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M IS C . I4 0 A —4 0 M —5-49
F ederal Reserve
bank of
N
ew
Y ork
March 11, 1954
Hon. Paul U * Douglas,
United itites Senate,
Washing ton, JD. C.
Dear Senator Dougla*:
ta this tssornl&g'* N e w York Journal of C ommerce you are
re p o rte d to have #ald, 1a & letter to the Pr«s»ideat, that "so long a* th»
5-5 relationship In maintained la the ©p#a Market Committee — - private
«,r« given, a weighted authority in the 4©lib*rations and policies #i
th# Committee.*'
The 8#wspi*p*r article went >Jbs to pa tot sat that a I-I
relationship (as between anember* of thiK^oaW ©f Governors and representa
tive® of the Federal Reserve
of ths Federal Opan Mark#!
Committee does not actually exlsvv Ther^ are^tUl six member* of the
So*rd of C h m m m * At
h©y«v*f,\ i « not
la Dm »j»«
nwrnbers. M y interest take* the
resentanent that even so constructive
and friendly a critic
ho«14 g W h support to the idea that membership
ta the Federal Open MarkevC^mmittee^ hy ®a«» who are p resident* ol
Il4tr»l Reserve iMuuta, give* a^th^rity of any kind, to ptivai© bankers, in
the da liberations and policies olkUMu£<Mnmittft«.
The law establishing the f ederal Open Market Committee
specifically designates those wh© shall be ro»ajb«ri and requires that the
time* character and volume of open market operations shall be governed with
a view to *e««f»mo4ltlBg eon,meree and business and with regard to their
bearing upon the general credit situation of the country. A m e m b e r of the
Committee who is also- President of a Federal Reserve Bsr&k, therefore, has
Individual statutory responsibilities which he roust discharge pursuant to law.
Me is not the
pyj^»,tfc bankers and, if he be an honest man,
he cannot give weighted preference or any other kind of preference to the
views of private bankers as to wh&t apen market policy should be. What the
Presidents do bring to the deliberations of the Open Market Committee is a
knowledge oi banking, business, agriculture and public opinion ii* various
parts of the country, which makes its contribution to the development of
policy, Just as does the knowledge of political {In the broad not narrow or
partisan sense) «tnd economic developments contributed by the members
of the Board of Governors who are members cf tfc* Cossr-mltt.ee,
Hon. Paul H. Douglas
3/11/54
it is m y view that you do not necessarily purge a m a n &{
private Lute re *t® by eisetus.g him or appointtag hi® i# public office at
*Vaahington or elsewhere, ma4 conversely that persons dedicated to the public
interevt, who have not been elected or dlr#etly appointed to public office»
can give unde viating public service,, Speaking for myself, aftsr 14 year*
in the Fm4mrai Reserve Syatei® tad II years aa President of the federal
& « * e r v e Bank of N e w York, I repreeeat nothing h a t the public Interest
when X a i t la meeting* el the i e-der a l 0*#n M a r k e t C o m m itt? * and I
contribute aobody'» weighted authority but m y own to i t * delthe r a t i o n s .
Yours faithfully^.
Atlas Sproul,
President.
@FedFRASER