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X-3525 OPEF MARKET POLICY COLlvIITTEE A n a l y s i s of R e p l i e s of t h e F e d e r a l Reserve Banks to B o a r d ' s L e t t e r d a t e d January 23, 1930. (Fo r e p l i e s r e c e i v e d from t h e Richmond, Kansas City o r D a l l a s B a n k s . ) 1. B o a r d ' s l e t t e r ; - Changes name to Open Market P o l i c y Conference. ITew York p r e f e r s p r e s e n t name. Cleveland o b j e c t s , and p r e f e r s o l d name. Other hanks do n o t mention t h i s . 2. Board recommendation: - Each F e d e r a l r e s e r v e bank to be r e p r e s e n t e d on t h e Open Market P o l i c y Conference. Boston; Suggests r e p r e s e n t a t i o n by t h e Governor, or by an o f f i c e r d e s i g n a t e d by t h e Board of D i r e c t o r s . Hew York; To be composed of r e p r e s e n t a t i v e s of t h e twelve F e d e r a l r e s e r v e banks, p r o v i d e d an e f f e c t i v e o p e r a t i n g committee i s a p p o i n t e d with f u l l a u t h o r i t y to execute approved p l a n s o r policies. Committee should be composed of Governors. We do not o b j e c t i f o t h e r Boards of D i r e c t o r s should appoint other r e p r e s e n t a t i v e s . Philadelphia; Hot m a t e r i a l whether Governor or o t h e r r e p r e s e n t a t i v e be d e s i g n a t e d by D i r e c t o r s . Chicago: Each F e d e r a l r e s e r v e bank should be r e p r e s e n t e d . San F r a n c i s c o ; The Board of D i r e c t o r s h a s d e s i g n a t e d t h e Governor a s i t s representative. 3. Board l e t t e r ; - The Conferences should meet w i t h t h e F e d e r a l Reserve Board a t such t i m e s as may be a r r a n g e d by o r w i t h t h e Board. - 2 - X-5525 ; Boston: Suggests amendment so t h a t Executive Committee can h o l d m e e t i n g s on own i n i t i a t i v e a s well a s on c a l l of Board. Few York; We assume t h a t meetings of t h e Committee, or t h e E x e c u t i v e Committee w i l l be c a l l e d by t h e Chairman of t h e Committee a f t e r c o n s u l t a t i o n w i t h t h e Governor of t h e F e d e r a l Reserve Board, whenever d e s i r e d by t h e Board or by t h e Committee. Philadelphia: A s s e r t s t h e r i g h t of t h e Committee to moot whenever in t h e judgment of t h e Executive Committee a meeting i s a d v i s a b l e . O b j e c t s to t h e p r o v i s i o n of (3) t h a t t h e r e p r e s e n t a t i v e s of t h e banks s h a l l moot w i t h t h e Board. This f a i l s to observe t h e d i s t i n c t i o n r u n n i n g through t h e Act t h a t t h e banks a r e t h e i n i t i a t o r s of a l l t r a n s a c t i o n s , s u b j e c t to t h e review and c o o r d i n a t i n g a u t h o r i t y of t h e F e d e r a l Reserve Board. The Board cannot p r o p e r l y review p o l i c i e s in t h e f r a m i n g of which i t p a r t i c i p a t e s , nor should i t t a k e any p a r t i n t h e r o u t i n e e x e c u t i o n of p o l i c i e s which i t h a s airoroved. O b j e c t s to p r o v i s i o n t h a t t h e Conference s h a l l meet o n l y a t such times a s may be a r r a n g e d by or with t h e Board. This would g i v e t h e Board an a b s o l u t e veto power over m e e t i n g of t h e Committee. The Board h a s a veto power over the recommendations of t h e Committee, b u t should not have a veto power over i t s meetings. The E x e c u t i v e Committee should have power to c a l l a meeting a t any time. Cleveland; We b e l i e v e t h a t meetings of t h e Committee should be c a l l e d e i t h e r by t h e Board or by t h e Executive Committee. Two of t h e r e g u l a r meetings of t h e f u l l Committee should be h e l d a t t h e time of t h e semi-annual Governors' Conference. Chicago; The Chairman of t h e o p e r a t i n g body should be a u t h o r i z e d to c a l l a meeting of the body a t r e q u e s t of two o r more members. The F e d e r a l Reserve Board could always c a l l the body t o g e t h e r . Board l e t t e r ; - The f u n c t i o n of t h e Open Market P o l i c y Conference should be to c o n s i d e r , develop, and recommend p l a n s w i t h r e g a r d to t h e p u r c h a s e or s a l e of s e c u r i t i e s in t h e open m a r k e t . —3— X-6525 Chicago a p p r o v e s t h i s . The o t h e r banks do n o t mention i t . Board l e t t e r ; - The t i m e , c h a r a c t e r , and volume of such p u r c h a s e s and s a l e s to be governed w i t h t h e view of accommodating commerce and b u s i n e s s , and w i t h r e g a r d to t h e i r b e a r i n g upon t h e credit situation. The banks do n o t comment on t h i s . Board l e t t e r : - The c o n c l u s i o n s and ( o r ) recommendations of t h e Open Market P o l i c y C o n f e r e n c e to be s u b m i t t e d to each of t h e F e d e r a l r e s e r v e banks and to t h e F e d e r a l Reserve Board f o r c o n s i d e r a t i o n , and ( o r ) a c t i o n . Boston; S u g g e s t s amendment so t h a t c o n c l u s i o n s or recommendations of t h e Open Market P o l i c y C o n f e r e n c e s h a l l be s u b j e c t o n l y to t h e a p p r o v a l of t h e Board. Few York; The p o l i c y a s to p u r c h a s e or s a l e of Government s e c u r i t i e s s h o u l d b e made s u b j e c t to r e v i e w a t any t i m e t h a t may seem wise e i t h e r to t h e Board o r to t h e p a r t i c i p a t i n g b a n k s . We r e c o g n i z e t h a t t h e banks and t h e Board h a v e a j o i n t i n t e r e s t i n t h e m a t t e r of open market p o l i c i e s w i t h r e s p e c t to p u r c h a s e and s a l e of Government s e c u r i t i e s . Philadelphia; F e e l s t h a t t h e f u n c t i o n of t h e F e d e r a l R e s e r v e Board i s a s a s u p e r v i s i n g and c o o r d i n a t i n g a u t h o r i t y , r a t h e r t h a n an o r i g i n a t i n g o r o p e r a t i n g body. The F e d e r a l Reserve Board l e t t e r t r a n s f o r m s t h e Committee i n t o a C o n f e r e n c e , t h e c o n f e r e e s c o n s i s t i n g of a r e p r e s e n t a t i v e of each Bank and t h e F e d e r a l Reserve Board. The B o a r d ' s d r a f t t h a t t h e recommendations of t h e C o n f e r e n c e s h o u l d bo s u b m i t t e d t o each bank f o r c o n s i d e r a t i o n and, - o r a c t i o n , i s a v e r y cumbersome r e q u i r e m e n t which might p r e v e n t prompt a c t i o n and p r o v e d i s a s t r o u s . The Board s h o u l d not be p u t in t h e p o s i t i o n of h a v i n g to c o n s i d e r and d e c i d e p o l i c i e s which i t h a s a s s i s t e d i n f r a m i n g . These p o l i c i e s would not r e p r e s e n t , a s t h e y now do, t h e u n i n f l u e n c e d and i n d e p e n d e n t views of t h e b a n k s s u b s e q u e n t l y a l l o w e d o r approved by t h e Board, b u t would b e t h e outcome of a w h o l l y e x t r a - l e g a l c o n f e r e n c e , i n which t h e r e v i e w i n g a u t h o r i t y h a d p a r t i c i p a t e d ab i n i t i o . — /j.— X-6525 Cleveland; O b j e c t s to (6) a s cumborsome, r e t a r d i n g a c t i o n , p a r t i c u l a r l y i n emergencies. P r e f e r s recommendation of Governors t h a t t h e f u l l Committee s h a l l c o n s i d e r and a c t upon t h e recommendations of t h e E x e c u t i v e Committee, and s h a l l then meet w i t h t h e Board to d i s c u s s t h e s e recommendations b e f o r e a c t i o n by t h e Board. Chicago: O b j e c t s to (5) a s unworkable. Each bank should d e l e g a t e a u t h o r i t y to i t s r e p r e s e n t a t i v e on t h e Conference to a c t f o r h i s bank a t a l l m e e t i n g s of t h e Conference. San F r a n c i s c o : Suggests t h a t t h e c o n c l u s i o n s and ( o r ) recommendations of t h e Conference s h a l l be submitted to t h e F e d e r a l "Reserve Board f o r c o n s i d e r a t i o n , and i f approved by i t , s h a l l thereupon become immediately o p e r a t i v e , to be p a r t i c i p a t e d i n by each F e d e r a l r e s e r v e bank a s i t may deem e x p e d i e n t . 7. Board l e t t e r ; - A Committee to be known as t h e Open Market Executive Committee to be c o n s t i t u t e d f o r t h e purpose of e x e c u t i n g such p u r c h a s e s and s a l e s of s e c u r i t i e s a s have been approved by t h e F e d e r a l r e s e r v e banks and t h e F e d e r a l Reserve Board. Boston: Suggests amendment to g i v e Executive Committee power t o c a r r y out p o l i c i e s a g r e e d on by t h e Conference through open market o p e r a t i o n s , s u b j e c t to the review and c o o r d i n a t i n g a u t h o r i t y of t h e F e d e r a l "Reserve Board. Hew York; The Committee (presumably a l s o t h e Executive Committee) should have a u t h o r i t y to execute approved p l a n s and p o l i c i e s in b e h a l f of such banks a s c a r e to p a r t i c i p a t e . The meetings of t h e Committee, or t h e E x e c u t i v e Committee, should be c a l l e d by t h e Chairman of t h e Committee a f t e r cons u l t a t i o n with t h e Governor of t h e Federal Reserve Board, whenever d e s i r e d by t h e Board or by t h e Committee. Philadelphia: O b j e c t s to p r o v i s i o n t h a t t h e Open Market Committee s h a l l merely e x e c u t e p u r c h a s e s and s a l e s which have been approved by t h e banks and t h e Board. This would put t h e Committee in a p o s i t i o n l i t t l e b e t t e r than t h a t of a b r o k e r or d e a l e r . The E x e c u t i v e Committee should c o n t i n u e to keep c l o s e watch upon f i n a n c i a l developments, and a n t i c i p a t e a s f a r a s p o s s i b l e -5- X-5525 s i t u a t i o n s l i k e l y to a r i s e , and bo p r e p a r e d to f o r m u l a t e recommendations and s u g g e s t i o n s f o r t h e c o n s i d e r a t i o n of t h e f u l l Committee. Cleveland; The "Executive Committee should have power to c a r r y i n t o e f f e c t t h e p o l i c i e s recommended by the f u l l Committee and approved by t h e Board, a s recommended by t h e Governors. Membership of t h e Executive Committee should be r o t a t i n g , so t h a t t h e Governor of each bank w i t h i n o v e r - n i g h t t r a v e l i n g d i s t a n c e from Washington would s e r v e a t a p p r o p r i a t e times. The Governor of t h e Sow York Bank should be a permanent member and a c t a s Chairman of t h e f u l l Committee, and of t h e E x e c u t i v e Committee, a s t h e Committee's o p e r a t i o n s must o b v i o u s l y be c a r r i e d on in Hew York. Chicago: The Open Market Conference should have an E x e c u t i v e Committee c l o t h e d w i t h a u t h o r i t y to f u n c t i o n . S t . Louis; There should be some method of r o t a t i o n on t h e p r o p o s e d E x e c u t i v e Committee, e x c e p t i n g o n l y t h e Governor of t h e Few York Bank. S u g g e s t i o n s by t h e Banks a s to P a r t i c i p a t i o n : Boston; Will p a r t i c i p a t e in a l l open market o p e r a t i o n s , w i t h o u t , however, s u r r e n d e r i n g any a u t h o r i t y , r i g h t s , or powers of independent a c t i o n c o n f e r r e d by t h e F e d e r a l Reserve Act. New York; Any F e d e r a l r e s e r v e bank may d e c l i n e to p a r t i c i p a t e i n any p u r c h a s e s or s a l e s a t any p a r t i c u l a r t i m e . W i l l c o n t i n u e our p a r t i c i p a t i o n a s long as t h e composition and f u n c t i o n s of t h e Committee w i l l i n s u r e and f a c i l i t a t e t h e f o r m u l a t i o n and e x p e d i t i o u s e x e c u t i o n of sound System open market p o l i c i e s . Our d i r e c t o r s a r e a g r e e a b l e to c o n t i n u e p a r t i c i p a t i o n i n System open market p r o c e d u r e worked out and a g r e e d upon by t h e Board and t h e Comm i t t e e , p r o v i d e d i t i s not i n c o n s i s t e n t w i t h t h e s e g e n e r a l views. Cleveland: w i l l c o o p e r a t e w i t h t h e Committee, r e s e r v i n g our l e g a l r i g h t to engage i n open market o p e r a t i o n s under Section 14. We have d e c l i n e d to p a r t i c i p a t e only when, in our judgment, t h e l e g i t i m a t e demands of our member banks made i t n e c e s s a r y go t.o do. We w i l l c o n t i n u e to support t h e open market p o l i c i e s approved by t h e Board, r e s e r v i n g t h e r i g h t to p u r c h a s e a t o u r o p t i o n , Government - 6 - X-6525 s e c u r i t i e s and b i l l s i n l i m i t e d or r e a s o n a b l e amounts when o f f e r e d to u s by our own member b a n k s , and w i l l e x e r c i s e our r i g h t to engage in open market o p e r a t i o n s f o r our own account o n l y in u n f o r e s e e n emergencies. San F r a n c i s c o : Our Board e x p r e s s l y r e s e r v e s to t h e Federal Reserve Bank of San F r a n c i s c o , t h e r i g h t to determine whether t h e bank w i l l p a r t i c i p a t e in t r a n s a c t i o n s recommended by t h e Conference and, i f i t does p a r t i c i p a t e , t h e e x t e n t of such p a r t i c i p a t i o n . I'o p r e s e n t or f u t u r e p a r t i c i p a t i o n by t h i s bank i n t h e t r a n s a c t i o n s of s a i d Conference s h a l l be i n t e r p r e t e d a s a commitment to f u r t h e r participation. Reservations. Boston; Reserves a l l a u t h o r i t y , r i g h t s , or powers of independent a c t i o n c o n f e r r e d by t h e F e d e r a l Reserve Act. Hew York; Without waiving t h e powers c o n f e r r e d upon u s by law to make p u r c h a s e s and s a l e s of Government s e c u r i t i e s , we would n a t u r a l l y assume, c e r t a i n l y a s long a s we c o n t i n u e a p a r t of any approved open market committee p r o cedure a c t i n g f o r t h e System, t h a t we would not e x e r c i s e our power to buy and s e l l Government s e c u r i t i e s i n c o n f l i c t w i t h approved System p o l i c i e s , except a s t h a t might be n e c e s s a r y i n an emergency i n our own m a r k e t . Cleveland: W i l l c o o p e r a t e w i t h t h e Committee, r e s e r v i n g our l e g a l r i g h t to engage i n open market o p e r a t i o n s under S e c t i o n 14. We w i l l c o n t i n u e to support t h e open market p o l i c i e s approved by the Board, r e s e r v i n g t h e r i g h t to p u r c h a s e a t our o p t i o n , Government s e c u r i t i e s and b i l l s in l i m i t e d or r e a s o n a b l e amounts when o f f e r e d to u s by our own member banks. Will e x e r c i s e our r i g h t to engage in open market o p e r a t i o n s f o r our own account only in u n f o r e s e e n emergencies. Atlanta; I t i s u n d e r s t o o d t h a t we may c o n t i n u e o r d i n a r y e v e r y - d a y p r a c t i c e of buying a c c e p t a n c e s w i t h i n our own D i s t r i c t , and of b u y i n g from and s e l l i n g to our member banks, Government and o t h e r s e c u r i t i e s a u t h o r i z e d by S e c t i o n 14. The above p r a c t i c e w i l l not hamper or i n t e r f e r e w i t h t h e o p e r a t i o n s of t h e Open Market Conference. Any a c t i o n n e c e s s a r y i n a l a r g e amount, i n c a s e of emergency, w i l l be s u b m i t t e d to Board f o r a p p r o v a l . -7- X-5525 San F r a n c i s c o ; Approves Board l e t t e r w i t h o u t waiving any r i g h t , or d e l e g a t i n g any power c o n f e r r e d upon t h i s "bank under t h e F e d e r a l Reserve Act. This Board, in approving t h e e s t a b l i s h m e n t of s a i d Conference, does not siurrender, b u t e x p r e s s l y r e s e r v e s to the F e d e r a l Reserve Bank of San F r a n c i s c o , t h e r i g h t to determine whether t h i s bank w i l l p a r t i c i p a t e in t r a n s a c t i o n s recommended by t h e Conference and, i f i t does p a r t i c i p a t e , t h e e x t e n t of such p a r t i c i p a t i o n . Ho p r e s e n t or f u t u r e p a r t i c i p a t i o n by t h i s bank i n t r a n s a c t i o n s of s a i d Conference s h a l l be i n t e r p r e t e d a s a commitment to f u r t h e r participation. Joint Interest. Hew York; We r e c o g n i z e t h a t t h e banks and t h e Board have a j o i n t i n t e r e s t in t h e m a t t e r of open market p o l i c i e s w i t h r e s p e c t to p u r c h a s e and s a l e of Government s e c u r i t i e s . Biffht of Withdrawal from t h e Conference. Hew York; Any F e d e r a l r e s e r v e bank may withdraw from t h e Committee p r o c e d u r e a l t o g e t h e r , i f i t deems i t a d v i s a b l e . "Exigencies. Hew York; We would n o t e x e r c i s e o u t power to buy and s e l l Government s e c u r i t i e s i n c o n f l i c t w i t h approved System p o l i c i e s , except a s t h a t might be n e c e s s a r y i n an emergency i n our own market. Cleveland; While wo r e s e r v e t h e r i g h t to p u r c h a s e a t our o p t i o n Government s e c u r i t i e s and b i l l s i n l i m i t e d or r e a s o n a b l e amounts v/hen o f f e r e d to u s by our oxm 'member banks, we w i l l e x e r c i s e our r i g h t to engage i n open market o p e r a t i o n s f o r our ovai account only i n u n f o r e s e e n emergencies. Atlanta; Any a c t i o n n e c e s s a r y i n t h e way of buying a c c e p t a n c e s w i t h i n our own D i s t r i c t , and buying f r o m and s e l l i n g to our member banks Government and o t h e r s e c u r i t i e s a u t h o r i z e d by Section 14, i n a l a r g e amount, in case of emergency, would be s u b m i t t e d to t h e Board f o r a p p r o v a l . Chicago; The F e d e r a l r e s e r v e bank r e t a i n s the powers c o n f e r r e d upon i t by S e c t i o n 14 to t h e e x t e n t t h a t i t may p r o t e c t any sudden or extreme emergency.
@FedFRASER