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820 F E D E R A L RESERVE BOARD WASHINGTON X-3077 March 2 2 , 1921. SUBJECT: Unauthorized S t a t e m e n t s as t o Rate Changes and F u t u r e p o l i c i e s . Dear S i r : The Board d e s i r e s t o c a l l t h e a t t e n t i o n of t h e o f f i c e r s and d i r e c t o r s of t h e F e d e r a l Reserve Banks t o the importance of t h e i r r e f r a i n i n g f r o m e x p r e s s i n g any opinion as t o t h e l i k e l i h o o d of changes i n d i s c o u n t r a t e s . Anything i n the n a t u r e of a f o r e c a s t of the r a t e p o l i c y of a F e d e r a l Reserve Bank or a f o r e c a s t by r e s p o n s i b l e o f f i c i a l s of t h e F e d e r a l Reserve Banks as to r a t e p o l i c i e s g e n e r a l l y i s f r a u g h t w i t h grave p o s s i b i l i t i e s of harm. A s t a t e m e n t which may be taken as p r e d i c t i n g a change i n p o l i c y o r a c o n t i n u a n c e of p r e s e n t p o l i c i e s might w e l l teake t h o s e charged w i t h t h e a d m i n i s t r a t i o n of the F e d e r a l Reserve System and t h e shaping of i t s p o l i c i e s open t c the c h a r g e of d e c e i v i n g t h e p u b l i c i n c a s e c o n t r a r y a c t i o n should be t a k e n . P a r a g r a p h (d) of S e c t i o n 14 of the F e d e r a l Reserve Act a u t h o r i z e s .the d i r e c t o r s of each F e d e r a l Reserve Bank " t o e s t a b l i s h from time t o time, s u b j e c t t o review and d e t e r m i n a t i o n of t h e F e d e r a l Reserve Board, r a t e s of d i s c o u n t t o b e charged by t h e F e d e r a l Reserve Bank f o r each c l a s s of p a p e r . " The Board r e s e r v e s t h e r i g h t , under i t s power of review, t o modify e x i s t i n g r a t e s a t any time b u t i t has always b e e n t h e p r a c t i c e t o p e r m i t the F e d e r a l Reserve Banks t o e x e r c i s e the i n i t i a t i v e . I t should be borne i n mind, however, t h a t any a c t i o n t a k e n by t h e d i r e c t o r s of the F e d e r a l Reserve Banks w i t h r e s p e c t t o d i s c o u n t r a t e s i s n e t f i n a l , b u t i s s u b j e c t t o review and d e t e r m i n a t i o n of t h e F e d e r a l Reserve Board. With the p o s s i b i l i t y t h a t t h e r e w i l l be c o n s t a n t l y i n c r e a s i n g p r e s s u r e f o r r a t e changes, the o f f i c e r s and d i r e c t o r s of the F e d e r a l Reserve Banks cannot be too c a r e f u l t o avoid making any s t a t e m e n t s which may be regarded as a f o r e c a s t . When the d i r e c t o r s of a F e d e r a l Reserve Bank v o t e t o make a change, no p u b l i c i t y whatever should be g i v e n t o such a c t i o n u n t i l t h e changes proposed have been approved by t h e F e d e r a l Reserve Board. Then i t should b e announced p u b l i c l y a t the c l o s e of b u s i n e s s on t h e day t h a t f i n a l a c t i o n i s t ak en b y the Board. In t h i s way no advantage w i l l be o b t a i n e d b y any one p e r s o n o r c l a s s of p e o p l e . The f o l l o w i n g r e s o l u t i o n which h a s b e e n adopted b y t h e d i r e c t o r s of one of t h e F e d e r a l Reserve Banks i s commended by the Board f o r f a v o r a b l e c o n s i d e r a t i o n b y a l l F e d e r a l Reserve Banks: X-3077 " I n view of t h e u l t r a - c o n f i d e n t i a l c h a r a c t e r of t h e work of t h e p e r s o n n e l of the F e d e r a l Reserve Bank, and i n view of t h e sometimes e x a g g e r a t e d imp o r t a n c e a t t a c h e d even t o i n f o r m a l o r p e r s o n a l comments or s t a t e m e n t s made by F e d e r a l R e s e r v e Bank employes c o n c e r n i n g g e n e r a l "banking m a t t e r s , no emp l o y e of t h e F e d e r a l Reserve Bank s h a l l i n any way d i s c l o s e t o anyone, o t h e r t h a n an employe o r o f f i c e r of t h e h a n k e n t i t l e d t h e r e t o , any i n f o r m a t i o n o b t a i n e d i n t h e c o u r s e of h i s or h e r work, o r d i s c u s s any "banking m a t t e r s t h a t may i n any way c o n c e r n o r r e l a t e t o t h e F e d e r a l Reserve Board, t h e F e d e r a l R e s e r v e Banks, o r any member h a n k , w i t h anyone n o t c o n n e c t e d w i t h t h e F e d e r a l Reserve Bank, 6nd i n no e v e n t o u t s i d e of t h e o f f i c e of t h e F e d e r a l Reserve Bank. Anyone g u i l t y of a b r e a c h of t h i s r u l e w i l l b e s u b j e c t t o immediate d i s m i s s a l . " You a r e r e q u e s t e d t o t a k e t h e f i r s t o p p o r t u n i t y of b r i n g i n g t h i s l e t t e r t o t h e a t t e n t i o n of your E x e c u t i v e Committee and of your Board of D i r e c t o r s . Very t r u l y y o u r s , G o v e r n o r . CW.fiIRMFN AND GOVERNORS OF ALT, FEDERAL RESERVE BANKS.
@FedFRASER