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Open market operations are placed in control of a committee of twelve
consisting of seven members of the Board, five representatives of the
banks elected by them. Apart from the unwieldy size of this connnittee,
a shift of one Board Member vote could result in a tie vote, preventing
action in an emergency.

Stated otherwise, unless the Board were unan-

imous it could not out-vote the representatives of the banks*

Government bonds can be sold by the "Banks only in the open market and
cannot be bought from the Treasury, a serious limitation on luick,
effective action to prevent runaway inflation or deflation.


The Board can change reserve ratios, but only on an affirmative vote
of five. Nothing could be done if only four were present; with five
presentjOne could block action and at any time three could block action.
Reserve ratios cannot be less than they are now, nor more than
twice what they are now. Either limitation might put a serious curb
on effective action at the extreme up-swings and do?m-swings of credit


The boards of Federal Reserve Banks elect their presidents subject to
veto by the Federal Reserve Board.

The term of office of the presidents

has been changed from one year to five years, thus reducing centralized

The objective of the Federal Reserve Board was stated in the House Bill
to be the elimination of unhealthy fluctuations in business activity,
prices and employment. This objective has been changed to that, primarily > of operating for the accommodation of commerce and business.

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The Sub-Committeefs draft requires keeping full record, with
annual reports to Congress, of all open market operations, the
votes thereon and the reasons therefor.


On underwriting by banks, the Sub-Committeefs draft is reported
to authorize such underwriting, but without relieving the banks
of their liability under sections 11 and 12 of the Securities
If banks are to be permitted to underwrite, and if it is
objected that the Comptroller of the Currency could not certify
the solvency of banks subject to the contingent liabilities
implicit in sections 11 end 12 of the Securities Act, it could
be provided that banks whose deposits are not insured in F.D.I*C
could underwrite only with fill liability under sections 11 and
12 of the Securities Act and that banks whose deposits are so
insured should not be liable under these sections but their
officers and directors should be personally liable.