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Reproduced from (he Uncfass'rfied / Declassified Holdings ofthe yii :?%>+• ■i-Kl-• rU jJ CRETARY OF THE TR W A SH IN G T O N March 27, 193 flear Mir. P latt: I have received through tha Central Ccmittee of Governors, located In Few York, a letter quoting a telegram received on March 34, 1933, from the Federal Beserve Bank of “Pallas, as follows: "National Park Bank w ill deliver to ycu $100,000 TJ. S. Treasury 4 j gold notes Series B-1926 due September 15, 1935, which you are authorized to purchase for our account on “basis ninety-nine and accrued interest, charging our account to cover purchase price, /Hold notes for our account sending us custody receipt.- Wir^ amount charged. This for our invest ment account”. This clearly represen a purchase of notes by tha Federal Beserve Bank of Dallas for it wn investment aecptfnt^and seems to he a violation of the u terstanding that the Federal Beserve Banks would not at this tin Zncrease their investments in Government securities through purchas i outside the system. / Very truly yours, t. 9. p . GIL3FET, Jr. , tjiider Secretary. Hon. Fditmnd ^latt ,t Acting Governor, Federal Beserve Bank, Washington, T>. C, Reproduced from the Unclassified I Declassified Holdings of the National Archives EXCERPT FROM SECRETARY'S MIMJTES OF GOVERNORS* CONFERENCE MARCH 26 . - 29, 1923. ^ s.'-*' Topic I. A. ( Report of Committee on Centralized Execution of Purchases and Sales of Government Securities for Account of Federal Reserve Banks, (see para. 9) The Governors expressed themselves as being in favor of the plan set up in the Board's memorandum X-3675, and with the establishment of the Open Market Investment Committee for the Federal Reserve System to supersede on and after April 1, 192*5, the present Governors Committee on Centralized Execution of Purchases and Sales of Government Securities for Account of Federal Reserve Banks. The Federal Reserve Board, upon the suggestion of the Governors, ap pointed the members of the old committee to serve as members of the new com mittee. (see X-3689 of April 7, 1923). It was generally felt by the Governors that the Board’ s resolution should be construed so that the banks should have some latitude in making retail intra-district purchases of acceptances. Reproduced from the Unclassified I Declassified Holdings of the National Archives 3 S V - * — x-36 7 5 (V A -2 Z -2 L 3 RESOLUTION RECENTLY ADOPT.'® BY THE FEDERAL RESERVE EOAKD. ‘ ’ 'Whereas tha Federal Re s e r v e Board, tinder the powers given it in Sections 13 and lU of the F e deral Reserve Act, has aut h o r i t y to limit and otherwise determine the securities a n d investments pur c h a s e d by Federal reserve banks: Whereas the Federal Re s e r v e B o a r d has n ever prescribed any l i mitation u p o n o p e n market purchases b y Federal reserve banks; Whereas the amount, time, character, and manner of such .pur chases may exercise an important influence u p o n the m o n e y market; 7’ hareas a n o p e n mar k e t investment p o l i c y for the twelve banks con^posing the F e deral reserve s y s t e m is n e c e s s a r y in the interest of the maintenance of a good relationship between the discount a n d p u r c h a s a operations of the Federal reserve banks a n d the general m o n e y market; ?Jhereas h e a v y investments in U n i t e d States securities, p a r t i c u l a r l y shor t - d a t e d certificate issues j h a v e occasioned em*b a rrassm^nt to the T r e a s u r y in a s c e r t a i n i n g the true condition of the m o n e y and investment m a rkets f r o m time to time, THEREFORE, B e It Resolved, That the Federal Reserve Board, in the exercise of its powers u n d e r the Federal Reserve Act, lay d o w n and adopt the f o l lowing principles w i t h respect to Oj.;en m a r k e t investment operations of the Federal r e serve banks, to-witJ * (l) That the time, manner, character, a n d v o l u m e of open m a r k e t investments purchased b y Federal reserve banks be governed Reproduced from the Unclassified / Declassified Holdings of the National Archives * £ -• x -3 6 7 5 with primary regard t i t th ? sccomrcdation of commerce and business and to the effect of such purchases or sal^s cm th© general credit situation. (2) That in mak* in j tho select ion of op3n market purchases, careful regard be always >*iv$n to the bearing of purchases of Enitad States Government securities, especially the short-dated issues, upon the market for such securities, and that op^n market purcha&es b« primarily comcturcial investments, except that Treasury certificates be dealt in, as at present, under so-called “repurchase* agreement. Be It Further Resolved, That on and after April 1, 1923, the present Coitmittea of Oovernorson Centralized Execution of Purchases and Sales of Government Securities be discontinued, and be superseded by a new comnittee known as tha Open Market Investment Committee for the. Federal Reserve System said Committee to consist of five representa tives from the reserve banks snd to be under the general supervision of the Federal Beserve Board; and that it be the duty of this Committee ♦ to devise and recommend plans for the purchase, sale and distribution of the open market purchases of the Federal reserve banks in accordance with the above principles and such regulations as may from time to tin© be laid down by the Federal Reserve Board* Note: ©13 Board has determined that Government securities of short maturities should be liquidated f ir s t , and wishes the opinion of tha Conference of Governors as to how this may best be done without disturbance to the market* Reproduced from the Unclassified I Declassified Holdings of the National Archives f Dear 31r: This will acknowledge receipt of yonr letter i LJU 4 3 3 3 , . , " T * of February lOth,\ enclosing ®i*mtesM»f tlie aeetlng of the!/ Qow<tee of (lovernors on centrallied execution of purchase® and sales of dovernaent securities by Jtederal Beserve banks, held at the federal Be serve Bank of Boston on February 5th, together with a copy of the report and accompanying ex hibits presented at that coseting. Tows very trnly, Acting Governor. Mr. W. B. Katteson, Federal Beserve B*nk, Hew York, H. f . Reproduced from the Unclassified I Declassified Holdings of the National Archives Fed er al Re s e r ve Bank o r N ew Y o r k Committee of Governors on Centralized Execution of Purchases and Sales of Government Securities by Federal Reserve Banks. CONFIDENTI AI» February 10, 1923. dear Mr. Platts / a Enclosed are the minutes'&f the meeting of tae Committee of Governors on Centralized Execution of Purchases and Sales of Government Securities by Federal Reserve Banks, held at the Federal Reserve Bank of Boston on February 5, 1923, together with a copy of the report and accompanying exhibits presented at that meeting. Secretary of the Committee Enclosures Honorable Edmund Platt, Acting Governor, Federal Reserve Board, Washington, D. C. > 1^1 , Reproduced from the Unclassified I Declassified Holdings of the National Archives r t •REPORT OF CCMMITTEE OF GOVERNORS ON CENTRALIZED BXHCUT1 OF PURCHASES AND SALES CF GOVERNMENT SECURITIES BY 5EDERAL RES O k SUBMITTED TO COMMITTEE AT MEETING IN CLEVELAND, OCTOBER; 31 r 1922. - -COVERING PERIODJifp£ MAY 17x 1922_TO OCTOBER 25x 1922_lkLUSIV’% _ ~ The secretary presents herewith the following exhibits, covering activities and operations of committee since its formation: Exhibit "A" - Government security holdings of Federal reserve banks ab reported to the committee of governors at the close of business October 25, 1922* Exhibit "BH - Government security holdings of Federal reserve banks as reported to the committee o f governors at the close of business September 20, 1922♦ Exhibit HCW - Total United States securities exclusive of Pittman Act certificates, held by Federal reserve banks * Exhibit "I?’ - Comparison of the Government security holdings by maturities of a ll Federal reserve banks combined as of May 17, June 30, September 20 and October 25, 1922. Exhibit "E" ~ Statement showing Government security investment holdings of reserve banks compared with record of gold imports into the United StatesExhibit ” F* - Report of transactions in Government securities for account o f the Treasury Department and Federal reserve banks from close of business October 18, 1922 to close of business October 25, 1922. as reported to the Com mittee o f Governors- Transactions in Government Securities by Federal Re serve Banks opinion of the members of the committee expressed at mee^ingS 0f j uiy 12 and October 2, 1922, wa« that Government securities held in the investment accounts of the various reserve banks be allo-wed to run off as they mature -irrithout replacement in other Government securities* The manner in which this has been ___ - Ou*> Reproduced from the Unclassified I Declassified Holdings of the National Archives - 2 - geherally carried out by the different banks is reflected in the amount of securities held October 26, 1922, as shown in Exhibit ,fCw, which is approximately $90,000,000 less than the amount held on June 30, 1922. During this time approximately $70,000,000 Treasury certificates, vrhich had been held in various investment accounts matured* In addition to this the Treasury Department, on October 17, 1922* expressed a desire to purchase for redemption any of the Treasury certificates maturing December 15, 1922, -which the Federal Reserve Bank of New "York was holding in its investment accounts As a result, the New York bank agreed to sell to the Treasury a ll of its holdings of December certificates amounting to §33*015,000 of which $15,000,000' have already been delivered, the §18,015,000 balance to be taken over by the Treasury during the remainder of the month* On October 24, 1922, the Treasury stated that they would be glad to redeem any or a ll of these issues held in the investment accounts o f the other re serve banks, and suggested that the committee might be willing to recommend such action to the governors of the other banks. Upon comnunicating with the several members of the committee they * unanamiously agreed to the proposal and thereupon, notice to this effect was sent to a ll other banks, which resulted in sales to the Treasury for delivery on October 26, 1922, of substantially a ll their Decenfcer 1922 certificates, with the exception of Cleveland, who sold about §3,000,000 of their holdings of December certificates for delivery October 26, and who s t ill have under consideration the sale of the balance of their December certificates and Victory notes, for delivery on October 31• Treasury Orders Recent orders given through Federal reserve banks covering the purchase and sale of Government securities are as follows: Reproduced from the Unclassified I Declassified Holdings of the National Archives • 3 • Date of Orders Account October 5, 1922 Cumulative Sinking Rind " " * " 7, 1922 7, 1922 7t 1922 10, 1922 16, 1922 to 25, 1922 17, 1922 " Issue * Price Third 4 1 /4 % L*L« bonds Amount Not Exceeding Par $10,000,000 Any L.L-bonds except 1st 3 1/2a Market 25,000,000 Y/ar Finance Corporation Any Tr. notes T7ar Finance Corporation Any L.L* bonds Not exceedexcept 1st 3 1/2s ing par. 20,798,000 Sept. 15 j 1926 4 l/4% Tr. notes Par 12,050,000 Alien property Custodian 4 l/4$ Tr# bonds of 1947^52 Market 28,314,000 Cumulative Sinking FanA 4 3/4$ Vict.notes called 12-15-22 100*12 15,000.000 " To yield 4 l/4%> or better 25,000,000 $111,162,000 These orders have been completed through purchases by the different banks, vith the exception of the order of October 17 for the Cumulative Sinking JUnd, on triiich there has been purchased up to date $11,204,800* Inasmuch as the Treasury offered under date of October 23 to redeem at par a ll Victory notes called for payment December 15, 1922, it was felt that further purchases on the order o f October 17, at the price of 100 *12 tnght well be temporarily suspended. The purchases resulting from the distribution of a ll Treasury orders since the committee began operations, including the recent large orders specified above, are as follows; Boston 46,738,350 Nevr Y0rk - ------------- - - 219,711,250 Philadelphia «* 27,241,500 Cleveland -» «* 3,300,000 Richmond 199,300 Atlanta - - - - - - - - 2,698,350 Chicago - ----------56,283,500 Kansas City 282,300 S t . Louis 6,576,700 Minneapolis - - - - - ---1,328,200 San Francisco - - - - - 13 1340 >600 T 0 T A L $377,700,050 EOg,B it Boston Dec. 15, 1922 # March 15, 1923 731,500. Hew York Philadelphia 118,015,000. ♦ Clovelatd ♦ 4,600,000. 2,134,500. Sept. 15 , 1923 5,844,000. 5,810,000. 547,000. 332,000. 2,000,000. 5,971,800.24,750. (uncalled) 5,656,000. Sales Contracts TOTAL 5,000,000. 150. 4,830,700. 11,500,000. 22,187,600. 10,979,100. ♦ 535,150. 1,111,750. 1,919,400. 873,200. 1.361.000. 22.360,900. ♦ 26,383,350. Pittman Act Ctfs. 2.250.000. x 0 T A L _______________ ♦89,110,650. 10.000.000. * 28, 633,350.*♦99,110,650. 2,500.000. 5,938,000.♦ 1,736,500. 2,500.000. ♦ 31,761,650. ♦49,016,100. Kanaae City 422,000. ♦ 30,000. 15,500,500. 1,190,900. 202,000. Sen Francisco T o t a l 250,000. ♦ *,040,000, ♦36,214,500. 1,593,000. 250, 000. 3 , 782, 500. 2 , 944, 500. 427,500. 2,173,500. 5,075,000. 22,250. 50,000. Dallae 7,149,500. 48,110,500. 29,553,000. 5,996,550. 1,756,500. 11,458,100. 4,821,600. 7,354,000. ____________ _____________________________ 3.509,400. ____________ ♦29,261,650, $46,516,100. Minneapolis 901,500, ♦ 1,167,000. ♦ 9,822,500. • This includes ♦18,015,000. December 15, 1922 certificates •old to Treasury tor redemption for delivery this month* 5,275,000. St. Louie 9,344,000. Victorys ( called) Miscellaneous 165,550. ♦ 500. 14,388,000. Treasury Notes Chicago 3,525,000.- 10,925,000. 3,850,000. « Atlanta 7,000. ♦10,465,000. 15 , 1923 Jun« Richmond 161,250. 10,065,300. 3,267,600. 23,333,600. 4,324,400. ___________ 3,986,600. ___________ 30,727,450. 17,459,100. 106,822,300. 2,669,500. ___________ 10,157,800. ___ ________ 39,146,300. 27.231,300. $1,240,900.$2,232,000.^40,372,500.^23,043,100. ♦ 9,436,500.^39,594,450.^11,375,000. ♦49,075,200.^367,641,400. 2,960,000. 2,999,000. 4,667,000. 3,571,000. 2,500.000. 2,821,000. 1.900,000. 2,332.000. 41,000,000. R 200,900.^5,231,000.^45,039,500.^26,614,100. ^11,936, 500.$42,415,450. ^13,275,000. ♦51,40T,200U408,641,400. Reproduced from the Unclassified I Declassified Holdings of the National Archives ____ liOVERNMENT SECURITY HOLDINGS OF FEDERAL RESERVE BANKS AS RBPOR1ED 10 THE OOmiTOE OF OOVERNORS AT 1HE CLOSE OF BUSINESS OCTOBER 25, 1922, INCLUDING PITIVAI! ACT CER1IFICATES EXHIBIT ft $ 1 5 ,000, -0- Philadelphia Cleveland $ Richmond Atlanta - 0- 792,000. $10 ,330 ,500. -0" Dec. 15, 1922 " 781 ,500.$43 ,5 17 ,000. 8,000. 10 ,434 ,000. -0- March 15, 1923 - 3,525,000. 1 5 ,000,000. 500. 5 ,838 ,000. -0- June 15, 1923 " 3,850,000. 10,000,000. 4,600,000. 2 ,134 ,500. -0- 2,000,000. Sept. 15,1923 " -0- 228,500. 292,000. -0- -0- -0- 5,971,800. 9,822,500. Victorys (called) H (uncalled) Treasury Notes Miscellaneous Bonds Sales Contracts TOTAL Pittman Act Certs, TOTAL 15 0 ,000. -05,936,000. 5 ,000,000. 4 ,830 ,700. 20,000,000. 535,150. 857 ,750 . 2-320.100. 2 1 ,210 .600. 150 . 22 ,1 2 7 ,600. 10,959,000. * 30 ,000. 1 5 ,500,50 c. 1,591,500. 1 ,366 ,000. 395 ,000. 203,500. 265,000. 7,149,500. 35,818,000, -0- -0- 3,211,000, -0- 5,996,550, 1 ,000. - 0- -0- -0- -0- -0- —0** -0- -0- -0- -0- - 0- -0- 1 ,756 ,500. 1 1 ,458,100 . 9,796,600. 4,*25,600. 2,714, 700. 7 ,303,400. 3,140,000. -0- -0- 1,240,900. 2,189,590. 26,462,800. 24,641,500. 15,497,600. 3 ,500 ,000. 3.460.000. 1,999,000. 6,667,000. 571*000. 68,500. 1 1 5 ,710 ,000, 250,000. 448,000. 159,590. ♦ Total 5 ,873 .500. 591,500. -0- -0- San Francieco -0- 1 ,500 ,000. 50 ,000. Dallas 4,040,000. -0- -0- 3, 500,000. 938,000. 3 ,782 ,500. -0- 3.250.000. 1 2 ,500 .000. 465,500. 5^7,000. $ 2 ,934,500. 200,000. 1 ,190 ,900. 56,655,500. * 1 | 1,022,500.1 Kansas City 1,736,500. 873,200. 29,217,850. ••O'* St. Lcuis Minneapolis 100,000. 1,461,100. 21,943,450.115,585,350. Chicago 000 . Oct. 16, 1922 Ctfs. New York 3 ,000,000. - 0- 10 ,850. 23,283,600. 4,442,000. _ -0- 40,722,950. 3 .8 a . 000. ♦25,193,4504128,085,350. $32 ,7 17 ,850. ♦60,155,500. *4,700,900. *6,188,590. *33 ,1 29,800. *28,212, 500c*l8,497,600. *44,543,950. «•0 Boston 24,750. 1 6 1 ,25c. 10,065,300. -0* 62,195,000, 47,81 2,500, 30,996,050, 17,459,100. 121,721,200, 2 ,629,500. 10 ,1 5 7 ,800. 37,175,990, -0- 26. 245.400, 3 ,580 ,500. 49 ,14 3 ,700. 386,881,690, 1.900,000. 2.832 ,000. 52.000.000, •5,480.500.•51,975,700. *438 ,881 .690 Reproduced from the Unclassified / Declassified Holdings of the National Archives g o v e r n m j n t s e c u r i t y h o l d i n g s of f e d e r a l r e s e r v e banks as reported tOT.iL HI! IT :1D STaTBS S ^CHRITI’CS, SXri/r.IYE Q” pi^T; y; //’" . . . Date 1922 4 Jan. 11 18 25 1 ?eb. 8 15 21 iiar. 1 8 15 22 29 5 Apr. 12 19 26 3 i&ay 10 17 24 31 7 June 14 21 28 5 July 12 19 Aug. 26 2 9 16 23 30 Sept. 6 13 20 27 4 Oct. 11 18 25 Boston 3.3 2-j, 8 25.5 23.3 29. C 30.2 30.4 29.8 29.8 30.2 28.3 29.2 23.5 27.4 27.1 23.0 41.9 42.9 44.0 42.6 42.7 42.6 52.5 54.1 38.7 43.1 41.5 40.5 43.0 43.2 37.9 37.2 38.2 40.4 44.8 45.8 46.3 21.9 24.7 28.0 28.8 28.3 26.4 . iiaw York Philtidel^ghiu Cleveland Richi iQiid 62.6 30.3 20.6 ?8.8 72.4 98.7 129.4 92.5 130.3 143.0 119.6 114.8 102.2 105.7 134.4 139.9 161.8 187.2 190.1 166-3 164.3 171.8 170.8 184.4 119.7 159.0 151.2 179.8 168.0 168.7 139.1 138.9 137.1 133.6 135.0 147.5 138.0 115.6 128.3 151.2 142.9 124.2 89.1 2.4 2.7 S .3 11.7 11.3 14.0 14.5 14.7 14.7 14.7 14.7 14.8 14.8 14.7 17.8 18.3 20.3 24.3 24.4 24.4 24.4 24.4 25.7 26.2 24.9 27.4 29.0 29.0 29.0 29.0 29.6 29.2 29.2 29.0 30.1 30.1 30.5 29.2 ?9.4 31.4 30.1 29.8 29.3 a.8 U. 1 6.1 o .l 15.4 21.9 22.0 26.5 32.6 35.G 35.6 36.8 37.8 41.6 43.7 45.7 45.7 o .8 57.4 59.4 65.9 66.5 69.5 70.1 6£. 5 70.2 70.3 7C.8 70.8 70.9 62.9 63.6 63.7 65.7 67.7 67.8 67.8 56.6 56.7 57.0 56.7 46.4 46. 5 1 1 1 1 1 1 1 1 O o 2 n A# n o 2 O 1 o 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 I 2 1 2 1 2 1 2 1 2 1 2 1 2 1 n 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 1 2 \ . . - lTy- At 1unt a 10.3 10.2 7.5 8 2.8 .9 .1 .2 .1 .1 .1 .1 .1 .1 .1 .1 .2 .2 .1 .3 .2 .3 .2 1.1 .4 2.2 2 2 2.2 2.3 2.1 2.6 2. 2 o o 2.3 2.2 2.1 2.2 2. 2 O O o 2! 2 2 2 2.2 vvvy~wT^f.~ Chicago lb . 3 12.2 24.9 .32.3 34.0 41.7 45.9 :0 .1 j 9.9 51.8 63.5 73.8 79.3 80.0 79.4 SC.7 86.7 25.7 B8.7 r 0.6 87.9 88.3 37.2 31.2 63.1 r8.5 .6.9 25.2 23.9 24.2 25.6 23.7 27.3 23. 5 27.9 29.9 28.9 26.5 26.0 23.9 37.3 4°.3 •10.4 .Louis 1.4 1.4 1.3 1.3 2.0 4.4 8.3 9.8 10.9 ] 1.9 13.4 16.5 16.7 18.2 21.0 21.4 21.4 21.4 24.1 “ 4.7 25.7 25.6 27.1 28.1 22. 5 °1.6 22.0 22.2 22. 5 22.7 21.6 21.1 21.6 22.7 24.0 25.2 25.1 24.7 23.1 23.2 23.0 23.0 23.0 VJ C /T !S 1 1 inneapolis .2 .1 .1 .1 .£ .6 1.0 1.1 1.4 3.1 5.4 5.7 5 7.3 8.5 9.8 9.3 10.2 10.5 10.7 10.6 10.9 11.2 12.3 8.9 2.3 9. 5 9.0 3.0 7.3 7.5 7.1 6.2 6.1 6.8 6.7 7.2 15.5 15.9 10.0 10*0 10.2 9.4 rCensfi? C?+.y v.O 3.9 3.9 3.9 v'.C 14.4 17.9 17.4 21.7 30.5 30.5 31.3 35.2 35.3 37.4 •10.3 39.4 39.4 37.7 37.2 37.2 37.2 37.5 37.5 40.3 41.3 41.3 41.5 41.4 41.4 41.4 41.2 41.2 -0 . 9 40.9 40.9 40.3 40.7 40.6 40.5 40.6 37. 5 'JQ ^ A Dallas 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.6 2.3 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.1 3.3 3.3 3.6 3.6 4.6 4.6 4.6 4.6 4.6 4.1 4.1 4.1 4.1 4.1 4.1 3.6 3.7 6. 6 >■.6 9.2 11.4 San Francisco A ll Banks .... 3.6 4.6 5.0 a *• q * 11.4 13.0 12.2 12.1 12.3 14.9 23 3 25.4 ° 5 .6 '0.8 51.6 51.7 51.7 •54*7 54.7 54.7 54.7 54.7 54.7 54.7 54.8 55.3 56.8 56.8 53.2 53.2 53.2 53.2 49.2 49.2 50.2 50.2 50.2 49.2 49.1 49.1 49.1 49.1 *9.1 119.1 10C. 2 113.9 137.1 192.4 243.6 285.1 258.0 317.6 349.9 339.4 352.7 351.8 375.3 -24.5 446.2 489.6 526.2 536.0 515.0 " 517.7 526.4 540.9 554.2 444.6 482.6 476.5 482.7 467.3 463.8 426.9 *22.7 421.1 413.7 435.0 451.6 441.8 386.9 400.9 435.3 428.5 403.4 367.6 Reproduced from the Unclassified I Declassified Holdings of the National Archives EXHIBIT MQH HHXBXT "D" m w T ___ ooMPiHiaag q f m (jm u m m y m (EXCWIOTG PITTIUIT AOT CERTITIOATES) r H0LPIH08 BY MAIURIIIS3 BBflTmnt m m QOMBima a s o r mat n . a m 30. .a g ia ffiM . 20 ^ Aim OCTOBER 86. 1982. Holdings Yfoen Committee was Formed May 17. 1922 Viotory 3^6 Notes Victory Notea $ 1,065,100 94,301,650 $ Holdings On Oct. 25. 1922 Holdings on Sept* 20. 1922 Holdings on June 30. 1922 * *36,992,600 54,497,900 *1 £6,724.000 9 i 9 - - 20,384,500 M B - 33,191,000 34,908,500 - - 16, 1922 44,466,000 26,502,500 15,710,000 December 15, 1922 46,879,500 82,161,500 62,195,000 36,214,500 Maroh 15, 1923 46,131,500- 48,635,500 47,812,500 43,839,500 June 15, 1923 - 29,896,500 35,818,000 48,110,500 September 15, 1923 - 3,211,000 29,553,000 121.721.200 106.822.300 323,460,300 $ 301,263,800 26,245,400 27,231,300 37.175.990 39.146,300 15, 1922 73,552,700 1, 1922 28,166,500 September 15, 1922 October June August Treasury Notes Sales contra&ts Other Misc. Gov’ t Bonds 'I’ O T A ,k,M - 87.542.600 123.816,900 $ 455,296,550 $ 420,803,800 - $ - 53,681.010 39.201,566 $ 508,977,560 $ 460,005,366 £ 386,881,690 - - 367,641,400 Reproduced from the Unclassified I Declassified Holdings of the National Archives S Y S T iS M HQ i H H t*i S STASElIiSNT OF GOLD AED GGVi^RMLiliT SECURITY IEVESmSNT HOUI1JGS OF RAJJLVd BANxiS AIID R2CORD OF 00LD IMPORTS TO YORK CITY Un MillionsJ Gold Hold ings in System iJtate 19 2 2 May' Gold Imports 17 24 31 3,005.1 3,007.7 3,007.6 iionthly 7 14 21 28 3,010.1 3,0C7.8 3,020.0 3,020.9 5 12 19 26 3,020.7 3,035.8 3,045.3 3,054.5 2 9 16 23 30 3,071.4 Weekly 3,071.6 3,066.4 3,061.8 3,063 .4 Sept. 6 13 20 27 Oct* 4 11 18 25 June July August .Aggregate Investments in Gov't. Securities Gold iixports N.Y.C. i- Gov’t security Pittman Investments Act iixc lud ing C ertifiPittman Act Ctfs>• cates 3.4 595.0 596.2 603.4 515.0 517.7 526.4 80.0 78.5 77.0 1.6 617.9 629.7 518.6 556 .6 540.9 554 .2 444.6 482.6 77.0 75.5 74.0 74.0 •6 550.5 556.7 541.8 540.8 476.5 482.7 467.8 468.8 74.0 74.0 74.0 72.0 4.2 3.2 1.7 5.6 5.4 .95 497.4 491.7 488.6 484.7 498.0 426.9 422.7 421.1 418.7 435.0 70.5 69 .0 67.5 66.0 63.0 3,060.8 3,067.2 3,061.9 3,076.9 1.1 1.5 1.3 7.0 .03 .02 .02 .01 508,2 496,9 438.9 451.4 451.6 441.8 386.9 400.9 56.5 55.0 52.0 50.5 3,089.3 3,090.0 3,086.8 3,085.1 10.0 .5 7.3 4.7 .01 .02 .01 .02 483.3 474.5 446 «9 408.6 435.3 428.5 403.4 367.6 48.0 46.0 43.5 41.0 9.0 iionthly 13.0 43.0 ~ RECAPI TULATION May (1/2 mo.) 2.5 Inc. 8.4 Ino. 11.4 Ino. 3.0 DM 46.8 Deo. 43.8 Deo. 3.0 it June 13.3 M 13.0 Inc. July 33.6 M 43.0 n •6 ■ 15.8 M 13.8 it 2.0 N 8.9 N 20.1 n .95 " 42.6 It 35.8 M 9.0 M 13.5 If 10.9 it .08 *» 46.6 It 34.1 N 1£*5 * 8.2 N 22.5 M .06 * 42.6 N 33.3 Deo. 9.5 M 80.0 N 109.5 3.29 " 186.4 39.0 M August September October le t Change IQggi 1.6 * It Deo. It 147.4 it Xhe above, with. the exception of the Gold Importation and Importation Figures « art taken from statements furnished weekly to the Federal Reserve Board, by the reserve banks. Reproduced from the Unclassified I Declassified Holdings of the National Archives TRANSACTIONS IN GOVERNMENT SECURITIES FOR ACCOUNT OF THE TREASURY DEPARTMENT AND FEDERAL RESERVE BANKS FROM -CLOSE OF BUSINESS OCTOBER IS, 1922, TO CLOSE OF 3USINESS OCTOBER 25, 1922, AS REPORTED TO THE COMMITTEE OF GOVERNORS ON CENTRALIZED EXECUTION OF PURCHASES AND SALES OF (BVERNMSNT SECURITIES BY FEDERAL RESERVE BANKS Treasury Orders Alien Property Custodian The Treasury has given authorizations totaling ^28,314,000 for the purchase of 4 l/4% Treasury bonds of 1947-52 at the market rate for account of the Alien Property Custodian. These orders have been com pleted by the following purchases: New York § 3,000,000 at 100 1/8 2,000,000 i i 100 1/16 2,556,000 ii 100,06 to 100.10 100.08 to 100 .10 1,876,000 3,513,000 n 100.06 to 100.10 3,159,000 it 100.08 to 100.12 100.04 to 100*10 3,250,000 4,400,000 loO»iO 750,000 100.08 il 100 2,000,000 1,000,000 100*12 net 700 ,000 100.000 H 100 1/16 $28,314,000 ii ii ii ii Boston Philadelphia Atlanta ii On the order dated October 17 authorizing the purchase of $15,000,000 called Victory notes at prices not exceeding 100.16, exclud» ing commissions, for account of Cumulative Sinking Fund, a total of §11,204,800 face amount of purchases ha\re thus far been reported. On October 23, 1922, the Treasury requested that the price limit on this order be changed to 100.12 excluding commissions. The following is the participation by banks in this order: New York Boston Philadelphia Chicago Kansas City Redemption s? 690,000 4,000 ,000 3,423,000 130,006 1,251,000 1,036,000 100,000 400 ,000 150 ,000 16,800 6,000 2.000 £11,204,800 3,795,200 at 100.04 to 100.20 100.20 net H 100.16 11 100.12 (registered) It 100 .16 If 100.10 to 100.20 It 100.16 II 100.10 II 100.16 II 100 .03 II 100.10 II 100 .04 ii Unexecuted Balance $15 ,000,000 In view of the large amounts of Treasury certificates and called Victory notes maturing December 15, 1922, now outstanding, the Treasury has expressed its desire to anticipate redemptions on that date EXHIBIT "F" Operations Account Treasury Department Reproduced from the Unclassified I Declassified Holdings of the National Archives • 2 *» by purchasing'this month‘from the Federal reserve banks about £18,006,000 December certificates and « 7 ,500,000 called Victory notes which are held by them# After obtaining the approval of the other members of the Committee, Governor Strong, as chairman, trans mitted the Treasurer's request to a ll reserve banks and replies thus far received indicate without exception that the banks are quite W illing to cooperate with the Treasurer’ s proposed redemption plan by selling their holdings of this maturity* As previously reported the Federal Reserve 3ank of New York has sold $33,000,000 December certificates to the Treasurer for redemption, representing its entire holdings of this issue. Miscellaneous Treasury Orders At the request of the Treasury Department the Federal Re serve Bank of New York purchased )390,900 face amount of Liberty bonds for the various accounts. Transactions by Federal Reserve Banks for Their Own Accounts Boston The market for Liberty bonds, certificates and notes has been quiet during the week, and a ll issues closed the period at lower prices, the longer maturities of certificates and notes show ing lowest levels. Dealers report the supply exceeding the demand and no buying by institutions. Advances to dealers in Government securities under sales contract agreements amounted to ^1,366,800. Transactions affecting the investment account are as f ollows: PURCHASES $ 100,000 called Victory notes at 100.10 on Treasury order. SALES | New York 207,000 called Victory notes on Treasury order 500,000 Pittman Act certificates redeemed. Increased selling, indicating further liquidation for business requirements* fcftaraeteri* ed th6 bond market during the past week. Liberty bands sold off on the Stock Exchange, closing with a ne-6 loss of about thirty-two certts per hundred for each issue. The netr Treasury bo»ds .of 1947-52 closed at 99*96 on Wednesday, giving evidence that furthet* selling might be expebted* Higher money ratefe have prevailed in response to commercial demands, al** though the call loan rate temporarily dropped on Wednesday to 4$* Treasury certificates and hotes were traded in at fractionally lower prices over last week in sympathy with the Liberty movement as well as reflecting the higher l.oan rates* At the close of business October 25 a total of ^22^60,900 was loaned to dealers in Government securitj.es under sales contract agreements* Reproduced from the Unclassified I Declassified Holdings of the National Archives - 3 - Investment account transactions were as follows: PURCHASES $ 8*090,000 June 3 3/4% certificates at 100 from dealers 4,400,000 September 3 3/4< " " 100 " " 898>000 June 3 3/4% H H 100 ” Chicago market 113,388,000 SALES $12,500,000 December 3 l/2$ certificates to Treasury for redemp tion 5.700.000 4 3/4# Treasury notes, due 3-15-25, on 4,50 basis to dealers 2.800.000 4 3/4^ Treasury notes, due 3-15-25., on 4.45 basis to dealers 1.200.000 June 3 3/4# certificates at 100 to foreign corres pondents 700.000 September 3 3/4$ certificates at 100 to foreign cor$22,900,000 respondents Philadelphia Liberty bonds and Treasury certificates continued their down ward swing notwithstanding- slip-htly easier rates for call money during the latter part of this period. A greater demand for money in a ll parts of the country caused selling by banks and industrial concerns, many of which purchased bonds below the present quotations. This liquidation w ill continue as long as money is worth more than the yield from Government securities. The movement is perfectly natural and no real advance w ill occur until money rates are lower* There is a considerable amount of bonds for sale at present prices on a scale up to par, with lit t le buying power. Dealers have liquidated and are taking a trading position, and hesitate to take on bonds. The new 4 l/4# Treasury bonds are now selling below par, in dications being that many dealers and brokers purchased these new bonds expecting that they would sell considerably above par, but found the supply was greater than the demand. Treasury certificates and notes, though both selling at Tower prices, are more firm and the demand for the same at these prices has improved to a considerable extent . Transactions affecting the investment account are as follows: PURCHASES 0 ) 192,200 Treasury bonds of 1947-52 at 100 66,000 September 3 3/4i* certificates at 100 3.000 December 3 l/2£ " " 100 261,200 SALES $ 225,200 2.000 580.000 500.000 $1,307,200 Treasury bonds of 1947-52 at 100 September 3 3/4% certificates at 100 December 3 1/2$ •” ” 100 for redemption Pittman Act certificates redeemed. Reproduced from the Unclassified I Declassified Holdings of the National Archives - Cleveland 4 •* Dealers report Liberty bonds'have declined during the past week, with most issues selling below 99* While considerable decline seems due to selling of Libertys to purchase new 4 1/4$ Treasury bonds of 1947-52, notwithstanding, the decline seems largely due to selling of bonds to take care of increasing business demands. Dealers are quite confident that bonds have reached their low point or are approaching it and look for a better market and rising prices shortly. The upturn, when it cones, may be Very sharp. Transactions affecting the investment account are as follows: PURCHASES $ 35,000 September 3 3/4$ certificates at 100 100,000 March 4 l/4$ " " 100 & 135,000 Richmond The demand for Libertys and the new Treasury bonds continues good. The Reserve Bank of Richmond sold Liberty bonds for account of member banks amounting to )77,300. There were no transactions affecting the investment account. Atlanta Selling of certificates and notes in moderate amounts has con tinued throughout the week, with the new Treasury bonds also selling but in smaller voliane than the former. There were no transactions affecting the investment account. Chicago Practically a ll outstanding Government securities are quoted substantially lower than last week, with very lit t le demand in face of heavy offerings of new Treasury bonds offered in large amounts on Wed nesday at par with brokers bidding 99.90. Advances to dealers under sales contract agreements amounted to )3 ,509,400 at the close of the period. Investment account transactions are as follows: PURCHASES $ 3,614,500 September 3 3/4$ certificates at 100 175,000 June " ” " 100 $ 3,789,500 St * Louis Brokers in Liberty bonds reported purchases.in excess of sales, with the demand for certificates and notes about offsetting the supply. Generally speaking, the market was dull and declining. Transactions affecting the investment account were as follows: PURCHASES 3 620,000 September 3 3/4$ certificates at 100 __ 61.100 Treasury bonds of 1947r52 M 100 $ 681,100 SALES $ $ 620,000 September 3 3/4$ certificates at 100 10 f 500 Treasury bonds of 1947-52 " 100 630,500 Reproduced from the Unclassified I Declassified Holdings of the National Archives - Minneapolis 5 - There has been very lit t le activity in the Government security market during the past week. Local banks and investment houses state that they have handled less volume for the period than for many weeks past. There are practically no purchasing orders in the market and very few selling orders. Investment account transactions are as follows: PURCHASES £ $ 225,000 500 50.000 20.000 62.100 357,600 September 3 3/4$ certificates December 4 l/2$ " June 3 3/4$ ' " 3-1926 Treasury notes Treasury bonds SALES $ 525,000 September 3 3/4$ certificates 471,200 Treasury notes 81.900 Treasury bonds §1,078,100 $ Kansas City Local brokers report a strong demand for Liberty bonds, one of the largest houses reporting that they have sold no Liberty bonds on the New V'ork market in the last four weeks, but have had to pur chase a considerable amount to supply the local demand. Treasury certificates and not>es are being offered freely by member banks from their own investment accounts, indicating an increased demand for loans• PURCHASES 500 March 4 l/4$ certificates at 100 M 100 2,133,000 September 3 3/4$ certificates at 100 50.000 Treasury notes at 100 17.100 ” bonds at 100 $2,202,600 4 2,000 December certificates SALES $ Dallas 100,000 Consols at 103 There s t ill remains an unsatisfied demand for the new issue of Treasury bonds. Transactions affecting the investment account are as follows: PURCHASES $2,229,500 June 3 3/4% certificates at 100 SALES £ 50,000 June 3 3/4$ certificates. Reproduced from the Unclassified I Declassified Holdings of the National Archives San Francisco There has been no change in the cdndition of the Govern ment s e c u rit ie s market during the past week, with trad in g s t i l l q u ie t. There were no tran saction s a ffe c tin p the investment account, Reproduced from the Unclassified I Declassified Holdings of the National Archives ' 0- EXCERPT FROM THE MINUTES OF THE GOVERNORS1 CONFERENCE, OCT. 10 - 12, 1922 Topic I .A . 1. Report o f Committee on C entralized Execution o f Purphases and Sales o f Government S e c u ritie s by Federal Reserve Banks. The Chairman presented to the conference the repo rt o f the Com m ittee on C entralized Execution o f Purchases and Sales o f Government Se c u r it ie s by Federal Reserve Banks, but inasmuch as some o f the Governors had not had an opportunity to read i t , the -whole top ic o f ,fCredit Trans actions and P o l i c i e s , ” as w e ll as consideration o f the minutes o f the October 2, 1922 meeting o f the Committee on C entralized Execution o f Purchases and Sales o f Government S e c u ritie s by Federal Reserve Banks was held over u n t il the next day’ s sessio n . * Topic I . A . l . * (see paragraphs 30 & 56) * (continued - see paragraph 2) Report o f Committee on C entralized Execution o f Purchases and Sales o f Government S e c u ritie s by Federal Reserve Banks. The Chairman announced that the Committee on C entralized Execu tio n o f Purchases and Sales o f Government s e c u ritie s had s li g h t ly revised the minutes o f it s meeting o f October 2, and submitted to the conference fo r i t s consideration and approval a copy o f the minutes as re v is e d . The Committee, as recorded in these minutes, expressed i t s approval o f the ac tio n taken by the Federal Advisory Council at i t s la s t meeting r e la t iv e to investments by Federal Reserve Banks f o r the purpose o f making earnings, and recommended to the conference (1 ) that Governor Pfetncher o f the Federal Reserve Bank o f Cleveland be made a member o f the Committee (see paragraph 14) and (2 ) that the Committee's d u ties be extended so as to provide fo r the making o f recommendations and suggestions to each Federal Reserve Bank from time to time concerning the a d v is a b ilit y o f making purchases or ■ Reproduced from the Unclassified I Declassified Holdings of the National Archives OCT. 10-12 — page 2 sale s o f Government s e c u r it ie s . Upon motion o f Governor Young, i t was VOTED that the rep o rt (pages 248-252 Stenographic record) and the recommendations contained in the minutes (pages 258-263 stenographic re co rd ) o f the Committee be approved. * Topic I .A . I . * (see a ls o paragraph 56) * (continued - see paragraphs 2 and 30) Report o f Committee on C entralized Execution o f Purchases and Sales o f Government S e c u ritie s by Federal Reserve Banks. The Chairman b r i e f l y outlined to Mr* G ilb e r t the p o lic ie s o f the Committee on C entralized Execution o f Purchases and Sales o f Government S e c u ritie s by Federal Reserve Banks, and aavised him o f the actio n taken by the committee at i t s meeting on October 2, together with the recommenda tion s made at that time* A fte r fu rth e r inform al aiscvission, at 5s40 o ’ clock p* m. the conference adjourned u n t il 10:00 o ’ clock a . m. Thursday, October 12, when they were to go into jo in t conference with the Federal Reserve Board and Federal Reserve Agents to discuss the Board’ s program on Federal Reserve Credit P o lic y . Reproduced from the Unclassified I Declassified Holdings of the National Archives I, E X C ERPT FROL'! THE M I NUTES OP THE G O V E R N O R S ’ CONFERENCE, MEETING OF OCT. 10-12, 1922^ /f - t d A d d i t i o n to P e r s onnel of Committee on Centralized E x e c u t i o n of Purchases and Sales of Government Securities b y Federal Reserve Banks. U p o n m o t i o n of Governor Seay, it was VOTED that Governor Fancher be m a d e a m e m b e r of the Committee o n Centralized E x e c ution of Purchases and Sales of Government Securities b y Federal Reserve Banks. ~ (14) ^ Reproduced from the Unclassified I Declassified Holdings of the National Archives E x c e r p t M i a u t e f L o f , Cgnfareafl* of Governors* Qctol^ IfeMk 192£ j q _/ | • Pursuant to c a ll o f the Chairman, a meeting of the Commit* tee (Committee on Centralized Execution o f Purchases and Sales o f Government Securities by Federal Reserve Banks)* was held at the Federal Beserve Bank o f New York on October 2, 1922, at 10*30 a* m» The following were presents Messrs* Strong, McDougal, Horse, Harris and Dr. K ille r o f the Federal Beserve Board, and others in attendance daring the course of the meetir^ were: Messrs. Fancher and W ills o f the Federal Beserve Bank of (H.eveland, Governor Wellborn of the Federal Reserve Bank o f Atlanta, Deputy Governor Case o f the Federal Beserve Bank of Wen York who acted as seoretary o f the meeting* The Chairman offered fo r the consideration o f the Committee a suggested report to be submitted a t the coaingGovernors* Con ference on October 10, 1922* The report Has read and on motion was unanimously approved* Consideration was given to the recommendation o f the Fed e ra l Advisory Council a t i t s meeting on September 26, 1922, in re* spect to the subject covered by Topic #8, as follows; "Should there be any change in the e a rlie r recommendations made by the Council in this regard, and reference is made to recom■s. mendation No, 9 o f the Proceedings of the Council, A p ril 28, 1922.* *8ame o f Committee added * F.H.G. Reproduced from the Unclassified / Declassified Holdings of the National Archives and the Council*s reply: "The Council reiterates its recommendation that the Federal Reserve Banks in their purchases of government obligations should not be governed by the necessity of covering their fixed charges and earning their dividends. The Council is strongly of the view that open market operations, particularly in so far as they touch investment in government securities, should be carried on under a uniform policy by the System as a whole. Council has learned with great satisfaction of the organization of a committee of Governors having supervision of transactions in government securities by the Federal Reserve banks* "In the Council*s opinion, the policy of the Federal Reserve System as a whole should be at this time not to increase any further its investments in Government securities." A f u ll discussion of this recommendation followed and i t was voted to report to the Governors' Conference that the Committee concurred in the recommendation of the Advisory Council, In contixnxing the discussion of this subject, the Chairman was requested to express to the Governors' conference the further views of the members of the Committee, which were substantially as follows: "Upon reviewing the investment operations of the Federal Reserve Banks during the year 1922 the Committee believes that there Reproduced from the Unclassified I Declassified Holdings of the National Archives w ill be no dissent to the proposition that in purchasing Government securities too much attention must not be given to the considera tion of earnings and dividends. Dae to the fact that liquidation was s t i l l in process and that the money market was easy, with low rates, apparently no particular harm has resulted from these opera tions during the fir s t half of the year. During the second half of the year the situation has chafed and with that change there has arisen a need for a different policy, the b elief being that increas ed attention mist be paid by the System to the bearing of the invest ment operations of the Federal Reserve Banks upon the money market* "At the present time indications point to increasing demand for loan funds which has been most in evidence in the New York market during recent weeks* The Committee is therefore of the opin ion, in view of present conditions, that th® investment policy of the Federal Reserve Banks, at least for the present, should give but minor consideration to the question of earnings and constant consideration to the effects, both directly and indirectly, which open market operations in Government securities have upon the con dition and the course of the money market and the volume of credit. Looking at things from this standpoint, the committee, without wishing to lay down any invariable course of action, is nevertheless unanimously of the opinion that, with the heavy Treasury operations impending during the next eight months, there should be a well con sidered policy of systematically regulating the dealings in United Reproduced from the Unclassified I Declassified Holdings of the National Archives -4States securities, with particular reference to the course of the money market and to the operations of the Treasury as one of the most important factors of the money situation, and recommends to the Federal Reserve Board the approval of such a policy. "The Committee recommends to the Conference that the Fed eral Reserve Banks continue at regular intervals to make necessary reports of earnings and investments to the Committee, which the Committee w ill, in turn, distribute to a l l Federal Reserve Banks. "In view of the foregoing, the Committee further requests the Conference to add to the duties of the Committee the making of recommendations from time to time to each Federal Reserve Bank as to the advisability of purchases or sales of Government securities, which recommendations w ill in every case receive serious consider ation by the officers or directors of the several banks. "It was further voted that a recommendation be made to the Governors1 Conference that the Committee be continued until the Spring Conference, and that the name of £• R. Fancher, Governor of the Federal Reserve Bank of Cleveland, be added to membership.* Reproduced from the Unclassified I Declassified Holdings of the National Archives 3 Excerpt froa StenonranMn o f Conference of Governor a. October 10-12. 1928 j Q f) - FIRST REPORT OF COMKimE OF GOVERHQRS OH CEHTHALIZED EZECDTIOB OF PURCHASES AHD SAI.BS OF GOVERHMEBT SECURI TIES BX FEDERAL RESERVE BASKS, SUBMITTED TO THE GOVERHORS' COfiFEREHCE 08 0CT0BER10, 1922, COVERXHG PHIIOD FROM MAI 17, 1922, TO SEPTEMBER SO, 1922, IHCLUSIVE. The Committee presents herewith a b rie f survey o f i t s ac tiv ities and operations since i t s formation. Meetings. Formal meetings o f the Committee were held at the Federal Reserve Bank o f Hew Iork on May 16, July 12, and October 2, 1922. Reports* The Committee has sent to the Governor o f each Federal re* serve bank, to the Governor o f the Federal Reserve Board and to the Under Secretary of the Treasury, a weekly report showing (a ) opera tions fo r the account of the Treasury, (b ) transactions affecting the investment accounts o f the reserve hanks, (e ) advances to deal ers in Government securities under sales contract agreements, and (d ) market conditions affecting Government securities in the several d is tric ts . Distribution o f Treasury Orders. In handling a l l transactions covering purchases and sales o f Government securities fo r account o f the Treasury Department, i t has been the custom o f the Committee to transmit by wire such orders to the other reserve banks requesting them to advise the Committee of market conditions existing in their d istric ts so that &. Reproduced from the Unclassified I Declassified Holdings of the National Archives -2- the Committee may be fo lly informed and in a position to distribute the orders to the beet advantage. In authorizing purchases the Committee follows the plan of having orders completed in one dis tric t before authorizing purchases in other districts* for this is obvious. The reason The Government security market is today a very sensitive one; dealers have branches and offices in many of the Federal Reserve cities of the country so that an order to purchase a given security in one Federal reserve city promptly affects the market in other centers. Except when the Treasury specifically requests that pur chases be made in a certain market it is the practice of the Com mittee, unless unusual conditions prevail in the New York market which make it imperative to make immediate purchases there, to give other Federal reserve banks the fir s t opportunity of purchasing the securities desired. Frequently, however, the other Federal re serve banks are unable to execute orders for large amounts of Trea sury obligations* Up to the present time the Kansas City and Dallas banks have not participated in these transactions at a ll . Upon completion of any pending orders notice is sent to a ll reserve banks. The ultimate purchases resulting from the distribution of The Treasury orders since the Committee began operations are as follows: Reproduced from the Unclassified I Declassified Holdings of the National Archives -3 - Boston #30,249,600 New York 83,900,250 Philadelphia 17,733,000 Cleveland 3,300,000 Richmond 199,300 Atlanta 2,532,200 Chicago 41,474,000 St. Louis 6,183,700 Minneapolis 1,200,000 San Francisco TOTAL 12.940.600 #199,712,550 Purchases and Sales for Fed eral Reserve Banks. When reserve banks desire to purchase or seU Government securities for their own accounts, it is the practice for such banks to notify the Committee of the contemplated transactions and of the general conditions in their district. I f such transactions are not likely to interfere with Treasury orders or pending operations of the Treasury, the Committee promptly so advises the banks. The exhibits hereto attached show purchases and sales for two different reserve banks during this period. In this connection i t is interesting to note that as of September 20, 1922, there was an actual decrease in the amount of Government securities held in the investment accounts of the reserve banks of approximately $168,000,000. from the high point of June 14, 1922. Reproduced from the Unclassified I Declassified Holdings of the National Archives During the period under review approximately $130,000,000 of Treasury certificates and notes held by the Federal reserve banks actually matured * It is therefore evident that the Federal Reserve Board's suggestion, that a l l banks allow their investments to run o ff without replacement, has been generally followed* Statements reflecting the result of the Committee's activi ties are appended as follows: Exhibit "A" - Government security Holdings of Federal Reserve Banks as Reported to the Committee of Governors at the Close of Business Sep tember £0, 1922* Exhibit "B" - Total United States securities, Exclusive of Pittman Act Certificates, Held by Federal Reserve Banks* Exhibit " C - Comparison of the Government Security Hold ings by Maturities of a l l Federal Reserve Banks Combined as of May 17, June 30 and September £0, 1922, Showing the Net Changes Between the last Two Dates* As the question of investment holdings of Government se curities is closely allied to that of earnings and expenses of the Federal reserve banks, the Committee has obtained from each Federal reserve bank a statement of estimated earnings and expenses for the year 1922, as of September 15, 1922, which is shown herewith (Exhibit nDn) * Respectfully submitted. Reproduced from the Unclassified I Declassified Holdings of the National Archives J -: - i Pursuant to call of the Chairman, a meeting of the Committee was held at the Federal Reserve Bank of New York on October 2, 1922, at 10.30 a. m. The following were present: /S-Z Messrs. Strong, McDougal, Morss, Norris and Dr. Miller of the Federal Reserve Board, and others in attendance during the course of the meeting were: Messrs. Fancher and W ills of the Federal Reserve Bank of Cleveland, Governor Wellborn of the Federal Reserve Bank of Atlanta. Deputy Governor Case of the Federal Reserve Bank of New York who acted as secretary of the meeting. The Chairman offered for the consideration of the Committee a suggested report to be submitted at the coming GovernorsT Conference on October 10, 1922. The report was read and on motion was unanimously approved. Consideration was given to the recommendation of the Federal Advisory Council at its meeting on September 26, 1922, in respect to the subject covered by Topic #8, as follows: "Should there be any change in the earlier recommendations made by the Council in this regard, and reference is made to recom mendation No. 9 of^jbhe^Proceedings of the Council, April 28, 1922." and the Council*s reply. “The Council reiterates its recommendation that the Federal Reserve Banks in their purchases of government obligations should not be governed by the necessity of covering their fixed charges and earning their dividends. The Council is strongly of the view that open market operations, particularly in so far as they touch invest- Reproduced from the Unclassified / Declassified Holdings of the National Archives -2 - ment in government s e c u r it ie s , should be c a rrie d on under a uniform p o lic y by the System as a whole. Council has learn ed with g re a t s a t i s fa c tio n o f the organ ization o f a committee o f Governors having super v is io n o f tran sactio n s in government s e c u rit ie s by the Federal Reserve banks. In the C o u n c il's opinion, the p o lic y o f the F ederal Reserve System as a whole should be at th is time not to in crease any fu rth e r i t s investments in Government s e c u r i t i e s . ” A f u l l discu ssio n o f th is recommendation fo llo w ed and i t was voted to re p o rt to the Governors1 Conference th at the Committee con curred in the recommendation o f the Advisory C ouncil. In continuing the d iscussion o f th is s u b je c t, the Chairman was requested to express to the Governors1 Conference the fu rth e r views o f the members o f the Committee, which were s u b s ta n tia lly as fo llo w s : "Upon review ing the investment operations o f the Federal Re serve Banks during the year 1922 the Committee b e lie v e s that there w i l l be no d issen t to the pro po sitio n th at in purchasing Government s e c u r it ie s too much atten tion must not be given to the consideration o f earnings and divid en d s. Due to the fa c t that liq u id a t io n was s t i l l in process and th at the money market was easy, with low r a t e s , apparently no p a r t ic u la r harm has re su lte d from these operations during the f i r s t h a l f o f the y e a r. During the second h a l f o f the year the s itu a tio n has changed and with that change there has a ris e n a need f o r a d iffe r e n t p o lic y , the b e l i e f being that increased atten tio n must be paid by the System to the bearin g o f the investment operations o f the Fed eral Re serve Banks upon the money market. Reproduced from the Unclassified / Declassified Holdings of the National Archives -3 - nAt the present time in d icatio n s point to in creasin g demand f o r loan funds which has been most in evidence in the New York market during recent weeks. The Committee i s th erefo re o f the opinion, in view o f present con d ition s, that the investment p o lic y o f the Federal Reserve Banks, at l e a s t f o r the present, should giv e but minor considera tio n to the question o f earnings and constant consideration to the e f f e c t s , both d ir e c t ly and in d ir e c t ly , which open market operations in Government s e c u r it ie s have upon the condition and the course o f the money market and the volume o f c r e d it . Looking a t things from th is standpoint, the committee, without wishing to la y down any in v a ria b le course o f actio n , i s neverth eless unanimously o f the opinion th at, w ith the heavy Treasury operations impending during the next eigh t months, there should be a w e ll considered p o lic y o f system aticallyr e g u la tin g the d ealin gs in United S tates s e c u r it ie s , with p a rt ic u la r refere n ce to the course o f the money market and to the operations o f the Treasury as one o f the most important fa c to rs o f the money s it u a t io n , and recommends to the F ed eral Reserve Board the approval o f such a p o lic y . nThe Committee recommends to the Conference that the Federal Reserve Banks continue a t re g u la r in t e r v a ls to make necessary re p o rts o f earnings and investments to the Committee, which the Committee w i l l , in tu rn , d is t r ib u t e to a l l Federal Reserve Banks. !lIn view o f the fo re g o in g , the Committee fu rth e r requests the Conference to add to the d uties o f the Committee the making o f recommendations from time to time to each F ederal Reserve Bank as to the a d v is a b i li t y o f purchases or s a le s o f Government s e c u r it ie s , Reproduced from the Unclassified I Declassified Holdings of the National Archives ~4— "which recommendations w i l l in every case re ceiv e serio u s considera tio n by the o f f i c e r s or d ire c to rs o f the s e v e ra l banks. " I t was fu rth e r voted that a recommendation be made to the Governors* Conference th at the Committee be continued u n t il the Spring Conference, and th at the name o f E. R. Fancher, Governor o f the Federal Reserve Bank o f C leveland, be added to membership." Reproduced from the Unclassified I Declassified Holdings of the National Archives Excerpt from the Recommendations o f the F ed eral Advisory Council September 26, 1922. TOPIC 8. Should there be any change in the p o lic y o f the Federal Reserve Banks carry in g considerable investments in United States Government s e c u ritie s? RECOMMENDATION: There i s no n ec essity o f any change in the e a r li e r recommendations made by the Council in th is re gard , and r e f e r ence i s made to recommendation No. 9 o f the Proceedings o f the C ouncil, A p r il 28, 1922. The Council r e it e r a t e s i t s recommendation that the F ed eral Reserve Banks, in t h e ir purchases o f government o b lig a tio n s should not be governed by the n ecessity o f covering th e ir fix e d charges and earning th e ir divid en d s. The Council i s stro n gly o f the view that open market operatio n s, p a r t ic u la r ly in so f a r as they touch investment in govern ment s e c u r it ie s , should be c a rrie d on under a uniform p o lic y by the System as a whole. Council has learn ed , with g re a t s a t is fa c t io n , o f the organ ization o f a committee o f Governors having su p ervision o f tran sactio n s in government s e c u rit ie s by the Federal Reserve Banks. In the C o u n c il's opinion, the p o lic y o f the F ed eral Reserve System, as a whole, should b e , a t th is time, not to in crease any f u r ther i t s investments in Government s e c u r it ie s . tmv S ir: Bocalpt &s ackB0^1eig»4 o f your lot tor of th# , jb u */^/ tL~ ^ <~ & st instwife# #aslo*tug copy of relmito* of mooting of ttoe C o m r 'llf m o f OoT»rodTs on oantraliaal control of parch*••• a&3 naleo of <Jo*ern»«Bt »*<58Fitio# hoH in Nov* “N T#rk on July 12, 1$®3, wfeiob *111 be brought to tho Attention o f the fb4or*l R•**!**• Boafd * Itery truly yoort, Go v a r n o r . Hr. f . B. H * t t « « m , ?*d«r*l R»««r*o Bank, How York, I . T. Reproduced from the Unclassified I Declassified Holdings of the National Archives £ 2. ~ ^ Q j \ 1' i^u-/ \ V of N ew Y ork Committee of Governors on Centralized Control of Purchases and Sales of Government Securities by Federal Reserve Banks. -j., July 21, 1 9 2 2 . My dear Governor Hardings I am enclosing copy of the Minute*^ [6f the 0 meeting of the Committee of Governors on Centralized Control of Purchases and Sales of Government Securities by Federal Reserve Banks held at New York on July 12, 1922. Secretary of the Committee Encl. Honorable W. P. G. Harding, Governor Federal Reserve Board, Washington, D. C. 53. - Reproduced from the Unclassified I Declassified Holdings of the National Archives Bear Mr. Barriaoa: I raoelpt of your l a tter of JjHfe,Ja»tant\aiid th*nk jou for sending m n 1) 2 ^ ..Mpy o f tht rtnutee o f tha M ating, h«ld on liay T^TtS, of the Co**ittee o f Governor* appointed J' at lb# resent Governor** Confer enoe to consider ^ ^ j adoption of a program fo r the orderly handling 7K-V4'vV'“ ^ of the buying and «e llla g o f Oovernaent eeenrltlee %y f9deral Beeerfe bask* tbrooch m m oentmlleed oontrol. I have read the ■ixratee with laterett aad ehall bring them to the »ttentloa of tbo other rraab^r* o f tha Board. I ' M * Tory truly ytmrt, o y • r n o r. Mr. George L. Barr!«on, Deputy Governor, Teleral R<n»er*a Bank, How Tork, tf. f . Reproduced from the Unclassified I Declassified Holdings of the National Archives Fe d e r a l R e s e r v e B a n k of N e w Yo r k IN R E P L Y P L E A S E R E FER TO Dear Governor Harding; v I am enclosing herewith a copy of tha.jainiLtes^of the Committee O h u 'H , of Governors appointed by the last Conference of Governors to consider the adoption of a program for the orderly handling of the buying and selling of Goremment securities by Federal Reserve Banks through some centralized con tro l. The Coamittee held a meeting in New York on May 16, and the minutes have now been distributed to a ll of the Federal Reserve Banks. Governor Strong has today suggested that Mr. Matteson of this bank act as the operat ing Secretary of the coamittee, and has advised each of the banks by tele gram that i f there is no objection to that appointment the committee w ill commence functioning tomorrow. Paragraph 64 of the minutes of the Governors* Conference, which were sent to you on May 11, goes into this question in some detail and records the votes of the conference on several other matters relating to the purchase and sale of Government securities. A review of that action of the Governors1 Conference w ill, perhaps, tend to clarify any matters in the enclosed minutes that do not seem to be perfectly clear. This whole program was reported to the Federal Reserve Board at the luncheon which the Board gave to the Governors in Washington on the last day ANSWE&SIIhe conference, and has also been fu lly discussed with Mr. Gilbert. The MAY 2 7£J95i5btary of the committee has been requested to keet^the Federal Reserve Board GovemorJ^pieiafeLy advised of its operations. Reproduced from the Unclassified I Declassified Holdings of the National Archives Excerpt from the Minutes o f Conference o f Governors* May 2 -4 , 1922 Pages 540-551 The Chairman: Now, th at leav es only one matter to be d iscussed , i t seems to me, and that i s the providing o f a method o f executing o rd e rs, where we have orders to buy or s e l l f o r our own account. Governor N o r r is : That does not in t e r e s t us because we never buy that way. The Chairman: Then you w u l d not be opposed to any p r in c ip le , which would not a ff e c t you, i f you have no such orders or no such prac t ic e . Governor N o r ris : We have never placed an order f o r the purchase o f government s e c u r it ie s . The Chairman: Suppose, Governor N o r r is , that we had a sudden change in conditions and your member banks came in and began to borrow very h e a v ily from you, and you might want to s e l l some o f those govern ment s e c u r it ie s ; how would you handle that? Governor N o r ris : 5 W e ll, th at o f course i f a th e o re tic a l p o s s i b i li t y . Our purchases have been so lim ite d and our a v a ila b le funds are so la r g e that as a p r a c t ic a l matter we do not consider i t a p o s s i b i li t y . The Chairman: But with other fe d e r a l re se rv e banks i t might be a p o s s i b i li t y . Governor N o r ris : The Chairman: Y es. Do you think i t i s a good thing to have a common p o lic y as to how these orders s h a ll be executed? Reproduced from the Unclassified I Declassified Holdings of the National Archives - Governor N o r r is : The Chairman: 2 - Y es. Would you want to be excepted from the operation o f that policy? Governor N o r r is : The Chairman: No. We would want to a v a i l ourselves o f i t . Then the question i s do we want to attempt to get to a common p o lic y with regard to the execution o f orders? Governor Fancher: The Chairman: Governor Do you mean s e lli n g orders? Both s e l li n g and buying. Morss: Now, what are you le a d in g up to? T e ll us the o b je ct o f i t . The Chairman: I am le a d in g up to one thing that i t seems to me has got to be done in some way, i f the views o f the Treasury Department are to be met, i f you do not want to meet them, that i s f o r you gen tle men to say. But the point i s un less orders are handled through some common source we w i l l be in the same f i x in s e l li n g as we may be in buying them in , and harm does a r is e from having no organized method. Governor Fancher: The Chairman: Have you a plan to suggest? I have n ot. The only plan that we have ever t r ie d was th is buying o f acceptances, where we had a form ula, as you w i l l remember, under which we used to d iv id e them around amongst the banks. Governor N o r r is : r e s u lt . There are only two p r a c t ic a l ways o f reaching the One i s by a c e n tra liz e d jo in t buying and s e l li n g agency, and the other i s by a p e r io d ic a l agreement on p ric e s . Reproduced from the Unclassified I Declassified Holdings of the National Archives - 5 - Governor McDougall: I would l i k e to say that we have, on a sound b a se , and c a r e fu lly , endeavored to develop some so rt o f a market in Chicago fo r s e c u r it ie s such as you are d iscu ssin g. As a matter o f in t e r e s t I would lik e to re p o rt that since the f i r s t o f the y e a r, up to A p r il 27th, we have handled in b e h a lf o f our member banks and on b e h a lf o f other fe d e r a l re se rve banks, tran sactio n s in Treasury c e r t i f ic a t e s and V icto ry n o tes, in number o f tra n s a c tio n s , 9,167, in volvin g the s a le and pur chase o f $318,000,000, The Chairman: That market has got to be protected, o f course. Governor McDougall: I mention that simply to have i t understood that we have a nice l i t t l e market that ?/e have handled on a s a t i s fa c to ry b a s is ; that we have worked a t a l l times in harmony with Mr, Kenzel, or a t le a s t we are co n ferrin g with him at a l l tim es, and we b e lie v e i t i s a good thing f o r the whole s itu a tio n to support that market. The Chairman: I s that in b i l l s and c e r t ific a t e s ? Governor McDougall; Lim ited to c e r t i f ic a t e s and V icto ry notes, and we are handling b i l l s , o f course, as you know. The Chairman: I t has been going through my mind that the p rin c ip a l market f o r these government s e c u rit ie s and notes i s in Chicago, Boston, P h ila d e lp h ia and New York. Of course they have a market out on the coast, but I suppose a good d eal o f that r e f le c t s the New York market, does i t n ot, Governor Calkins? Reproduced from the Unclassified I Declassified Holdings of the National Archives - 4 - Governor C alk in s: other case. Yes, and to some extent that i s true in every The P h ila d e lp h ia , Boston and Chicago markets r e f le c t the New York market con stan tly. The Chairman: The r e fle c t io n i s both ways. How would i t do to have a committee o f those banks th at are a ffe c te d to work out a program f o r the execution o f orders? Governor N o r r is : A c e n tra liz e d s e lli n g agency would, o f course, not in volve any n ec essity f o r the execution o f orders in a s in g le mar k e t. The agency could d is t r ib u t e those orders vAierever there was a s u b s ta n tia l market. The Chairman: A b so lu tely . I think i t would be a very unfortunate thing to have a common agency concentrate the market in any one p la c e . The Secretary does not want th at to happen. Governor Morss: Of course with resp ect to these lo c a l markets — I am speaking o f Boston, anyway — they are secondary and very much secondary to New York. But we are qu ite je a lo u s o f our own market and o f m aintaining i t both f o r b i l l s and government s e c u r it ie s , and we do not want to giv e up the use o f i t . The Chairman: And you should not. I think that would be d e t r i mental to the Treasury, i f we should give i t up fo r any other reason. Governor Morss: I t would seem to us as i f that was a backward step in the development o f the Boston market. W hile i t i s secondary to New York, s t i l l i t i s our own and we think a l o t o f i t even i f i t i s sm all. Reproduced from the Unclassified I Declassified Holdings of the National Archives - 5 - How much i s i t necessary to do in ad d ition to what we have done now? We are to be informed o f Treasury operations and we are to re f r a i n from going in to the market when there are Treasury operations in the market. I s there some other form o f cooperation that v/e can b rin g up by which no F ed eral reserve bank w i l l do anything, without examining conditions at le a s t? The Chairman: The same reason able co n tro l o f the execution o f o rd e rs , w ithin the gen eral lim ita tio n s o f p o lic y which we have d is cussed here ought to be e ffe c te d , i f y_________________ by some committee, by the Federal Reserve Board, i f you p lea se , or in some way, so as not to destroy these markets in the d iffe r e n t c i t i e s , but at the same time we w i l l have an o rd e rly execution o f orders in a l l o f the markets that need to be preserved. Governor Morsss Mr. Chairman, we are w i l li n g to cooperate with anybody on anything f o r a good purpose. The Chairman: Governor Do you think th at i s a good purpose, Governor N orris? Morss: The Chairman: Yes s i r . W i l l somebody make a proposal? Governor N o r r is : I f any Reserve Bank contemplates the p o s s i b i li t y o f having to s e l l any s e c u r it ie s , i t i s very much to i t s in t e r e s t to have the thing c e n tra liz e d . Anyone who knows anything about the s e c u rity market knows that i f two or three orders come in a t the same time to s e l l , say one m illio n d o lla r s each o f a ce rta in one o f these s e c u r it ie s Reproduced from the Unclassified I Declassified Holdings of the National Archives - 6 - th at we are ta lk in g about, those orders become known to a l l the d e a le rs , and in stead o f there bein g inform ation go out as i t ought to go out that those orders are f o r three m illio n , the id ea w i l l get out that there are orders to s e l l t h ir t y m illio n in the market. s t a r t to get from under and the p ric e w i l l run o f f . Everybody w i l l I f there were a c e n tra liz e d s e l li n g agency and three orders to s e l l a m illio n d o lla r s in bonds came in , the people who were attending to the execution o f that order would not s e l l the three m illio n a l l at once in the market i f i t was s o f t , but they would w a it, and would s e l l h a l f a m illio n or a m i l l i o n , , and would handle the thing in such a way that i t would enable them to get a b e t te r p ric e f o r the s e c u r it ie s . The Chairman: There i s no question about the d e s i r a b i l i t y o f c e n tra liz e d execution o f o rd e rs. What would you propose Governor N orris? Governor N o r ris : That as to orders placed in the market to buy and s e l l f o r account o f F ed eral reserve banks, that they be given to a committee which w i l l execute those orders in accordance with th e ir own b e s t judgment and d is c re tio n and d is t r ib u t e the s a le in the e x is t ing markets in proportion to the s iz e o f those markets with regard to the l o c a l demand and supply, and that the r e s u lt s o f the purchases or s a le s be pro rated among the banks having orders in a t the time. The Chairman: Who would you suggest as a committee, a committee o f Governors to d eal with the matter? Reproduced from the Unclassified I Declassified Holdings of the National Archives - 7 - Governor N o r ris : Yes* chairman o f that committee. about h is lo c a l market. but i t i s mine own." Of course someone from New York should be I f e e l ju s t the way Governor Norss f e e ls In the words o f the poet, f,I t i s a poor th in g, There are other markets that ought to be pre served----The Chairman: Obviously Chicago, obvio u sly Boston and obviously San Fran cisco. Governor C alkins: I s n Tt i t true that the existence o f a market in the vario u s fe d e r a l re se rv e d i s t r ic t s i s only a matter o f degree. The la r g e s t market in New York, the next one may be Boston or Chicago, fo r a l l I know, and whatever Governor Morss has said about p reserving the market i s a p p lic a b le to a l l o f the re se rv e bank c i t i e s , I am en t i r e l y in sympathy with the proposal o f Governor N o r r is , but i t should not be made with such p ro v isio n s as to imply or put in to operation the id ea th at there are only one, two or three markets in the country. Governor N o r ris : I d id not put i t in th at way. I s a id with regard to a l l e x is tin g markets. The Chairman: Vfoy not have a committee o f those fo u r governors who have been named who are nearby, and have in stru ctio n s given to them, i f you p le a se , to have due regard to a l l o f the markets in a l l o f the tw elve reserve c i t i e s . Governor C alk in s: I think a committee o f fo u r i s too la r g e . you w i l l make i t a committee o f three I w i l l second the motion. If Reproduced from the Unclassified I Declassified Holdings of the National Archives - The Chairman: 8 - That i s immaterial to me. Governor C alk in s: I make a motion th at a committee o f the Governors o f the New York, Chicago and Boston banks he appointed. Governor Morss: I think that goes p re tty f a r . I do not see why we should not have some s o rt o f bureau o r committee or something which, i f any F ed eral reserve bank wishes to go in to the market, would be in a p o s itio n to re c e iv e in q u ir ie s from the rese rve banks as to co n d itio n s, g iv in g some in d icatio n to the committee o f what they want to do or propose to do, and keep the committee thoroughly informed so that i f any bank was not informed o f conditions i t could inform i t s e l f o f them on short notice and the matter could be taken care o f in that way. are l i k e l y to in q u ire o f New York. York and Boston. We VJe have brokers th at are in New We in q u ire o f them and keep ourselves w e ll posted. I should be very g la d i f there was a committee that we could ask about conditions. tio n We could probably g iv e the committee some in d ic a o f what we thcqght we would lik e to do and get an expression o f opinion from them as to whether i t was an opportune time or not to do th a t, but I do not think we should go much fu r t h e r . The Chairman: Yftiy not have the question o f o rd e rly method o f executing orders re fe rr e d to th is committee? Governor C alk in s: I was about to o f f e r a motion th at the matter o f working out an o rd erly and proper method o f executing orders to buy and s e l l government s e c u rit ie s be r e fe rr e d to a committee c o n sist ing o f the Governors o f the New York Bank, the Chicago Bank, the Reproduced from the Unclassified I Declassified Holdings of the National Archives - 9 - Boston Bank and the P h ila d e lp h ia Bank. Governor Fancher: The Chairman: I w i l l second that motion. I s there any fu rth e r discussion? (There was no fu rth e r d iscu ssio n and the motion, being duly seconded, was c a r r ie d .) Reproduced from the Unclassified I Declassified Holdings of the National Archives / Excerpts from the Minutes of the Governors Conference, May 2 - 4, 1922. (c) Policy as to amount of investments The secretary then read to the conference Secretary Mellonfs letter of April 25, 1922,/ addressed to Governor Harding, in respect to the investment of Federal Reserve Banks in Government securities. The chairman referred to another letter^ addressed by Secretary Mellon to Governor Harding, dated April 29v 1922, stating that the Secretary is interested in what the Federal Reserve Banks1 position will be in re gard to investments in Government securities in view of the further de liberations of the conference, and in vievf of the recommendations of the Federal Advisory Council. After a long discussion of the letters referred to and of the policy of the several Federal Reserve Banks in respect to the pur chase of Government securities, it was, upon motion of Governor McDougal, VOTED to be the sense of the conference that each governor recommend to his directors that it be the policy of the bank to in vest in Government securities only to the extent that it may be neces sary from time to time to maintain earnings in amounts sufficient to meet expenses, including dividends and necessary reserves. Governor Norris voted ,!yes,f with the understanding that his action carries no reflection on anything that the Federal Reserve $ t Reproduced from the Unclassified I Declassified Holdings of the National Archives - 2 - Bank of Philadelphia has already done in respect to the purchase of Government securities. (d) Disposition of Present Investments in Excess of. Earning Requirements Upon motion of Governor McDougal, it was VOTED that if the estimates of expenses and earnings for the current year to be made by each Federal Reserve Bank in accordance with the vote taken under sub-paragraph (a) of this paragraph, show that the present investments will give an excess of earnings over ex penses, it will be the policy of the Federal Reserve Banks to permit these investments to run off, rather than to sell them in the market. (e) Transactions direct with member banks Upon motion of Governor McDougal, it was VOTED that the principle should be adopted that nothing should prevent Federal Reserve Banks from buying Government securities from or selling them to their own member banks, provided there is no violation of the principles defined in previous votes. (f) Centralization of purchases and sales In order that Federal Reserve Banks, in placing both buying and selling orders for their own account will not destroy the market or compete with one another, it was moved by Governor Norris, that all orders to buy and sell for account of any of the Federal Reserve Banks shall be given to a committee which shall execute such orders in ac cordance with its best judgment, and which shall distribute the Reproduced from the Unclassified I Declassified Holdings of the National Archives execution of the orders among the different markets as circumstances might prompt, and that orders so executed be pro rated among those banks having placed orders with the committee. In discussion of this motion it was felt that the methods by which this committee should act might best be determined after further consideration by the committee itself* Yi/hereupon, upon motion of Governor Calkins, it was VOTED that the governors of the Federal Reserve Banks of Boston, New York, Philadelphia and Chicago be made a committee for the purpose of studying this question and working out an orderly program for handling the buying and selling of Government securities by Federal Reserve Banks through some centralized control. Reproduced from the Unclassified / Declassified Holdings of the National Archives EXCERPT FROM THE RECOMMENDATIONS OF THE FEDERAL ADVISORY COUNCIL, APRIL 28, 1922. Reooimiiendation 9: The Council has read with interest the letter of the Secretary of the Treasury^to the Governor of the Federal Reserve Board dated April 25, 1922,/relative to investments of Federal Reserve Banks, m...... . • ' ■Jl in which letter the Secretary requested the consideration of the subject by the Federal Advisory Council. The Council congratulates the country upon enjoying a financial administration which takes the enlightened point of view that the Federal Reserve System should not be used for the purpose of carrying the Govern m e n t s obligations. Many countries of Europe would have been saved from some of their most serious financial difficulties, if equal wisdom had governed their policies. The Council is also in sympathy with the point of view expressed by the Secretary of the Treasury that the Federal Reserve Banks should avoid excessive investments in Government securities, even of a short maturity. The Council is fully in accord with the views implied that the Federal Reserve Banks should by preference seek investments in the fields of such bills of exchange as they can purchase in the open market. The Council is of the view, however, that the particular cir cumstances prevailing at present must be borne in mind, especially the present high percentage of reserves of the System. Moreover, if the Federal Reserve Banks should entirely liqui date their holdings of Government obligations, they would thereby lose all power of influence on the banking situation of the country, in case excessive ease of money should develop, threatening a new era of infla tion. In such times, it is of the utmost importance that the Federal Reserve System should be able to dispose of its holdings, thereby throwing the Reproduced from the Unclassified I Declassified Holdings of the National Archives April 28, 1922 — page 2 burden on the member banks and thus exercising a restraining influence. The floating supply of bills at present is extremely limited. Aggressive buying of acceptances would, no doubt, tend further to reduce the rate at which these acceptances could be bought, and it might destroy to a certain extent at least the distribution of acceptances among a large part of buyers— the so-called acceptance market--which has been built up with no little effort. “ While the Council believes at the same time that the Federal Reserve System would be well advised in making efforts to increase its holdings of acceptances, there is no doubt that the Federal Reserve Banks as a whole can not avoid at this time, for the reasons above explained, investing very substantial amounts either in Government Bonds, Certifi cates of Indebtedness, or warrants. Of these three, no doubt, the short term Treasury Certificates are the most suitable as investments for the Federal Reserve Banks. Bearing in mind that the capital and surplus of the combined Federal Reserve Banks amount to approximately $300,000,000, the Council does not feel that there is just cause to criticise the Fed eral Reserve Banks for having invested in Treasury Certificates and short term Government obligations up to an amount which is not largely in ex cess of their capital and surplus, and which, considering the amount of their assets, constitutes only a small part of their resources. The Council is still of the opinion that the Federal Reserve Banks should avoid investing in long term Government bonds. The Council further urges the Federal Reserve Banks when making any purchases of short term Government obligations, that such purchases should not interfere with Treasury operations. In giving this view, the Council is in no way moved by any con- Reproduced from the Unclassified I Declassified Holdings of the National Archives April 28, 1922 — page 3 sideration of earnings of the Federal Reserve Banks, but stands entirely by the opinion expressed in its resolution of November 21, 1921, as fol lows : ’’The Board brought to the attention of the Council the matter of the increase in the reserves of the Federal Reserve Banks, and the apparent approach of the time when, as a result of the liquidation of borrowings by member banks, the Federal Reserve Banks will be seeking in vestment for their idle funds. The Board requested the Council’s opinion as to the wisdom of the Federal Re serve Banks1 investing these funds in United States Government bonds. "The Council stated that it is not disturbed by the fact that the earnings of the Federal Reserve Banks are decreasing because of the accumulation of idle funds. The Federal Reserve Banks were not created for profit and the Council is mindful of the fact that, as past experience has shown, times of temporary idleness of funds are bound to be followed by periods of greater demands for money, be they seasonal or emergency requirements. "Ihenever it may appear necessary for Federal Re serve Banks to seek investments in the open market, the Council would recommend that preference be given to obligations such as: 1. Bankers Acceptances. 2. United States Certificates of Indebtedness. 3. Such short term State and Municipal obliga tions as are permitted by the Federal Reserve Act.” Reproduced from the unclassified / Declassified Holdings of the National Archives EXCERPT PROM THE MINUTES OF THE ilsDERAL RESERVE BOARD, MEETING OF Memorandum dated April 1 Logan) a PRIL 14, 1922 sel, (Walter S. expressing the opinion that the Federal Reserve Board has legal right to impose any restrictions and limitations it may deem proper in the matter of the purchase of Government securities by Federal reserve banks for their own account* Also, letter dated April 14th,/from the Under Secretary of the Treasury,(S. Parker Gilbert) calling attention to recent increased purchases in the holdings of Government securities b y Federal reserve banks. Upon motion, ordered placed upon the program for discussion at the forthcoming Conference of Governors of the Federal Reserve Banks. (Uam.es in parentheses added — fhg) Reproduced from the Unclassified I Declassified Holdings of the National Archives . \ FEDERAL RESERVE BOARD 3 33,-*— X-3689 WASHINGTON a d d r e s s o f f ic ia l c o r r e s p o n d e n c e t o TH E FEDERAL RESERVE BOARD April 7, 1923 SETBJECT: Policy Governing Open Market Purchases by Federal Reserve Banks and the Administration thereof. Dear Sir: This is to advise you formally of the action of the Federal Re serve Board taken at its meeting of March 22nd, with respect to open market purchases by Federal Reserve Banks, and which was discussed at the recent conference between the Federal Reserve Board and the Governors of the Federal Reserve Banks* The Board has adopted the following principles with respect to open market investment operations of the Federal Reserve Banks: (1) That the titae, manner, character and volume of open market investments purchased by federal Reserve Banks be governed with primary ^ regard to the accommodation of commerce and business, and to the effect of | such purchases or sales on the general credit situation# ■« (2) That in making the selection of open market purchases, careful regard be always given to the bearing of purchases of United States Government securities, especially the short-dated issues, upon the market for such securities, and that open market purchases be primarily commercial investments, except that treasury certificates be dealt in, as at present, under so-called "Repurchase” agreement* In order to provide for the proper administration of the policy defined above, the Board fules that on and after April 1, 19^3» tti® present Committee of Governors on Centralized Execution of Purchases and Sales of Government securities be discontinued, and be superseded by a new committee known as the Open Market Investment Committee for the Federal Reserve System^ said committee to consist of fJtES-representatives from the Federal Reserve Banks and to “be uilder th£ general supervision of the Federal Reserve Board; and that it be the duty of this committee to devise and reoomtoefcd plans for the pur chase, sale and distribution of the open market purchases* of the Federal Reserve Banks in accordance with the above principles and such regu lations as may from time to tin® be laid down by the Federal Reserve Board* 35 Reproduced from the Unclassified I Declassified Holdings of the National Archives -2- X- 36S9 In accordance with the informal agreement made at the time of the last Governors* Conference, the membership of the Open Market In vestment Comn'iittee for the Federal Reserve System, will be identical with the mem'bership of the old Committee, as follows: Federal Federal Federal Federal Federal Reserve Reserve Reserve Reserve Reserve Bank Bank Bank Bank Bank of of of of of Boston Heto York Philadelphia Cleveland Chicago By order of the Federal Reserve Board* Wm- W. Hoxton, Secretary. To Governors of Federal Reserve Banks. Copies to Agents,
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