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F.
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TROM
REMARKS:
Memos used a t Open Liarrcet Comiriittee ( f u l l )
on June 26, 1943.
CHAIRMAN'S OFFICE
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CLA^S OF SERVICE D SIRED V
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ACCOUNTING INFORMATION
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LETTER
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RADIOGRAM
SERVICE
| Patrons should check class of service
desired; otherwise the message will be
L
transmitted as a telegram or
^^
/ ordinary cablegram.
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A. N . W I L L I A M S
PRESIDENT
ION
NEWCOMB CARLTON
CHAIRMAN OF THE BOARD
m
TIME FILED
m
J. C. WILLEVER
FIRST VICE-PRESIDENT
NT
Send the following telegram, subject to the terms on back hereof, which are hereby agreed to
Pullman employes are required to furnish receipt for all paid telegrams
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~>ANT A REPLY?
by WESTERN UNION"
or similar phrases may be
Included without charge.
SENDER'S PERMANENT ADDRESS:
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for Western Union Telegram
for Western U n i o n Telegram
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Flledat
Filed at
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AGENT OR OPERATOR
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Data
PULLMAN CONDUCTOR OR PORTER
LINE NO.
Pullman employe acts only as agent of sen'der. No responsibility is assumed by the
Pullman Company. This coayen to be given to the passenger
J. '. CLA£S
CLASS 0
OF SERVICE DESIRED
CABLE
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transmitted as a telegram or
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ordinary cablegram.
[
A. N. WILLIAMS
UNION
NEWCOMB CARLTON
PRESIDENT
en
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m
TIME FILED
70
J . C. WILLEVER
FIRST VICE-PRESIDENT
NT
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Send the following telegram, subject to the terms on back hereof, which are hereby agreed to
Pullman employes are required to furnish receipt for all paid telegrams
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To.
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Place
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p-^«
ANT A REPLY?
^er by WESTERN UNION"
ur similar phrases may be
Included without charge.
SENDER'S PERMANENT ADDRESS:
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for Western Union Telegram
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Pullman Company. This coupon to be given to the passenger
J
CLASS OF SERVICE DESIRED
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SERVICE
1 Patrons sheuld check class of service
I desired; otherwise the message will be
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transmitted as a telegram or
^^
ordinary cablegram.
f
A. N. WILLIAMS
PRESIDENT
UNION
'
NEWCOMB CARLTON
CHAIRMAN OF THE BOARD
TIME FILED
70
J. C. WILLEVER
FIRST VICE-PRESIDENT
NT
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Send the following telegram, subject to the terms on back hereof, which are hereby agreed to
Pullman employes are required to furnish receipt for all paid telegrams
19.
To.
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Place
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SENDER'S PERMANENT ADDRESS:
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PASSENGER'S RECEIPT
for Western Union Telegram
PULLMAN EMPLOYE'S FECEIPT
for Western Union Telegram
Amount received $
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_to pay for
_to pay for
19.
.19.
Telegram destined.
Filed at
D-s
Pullman employe will attach
A6ENT OR OPERATOR
this coupon to trip report
PULLMAN CONDUCTOR OR PORTER
Pullman employe acts only as agent of sender. No responsibility is assumed by the
Pullman Company. This coupon to be given to the passenger
TJ
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CLASS OF SERVICE DESIRED
CABLE
DOMiSTtC
T£LEGRAM
ORDINARY
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Patrons should check class of service
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>»-SNlGHT
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^SRAM
A. N. WILLIAMS
PRESIDENT
UNION
NEWCOMB CARLTON
CHAIRMAN OF THE BOARD
m
3D
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>
DC
J . C. WILLEVER
FIRST VICE-PRESIDENT
Send the following telegram, subject to the terms on back hereof, which are hereby agreed to
Pullman employes are required to furnish receipt for all paid telegrams
.19.
To,
m
3
70
I
Street and No.
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m
Place
A REPLY?
r by WESTERN UNION"
v. similar phrases may be
included without charge.
SENDER'S PERMANENT ADDRESS:
PULLMAN EMPLOYE'S RECEIPT
for Western Union Telegram
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for Western Union Telegram
JAo pay fof
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Filed at
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Dzte
Pullman employe will attach
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this coupon to trip report
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Date-
PULLMAN CONDUCTOR OR PORTER
LINE NO.
Pullman employe acts only as agent of sender. No responsibility is assumed by th«
Pullman Company. This coupon to be given to the passenger
0
p
Y
WESTERN UNION TELEGRAM
June k,
Daniel W. Bell
Under Secretary Treasury
Washington, D. C.
Relative proposed treasury financing have following comments
to make: Approve time proposed for third war loan drive.
advise against reopening 2-1/2 percent bonds.
Strongly
If bank and nonbank
financing are to be separated, then market offerings should not be
made to public between drives, Yfould greatly reduce amount securities
sold during drives.
Insurance companies and other large nonbank
investors should accumulate funds for next drive.
Requirements of
insurance companies and others desiring invest in anticipation income
can be met next drive by making 2-l/2 percent bonds available on four or
five-month installment basis.
during drive.
This would also increase funds raised
Banks should supply funds when needed in addition to
those secured during drives and on tap issues between drives.
I very
much favor limiting amount of commercial bank subscriptions on basis
capital and surplus on basis time as well as denand deposits.
It would
be unfair to exclude time deposits unless they are permitted to be
invested in 2-1/2 percent bonds.
I favor offering to commercial banks
and dealers only note or 2 percent bond when treasury needs money.
July
nineteen when certificate is proposed may be good time for bank offering,
or it could be delayed until August depending on new funds raised on
certificate.
At present would favor 2 percent bond for banks as this
security in greatest demand.
A small premium on bond offered at par
would assure all banks taking their full quota.
Plan to refund 3~
percent bond in August seems advisable.
Eccles
IS a full-fate
Telegram or Cablegram-unless its dexred character is inicated by a suitable
j symbol above or preI ceding the address.
A. INI'. W I L L I A M S
PRESIDENT
TE
UNION
NEWCOMB CARLTON
1220
SYMBOLS
DL-Day Letter
NT -Overnight Telegr»n
LC-Deferred Cable
J. C. WILLEVER
FIRST VICE-PRESIDENT
Ship Radiogram
The filing time shown in the date line on telegrams and day letters is STANDARD TIME at point of origin. Time of receipt is STANDARD/tlME at point of destination
MA347
2 7 1 / 2 7 0 GOVT=BD WASHINGTON DC 3
iviARRIMER S ECCLES=
;E CONDUCTOR CITY OF
LEAVING CHGO AT 6PM ARRIVING OMAHA 2AM OMAHA
BELL SENDING FOLLOWING WIRE THIS AFTERNOON TO PRESIDENTS OF
FEDERAL RESERVE BANKS AND ASKS FOR VIEWS OF MEMBERS OF
BOARD BY 4 PM.. TOMORROW FRIDAY AFTERNOON. THIS WIRE FOLLOWS
INFORMAL DISCUSSION AT TREASURY TODAY. IF YOU HAVE ANY VIEWS
TO EXPRESS SUGGEST YOU WIRE BELL DIRECT IN THE INTEREST OF
TIME OR WIRE US AND WE WILL FORWARD IT TO BELL; QUOTE
jr
V
WOULD LIKE TO HAVE D Y FOUR PM WASHINGTON TIME
*__NTS ON THE FOLLOWING;
THIRD WAR LOAN DRIVE TO B'EGlN MONDAY SEPTEMBER TWENTY
ENDING SATURDAY OCTOBER NINE. REOPEN ON JUNE TWENTY EIGHT
LAST 2 1/2 PERCENT BOND- PRIMARILY FOR INSURANCE COMPANY
\
-
•
FUNDS BUT ALLOW ANYONE TO COiviE EXCEPT COMMERCIAL BANKS AT
SAME T I M E OFFER PRIMARILY
FOR THE BANKS,
B I L L I O N DOLLAR FOUR TO F f v E
A TWO AND ONE HALF
YEAR TlOTE OR S I X TO f i l l YEAR I
BOND ENDaT
END1.
http://fraser.stlouisfed.org/ THE COMPANT
Federal Reserve Bank of St. Louis
WILL APPKBCIATB SUGGESTIONS FBOM ITS PATRONS CONCERNING ITS SERVICE
Cabledearacter is inircated by a suitable
symbol above or preceding the address.
WESTERN
UNION
A. N. WILLIAMS
PRESIDENT
NEWCOMB CARL.TON
SYMBOLS
DL-DayLette
NT -Overnight Telegram
LC-Deferred Cable
NLT -Cable Night Letter
J. C. WILLEVER
FIRST VICE-PRESIDENT
The filing time shown in the date line on telegrams and day letters is STANDARD TIME at point of origin. Time of
Ship Radiogram
STMJtt>Ait>
MA547/2 3
THIS WILL BE A PUBLIC OFFERING AMD OPEN TO ANYONE WHO CARES
TO SUBSCRIBE WE ARE NOW CONSIDERING PLACING-A LIMITATION
-AMOUNT THAT A BANK CAN SUBSCRIBE SUCH AS A CERTAIN
PERCENTAGE OF DEMAND DEPOSITS ON JULY NINETEEN OFFER^A NEW j
CERTIFICATE TO RAISE FUNDS TO MEET THE AUGUST_ONE MATURITY
THIS CERTIFICATE ¥ T G H T POSSIBLY BE INCREASED BY FIVE* HUNDRED
MILLION DOLLARS IF ADDITIONAL FUNDS ARE NECESSARY AT THAT:
TIME; SOME TIME IN AUGUST PREFERABLY BEFORE THE FIFTEENTH
OFFER A NEW SECURITY IN EXCHANGE FOR THE ONE BILLION FOUR
iHUNDRED MILLION DOLLARS OF 3 1/4 PERCENT 1943-45 BONDS
WHICH WILL BE CALLE? FOR PAYMENT ON OCTOBER JWfTlE?TTlTI5'*
REFUNDING IS SUGGESTED FOR TH IS T IME~ I N" ORDERT TO GET 1T OU
OF THE WAY BEFORE THE DRIVE BELL UNQUOTE=
RANSON.
3 1/4 1943-45. (
THE COMPANT
WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE
STRICTLY CONFIDENTIAL
— 3 —
R&S 100-723
June 2 6 , I9h3
Over the next year, the Systen rill add perhaps 7 billion dollars to
its holdings in order to give to banks the reserves necessary to offset a
loss of 1+ billion dollars in currency and an increase of 3 billion in required
reserves. Probably most of this total vrill be in bills and a large part of
it in the option account. The commissions to dealers on bill purchases could
be eliminated if the System placod a bid with the Treasury for each issue of
bills for not only the amount of each rook's maturity but an additional amount
to provide for an expected increase in the portfolio and purchased oth^r bills
from dealers only at the buying rate* Otherwise, if the System purchases a
billion dollars net of bills from dealers and turns over the.present billion
dollars of holdings under the regular authority four times in the year, total
purchases of 5 billion dollars would net the doalers nearly .$200,000 of gross
profits. In addition, the System must replace maturities of a billion dollars
of certificates, v;hich might not the dealers ^100,000, and of 600 million
dollars of notes and bonds, which might net them another $100,000. The
System1 s purchases and sales to maintain the pattern of rates may aggregate
2 or 3 billion dollars, which nay bring the dealers $300,000 in profits*
The wide fluctuations in required reserves and in excess reserves
brought about by the elimination of reserve requirements on war loan deposits
nay result in increased trading and consequently in increased profits to
dealers. Other buying and selling will be largo and will increase. Finally,
the dealers will continue to make largo profits on subscriptions for rev/
Treasury offerings.
While all of this may seem to bo of small importance, the System is
in the position of adding between $500*000 cuid a million dollars a year to the
profits of a group of dealers nho perforn a useful function but about whoso
activities the System has relatively little knowledge and over whom the
System has relatively little control. It nay well be that the net profits
of dealers aro excessive or they may be only sufficient for the maintenance
of a necessary function. The undesirable activitGS of dealers and of other
groups in the market may bo of groat or of little importance. At any event,
it would seem that the Systcn should have knowledge of and control over the
activities of the dealers and of other clononts in the Government securities
market.
There follows a list of scne regulations that might be made applicable to all dealers and brokers in Government securities:
1. The submission of regular reports of trading, balance sheets,
and profit and loss statements,
2.
Regular oxanination of the books,
3. Prohibition of (a) the dissemination of information, whether true
or false, to the offect that prices are likely to rise or fall because- of the
operations of some person, such as the Federal Open I4arket Committee, (b) the
making of false or misleading statements as to any material fact, and (c) the
effecting of transactions in series for the immediate purpose of causing the
market to be active or causing quotations to move with the ultimate purpose
of thus inducing other porsons to buy or sell*
1;.
The establishment of a codG of uniform and fair trading practices,
STRICTLY CONFIDENTIAL
BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
R&S 100-718
June 19, 19U3
Board of Governors
Federal Open Harket Committee meeting
L. K. Piser and David M. Kennedy
The exemption of ;:ar loan deposits from reserve requirements has
completely reversed the timing of changes in required reserves of member
banks. Instead of increasing sharply during the drives required reserves
now doiine sharply at such times and increase substantially between drives.
In the December drive, required reserves increased by about 800 million
dollars; in the April drive, required reserves declined by l,[j. billion
dollars. Between the first and the second drive, required reserves showed
little change; after the April drive, however, they increased by a billion
dollars. It is expected that between now and the end of August, required
reserves will increase by an additional 1.3 billion dollars, while during
the September drive they will decline by 1,5 to 2.0 billion dollars.
This reversal in the movement of required reserves, and consequently
of excess reserves, has considerably altered the timing of Federal Reserve
security transactions. It is necessary for the System now to make large
purchases between the drives and large sales during the drives. If excess
reserves are maintained at about 1.5 billion dollars, between now and the
end of August the System will have to increase- its holdings of Government
securities by about 2,2 billion dollars in order to offset the increase of
1,3 billion in required reserves and an increase of 9^0 million dollars in
money in circulation. During the September drive, the System will be able
to reduce its holdings.
The situation is complicated by the present necessity of maintaining a pattern of rates that was established when excess reserves were higher
and the outstanding amount of short-term securities was small. Under the
present pattern, there is a substantial demand for intermediate and longterm securities end a substantial supply of short-torn issues. In maintaining the pattern, the System has sold the former securities and bought
the latter. Since the beginning of the year, the System's holdings of
Treasury bonds h&ve declined by 1,2 billion dollars and of Treasury notes
by 500 million dollars, while holdings of bills have increased sharply.
STRICTLY CONFIDENTIAL
~ 2 —
R&S 100-718
The System's holdings of some issues of bonds that arc in substantial demand have boon completely exhausted, and holdings of other issues
arc small. Government agencies have placed some of their holdings at the
disposal of the System in an attempt to maintain the pattern. The Treasury
is offering a new issue on June 28, not because they need tho funds but in
an effort to maintain the pattern. The situation may come to a head during
the September drive, when excess reserves will increase sharply and banks
will bo anxious to add to their holdings. If banks in September will repurchase bills instead of bidding for longer issues, it may bo possible to
maintain the pattern, but at some time in the future the ammunition probably
will be exhausted.
One possible solution would be to bring tho market into balance
again by increasing the bill rate and decreasing the intermediate and longterm rato by extending tho maturity on new issues. Both the Treasury and
the System, however, are committed to maintaining the present pattern of
rates. Another possible solution would be to discontinue the issuance of
3-month bills and 1-year certificates and to substitute 6-month or 9-month
certificates. This proceduro would have little or no influence on the demand
for intermediate and long-term bonds unless at tho same time tho short-term
rate wore increased. It might be possible, however, to make some revision
in the rate at tho time of the change.
The best solution would appear to be to make no further increase
in the weekly offering of bills, which is now a billion dollars, and to
confine future increases in the debt to 2 per cent bonds and longer issues.
If this procedure did not correct the situation, the amount of the shortterm debt could bo decreasod, and as a last resort the pattern of rates
might be altered. If the present situation should reverse itself in the
future, the short-term debt could be increased whenever such action might
appear to be dosirable.
Other subjects that might be considered at the meeting are as
follows*
1. The System might seek to arrange with the Treasury for the
direct replacement of maturing bill issues. Between now and the end of
August, the System not only will be replacing on the average 200 million
dollars of maturing bills a week but will be adding on the average 200
million of securities to the portfolio. These additions will probably be
largely in bills. The mechanics of replacing the maturities would be
simplified if replacement were made direct witii tho Treasury rather than
retaining the present intermediate step by which dealers purchase bills
from the Treasury and sell them to the System. Arguments against a change
in the present procedure ere that (1) investors are now given an opportunity
to purchase bills from the dealers1 woekly allotment, and some bills arc
distributed in this manner, and (2) tho public might misunderstand the
action and construe it as adding to inflation.
STRICTLY CONFIDENTIAL
—
3 —
R4S 100-718
Juno 19,
^
2. If oxcoss reserves ai*o kept at a low lovol, the Systen just
prior to oach bank financing might purchu.se a sufficient amount of securities
to enable the banks to purchase the amount of the offering and no more* By
purchasing a part of the weekly bill issue direct from the Treasury, the
System would supply promptly the necessary excess reserves with littlo
disturbance to the market. These direct purchases would bo in addition to
the direct roplacement of maturities. The purpose of this change would be
to limit the increase in bank holdings of Government securities. The change
would not necessarily accomplish this purpose, however, since banks are
always able to sell bills to the Reserve Banks at the buying rate and
with the additional reserves thereby provided to purchase several times
that amount of securities. Banks now hold 7 billion dollars of bills that
could be used for the further expansion of bank credit. The only really
effective limitations on increases in bank holdings in the present situation
are their own policy to limit their holdings, which is not very strong,
and the amounts that thoy are able to purchase in the market or on subscription from the Troasury*
3, Subscriptions for nov; issuos by recognized dealers might be
further limited, or all dealers and brokers might be allotted new issues
on tho same basis as commercial banks. Large amounts of dealer subscriptions
are sold to commercial banks at premiums, and the banks have a justifiable
complaint in this regard. It is estimated that in the April drive the recognized dealers nado a profit of close to a million dollars on thwir subscriptions*
U* Tho supervisory authorities night issue a statement condemning
tho practice of banks in making speculative loans on Government securities.
The amount of speculation incroasod considerably in the April drive. Loans
by weekly reporting member banks to others than brokers and dealers for
purchasing and carrying securities increased by 27I4. million dollars between
April 7 and May 5> compared with an increase of 53 million in the December
drive. Although seme of those leans were made to investors who are repaying
them from current income, substantial loans undoubtedly wore made to speculators who obtained a quick profit out of tho drive,
5« A partial payment plan might be inaugurated in the next drive.
Subscribers would be enabled thereby tc invest not only accumulated funds
but funds that they expect tc receive in tho near future• If as funds
accumulate they are absorbed by repaying loans en securities previously
purchased, there is less chance that thoy will bo used for inflationary
buying. Such a plan would also make it easier to lengthen the period
between the drives to six months. Tho public ever a period of years has
been accustomed to making instalment purchases, and this method of buying
securities night have a popular appeal. If the Treasury is unwilling to
inaugurate a partial payment plan, the 2 l/2 per cent bonds should be
placed perhaps continually on offer in order to provide an outlet for
funds as they accumulate.
o
STRICTLY CONFIDENTIAL
— h —
R&S 100-718
Juno 1 9 , 19U2
6. In raising funds butwoon the drives the Treasury might issue
certificates tliat would mature at the time of the succeeding drive. Investors
could place in the certificates funds that accumulate between the drives
and could use the proceeds from the redemption of the certificates to purchase
now issues in the drives. In addition, to the extent that the Treasury
would sell securities only as funds wore needed and would arrange the
maturities of those issues to coincide with the receipt of funds during the
drives, the Treasury balance would not increase to such a high level as is
the case under the present program, and the amount of interest payments
would bo correspondingly reduced.
7. Since the Treasury first offered bills on a fixed-price basis,
the weekly tenders on this basis have averaged 80 million dollars. If half
of these funds represent tenders that would not havo been placed under the
old method, the change will raise during the 13-v'cek cycle more than 500
million dollars of nev funds. This amount could be increased by a renewed
campaign by the Federal Reserve Banks.
n
8. In the next drive, the lowest denomination of the 2 l/2s should
be reduced from $500 to $XQO« Although most smell investors prefer to purchase savin&s bonds, there are many who for one reason or another profer
marketable issues, Tho change would moot this demand and would probably
increase total sales to nonbanking investors.
9. Tho 025 denomination of Series E savings bonds should be discontinued. The cost of registering, issuing, end redeeming tho large number
of these bonds is substantial. The price of the $50 denomination can bo
accumulated by savings stamps, payroll deduction, or otherwise. This change
probably would result in little or no decline in total sales to nonbanking
investors.
10, The Series F and G savings bonds might be discontinued. They
give an unjustified subsidy to fairly large investors and increase the
already substantial short-term liabilities of the Treasury, On the other
hand, their discontinuuncc would lose BOSKS sales that arc now made to nonbanking investors,
11, The Treasury might sell annuities. A number of investors particularly purchasers of Series E bonds under the payroll deduction plan
might prefer to have their investments in this form rather than in the form
of a large number of individual bends that nature in a fev; years. This
change would probably incroase sales to nonbanking investors.
12, Commercial banks might be permitted to hold new 2 l/2 per cent
bonds in tho amount of $100,000 or their savings deposits, whichever is
smaller, A number of conmorcial banks hold a largG proportion of savings
deposits and are at a disadvantage as coiipurod with mutual savings banks
and other savings institutions. This change would remove some of tho
inequality.
@FedFRASER