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August 23, 1937.



Mr, Taylor



Chairman Eccles

As I will not be here during the final consideration of the September financing, I told the Secretary that before I left, I would leave a meaorandus for
him covering broadly and in a general way ay views of
the situation as they existed at the time I left.
I am, therefore, enclosing such a letter,
which I w i n appreciate your bringing to the attention
of the Secretary at the proper tiae.


August 21, 1937*
iy dear Mr. Secretary:
On the basis of present conditions, it is ay belief that it would
be advisable in the September financing to issue Treasury noted in exchange for the maturing notes and to raise no additional cash.
Froa the present cash position of the Treasury and budgetary prospects it appears that, if no cash is raised in the September financing,
the working balance will decline to a minimus of around #650,000,000 at
the end of October and will amount to about $600,000,000 at the end of
Hovember, This estimate assumes purchases of $403,000,000 of gold between the middle of August and the end of November and the issuance of
a similar amount of Treasury bills to aauire around the March tax date.
Additional cash can be raised at the time of the December financing if
necessary* If purchases of gold exceed the $400,000,000 mentioned above,
the inactive gold account will approach $2,000,000,000* Under these
circumstances, it will likely be not only desirable kit necessary to
find soae other way to deal with the gold iaport problem
In refunding the September notes it does not seea to ae that the
market would be receptive to an issue of bonds. Member banks are still
liquidating Government securities, and it is understood that some of
them are anxious to sell the long bonds in particular on favorable markets, since their holdings are still at a relatively high level.
As to details of the new issues, notes maturing in about five years,
either in June or September, 1942, or an issue maturing in December, 1958,
might be offered in exchange for the maturing notes. Or the holders of
Maturing notes Bight be given the option to exchange for either of these
issues. I do not feel that I can at this time express an opinion as to
which of these alternatives would be most desirable, since that will depend, of course, on market conditions at the time of the announcement.
Sincerely yours,

M. S. Eccles,
Honorable Henry Morgenthau, Jr.,
Secretary of the Treasury,
Washington, D. G.