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1220 CLASS OF SERVICE SYMBOLS DL=D»yLetter Th« is a full-fate Telegram or Cablegram unless its deferred character is inicated by a suitable .ymbol above or preceding the address. A. N. WILLIAMS PRESIDENT UNION NEWCOMB CARLTON LC -Deferred Cable NLT=Cable Night Letter J . C. WILL-EVER CHAIRMAN OF THE BOARD NT = Overnight Telegram Ship Radiogram FIRST VICE-PRESIDENT Thefilingtime shown in the date line on telegrams and day letters is STANDARD TIME at point of origin. Time of receipt is STANDARD TIME at point of destination 1W SHELT 2 IMS JUL 28 A I I 2 6 M THE SECRETARY OF THE TREASURY WASHINGTON JULY 27,1945. DEAR MR RANSOM; SINCE TALKING TO YOU OVER THE TELEPHONE ON MONDAY, * HAVE GIVEN CAREFUL CONSIDERATION TO THE TWO LETTERS WHICH CHAIRMAN ECCLES SENT TO SECRETARY MORGENTHAU ON JULY 9, 194$, AND TO THE MEMORANDUM PREPARED BY THE EXECUTIVE COMMITTEE OF THE FEDERAL . OPEN MARKET COMMITTEE, WHICH WAS ATTACHED TO THE LETTER WHICH MR, ECCLES SIGNED IN HIS CAPACITY AS CHAIRMAN OF THAT COMMITTEE. THE LETTERS AND THE MEMORANDUM CONTAIN A NUMBER OF RECOMMENDATIONS WITH RESPECT TO THE FUTURE CONDUCT OF TREASURY BORROWING OPERATIONS, PARTICULARLY THE EIGHTH WAR LOAN, THEY ALSO STATE THAT THE BOARD OF GOVERNORS AND THE FEDERAL RESERVE BANKS ARE CONSIDERING THE DISCONTINUANCE, AT AN EARLY DATE, OF THE PREFERENTIAL DISCOUNT RATE OF 1/2 OF ONE PERCENT ON GOVERNMENT SECURITIES MATURING OR CALLABLE IN ONE YEAR OR LESS. THE MEMORANDUM STATES THAT "A NECESSARY COROLLARY" OF THIS. ACTION WOULD BE ".•. THE DlSONTI.NUANCE OF ATTEMPTS TO MAINTAIN A PATTERN OF RATES EETWEEN THE }/8 OF ONE PERCENT BILL RATE AND THE 7/8 OF ONE PERCENT CERTIFICATE RATE", SUBSTITUTING INSTEAD A UNIFORM SUPPORT* PR ICE FOR ALL CERTIFICATES — IRRESPECTIVE OF MATURITY— AT A 7/8 OF ONE PERCENT RATE. http://fraser.stlouisfed.org/ THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS' PATRONS CONCERNING ITS SERVICE Federal Reserve Bank of St. Louis V, J C L A S S OF SERVICE T n p is a full-fate Telegram or Cablegram unless its deferred character is inicated by a suitable ,ymbol above or pre* ceding the address. _/" TE UNION NEWCOMB CARLTON CHAIRMAN OF THE BOARD 1220 SYMBOLS DL» Day Letter NT •» Overnight Telegram LC -Deferred Cable NLT=Cable Night Letter 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 TIME at point of destination JUL 28 AM 11 2 6 I EXPECT TO REVIEW THOROUGHLY THE WHOLE PICTURE OF GOVERNMENT BORROWING OPERATIONS BEFORE MAKING MY DECISIONS WITH RESPECT TO FUTURE WAR LOANS. IN THE COURSE OF THIS REVIEW, I SHALL GIVE CAREFUL CONSIDERATION TO THE CHANGES IN BORROWING TECHNIQUE SUGGESTED IN THE EXECUTIVE COMMITTEE'S MEMORANDA WHICH ARE AND LOOK FORWORD TO DISCUSSING THESE, PROPOSALS FURTHER WITH YOU AND THE COMMITTEE. IN THE MEANTIME, HOWEVER, I DO NOT BELIEVE THAT IT WOULD BE WISE. TO INITIATE AN INCREASE IN SHORT-r-TERM INTEREST RATES. THE PREFERENTIAL DISOUNT RATE OF 1/2 OF ONE PERCENT ON MEMBER BANK BORROWING, SECURED BY GOVERNMENT OBLIGATIONS MATURING OR CALLABLE IN ONE YEAR OR LESS, WAS INITIATED IN ORDER TO ENCOURAGE BANKS TO HOLD SHORT—RATHER THAN LONG-TERM OBLIGATIONS. ITS ELIMINATION WOULD INCREASE THE RATE OF INTEREST ON MEMBER BANK BORROWINGS SECURED BY SUCH OBLIGATIONS FROM 1/2 OF ONE PERCENT TO ONE PERCENT; AND, CONSEQUENTLY, IT WOUfcD GREATLY WEAKEN THE INCENTIVE OF BANKS TO HOLD SHORT-TERM GOVERNMENT OBLIGATIONS AT A TIME WHEN WE ARE BOTH AGREED THAT SUCH INCENTIVE IS PARTICULARLY NECESSARY. PRACTICALLY ALL MEMBER BANK BORROWING NOW SECURES THE BE^EFIT OF THE PREFERENTIAL RATE, AND THIS FACT IS GENERALLY KNOWN. THE ELIMINATION OF THE PREFERENTIAL RATE, THEREFORE, WOULD HAVE THE EFFECT, BOTH ACTUALLY AND PSYCHOLOGICALLY, OF DOUBLING THE EFFECTIVE DISCOUNT .RATE OF THE FEDERAL RESERVE BANKS. I AM CONCERNED THAT SUCH ACTION, PARTICULARLY IF IT OCCURRED AT THIS JUNCTURE, http://fraser.stlouisfed.org/ THE COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE Federal Reserve Bank of St. Louis * CLASS OF SERVICE "ftrfTiis a futl-fate Telegram or Cable' gram unless its de/• 'erred character is inI cated by a suitable /mbol above or pres i ceding the address. "\ A. N. WILLIAMS PRESIDENT TERN UNION NEWCOMB CARLTON CHAIRMAN OF THE BOARD SYMBOLS D L = D » T Letter NT ™ Overnight Telegram LC -Deferred Cable NLT=Cable Night Letter Ship Radiogram J . C. WILLEVER FIRST VICE-PRESIDENT in^he date line on telegrams and day letters is STANDARD TIME at point of origin. Time of receipt is STANDARD TIME at point of destination W5 JUt 28 A I I 26 M MIGHT BE INTREPRETED BY THE MARKET AS AN INDICATION THAT THE GOVERNMENT HAH ABANDONED ITS LOW-1NTE REST-RATE POLICY AND WAS NOW VEERING IN THE DIRECTION OF HIGHER RATES, I RECOGNIZE, OF COURSE, THAT THE F I X I N G OF DISCOUNT RATES IS A STATUTORY PREROGATIVE OF THE BOARD OF GOVERNORS AND OF THE FEDERAL RESERVE BANKS. WE HAVE BOTH ALWAYS RECOGNIZED, HOWEVER, THAT IT IS NECESSARY, FOR THE DURATION, TO WORK AS A SINGLE TEAM IN FINANCING THE WAR IN THE BEST POSSIBLE MANNER. I AM SURE, THEREFORE, THAT YOU WILL BE WILLING TO CONTINUE THE PRESENT PREFERENTIAL DISCOUNT RATE AND THE PRESENT POLICY WITH RESPECT TO SHORT-TERM RATES AS LONG AS I T IS REQUIRED IN THE INTEREST OF -SOUND WAR FJNANCE. SINCER&Y YOURS (SGD) FRED-M VINSON, HONORABLE RONALD RANSOM ACTING CHAIRMAN. BOARD OF GOVERNORS. OF THE FEDERAL' RESERVE SYSTEM WASHINGTON 2 5 DC. http://fraser.stlouisfed.org/ THE Federal Reserve Bank of St. Louis RONALD RANSOM. 1102A COMPANY WILL APPRECIATE SUGGESTIONS FROM ITS PATRONS CONCERNING ITS SERVICE
