr. thosms under d«t« of February 9* In viev of your *b#esc«, I »a ps^tng th^t eopies of this b« sttppll»d to «&cb 3o»r4 M«sb«r nnd to Mr, Horrlll, Mr* , Mr* Thuret^n &a& Hr. Elefl«r« February 10, 1949. Pays I think the term •ceatr*! banker* should be el lain*tad end thing Xlic# "supervisory authority* be substituted. This tera "c#ntnl banker*, I find, irritate* a lot of people &laost as snieh as It does Me. X dan*t think it bus »ny pl*ce in our federal Ke&erve Syetem as presently constituted, 6* Paraeranali ^ there Is no seat Ion at this point in the st&teaeat, or any other oint that 1 can see, of the Federal Advisory Council. I voiild think that they should be brought into it, especially since they are & statutory body created for the specific purpose of ^drifting the Board and a creature of the Congress la soa* respects the swas eg the Board* Page 7. The third senteace i« not clear. If the vord "either* should be •other*, I think it votdd be better to give the traaber of branches visited provided eueh nnaber Is aa appreciable pereeatage of the total* Page 7. Ps-raaraah L Hie third seateaoe refers to Federal Reserve purchase of »ecurities, a>ould urn not emphasis* here the Federal Open Market Cowaittee1* op«ratloati so as to again bring before the Congress the entire vast picture of the Federal Ess«rv« framework, vhich is the Boards the banks, the Federsl Open Market Coeu*ittee, the Federal Advisory Council, and the aeaber banks. 8. the last sentence of this paragraph is not as eaphatle or as I think it efeosld be, and a hasty reading aight leave vith the reader the Impression that the Frealdtat had reeoaaeaded aeasuras which would perait as to ab»ndon the support and also to throv aside mar responsibility for malatalning sound credit, k aore positive wording of this sentence would add strength In ay opinion. Beginning vith line 3 the steteaeat touches on th* ticklish question of capital acoouats aad sight veil be interpreted to aean th*t ve as a Board feel tact the present capital account is satisfactory, vben, as a setter of fact, aoae of as feel coafortable about the present situation. X think ire should either eoaa out vith the bold statement ttiat capital aceoaats should be increased #v#n vith the present volua« of deposits aad - 2 - , and a^at certainly be increased i f there i s & further «yp&asion in the voluae of bank loans end deposits. If we are not willing to «£.ke the F.t«t«swmt Lais strong, then 1 euggert th*.t reference to capital accounts be X«ft out. (I think also that in fairness to th# mmwfo&r bf?.nks wo should, at l e e s t sontetiE&e, compare their net profits pereent&g»-*itie» to the gross of business done auring this ^ost-war period urn tfce groet. assoimt of done in the .pre-war period. In other wor4s, i t t&feeti cult© « f<nv dollars raore of bu«in«ss today to produce th* S^SMI n«t profit that vae pro<iuc»d by » such lesser t&aount of business in th« pr*-v»r ^ r i o d . Of oowrs-©, I «n aot »«g^»«ting thftt ftiqrtfoiiig like this go into th« Ch&ira&al& i-Utwaent to th« Con^reea.) 10> Paragraph 3 Do you not think tb#t »# ^iould r*f«-r to tb« this peiragrepb &e being probr.bXy the l«rg«»t f i l l e r s of GoT«rnn«iit bonds? in this psr&gr&ph v« ref^r to the Federal h»&9Twm mmkln^ th# :mrchft,a«s and task* ao rafereaoe to t^i<» f«d«r&l Open Market 11« In line 2 we use the phrese *Ve do knov th»t ve arm nov f«r aore poorly equipped, ••••"• I t occurs to «e that the vord •¥•• does not sufficiently e»ph«$is« th»t th« Cheira»n ie talking about the Federsl Keserre Board, since *ve* in other parts of the statement refers to the eeonosgr <n the Gorernaesit *s * whole. I would think fcb«t a positive stateatent to the effeet that the Federal Beaerre Board ie definitely not properly ecmipped, etc, vould lend strength to the statement. Tbm lust st*teaMnt 1B, to ay aind, entirely too ve*»it in view of the importance of the question ooTered by it* I t occurs to me tii«t the Chairwn should ettphesixe that i f the present »u^plaaentnl authority i s ftlLfrved to expire on June 30 tbet 'X11 dolltirs of reserves will be automati cally reletped, thrreby having an iaftediats end inflntionery inpe-et on tiw Fane 13* Peragrr c^i 3 In the 4th sentence the Chairann uses the phrase p since I have been associated vith the Federel Beserve Sy«tes«. •. •". This i s * aiaor poiat f but I think the Chairman'* at*tenant vouid be greatly strengthened if he stated here aoswthing to the effect • ! have been asr-oelated with the Federal Beserve System for 1^ years as a K&aber of the Bo*rd ftnd Chaixwan of the Federal Reserve Bank of Philadelphia and later ae Ghalraan of the Federal feserve Board here, &nd for the f i r s t t i s » in a l l of thea* ye*r» I h»v» found suwber banks becoming restive, ete**» 15- Beginning with the 5th ©entence, •¥• sake a reel contribution •, personally I would like to see this passage ell&inated. I do not think I t adds strength to the st&teaeat, bat I t does raise the qy^etion in the salads of some of us ** to th* viBdOA of p$t«n3ftliatic legislation rod regulation* Ih« Chairman wzy r*c»ll th»t on* of th« »er«re»t &tt»cka wid« oa Kegulati<m V h«e b«an oa the b«»ie of poter&ali»i» tad w& «ffort oa th« pert of th« X«v 0««1 to "wet nurse" and direct the thinking #od a e t i r i t i e s of our citlzeoft. e 1S« Pftrc^rg; jb 2 X don't think this sentence 1* positive enough. The phrase "The frequent doubts I heard on agr latest t r i p . . . . . " does not «mp*j«tsize vith sufficient positivenesa &a to juet vibat these doubts are about. In the l a s t i i a e of thin mum pferagr^pfe I think enother op^rttroit? ie lost to eaphnsiaee that the Federal R«*erre Board does sot hare sufficient outbority, rather than the weaker chr«i» *ve are at present i l l
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