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Reproduced from the Unclassified I Declassified Holdings of the National Archives




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DECLASSIFIED'

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No M a teria l r e c e iv e d in Records f o r

19^3

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , 0 .

FEDERAL

RESERVE
M

B A N K OF

inneapolis

2, M

MINNEAPOLIS

innesota

July 8, 19t>2

Mr, Winfield W. Riefler, Secretary
Federal Open Market Committee
Board of Governors of the
Federal Reserve System
Washington 25, D. C.
Dear Mr. Riefler:
We should appre ciate^^feiving an additional
fifteen printed copies of the June 19 $ 1952 amendment_
to the regulation of the Federal Open Market Committee.
Very truly yours,

MHS:D

MAILED

B. A. GARTER
http://fraser.stlouisfed.org/
i.
Federal Reserve Bank of St. Louis

M. H. Strothman, Jr.
Vice President

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

Fe d e r a l R e s e r v e B a n
Sa

n

Fr

a n c is c o

Sa n F

k of

20, Ca

l if o r n ia

July 7, 1952

Mr. Winfield ¥. Biefler,
Secretary, Federal Open Market Committee,
Board of Governors of the Federal Reserve System,
Washington 25, D. C.
Dear Mr. Riefler:
Thank you for the fifteen copies of the
/
June 19, 1952,/amendment to Section 8 of the Federal Open
m u n i ..................... ■ i i

i

'l"a
i

Market Committee Regulation -which you enclosed with your
letter of July 2> If available, we should like to have
(
fifty additional copies of this amendment.
Very truly yours,

C. E. Earhart,
President.

WILED
B. K carter



Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
-

Authority

^

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F. R. 638
Rev. S e p t .

1946

i

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Tprr,?^ ' w Tn o £ *

J

JUL11J952 ^
rqe

R E Q U E S T FOR P U B L I C A T I O N S AND R E L E A S E S !

\

FORM OF REQUEST
Telephone

LxJ

Memorandum

□

Letter

I

Mr. Sherman

□

Postal
I

O rd er f orm

□

card

Per sonal

ca ll

I

1

Person o r
organ i z a t ioji

P r e s id e n ts o f &j-1 -c •
f

A tte n tio n of:

_ _ _ _ _ -----------------------------------------------------------------------------------------------

Street

_________________________ -----------------------------------------------------------------

City

address

and zone

State

Banks

___________________ _____________________________________________
------------------------------------------------------------------------------------------------------------

( L e t t e r s and la.bels sen t from H r. Sherman’ s o f f i c e )
No.
copies

Publications and Releases

Called
for

To be
sent

15 c o p ie s each o f Amendment to S e c t io n Wo* 8 o f the F ed era l Open Market
Committee t o be sen t to the fo llo w in g w ith accompanying l e t t e r signed
tjr Mr. W in fie ld ¥ . E i e f l e r , S e c r e ta r y , F ed era l Open Market Committee
dated July 3*

Mr* E rick son ,
Mr. S p ro u l,
Mr. W illiam s

L e t t e r s and la b e ls a tta ch e d .

F . B. Bank o f B oston
New York

Mr. Young

Chicago

P h ila d e lp h ia

Mr. Johns

S t . L ou is

Mr. P ow ell

M inneapolis

Mr. Leedy

Kansas C ity

Mr. Gidnqy

C leveland

Mr. Leach

Richmond

Mr. Biyan
Remittance received:.

(/ u ij



le tte r

A tla n ta
Complimentary.

Mr. G ijlbertF O ©<£0
Mr. ifyajrhaBt L S;a n Franc i s c o

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
Authority 1^> D • \

1

P "'H on
.
BOARD

OF G O V E R N O R S
UF I Mh
□ r THE.

FEDERAL RESERVE

JUL2 3 1952 /f*

j

SYSTEM L

WASHINGTON 25, D. C.
ADDRESS

O F F I C I A L .1 C O R R E S P O N D E N C E
TD

THE

BOARD

July 3, 1952

H

7 i

Dear Sir:
Supplementing uy letter of June 27, 19524 we
are enclosing 15 printed copies of the amendment to
section 8 of the Federal Open Market Committee regulation
adopted effective June 19, 1952.

Should you need addition­

al copies of this amendment, please let us know and we
shall be glad to furnish them to you.
Very truly yours,

Federal Open Market Committee

Enclosures

TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS




Reproduced from the unclassified / Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , Q .

[M il/:
/M *

FED E R A L R E S E R V E BANK
OF D ALLAS

rec* w n u it
d

nkm cj

JUL1 61952
R . R . G ILBER T
P R E S ID E N T

J u ly 1 ,

1952

?■ C> y y i
fl

Mr. Winfield W. Riefler, Secretary
Federal Open Market Coimnittee
Board of Governors of the
Federal Reserve System
Washington, D, C,
Dear Mr. Riefleri
f

I

acknowledge receipt of your letter of June 27/

referring to the action of the Federal Open Market Committee
at its meeting on June 19, 1952 with reference to purchases
by the Federal Reserve Banks of prime eligible bankers' ac­
ceptances in the open market.

It is observed that the Com­

mittee has fixed the minimum buying rate on acceptances at
1-3A




- 3 + 7 /

per cent per annum.
With best regards, I am,

Sincerely yours,

I

Reproduced from the Unclassified I Declassified Holdings of the National Archives

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distribu tion o f tiia Ara«adaeiit to Soctioa d o f th# Federal Qpon Market
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DECLASSIFIED '
Authority

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Supply Boo*
P tT rl«lon o f Btak O iXCTU attt

Mr. L eonard

Hr* Hortaatt

Mr. M yrlclt

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Mr. D w ight A llo n

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Reproduced from the Unclassified / Declassified Holdings of the National Archives

“ declassified *
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„

I

Authority

EC'D

JUL z
BOARD

1952

DF G D V E R N D R S
OF THE

FEDERAL RESERVE

Z--3471 (On office
copies only)
/ c ■i , .

SYSTEM

WASHINGTON 25, D. C.
ADDRESS

OFFICIAL
TO T H E

CORRESPONDENCE
BOARD

June 27, 1952.
:

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3

V

J

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C a rd ed

Dear Sir:
At the meeting of the Federal Open Market Committee on
June 19, 1952, the Committee adopted an amendment to Section 8
of the regulation of the Federal Open Market Committee in the form
set forth in the recommendations regarding bankers' acceptances
adopted at the meeting of the executive committee on April 21, 1952,
a copy of which was sent to you under date .of May 7, 1952^*r"5opys
*
of the amendment is enclosed.
—
The Full Committee also approved the recommendations of
the executive committee to the Federal Open Market Committee that:




(a) Each Federal Reserve Bank be authorized to pur­
chase prime eligible bankers’ acceptances in the open mar­
ket from banks and financially responsible experienced
dealers and to hold such acceptances in its own portfolio.
(b) The minimum buying rate on such prime eligible
bankers' acceptances shall be fixed by the Federal Open
Market Committee at this time at 1-3/4 per cent, subject
to change from time to time by the Committee in order to
carry out its policies.
(c)//,The effective rates at which a Federal Reserve
Bank may 'purchase bankers' acceptances shall be not less
than the minimum buying rate and shall be specified from
time to time by the Manager of the System Open Market Ac­
count in the light of market conditions and developments
and in accordance with any directives or limitations pre­
scribed by the full Committee or the executive committee
for the purpose of carrying out the current policies of
the Federal Open Market Committee. Any change in the ef­
fective buying rates on bankers' acceptances shall be
promptly reported by the Manager of the Account to the
Federal Open Market Committee.n
,
■L
J

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , p .

/
At the m eeting o f the e x e c u t iv e committee o f the F ederal
Open Market Committee a ls o h e ld on June 19> the e x e c u tiv e committee
n oted th a t the F ed era l Open Market Committee in adopting the recom­
m endations s e t f o r t h above f ix e d the minimum buying r a t e on bankers
a ccep ta n ces a t one and th ree q u a rters p er c e n t, s u b je c t t o change
from tim e to tim e by the Committee.
V ery t r u ly y o u r s ,

Winrxeia w» mexxex-,
e ua,i.,y,
Federal Open Market Committee

Enclosure

TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
'

I

Authority

/
AM
EEDIIE1TT 10 REGULATION OF THE FEDERAL OPEN MARKET COMMITTEE

The Federal Open Market Comnittee amended its Regulation,effective June 19, 1952, by changing section 8 thereof to read as
follows;
SECTION 8 .

OTHER OPEN M
ARKET OPERATIONS

Subject to directions of the Committee and the following
conditions, each Federal Reserve hank may engage in open
market operations other than the purchase or sale of Government
securities?
(1) Each Federal Reserve hank, as may be required from
time to time "by the Committee, shall report all such trans~
actions to the Secretary of the Committee,
(2) Only acceptances and bills of exchange which are of
the kinds made eligible for purchase under the provisions
of Regulation B of the Board of Governors of the Federal
Reserve System may be purchased* Provided, That no obliga­
tions payable in foreign currency shall be purchased or
sold for the account of the Federal Reserve teank except in
accordance with directions of the Committee*
(3) Only bills, notes, revenue bonds, and warrants of
States, counties, districts, political subdivisions, or
municipalities which are of the kinds made eligible for pur­
chase under the provisions of Regulation E of the Board of
Governors of the Federal Reserve System may be purchased*
(4) Ho Federal Reserve bank shall engage in the pur­
chase or sale of cable transfers for its own account except
in accordance with the directions of the Committee*




Reproduced from the Unclassified I Declassified Holdings of the National Archives

~~

DECLASSIFIED'

Authority ^

>Q • \ b G ^ (

i

Mr. Tvoaey
Miss Dorsey

?!•*»•

m . . f # K.6 mailing list, eopie* o f
te

the Amendment to Federal Open Market Committee, Regulation Relating to
Open Market Operations of Federal Reserve Banks*
completed send all copies to the Supply Room.

cc:

Mr. Johnson

MEDilec
ft.**.




Vhen the printing is

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
Authority l ^ i Q • \

^ 1

June 27, 195&.
Supply Room—

Mr. Illek

Miss Dorsey

Flea## do not make any building distribution of copies of
the Amendment to Federal Open Market Committee, Regulation R ela tin g
to Open Market Operations of Federal Reserve Bunk#,

c c : Mr. Johnson

MS&iltc




Reproduced from the Unclassified I Declassified Holdings of the National Archives

“
'

DECLASSIFIED'
Authority ^

>D

\

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1

’ t:

S #

JUN 2 7 1952 ^

i J .
r - i 0 fh 1 ... j
L

k m , m m m to kbgulatiok or b e federal opih m r o r coiaaftEE

Tbs Federal Open Market Committee amended it* Regulation,
e ffe ctiv e June 19$ 1952, by ©hanging section 8 thereof to read ae

O

follow sI

m m t m 8.

oihkr opek wuraif operations

Subject to direction* o f the Committee and the follow ing
conditions, each Federal Reserve bank may engage in openmarket operation* other than the purchase or sale o f Government
securities*
(1) Each Federal Reserve bank, ae say be required fmm
tlae to tine by the ©oamittae, sh a ll report a ll such trans­
actions to the Secretary o f the Committee.
(2 ) Only acceptances and b ills o f exchange which are
o f the kinds made e lig ib le fo r purchase tinder the provi­
sions o f Regulation B o f the Board of Governors o f the
federal teeerve System say be purchased! Provided, that
no obligations payable in foreign currency1
'"''shall Be pur­
chased or sold fo r the account o f the Federal Reserve bank
except in accordance with d irection s o f the Committee.
(3) Only b ills * notes, revenue bonds# and warrants o f
States, counties, d is tr ic ts , p o litic a l subdivisions, or
m unicipalities which are o f the kinds mad* e lig ib le fo r
purchase under the provision*, o f Regulation 1 o f the
Board o f Governor* of the Federal Reserve System may be
purchased.
(U) So Federal Reserve bank shaH engage in the
purchase or sale of cable transfers fo r it * own account
except in accordance with the direction* o f the Committee.

HHHijo
6-20-52

V



p o p

>

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

/

RECOMMENDATIONS REGARDING BANKERS' ACCEPTANC

/
I.

The executive committee recommends to the Federal Open Mar-

ket Committee:
That section 8 of the Regulation of the Federal Open Market
Committee be amended to read as follows:

"SECTION 8.

-

OTHER OPEN MARKET OPERATIONS

"Subject to directions of the Committee and the following
conditions, each Federal Reserve bank may engage in openmarket operations other than the purchase or sale of Government
securities:
"(1) Each Federal Reserve bank, as may be required from
time to time by the Committee, shall report all such
transactions to the Secretary of the Committee.
"(2) Only acceptanpes and bills of exchange which are
of the kinds made eligible for purchase under the provi­
sions of Regulation B of the Board of Governors of the
Federal Reserve System may be purchased: Provided, That
no obligations payable in foreign currency shall be pur­
chased or sold for the account of the Federal Reserve bank
except in accordance with directions of the Committee.
”(3) Only bills, notes, revenue bonds, and warrants of
States, counties, districts, political subdivisions, or
municipalities which are of the kinds made eligible for
purchase under the provisions of Regulation E of the
Board of Governors of the Federal Reserve System may be
purchased,
"(it) No Federal Reserve bank shall engage in the pur~
chase or sale of cable transfers for its own account
except in accordance with the directions of the Committee."
II.

The executive committee also recommends to the Federal Open

Market Committee that:
A.

Each Federal Reserve Bank be authorized to purchase prime

eligible bankers1 acceptances in the open market from banks and financially




WW '
>
'■

1

—
Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '
Authority

X ^\

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responsible experienced dealers and to hold such acceptances in its own
portfolio.
B.

The minimum buying rate on such prime eligible bankers’

acceptances shall be fixed by the Federal Open Market Committee at this
time at 1 - 3 /h per cent, subject to change from time to time by the Com­
mittee in order to carry out its policies.
C.

The effective rates at -which a Federal Reserve Bank may

purchase bankers' acceptances shall be not less than the minimum buying
rate and shall be specified from time to time by the Manager of the
System Open Market Account in the light of market conditions and develop­
ments and in accordance with any directives or limitations prescribed by
the full Committee or the executive committee for the purpose of carrying
out the current policies of the Federal Open Market Committee.

Any change

in the effective buying rates on bankers' acceptances shall be promptly
reported by the Manager of the Account to the Federal Open Market
Committee.

April 21, 1952.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
Authority

>Q • \

|
^ j

|

L
BDSSIBL1, REVISION OF SECTION 8

SECTION 8.

_

OTHER OPEN MARKET OPERATIONS

Subject to directions of the Committee and the following
conditions, each Federal Reserve bank may engage in open-market operations
other than the purchase or sale of Government securities:
(1) Each Federal Reserve bank, as may be required
from time to time by the Committee, shall report all such
transactions to the Secretary of the Committee.
(2) Only acceptances and bills of exchange which are
of the kinds made eligible for purchase under the pro­
visions of Regulation B of the Board of Governors of the
Federal Reserve System may be purchased:

Provided, That

no obligations payable in foreign currency shall be pur­
chased or sold for the account of the Federal Reserve bank
except in accordance with directions of the Committee.
(3 ) Only b i l l s , n o t e s , revenue bonds and warrants o f
S t a t e s , c o u n t ie s , d i s t r i c t s , p o l i t i c a l s u b d iv is io n s o r m u n ici­
p a l i t i e s which are o f the kinds made e l i g i b l e f o r purchase
under the p r o v is io n s o f R eg u lation E o f the Board o f G overnors
o f the F ed eral Reserve System may be purchased.

(U) No Federal Reserve bank shall engage in the purchase
or sale of cable transfers for its own account except in
accordance with the directions of the Committee.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

~

DECLASSIFIED *

Authority

>Q • \ b G ^ j

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CHANGES WIICH IOULP BE M
ADE BY PROPOSED REVISION OF
' SECTION~8 OF OPEN M
ARKET REGULATIONS

The p roposed r e d r a ft o f s e c t io n 8 o f th e R egu lation o f
the F ed eral Open Market Committee would make o n ly th e fo llo w in g
changes:
1.
In subparagraph ( 2 ) , w ith r e s p e c t to acceptan ces and
b i l l s o f exchange, th e r e d r a ft would om it th e words "and the r a te s o f
d isco u n t s h a ll be e s ta b lis h e d in a ccord a n ce w ith the p r o v is io n s o f
s e c t io n l ii( d ) o f the F ed eral Reserve A c t", so th a t the p r e s e n t p ro­
cedure f o r e s ta b lis h in g r a te s on purchases o f b a n k ers1 a ccep ta n ces
would no lo n g e r be fo llo w e d and such r a te s "would h e r e a ft e r be f i x e d
by th e Open Market Committee as i s now the ca se w ith r e s p e c t t o r a te s
on repurchase agreements co v e rin g Government s e c u r i t i e s .
2 . In the same subparagraph (2 )$ the p r o v is o would b e g in
sim ply with the word "P rovid ed " in stea d o f th e words "P ro v id e d , f u r t h e r " ,
3.
In subparagraph ( W , w ith r e s p e c t t o d e a lin g s in ca b le
t r a n s fe r s , th e p r o v is o r e la t in g t o d e a lin g s through the Habana Agency
would be om itted as o b s o le t e .

2 -2 5 -5 2




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
A u th o r ity

K®

F. R. 638
Rev. S e p t. 1946

r

niFH SECTION'

‘ JAW 2
R E Q U E S T FOR P U B L I C A T I O N S AND R E L E A S E S ;

7 1947
p

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FORM OF REQUEST
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organ i za t i on
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City

call

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of:

address

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Remittance received:




C j

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Called
for

To be
sent

Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C LA S S IF IE D '
A u th o r ity

RC
E

F. R. 638
Rev. S e p t. 1946

^

?ILES SECTIO
il

241947
1

R E Q U E S T FOR P U B L I C A T I O N S AND R E L E A S E S

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9

Date.

FORM OF REQUEST
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Compl imentary.

Mailed

Ife W
atkin
jL




By.

•

•

•

•

November 1 3 , 1946.

M iss Eleanor Howard, L ib r a r ia n ,
P itts b u rg h Branch,
F ed era l Reserve Bank o f C lev ela n d ,
P itts b u rg h 1 9 , P en n sy lvan ia.
Dear miss Howard:
In a ccord a n ce w ith the re q u e s t in you r l e t t e r o f
November B, we a re sending t o you under sep a ra te c o v e r fo u r
c o p ie s o f each o f the fo llo w in g !
R ules o f O rg a n isa tio n and Rules o f
P roced u re (Board o f G overnors o f
th e F ed era l r e s e r v e S y stea )
Rules on O rg a n isa tion and I n fo r iia tio n
and R ules on P roced u re (F e d e ra l Open
Market Committee)
Meaorandum on Economic O u tlook , by
Chairman E ccle s
»'e r e g r e t th a t we no lo n g e r have c o p ie s o f the ad d ress by
Mr. W o o d lie f Thoaas e n t i t l e d "P ostw ar Monetary Problem s and
P o lic ie s ."
Very t r u ly y o u rs ,

S u p e rv is o r, P u b lic a t io n s S e c t io n ,
D iv is io n o f A d m in istra tiv e S e r v ic e s .
BLCtgaa-------




TF E COPY

i ku M
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X 7 R G II B R A N C H

F

e d e r a l
of

R

e s e r v e

B

a n k

Clev elan d

P i t t s b u r g h 19, Pa .

November 8,

Board o f Governors o f the
F ederal Reserve System
Washington 25, D.C.
Deer S i r s :
W would a p p recia te r e c e iv in g fou r c o p ie s o f each o f the
e
f o llo w in g p u b lic a t io n s f o r our in form a tion f i l e s :
Postwar Monetary Problems & P o l i c i e s , by Wood l i e f Thornes.
Memorandum on Economic O utlook, by M arrmer E c c le s .
Rules on O rgan ization & In form a tion , and Rules on Procedure
Issued Pursuant t o A d m in istra tiv e Procedure Act & F ederal
Reserve A c t. E f f e c t iv e September 11, 1946.
Rules o f O rganization * Rules o f Procedure Issued Pursuant
t o th e A d m in istra tiv e Procedure A ct, and Other R evelant
P r o v is io n s o f Law. E f f e c t iv e September 11, 1946.




Yours t r u ly ,

L ib ra ria n

1946

Reproduced from the Unclassified I Declassified Holdings of the National Archives

- .K - .r .l * a J B «

NOV 141946
J

»ov - 7 m

Mr. Martin U U t% m , Ubrarian,
Iat*roatio*ial Monetary Fmd,
Washington 6 , D. C.
Dear Slri
We a r e g U d t o c o a p ly w ith t h e r e q u e e t i n y o u r l e t t e r
o f M erab^ 4

« » * a c c o r d i n g l y m a r e aending y w i h e re w ith &

c o p y o f t h e F e d e r a l Open M arket C o w i l t t e e , » R u le s on O rg a n isa ­
t i o n and I n fo r m a tio n and E iilea on P r o c e d u r e .

Very truly yowa,

S. t* Carpenter,
Assistant Secretary,
Federal Open Market Cnwaittee,
fincloaure




F

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

D E C LA S S IF IE D *
A u th o r ity £ , Q .

if**D Xil F^lLhiio iai&
C'Xl
N O V I 41848

/^/IN TE R N A TIO N A L M ONETARY FUND
C able A ddress^
IN TER FU N D

W A S H IN G T O N 6 , D. C.

November 6, 1946

Dear Sirs
-




We shall appreciate receiving the "Rules on
Organization and Information, and Rules on Procedure*
September 11. 194-6 for the use of the International
Monetary Fund.
If there is a charge, please notify us before
nailingo
Thank you for your courtesy in this matter*

lours very truly,

Martin L. Loftus
Librarian

Federal Open Market Committee
Federal Reserve System
Washington 25, D»C«

o

Reproduced from the Unclassified / DeclMliWd'Holdings of the National Archives

DECLASSIFIED *

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October 4 , 1946*

Supply Boo*

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Please make the
and Information and Rules
and Rules o f Organization
la the building as in the

same distribu tion o f Rules on Organization
©a Procedure (Federal Open Market Coacaittee) t
and. Ernies o f Procedure (Board o f Governors)
case o f regulations.

KLCtmtc




FILE COPY

& O
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Reproduced from the Unclassified I Declassified Holdings of the National Archives

October 4 f 1946.
Mr. Twomey
Kiss Carmichael
Please sake the follow ing distribu tion of the Rules on Organisation and
Information and Rules on Procedure {Federal Open Market Coaiaittee) to the Federal
Reserve Banks*
Federal Reserve Bank of Boston
10
Bank of New fork
100
Bank o f Philadelphia
25
Bank o f Cleveland
2§
Federal Reserve Bank of Richmond
SO
Federal Reserve Bank o f Atlanta
IE
Federal Reserve Bank of Chicago
5
Federal Reserve Bank o f St*
is
IE
Federal Reserve Bank o f Minneapolis
100
Bank of Kansas C ity
2M
Bank of Dallas
5
Bank o f San Francisco
10
Total
552
cei Mail Roo*

ELCtgwi




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1 J L E G R A M
Board o f Governors
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Federal Reserve System

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M 17W A SH B IT

BO S 2 3 - 1 GOOA

BOARD

RE B O A R D 'S L E T E R AUGUST. J I E N I Y ^ E I G M T ,

ANT I C I P A T E T E N P R I NTED

C O P IE S OF F E D E R A L OPEN M ARKET CO M M ITTEE R U LE S O F O R G A N IZ A T IO N
AND PRO CEDURE S U F F IC IE N T




FOR OUR PU R PO SES
W IL L E T T

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OF PRO CEDURE AND F E D E R A L OPEN M A RKET C O M M ITTEE R U L E S ON O R G A N IZ A T IO N
AND IN FO R M A TIO N AND R U L E S ON PRO CEDURE W IL L MEET T H E R E Q U IR E M E N T S
OF T H IS O F F IC E AND B R A N C H E S . SO RRY REQ U EST YOUR L E T T E R S 2 3 R D AND
28T H WAS O VERLOOKED




M C L A R IN .

Reproduced from the Unclassified I Declassified Holdings of the National Archives

D E C LA S S IF IE D
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cm m m m

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TODAY.
W IL L R E Q U IR E TWENTY F I V E
;
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COM M ITTEE R U L E S




6 IM E Y .

C O P IE S F E D E R A L OPEN M ARKET

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N l N E T E m UNABLE TO LO C A TE YOUR

AUGUST T W E N T Y -E IG H T P L E A 8 E FORWARD COPY




W IL L E T T .

LETTER

f\

Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C LA S S IF IE D '
A u th o r ity

Q

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in f i l e s m a n m

TELEGRAM

SEP 2 31946 (M-

BOARD OF GOVERNORS
O F THE

£

FEDERAL RESERVE SYSTEM
LE A S E D W I R E S E R V IC E

WASHINGTON

Soptamber X9, 1946*

W h itte a o re - B o s to n

l u r e o u r l e t t e j r . o f A u g y jf £&, p le a a e w ir e r e g u ir a ^
m eats f o r a o p ie s o f F e d e r a l Open M arket C o w a itte e B u ie s oa
O r g a a ix e t io n aad I n f o m a t i o a and H ules on P r o c e d u r e ,




(Sijnad I S. f,C
t arpsntar
C a rp e n te r .

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED
r

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TELEGRAM

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->tP2 3 $4(5

.. otH /0

OF THE

FEDERAL RESERVE SYSTEM
L E A S E D W IR E SE R V IC E

WASHINGTON
September 19, 1946,

Oldney - Cleveland
Inre our letter of August 28, pleas® wire
rsq u lra m sn ta f o r o o p l « of F e d e r a l Open M arkat CcffimlUee
R uiag on O r g a n is a t io n and I n f o r a a t i o n and R u le* on P r o o a d u r e .

?S B. Carpenter
>
Carpenter*

^*

Reproduced from the Unclassified I Declassified Holdings of the National Archives

September 5, 1946

To?

Mr.,
Sir*
Mr,
Hr*
Mr*
Mr.
Mr.
Mr*
Mr*
Mr.

M orrill
Thuraton
fau lger
Smead
Barry
Thoatas
Test
Bethea
Leonard
Neleon

From

Mr. Carpenter

Attached are tcopies o f the Federal Open Market
CoHKittee Rules on Organisation a ad Info neat ion and
Mules on Procedure issued In co*pllance with section $
o f the Adminietratlve Procedure Act and approved by the
Oowulttee to become e ffe c tiv e September 11, 1946*

Attachment*




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...... .............-.............

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j.-.a .rd o f G o v e : f i o r ;
of the

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S y s t e m

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'94 6 ,^-P

WA00GC92W ASH L 4 6
BOARD

4

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SF 4 - 1 1 5 9

■ C A R P E N TER

R E U R LE T AUGUST 2 8 P L E A S E F U R N IS H US W IT H

1 0 A D D IT IO N A L C O P IE S OF

R U LES OF FE D E R A L OPEN MARKET M M M M K

C O M M IT T E E .




CLERK.

F o a m ..:

E. !•'. 0&rm,e

5

of

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S H A LL A P P R E C fA T E YOUR S E N D IN G US F I V E

C O P IE S .O F R E P R IN T S

OF F E D E R A L OPEN MARKET CO M M ITTEE R U LE S ON O R G A N IZ A T IO N AND
R U LE, ON PRO CEDURE MENT IONED YOUR L E T T E R AUGUST 2 8




YOUNG

‘

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X*.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

D E C LA S S IF IE D
A u th o r ity

T I L i O E i l '
J o a r d o f Gover n o r r
of the

; Q

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F e d e r a l R e s e r v e
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WB01GC98BD WASH J 5 6
CARPENTER

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!
1946 SE '/ 4 P i m
P
N

KC 4 - 1 1 0 4 A

REFERENCE YOUR R ^Q iiE JS i. AS TO NUMBER OF P R I NTEB C O P IE S OF FEDERAL
OPEN MARKET CO M M ITTEE RULES ON O R G A N IZ A T IO N AND IN F O R M A TIO N AND
RULES ON PROCEDURE UNDER ADM IN IS T R A T IV E PROCEDURE ACT W HICH WE
.

^

W I1 L R E Q U IR E , WE E S T IM A T E TH A T TWO HUNDRED W IL L BE S U F F IC IE N T




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Authority

0 •

Fed e r a l Reser ve Ba n k
of N e w Y o r k

1

I

sai-c.s S e r i a l

SEP

7

September J+, 194-6.

Honorable M. S. Eccles, Chairman,
Federal Open Market Committee,
c/o Board of Governors of the
Federal Reserve System,
Washington 25, J . C.
D
Dear Chairman Eccles:
The receipt is acknowledged of the letter dated August 15,

194- , and of the copies enclosed therewith of the revised drafts of
6
proposed ”Rules on Organization and Information" and "Rules on Pro­
cedure" of the Federal Open Market Committee for publication in
conformity with the provisions of Section 3 of the Administrative
Procedure Act.
I have noted the changes in the revised drafts, from the
prior drafts enclosed with the letter of July 26, 194-6.
I approve of the adoption and publication by the Federal
Open Market Committee of the proposed rules in the form of the revised
drafts, to become effective September 11, 194-6.
lours fait

A1
Fed.

^ICTORY
M BUY
mA
u n it e d
m

STA TES

W WAR
(■ b N S
WO D
« n
AD
N
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WB26G77W ASH H 2 6 ^ S T L 3 - 4 1 2
CARPENTER BOARD

,REURjJ E IIE B J A U (m S X J M U -

T H IS BANK W IL L NEED TWELVE A D D IT IO N A L C O P IE S
■

FEDERAL OPEN MARKET C O M M IT T E E RULES ON ORGAN I Z A T I O N « S
AND RULES ON PROCEDURE




DAVIS

•

.

IN FO R M A TIO N

Reproduced from the Unclassified I Declassified Holdings of the National Archives

~

DECLASSIFIED

Authority

\

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1

September 3, 1946*

Mr. S. R. Carpenter, Assistant Secretary,
Federal'Open Market Committee,
e/o Board of Governors of the
Federal Reserve System,
Washington 25, D. C.
Dear Mr. Carpenter:
Referring to your letter of August 28, 19-46, we would
appreciate receiving 100 copies of the Federal Open Market
Committee Rules on Organization and Information and Rules on
Procedure issued in compliance with section 3 of the Administra­
tive Procedure Act.
This will confirm m y request to y o u h y telephone the
other day that y o u furnish this bank with 500 copies of the
B o a r d fs Rules of Organization and Rules of Procedure pursuant
to section 3 of the Administrative Procedure Act.




Very truly yours,

U ) d U lu x ^ s i) < 3 i ^
William F. Treiber,
Secretary.

Reproduced from the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED
Authority £ s U

T S L E 0 R A M
.u j a r d o f G o Y e r n o r s

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R E U R L E T 2 8 ONE HUNDRED C O P IE S R U L E S ON O R G A N IZ A T IO N AND
AND V

P

IN FO R M A TIO N

R U LE S ON PRO CEDURE OF F E D E R A L OPEN MARKET C O M M ITTEE M IG H T B E

U S EFU L H E R E
~




PEYTO N.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '
Authority

0 •

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a s o 'n u
ji:

w m s ffic tr a p
; l

FED ER AL R E SE R V E BANK
OF DALLAS
R . R . G IL B E R T
PRESIDENT

August 31, 1946

Mr, S* R* Carpenter, A ssistant Secretary
Federal Open Market Committee
Board o f Governors of the
Federal Reserve System
Washington, D* C*
Dear Mr* Carpenters
I have your le t t e r of August 28, enclosing three
copies of the Federal Open Market Committee Rules on Organi­
zation and Information and Rules on Procedure, issued pursuant
to section $ of the Administrative Procedure Act*

I t w ill be

appreciated i f you w ill send us three additional copies of these
rules*




uc-R r i : .
£ . L. Carm:

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED
Authority

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TELEGRAM
Board o f G overn ors

oftHe

'*46 A G 2 0
U 5

F e d e r a l R e s e r v e
Leased Wire Service
Received at Washington, 0, C,

WA76WA8H C 8 9
CARPENTER

-

BOARD
,x.

RELET AUGUST

S y s t e m

PH JLA J 0 -3 4 7 P

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.

/}

PLEAS E FORWARD

25

COP I E,S FEDERAL OPEN MARKET

CO M M ITTEE RULES ON O R G A N IZ A T IO N AND IN FO R M A TIO N AND RULES ON
PROCEDURE.
i

V E R G A R I.




PM -o

55

Reproduced from the Unclassified I Declassified Holdings of the National Archives

D E C LA S S IF IE D *
A u th o r ity

F e d

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B

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OF Cl.EYE J AN J
^ J TD
-7/
RAY M . GiDNEY, P r e s i d e n t

August 3 0 , 1946

Mr. S. E. Carpenter, Assistant SecretaryFederal Open Market Committee
Board of Governors of the
Federal Reserve System
Washington 25* D* C«
Dear Mr. Carpenters
Receipt i s acknowledged o f

Yo u r

le t t e r o f .

October-28 with mimeographed copies o f Federal Open
Market Committee Rules on Organization, and Infor­
mation and Rules on Procedure,




s ic iio i

Sincerely yours.

Ray M. Gidney,
President*

Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C LA S S IF IE D
A u th o r ity

sQ ■\ 6 ^ 0

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•■ T S L E 0 H A M
B oa rd

of

G overn ors
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Federal ReserveSystem
.Leased Wire Service
Received at Washington, 0, C,

WA96WASH RH 6 7

R IC H

2 9 -2 2 1

CA RPEN TER
cYOUR L E T T E R !:

I A N T IC IP A T E WE W IL L

O F 'F E B E R A L OPEN M ARKET C O M M ITTEE R U L E S

MORE THAN F
O R G A N IZ A T IO N AND IN FO R M A TIO N

AND R U LE S ON PRO CEDURE




I

V

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1.

Reproduced from the Unclassified I Declassified Holdings of the National Archives
D E C LA S S IF IE D *
A u th o r ity f c . Q .

BT

I I FTT/R*

BDARD DF GOVERNORS
-

OF TH E

(

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FEDERAL RESERVE SYSTEM

4

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W A S H IN G T O N 2 5 , D. C.
ADDRESS OFFICIAL C O R R E S P O N D E N C E
TO T H E BOARD

August 28, 1946.

Dear Sir:'
Enclosed are several mimeographed copies of Federal Open
Market Committee Rules on Organization and Information and Rules
.on Procedure issued in compliance with section 3 of the Administra~
tive Procedure Act. The adoption of these rules, to become
effective September 11, 1946, has been approved by the members of
the Committee; and this action will be brought before the next
meeting of the Committee for ratification.
The rules differ only in minor respects from the prelim-#
inary drafts which were enclosed with gy letter of July 26.^19L b , / *
No changes in the drafts were suggested f y the Presidents of eight
c
of the Federal Reserve Banks and relatively few were suggested by
the others.
The rules will be published in the Federal Register and
also will be printed for distribution to interested persons, In
order to aid us in determining the number necessary to be printed,
it will be appreciated if you will advise by wire the number which
you anticipate your Bank may need.
Very truly yo\ps^

S. R. Carpenterf Issistimt Secretary,
Federal Open Market Committee.
Enclosures

TO THE PRESIDENTS OF ALL FEDERAL RESERVE BANKS




/

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *

|

Authority

BL

*D TF FTP?*

r< I

AUG 2 a m i

AUG

2 8

1 9 4 6

law Sir i
K a c l at#
9^HN>{ra^Ml ©optes of N « r i l Opea
Xftrl#* Co«*ittee Hal** on Organisation aad Iaferaatioa «n L Sale*
<
m Procedure iim d ia soKpliaste# with sootier
i
©f the Adminis­
trative Prooe&tre *et. fbe adoption of these nil##, to be«<m
e
effeottre September 11, 1 9 # , **• boea
% the meaber. #f
tt»# Goaaitt##; « d tfeia a#tioa #41.1 be brought before tbe next
mmMMg #f the Comittee for ratification.

3

ffe# ml## differ only ia uimmt respects fro* the pr#llmiaary drafta ehioh w#r# enclosed with *y letter of July SjL
19^* S# «faiag»i ia the
#«r© soggoslol™l^th#.ffwiftaatii
of eight of the Federal Reserve Banks and relatively f## were sug­
gested by the ethers.
Th# m l # # #111 b# jmhlished la the Federal Register aai
#1## #111 b# printed for distribution to iat«re«t*<l persons* la
«r4ar- to. aid »# ia determining the amber neoessary to bo printed*
i t # ill bo appreciated i f you # ilj advi.e % #ir# the nuafcer whioh
y«t sntioipate yoor B
ank aay aeed.
Tory trmly yours,

(Signed} S ft* Carpenter
.
8* I . Carpenter, Assistant Secretary,
Federal Opea Market Comitte#,
Enclosures

or asl p m u & hesistb hxks

4

C




F

I L

E

C

O

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Reproduced from the Unclassified I Declassified Holdings of the National Archives




~~
r-

DECLASSIFIED

A u th o r ity ^

FEDERAL O
PEN M
ARKET COM ITTEE
M

RULES O ORGANIZATION
N
AN INFORMATION
D

and

RULES O PR CED RE
N
O
U

Issued Pursuant to
ADMINISTRATIVE PRO
CED
URE ACT
and Federal Reserve Act

E ffectiv e September 11, 1 % 6

>D • \ b G ^

\

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED*
"

" “"1

A u th o r ity £ , i ) .

|

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FEDERAL OPEN MARKET COMMITTEE
RIFLES O PROCEDURE
N
Page
SEC. 1.

BASIS AND SCOPE........................................

1

SEC, 2.

COMMITTEE A C T IO N ...............................

1

SEC. 3.

NOTICE AND PUBLIC PROCEDURE ...........................

2

SEC. '4.

EFFECTIVE D A T E .....................................................

2

SEC. 5.

SUBMITTALS, PETITIONS AND REQUESTS. . . .

3




j ,

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'

j

Authority ^ >D • \b G ^ 1

FEDERAL OPEN' MARKET COMMITTEE
RULES ON PROCEDURE

Sec. 1.

Basis and Scope. - These rules are issued by the

Federal Open Market Committee (hereinafter sometimes called the
Committee) pursuant to the Administrative Procedure Act and the Fed­
eral Reserve Act.

They include the rules specified by section 3(a)(2)

of the Administrative Procedure Act.
Sec. 2.

Committee Action. - The function of the Committee

is the direction and regulation of open market operations which are
conducted by the Federal Reserve Banks.

This involves the determina­

tion of the policies which are to be pursued with respect to the
purchase and sale of securities by the lederal Reserve Banks with a
view to accommodating commerce and business and with regard to their
bearing upon the general credit situation of the country, together
with consideration and action upon incidental matters relating to the
manner in which such operations are to be conducted.

The discharge

of the Committee’s responsibilities requires the continuous gather­
ing of information and study of changing financial, economic, and
credit conditions and other pertinent considerations by the members of
the Committee and its personnel.

These activities are closely inter­

related with other activities of the Board of Governors of the federal
Reserve System and the Federal Reserve Banks and all relevant informa­
tion and views developed by these organizations are available to the
Committee.




With this background, action is taken by the Committee upon

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DECLASSIFIED '

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its own initiative at periodic meetings held at least four times each
year and oftener if deemed necessary.

Attendance at Committee meetings

is restricted to members of the Committee and its official staff, the
Manager of the System Open Market Account, the Presidents of Federal
Reserve Banks who are not at the time members of the Committee, and such
other advisers as the Committee may invite from time to time.

The

''Committee acts through the adoption and transmittal of directives and
regulations to its Executive Committee or to the Federal Reserve Banks.
Operations in the System Open Market Account are conducted under the
direction of the Executive Committee pursuant to directives issued by
the Committee.
Sec. 3.

Notice and Public Procedure. - There ordinarily will

be no published notice of proposed action by the Committee or public
procedure thereon, as described in section 4 of the Administrative Pro­
cedure Act, because such notice and procedure is impracticable, un­
necessary, or contrary to the public interest for one or both of the
following reasons:
(a) Non-disclosure of information is required in the public
interest for reasons stated in section 6(d) of the Committee’s Rules
on Organization and Information; and
(b) Expeditious and timely action, without the delay in­
cident to such notice and procedure, is required in the public interest.




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D E C LA S S IF IE D '
I"

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Sec* 4.

Effective Date. - Committee action ordinarily will

be made effective on the date the action is taken because the nature
of the subject matter and the action taken is such that the public
interest a
rrd the proper discharge of the Committee's responsibilities
so require.
Sec. 5.

Submittals, Petitions, and Requests. - Submittals,

petitions, and requests may be made to the Committee at any time in
the manner stated in section 5 of the Committee’s Rules on Organiza­
tion and Information.

They will be considered by members of the

Committee's official staff and, where appropriate, will be brought to
the attention of the members of the Committee or its Executive Com­
mittee for consideration and any necessary action.




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r* '

■
D E C LA S S IF 1 E D .
A u th o r ity

gl^ / H
FEDERAL OPEN M
ARKET COMMITTEE
HJLES O ORGANIZATION
N

aND

INFORMATION

Page

SEC. 1.

BASIS AND SCOPE-................................. ..................................1

SEC. 2.

COMPOSITION AND MEETINGS OF COMMITTEE....................1
(a ) M em bers........... . . . . . . .............................. * ••
1
( b) Chairman and V ice C hairm an.................... ......1
( c ) M eetings .................... .................. . . . . .......... ......1

SEC. 3.

EXECUTIVE COMMITTEE..................................................... ......1
(a ) Members . . . . . . . . ................................................. I
( b ) M eetings ....................................................... .. • 2
( c ) Duties
.................... ......... 2

SEC. U*

OTHER PERSONNEL ........................... .. 3
(a) Official Staff ............... .
3
(b) System Open Market Account ........ ... 3
(c) Others
.......... .......... •* 3

SEC, 5 .

SUBMITTALS, PETITIONS, AND REQUESTS ......... 3
(a) Place ......... ......... .......... .. 3
(b) Method........................... .. h

SEC. 6,
j
.
|
1

AVAILABILITY OF INFORMATION .......... ........U
(a) Federal Register ................ .....U
(b) Policy Record »
t
r•* -h
(c) Unpublished Information .f........... h
.
(d) Reasons for Non-disclosure...........5
(e) Requests for Unpublished Information. 7

SEC. 7.
(a)
(b)

i




SUBPOENAS ........... ............ 7
Advice by Person Served .......... 7
Appearance by Person Served ....... ...7

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DECLASSIFIED'

A u th o r ity

• \ b G ^

j

FEDERAL OPEN MARKET COMITT EE
SSJLES ON ORGANIZATION AND INFORMATION

Sec. 1.

Basis and Scope. - These rules are issued by the

Federal Open Market Committee (hereinafter sometimes called the Commit­
tee) pursuant to the Administrative Procedure Act and the Federal Re­
serve Act.

Included therein are the rules specified by sections 3(a)(1)

3(b), and 3(c) of the Administrative Procedure Act.
COMPOSITION AND MEETINGS OF COMMITTEE

Sec. 2(a)

Members. - The Federal Open Market Committee con­

sists of the members of the Board of Governors of the Federal Reserve
System and five representatives of the Federal Reserve Banks who are
Presidents or First Vice Presidents of such banks.

The representatives

of the Federal Reserve Banks, and an alternate for each representative,
are elected in accordance with section 12A of the Federal Reserve Act
for terms of one year commencing on March 1 of each year*
(b)

Chairman and Vice Chairman. - At its first meeting on or

after March 1 of each year, the Committee selects a Chairman and a Vice
Chairman from among its membership.
(c)

Meetings.

The Committee meets at Washington, D. C. , on

call by the Chairman of the Board of Governors of the Federal Reserve
System or at the request of three members of the Committee, at least fou
times each year and oftener if deemed necessary.




EXECUTIVE COMMITTEE
Sec. 3(a)

Members. - At its first meeting on or after March 1

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DECLASSIFIED'

Authority

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of each year, the Federal Open Market Committee selects from among its
membership an Executive Committee consisting of three members of the
Board of Governors of the Federal Reserve System and two of the repre­
sentatives of the Federal Reserve Banks.

Alternates to serve in the

absence of members of each group represented on the Executive Committee
are likewise selected.

The Chairman of the Federal Open Market Commit­

tee is one of the members of the Executive Committee and serves as its
Chai m a n .
(b)

Meetings. - The Executive Committee meets periodically,

on call of the Chairman or at the request of two members, as necessary
in the performance of the duties assigned to it.
(c)

Duties. - The duties of the Executive Committee are:

(1)

To direct the execution of transactions in the open mar­

ket in accordance with open-market policies adopted by the Federal Open
Market Committee;
(2)

To allocate the Government securities and other obliga­

tions held in the System Open Market Account among the several Federal
Reserve Banks in accordance with the principles determined by the Fed­
eral Open Market Committee;
(3)

To keep the members of the Federal Open Market Committee

informed of all transactions executed under the direction of the Federal
Open Market Committee and of all allocations and reallocations of Govern­
ment securities and other obligations held in the System Open Market
Account; and




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A u th o r ity

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-3(4)
I.

To perform such other functions and duties in connection

with open-market operations as may be assigned to it from time to time
by the Federal Open Market Committee.
OTHER PERSONNEL

Sec. U(a)

Official Staff. - The official staff of the Feder-

al Open Market Committee includes its Secretary, Assistant Secretary,
General Counsel, Assistant General Counsel, Economist, and Associate
Economists, who perform the duties indicated by their titles.

These

staff members are selected from among the officers and employees of the
Board of Governors of the Federal Reserve System and the Federal Reserve
Banks•
(b)

System Open Market Account.

One of the Federal Re­

serve Banks is selected by the Committee to execute transactions for
the System Open Market Account.

Such bank selects a Manager of the

System Open Market Account, satisfactory to the Committee.
(c)

Others. -

The services of other officers and employees of

the Board of Governors of the Federal Reserve System and Federal Reserve
Banks are.made available and are utilized by the Committee as required.
SUBMITTALS, PETITIONS, AND REQUESTS
Sec. 5(a)
Market Committee is:

PI ace. - The mailing address of the Federal Open
Federal Reserve Building, 20th Street and Consti­

tution Avenue, Washington 25» D? C,

The Committee customarily meets at

the offices of the Board of Governors of the Federal Reserve System at
that address*




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A u th o r ity

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4*-

(b )

Method. - A ll s u b m itta ls , p e t i t i o n s , and r e q u e s ts , in ­

clu d in g requests f o r a ccess to in fo rm a tio n , s h a ll be made in w r itin g
and m ailed to the Committee at the address s ta te d in s e c t io n 5 ( a )
r u le s .

th ese

An f p e t i t i o n o r request s h a ll be sign ed by the person making i t ,

o r his duly a u th orized agen t, and s h a l l , in so fa r as p r a c t ic a b le , c l e a r l y ,
com p letely and c o n c is e ly s ta te h is f u l l name and a d d ress, the fa c t s in ­
v olv ed (in c lu d in g the purposes f o r which any unpublished in form a tion
requested w i l l be used i f made a v a ila b le ) ,t h e a c tio n d e s ir e d , the p e r ­
s o n ’ s in t e r e s t in the m atter, and the reasons why the p e t i t i o n or re­
quest should be gran ted.
AVAILABILITY .OF INFORMATION
S ec, 6 ( a )

Federal R e g is t e r . - Rules d e s c r ib in g the Commit­

t e e ’ s o r g a n iz a tio n and procedure and any su b sta n tiv e ru les or statem ents
o f p o l i c y which are form ulated and adopted by the Committee f o r the
guidance o f the p u b lic w i l l be p u b lish ed in the Federal R e g iste r.
(b )

P o l i c y Record.

A com plete record o f the a ctio n s taken

by the Committee during the p reced in g year upon a l l m atters o f p o l i c y
r e la t in g to open market o p e r a tio n s , showing the votes taken and the rea­
sons u n d erlyin g the a c t io n s , is in clu d ed in each annual re p o rt made to
Congress by the Board o f Governors o f the Federal Reserve System in a c­
cordance w ith S e c tio n 10 o f the Federal Reserve A ct.
(c)

Unpublished In fo rm a tio n . - Except as may be s p e c i f i c a l l y

a u th orized by the Committee or i t s E xecu tive Committee, o r as may be re­
q u ired in the perform ance o f d u ties f o r , o r pursuant to the d ir e c t io n o f ,




Reproduced from the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED'
Authority ^ >0 • \ b G ^

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f"

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-5 -

the Committee, no person s h a ll d i s c l o s e , or perm it the d is c lo s u r e o f , any
unpublished in form a tion o f the Committee to anyone, whether by g iv in g out
or fu r n is h in g such in form a tion or copy t h e r e o f, by a llo w in g any person to
in s p e c t , examine or copy such in form a tion o r copy t h e r e o f, or by any oth er
means.

Unpublished in form a tion o f the Committee s h a ll in c lu d e a l l in ­

form ation con cern in g the p ro ce e d in g s, d e lib e r a t io n s , d is c u s s io n s , and
a c t io n s o f the Committee and a l l in fo rm a tio n or a d v ice coming to the Com­
m ittee or to any member o f the Committee or any o f f i c e r , employee or agent
o f the Committee, the Board o f Governors o f the F ederal Reserve System,
or any Federal Reserve Bank, in the perform ance o f d u tie s f o r ,

or pursuant

to the d ir e c t io n o f , the Committee, whether con ta in ed in f i l e s ,

memoranda,

documents, r e p o r t s , b ook s, a cco u n ts , r e c o r d s , or papers or oth erw ise a c ­
q u ired and whether lo c a t e d a t the o f f i c e s o f the Board o f Governors o f the
Federal Reserve System, the Federal Reserve Banks, or elsew h ere:

P rov id ed ,

That i t s h a ll not in clu d e in form a tion which has been p u b lish ed in a c c o r d ­
ance w ith s e c t io n s 6( a ) and 6( b) o f these r u le s or in form a tion which is
a v a ila b le to the p u b lic through oth er s o u rce s ,
(d )

Reasons f o r N o n -d is c lo s u r e ,

The n o n -d is c lo s u r e o f un­

p u b lish ed in form a tion o f the Committee g e n e r a lly is r e q u ire d in the p u b lic
in t e r e s t f o r one or more o f the fo llo w in g r e a s o n s :
(l)

D isc lo su re o f unpublished in fo rm a tio n con cern in g p o l i c i e s

w ith r e s p e c t to fu tu re open market o p e ra tio n s which are under c o n s id e r a ­
tio n or have been adopted by the Committee, and o f unpublished in form a tion
which might a id in a n t ic ip a t in g a c t io n by the Committee, would*




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
Authority ^ >D • \ b G ^ \

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( i ) I n t e r fe r e w ith the accomplishment o f the o b je c t iv e s
o f the committee ’ s a c t io n s taken w ith a view to accommodating commerce
and bu sin ess and w ith regard to th e ir bea rin g upon the gen era l c r e d it
s itu a t io n o f the cou n try;
*

( i i ) Permit s p e cu la to rs and oth ers to reap u n fa ir p r o f i t s

or oth er u n fa ir advantages by s p e c u la tiv e tra d in g in s e c u r it ie s and o th e r ­
w is e ;
( i i i ) I n t e r fe r e w ith the o r d e r ly e x e cu tio n o f p o l i c i e s
adopted by th e Committee;
( i v ) R esu lt in unnecessary and unwarranted d istu rba n ces
in the s e c u r it ie s m arkets;
(v ) Make open market o p e ra tio n s more c o s t l y to the F ederal
Reserve Banks;
( v i ) I n t e r fe r e w ith the o r d e r ly e x e cu tio n and a ccom p lish ­
ment o f the o b je c t iv e s o f p o l i c i e s adopted by oth er Government a g en cies
concerned w ith econom ic and f i s c a l m atters; and
( v i i ) Cause m is in te r p r e ta tio n s and m isunderstandings, w ith
p o s s ib le r e s u lta n t impairment o f p u b lic c o n fid e n c e in the n a t io n ’ s
f in a n c ia l s tr u c t u r e .
(2 )

The Committee’ s unpublished in form a tion in clu d e s much th a t

is fu rn ish ed to i t on a s e c r e t or c o n fid e n t ia l b a s is and i t s

d is c lo s u r e

w ould:
( i ) Have the e f f e c t s d e s c r ib e d in s e c t io n 6 ( d ) ( 1 ) o f
th ese r u le s ;
(ii)

Impede the n eoessa ry c o l l e c t i o n o f in form a tion and

a d v ic e , much o f which cannot be obta in ed ex cep t on a c o n fid e n t ia l and
v olu n ta ry b a s is ; and




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DECLASSIFIED'
Authority

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(iii)

Unreasonably and u n n e ce s s a rily d istu rb and in ­

t e r fe r e w ith in d iv id u a l p riv a cy and c o n f id e n t ia l b u sin ess r e la t io n s h ip s .
(e )

Requests f o r Unpublished In fo rm a tio n , - Requests fo r

a ccess to unpublished in form a tion w i l l be granted o n ly i f i t c le a r ly
appears th a t d is c lo s u r e o f the in form a tion w i l l not be co n tr a r y to the
p u b lic in t e r e s t f o r any o f the reasons s e t f o r t h in s e c t io n 6( d) o f
£hese r u l e s .

SUBPOENAS
S ec. 7( a) A dvice by Person S erved, - I f any p erson , whether
or not an o f f i c e r or employee o f the Committee, o f the Board o f Governors
o f the F ederal Reserve System, or o f a F ederal Reserve Bank, has unpub­
lis h e d in form a tion o f the Committee and in co n n e ctio n th erew ith is
served w ith a subpoena, o r d e r , or other p ro ce s s r e q u ir in g h is personal
attendance as a w itn ess or th e p rod u ction o f documents or in form ation
upon any p ro ce e d in g , he s h a ll prom ptly a d v ise the Committee o f such
s e r v ic e and o f a l l r e le v a n t f a c t s , in c lu d in g the documents and inform a­
tio n req u ested and any fa c t s w hich may be o f a s s is ta n c e in determ ining
whether such documents or in form a tion should be made a v a ila b le ; and he
s h a ll take a c t io n a t the a p p rop ria te time to a d v ise the co u rt or tr ib u n a l
which issu ed the p r o c e s s , and the a tto r n e y f o r the p a rty a t whose in sta n ce
the p ro ce s s was is s u e d , i f known, o f the substance o f th ese r u le s .
(b )

Appearance by Person Served. - Except as d is c lo s u r e o f

the r e le v a n t in form a tion has been a u th orized pursuant to th ese r u l e s ,




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DECLASSIFIED'
Authority

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any such person who has unpublished in form a tion o f the Committee and is
req u ired to respond to a subpoena or other le g a l p ro ce ss s h a ll attend
at the time and p la c e th e r e in m entioned and r e s p e c t f u l l y d e c lin e to
produce any documents or d is c lo s e any in form a tion or giv e any testim on y
w ith r e s p e c t t h e r e t o , basin g h is r e fu s a l upon th ese r u le s .

I f , n otw ith ­

sta n d in g, the co u rt or other body ord ers the p rod u ction o f any docu­
m ents, d is c lo s u r e o f any in fo rm a tio n , o r g iv in g o f any testim on y , the.
person having such unpublished in form a tion o f the Committee s h a ll
prom ptly r e p o r t the fa c t s to the Committee.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

”

DECLASSIFIED'
Authority ^ i 0 ■

1

w, i m *

Mr* Arthur I* Pont, Soorotary,

toior&l loooxiro Bask o f P&lladolphio*
Philftdolpfcla, fonaoyxfaaiot
Boas* Mr, Foot*
III MHplloft*# wttfc your

April 271
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of*l Opoa Mark#* Gcwmittoo, re* loo* M
arefe 14
1 9 3 8 # on Opmi Metric** O p orotiou **

ftry truly yours,
‘

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Bray Hooaond, % S o f #

ftorroofO & oo aad iNiblioatioiio Bootion.
M oi&

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Reproduced from the Unclassified I Declassified Holdings of the National Archives




D E C L A S S IF IE D *
A u th o r ity

i.

FED E R A L R ESER V E BANK
o r

8

. r a m s , ^ jjvxjou

APR 3 C 1342

April 27, 1942

Board of Governors
of the Federal Reserve System
Washington, D. G.
Attention:

Mr. Chester Morrill
Secretary

Dear Sirs:
We should appreciate„jreeeiving 50 copies
of the Regulation of the Federal Open Market Com­
mittee, revised March 1, 1938, on Open Market Op­
erations.
Very truly ypaars,

Arthur E. Post
Secretary

I MBRsEVJ

FOS PILES
Bray Henxunood
...... .....
-

............. ■ <
-

Reproduced from the Unclassified I Declassified Holdings of the National Archives




D E C LA S S IF IE D '
A u th o r ity

w * * » tK n u ® s t o r m J

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£

B ank o f i t * tmii»

fe d e ra l
M * lo u i* #
D e a r M r#

S ta w a rt?

la accordance with the

talaed In

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of

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mplms Of "Begulatloii Kelating to Opea Market

OpM«tlc&« o f federal Besenre Banka* (refill
effeetive l&rnh 1, if38} ***** &«*& ftivftfM
to you t#i*r » i # r serrate ©oyer*

t*iy truly your*,
rSteM fy J* O, Noe».

JU w ittiftt S e c r e ta ry

FOl FILES
Phylii* C. Stewart

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED'
—

Authority ^

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Fe

deral

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FEB 9 - 1940
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S t. L o u i s

February 5, 1940.

Board o f Governors o f the
F ederal Reserve System,
W ashington, D. C.
Gentlemen:
P lease forward us 50 c o p ie s o f
’’R egu lation R e la tin g t o Open Market Opera­
tio n s o f Federal Reserve Banks’* (re v is e d
e f f e c t i v e Ik rch 1, 1 9 3 8 ).
Very tr u ly y o u rs,

fo * mm
PhyiB*
0

K

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *

Fe d e r a l R e s e r v e B a n k
O F

Ka

n sa s

C it y
March £6, 1938

Mr. S. R. C arpenter, A s s is ta n t S ecreta ry
Board o f Governors o f th e
F ed eral R eserve System
W ashington, D. C.
Dear Mr. C arpenter:
R e ce ip t i s hereby acknowledged o f
the 300 c o p ie s o f the r e g u la tio n o f the F ed eral
Open Market Committee r e la t in g to open market opera­
t io n s o f F ed era l r e se r v e banks as amended at the
m eeting o f th e F ederal Open Market Committee on March 1 ,
193 8.

Yours very t r u ly ,

P re s id e n t

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DECLASSIFIED *
Authority 1 - 1 0 - \
—

|

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JrEC'Li in f i l e s s e c t io n

Fe d e r a l R e s e r v e Ba n k
off . ce of

o f

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A t l a n t a

MAR 2 f> *02?

----------

P r e s id e n t




March 24, 1938.

Mr. S. R. C arpenter, A s s is ta n t S e c r e ta ry ,
.Board o f G overnors o f the F ed eral R eserve System,
W ashington, D. C.
Dear Mr., C arpenter:
I

have you r l e t t e r o f March 2 1 s tja d ­

v is in g that th ere were being forw arded t o me, under sepa­
r a te c o v e r , th re e hundred p r in te d c o p ie s o f the r e g u la tio n
o f the F ed era l Open Market Committee r e la t in g t o open market
o p e r a tio n s o f F ed eral re se rv e banks, as amended at the meet­
in g o f the F ed eral Open Market Coimnittee on March 1 , 1938.
These c o p ie s have been duly r e c e iv e d , f o r which we thank you.

Very t r u ly y o u rs,

P r e s id e n t.

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March 21* 1958.

1r . H. Amfonag, President,
Federal Reserve Bank o f Boston,
B o s t o n , la s e a c h a s e t t s *
'B e a r Mr# fo u n g s
There are being forwarded to ym. today, under
separate cover, three hundred printed co$tee o f the
regulation of the Federal Open Market Committee re­
la tin g to open market operations o f Federal reserve
'Mnk§ as amended at the meeting o f the Federal Open
Market Committee cm March 1 , 1958.




¥© ry t r u l y your*?,

S. 1. Carpenter,
A ssistant Secretary*

Reproduced from the Unclassified I Declassified Holdings of the National Archives

“

DECLASSIFIED'

Authority ^

I

>D • \ b G ^ 1

Xtf FILES 3EQTX
MAR $ ! iQOf!
A
March 21, 1938.

Mr* G* L. HarrigoD, P re s id e n t,
F ed eral R eserve 0aak o f I<ew York,
Uew Y ork, Sew Y ork.
Dear Mr* H a rrison :
there are being forw arded to you to d a y , un­
d er separate co v e r, three hundred printed c o p ie s o f the
r e g u la tio n o f th e F ed eral Open Market Committee r e l a t ­
in g t o open market o p e r a tio n s o f F ederal r e s e r v e banks
as amended at the m eeting o f th e F ederal Open Market
Committee on March 1 , 1938*




Very truly y o u r s .

S* R. C arpenter,
A s s is ta n t Secretary*

Reproduced from the Unclassified I Declassified Holdings of the National Archives




^
DECLASSIFIED *

„

Authority

Mr. I* S# S in c la ir , President*
federal Reserve Bank o f Philadelphia,
Philadelphia, Pennsylvania*
Bear Mr* S in c la ir :
There are being, forwarded to you today,

wader separate cover, three hundred printed copies
of the regulation o f the Federal Opes Market Coamittee re latin g to open market operation* o f Federal re­
serve banks as amended at the meeting o f the Federal
Open Market Committee on March 1# 193&*
Very truly yours,

8* 1 . Carpenter,
Assistant Secretary*

F

i

Reproduced from the Unclassified I Declassified Holdings of the National Archives




^
D E C L A S S IF IE D '

|

Authority

11$

PILES SECTION

mU 2

March 21, 1938* .

?
I

<8

Mr. M* if* Flem ing, P r e s id e n t ,
F ed eral R eserve Bank o f C lev ela n d ,
C lev ela n d , ©Mo*
Dear Mr* Flem ingi
Itoere are being forw arded to you t o d a y ,
under separate c o v e r , th r e e hundred p rin te d c o p ie s
o f the r e g u la tio n o f th e F ed eral Opes Market Commit­
t e e r e la t in g t o open market o p e r a tio n s o f F ed era l
r e s e r v e banks a® amended a t th e m eeting o f th e Fed­
e r a l Open Ifcrket Coom lttee on March 1 , 193&*
Very t r u ly yours,.

S . R. C arpenter,
A s s is ta n t S e cre ta ry *

3 1930

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *

|

Authority

'k

March 2 1 , 193^*

L _ „ ....*

Mr, Bug}* Leadl, President,
^Federal R eserve Sank o f Richmond*
'Richmond, Virginia*
Bear I r * Leach:
fh e r e are b e in g forw arded t o you to d a y ,
under sep a ra te c o v e r t h r e e hundred p rin te d c o p ie s
o f th e r e g u la tio n o f the F ederal Open Market Com- .
m ittee r e la t in g to open market o p e r a tio n s o f Fed­
e r a l r e s e r v e banks as amended at the m eeting o f
the F ed eral Open Market Committee on March 1 , 193&»
Very t r u ly y o u r s .

S . R. Carpenter*
A s s is ta n t S ecreta ry *

.

(

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
Authority 1^ ; D •

1

•u

l

riv

s e c tio n

i

0 ‘ i jqor?
t

i..................................................................

March 21, 193?*

"'
.

Ur* Oscar Newton, P r e s id e n t,
F ed eral Reserve Bank o f A tlan ta ,
A tla n ta , G eorgia* ■
Dear Mr. Newtoni
There are b ein g forw arded t o you today,,
under sepa ra te cover,, th ree hundred p r in te d c o p ie s
o f the r e g u la tio n o f the Federal Open Market Com­
mi t t ee r e la t in g t o open market o p e r a tio n s o f Fed­
e r a l r e s e r v e banks as amended rat the m eeting o f
th e F ed era l Open Market Committee on March 1 , 1933#
Very t r u ly y o u rs ,

S , R* C arpenter,
A s s is ta n t S e c r e ta r y ,

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
r~

,

I

Authority f c . p .

|

f REC *D
March. 21

,

;

1933*

M

I

in F l l M s e c t io n r
. R

.

‘3

0.

M r* G. J * S e h a lle r , P r e s id e n t,
F e d e ra l Reserve Bank o f C hicago,
C h ica go, I l l i n o i s *
D ear M r* S e fca lle rs
B ie r© a re b e in g fo rw a rd e d t o you to d a y ,
u n d e r s e p a ra te c o v e r, th r e e hundred p r in te d c o p ie s
o f th e r e g u la t io n o f th e F e d e ra l Open M arket Co»~
m itte e r e l a t i n g to opes, is a rk e t o p e ra tio n s o f Fed­
e r a l re s e rv e betake as amended a t th e M e t i n g o f
th e F e d e ra l Open M a rke t G oam ittee on March 1 , 193$*
V ery t r u l y y o u rs ,

S* R# C a rp e n te r,
A s s is ta n t S e c re ta ry *

jm
F

L j)

&

[

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ . 0 -

■REC5D
;
j

m R:

March 21t 193 a .

Mr* W. IcC* Martin, President,
Federal Reserve Bank of St* Louis,
St* Louis, Missouri. .
Dear Mr. Martin:
There are being forwarded to you today ,
under separate cover, three hundred printed copies
o f the regulation o f the Federal Open Market Com­
mittee re latin g to open market operations of. Fed­
eral 2
’@serve banka as amended at the meeting o f
the Federal Open Maxket Committee on 'March l f 1938+
Very tr u ly yours*

S* R. Carpenter*
A ssistant Secretary*

FQLE COPY



f

Reproduced from the Unclassified / Declassified Holdings of the National Archives




^

DECLASSIFIED'

Authority

\ b^ \

f hec ’ d

j
Mardi 2 . 1938.
1,

I
'

|

in f il e s sec tio n ]

M A R S 3 1938

.

#

Mr* J* M* P ey ton , P r e s id e n t,
F ederal R eserve Bank o f M in n ea p olis,
H la & ea p olls, M innesota.
Dear Mr* Peytons
There are b e in g fo m a rd e d t o you to d a y ,
under sep a ra te © over, tferee hundred p r in te d c o p ie s

of th e r e g u la t io n o f th e fe d e r a l Open Market Gom»
m itt 0 8 r e la t in g t o open market o p e r a tio n s o f f e d ­
e r a l reserve banks a s amended a t the aaeeting o f
the f e d e r a l Open Market Committee on March 1 , 1938.
Very t r u ly y o u r s ,

S* R* C arpenter,
A s s is ta n t S ecreta ry *

F IL E COPY

j
.....1

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
Authority £ a ) -

SEC'0 « r
J

L
March 21, 1938.

Hr* G. B* Hamilton, President,
Federal Beserve Bank of Kansea City*
Kansas City , Missouri *
Dear Mr* Hamilton:
There ©re being forwarded to you today*
under separate cover, three hundred printed copies
of the regulation of the Federal Open Market Com­
mittee relating to open market operations of Fed**
era1 reserve banks as 'amended at the meeting of
the Federal Open Market Committee on March 1, 1938.
Vexy truly yomrsf

B B# Carpenter*
m
Assistant Secretary*

Reproduced from the Unclassified I Declassified Holdings of the National Archives




“

dj^ l X ss IFIED

*

Authority

j RECfD i n P iu ;:r s E c n o n

i

M AR

i

2819 3 8

m

March 21, 193&*

j|j», B* A« Md&nney, President,
* Federal He serve Bank of Dallas,
"
Dellas, Texas*

Dear Mr# McKinney t
flier® ©re being forwarded to you today,

wader separate cover, three hundred printed co-pies
of tlie r e g u la tio n of the Federal Open Market Co®**
mittee relating to open market operations of Fed­
e r a l r e s e r v e banks as aaended at the meeting, of

the Federal Open Market Cowalttee on March 1, 193ft*
Very t r u ly y o u r s ,

S* H* Carpenter,
Assistant Secretary*

i

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
Authority £ , i ) .

>

t

REC

1 IN FlLES~SECTl0l7
D

^ViaR y ,j 1938
March 2 1 , 1938*

m

Mr* ! . A* Day, President,
- Federal Reserve Bank o f San Francisco,
Sen F r a n c is c o , C&llfor&itt*
Dear Mr* Days
l&ere are being forwarded to yon todey,
under separate cover, three hundred printed copies
o f the regulation o f the Federal Open Market Coa~
mittee relatin g to open market operations o f Fed*
eral reserve banks as amended at the jMBting o f
the Federal Open Market Committee on March 1 , 1938*
Very tru ly yours.

S* 1* Carpenter,
Assistant Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority f c . p .

Tn

Mr. Kilgore__________________

Subject:.

Prnm

Mr. Thompson_____________ ____

_______

The Presidents of all Federal reserve banks are being advised by
letter today that three hundred printed copies of the revised regulation
of the Federal Open Market Committee relating to open market operations
of Federal reserve banks are b^ing forwarded to each Federal reserve bank
today under separate cover.

It will be appreciated if you will see that

these copies go forward today.

U'

'




Reproduced fro th Unclassified
m e

*n /

Holdings of th National Archives
e

FED ER AL OPEN M ARK ET

/. / f t f>

I Declassified

C y f f i . J ?/. A .

^/rA/rT'r'riaE

R C IN FILES S C
E *D
E1

M - 9 1938
AR

REGU LATIO N RELATIN G TO
OPEN M ARKET OPERATIONS OF
FEDERAL RESERVE BANKS




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C~J xn
cy w
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J
O

A dopted M ar ch 19, 1936

REGULATION
F E D E R A L O P E N M A R K E T C O M M IT T E E
Adopted March 19, 1936
O P E N M A R K E T O P E R A T IO N S
SECTION 1

Pursuant to the authority conferred upon it by section 12A of
the Federal Reserve Act, as amended, the Federal Open Market
Committee prescribes the following regulations relating to the
open-market transactions of the Federal Reserve banks.
The Federal Open Market Committee expressly reserves the
right to alter, amend, or repeal this regulation in whole or in part
at any time.
SECTION 2. D EFIN ITIO N S

( a ) Government securities.— The term “ Government securi­
ties” shall include bonds, notes, certificates of indebtedness,
Treasury bills, and other obligations of the United States, includ­
ing obligations fully guaranteed as to principal and interest by
the United States.
( b ) Obligations.— The term “ obligations” shall include all
bankers’ acceptances, bills of exchange, cable transfers, bonds,
notes, warrants, debentures, and other obligations, including
Government securities, which Federal Reserve banks are author­
ized by law to purchase in the open market.
(c) System open market account.— The term “system open
market account” applies to Government securities and other obli­
gations heretofore or hereafter purchased in accordance with
open-market policies adopted by the Committee and held for the
account of the Federal Reserve banks.
( d) Committee.— The term “ Committee” shall mean the Fed­
eral Open Market Committee.
(e) Executive Committee.— The term “ Executive Committee”
shall mean the Executive Committee of the Federal Open Market
Committee.




1

2

RE G U L A T IO N — FEDERAL, O PEN M A R K E T COM M ITTEE
SECTION 3. GO VE R N IN G P R IN C IP L E S

By the terms of section 12A of the Federal Reserve Act, as
amended, the time, character, and volume of all purchases and
sales in the open market by Federal Reserve banks shall be gov­
erned with a view to accommodating commerce and business and
with regard to their bearing upon the general credit situation of
the country.
SECTION 4. F E D E R A L OPEN M A R K E T COM MITTEE

(a) Functions.— The Committee shall consider the needs of
commerce, industry and agriculture, the general credit situation
of the country, and other matters having a bearing thereon and
consider, adopt, and transmit to the several Federal Reserve
banks, regulations and directions with respect to the open-market
operations of such banks under section 14 of the Federal Reserve
Act.
( b ) Participation in System Open Market Account.— The Com­
mittee from time to time shall determine the principles which
shall govern the allocation among the several Federal Reserve
banks of Government securities and other obligations held in the
System Open Market Account, with a view to meeting the chang­
ing needs of the Federal Reserve banks.
SECTION 5. E X E C U T IV E COM M ITTEE

(а) Organization.— The Committee, at its first meeting after
March 1 in each calendar year, shall select from its own mem­
bers an executive committee consisting of five members.
(б) Functions.— It shall be the duty of the Executive Com­
mittee :
1. To direct the execution of transactions in the open mar­
ket in accordance with the open-market policies adopted by
the Federal Open Market Committee;
2. To allocate the Government securities and other obliga­
tions held in the System Open Market Account among the
several Federal Reserve banks in accordance with the prin­
ciples determined by the Federal Open Market Committee;
3. To keep the members of the Federal Open Market Com­
mittee informed of all transactions executed under the direc­
tion of the Federal Open Market Committee and of all allo­
cations and reallocations of Government securities and other
obligations held in the System Open Market Account; and




R E G U L A T IO N — F E D E R A L OPEN M A R K E T COM MITTEE

3

4.
To perform such other functions and duties in connec­
tion with open-market operations as may be assigned to it
from time to time by the Federal Open Market Committee.
SECTION 6. CONDUCT OF O P E N M A R K E T OPER ATIONS

Each Federal Reserve bank shall engage in open-market opera­
tions under section 14 of the Federal Reserve Act only in
accordance with this regulation and the directions issued by the
Committee from time to time, and no Federal Reserve bank shall
decline to engage in open-market operations as directed by the
Committee.
Transactions for the System Open Market Account shall be
executed by a Federal Reserve bank selected by the Committee.
Each Federal Reserve bank shall make available to the Federal
Reserve bank selected by the Committee such funds as may be
necessary to conduct and effectuate such transactions.
SECTION 7. PURCH ASES A N D SALES OF G O VE R N M EN T SECU RITIES

No Federal Reserve bank shall purchase or sell Government
securitie^lxcept pursuanTto^uthority granted by the Committee
or in accordance with an open-market policy adopted by the Com­
mittee and in effect at the time.
The Committee reserves the right, in its discretion, to require
the sale of any Government securities now held or hereafter pur­
chased by an individual Federal Reserve bank or to require that
such securities be transferred into the System Open Market
Account in accordance with such directions as the Committee
may make.
SECTION 8. OTH E R OPEN M A R K E T OPERATIONS

Subject to directions of the-Committee and the following condi­
tions, each Federal Reserve bank may engage in open-market
operations other than the purchase or sale of Government
securities:
Buch^fBnaactiona ahall bo reported daily to tho
•S W u n tm m n f +lin P n m in iH n i. n r flnn

p ]n rr

(2) Only acceptances and bills of exchange which are of
the kinds made eligible for purchase under the provisions of
Regulation B of the Board of Governors of the Federal Re­
serve System may be purchased and the rates of discount
shall be established in accordance with the provisions of sec-

Reproduced fro th Unclassified / Declassified Holdings of th National Archives
m e
e

4

R E G U L A T IO N — F E D E R A L OPEN M A R K E T COM MITTEE

^ > ^ 6 /r u tion 14(d) of the Federal Reserve A ct: Provided, further,
tJU, ^
That no obligations payable in foreign currency shall be
.
purchased%xcept in accordance with directions of the Com-

»

A

a

mittee.
^
Only bills, notes, revenue bonds and warrants of
States, counties, districts, political subdivisions or munici­
palities which are of the kinds made eligible for purchase
under the provisions of Regulation E of the Board of Gov­
ernors of the Federal Reserve System may be purchased.
(4)
No Federal Reserve bank shall engage in the pur­
chase or sale of cable transfers for its own account except in
accordance with the directions of the Committee: Provided,
That Federal Reserve banks may purchase and sell cable
transfers through the Habana agency in accordance with the
resolutions or regulations of the Board of Governors of the
Federal Reserve System governing the operations of such
agency.




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F o r m F. R. 131

^ A R D

OF

GOVERNORS

OF TH E

FEDERAL

RESERVE

Office Correspondence
To _

X o rrili

SYSTEM

Date February 2 5 r 1 9 5 8 _
_
Subject C la r if y in g amendments t o by-law s

From, I r , D r e ib e lb is , A s s is ta n t

and r e g u la tio n o f Open Harket Committee.

General Counsel*

There fo llo w s c e r t a in c l a r i f y i n g amendments t o the by-lav/s
and r e g u la tio n o f the Open Iiarket Committee “ hich I have prepared
w
in the lig h t o f su gg estion s by Mr. C arpenter, and su gg estion s made
by the Hew York Bank sometime ago p reced in g the a d op tion o f th e
r e s o lu t io n r e la t in g t o the purchase and sa le o f f o r e ig n b i l l s .

BY-LAWS
1*

Amend s e c t io n 1 o f A r t i c l e I t o read as f o l l o w s :

"S e c tio n 1 . O rg a n iza tion . P r io r t o the f i r s t m eeting o f the
Committee fo llo w in g March 1 st each y e a r , each member o f the Commit­
t e e rep resen tin g the F ederal Reserve banks s h a ll cause a r e c o r d o f
h is e l e c t io n and o f the e l e c t i o n o f th e a lte r n a te t o serve in h is
absence t o be forwarded t o th e S e cre ta ry o f the Committee* I f any
q u estion be r a is e d as t o the e l e c t i o n or e l i g i b i l i t y o f such member
or a lt e r n a t e , the Committee s h a ll determ ine such q u estion b e fo r e
p erm ittin g such member o r a lte r n a te t o p a r t ic ip a t e in the m e e tin g s .1
1
2*

Amend s e c t io n 5 o f A r t ic le I by adding th e fo llo w in g :

"and upon r e c e ip t o f such n o t ic e the a lt e r n a t e s h a ll a d v ise the
S ecreta ry -whether he w i l l attend such m e e tin g .”
3 . Amend s e c t io n 2 o f A r t ic le I I by adding t o the f i r s t
sentence the fo llo w in g :
” aild an A s s is ta n t S ecreta ry o f the Board o f Governors d esign ated
by th e S ecreta ry s h a ll be ^ A s s i s t a n t S e cre ta ry o f the Committee” ,
And by s t r ik in g out the l a s t sentence o f such s e c t io n
and s u b s titu tin g t h e r e fo r "The A s s is ta n t S e cre ta ry s h a ll a s s is t the S e cre ta ry and in h is
absence 3 h a ll a c t as S e cre ta ry pro tem .”

c -f)

\

'c

'

A




K , ■**+.

Mr* Morrill - 2
4. Strike out the last two sentences of section 5 of
Article II and substitute therefor the followings
“Such bank shall select a Manager and an Assistant Manager of
the System Open Market Account who shall be satisfactory to the
Committee and who shall serve at the pleasure of the Committee• The
Manager shall attend all meetings of both the Committee and the
Executive Committee# The Assistant Manager shall perform the duties
of the Manager in the absence of the latter*”
5. Amend section 2 of Article III by striking ^out the
following words in the first sentence:
"furnish copies thereof to the members of the Executive Com­
mittee”*
OPEN MARKET REGULATION
1* Amend the first paragraph of section 7 by inserting
between the words "sell" and "Government" the following:
"for its own aocount or for the account of any other Federal
Reserve bank”*
Z
m Amend section 8 by striking out paragraph (1) .thereof
and substituting therefor the following:
"(l) Each Federal Reserve bank, as may be from time to time
required by the Committee, shall report all such transactions to
the Secretary of the Committee,"
And by inserting between the words "purchased" and
"except" in the last sentence of paragraph (2 ) the following:
"or sold for its own account".




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority f c . Q .

FEDERAL. R E SE R V E BANK
0 F S A N FRANCISCO

A p r il 8 , 1936
-

1956

Board o f G overnors o f the
F ed eral Reserve System,
Yifashington, D. C.
Dear S ir s :

The th re e hundred c o p ie s o f the
r e g u la tio n r e la t in g to open m arket opera­
t io n s o f F ed eral Reserve Banks, r e fe r r e d
to in you r l e t t e r o f A p r il 3d, have been
r e c e iv e d .




.

,

...................................... IIII1 «[|. m . n IIII
1
ull

Very t r u ly y ou rs,

P resid en t

reive d
' ^ -s£f?V£ fjQAc 't’CTQti
'

13

AM

02

Reproduced from the Unclassified I Declassified Holdings of the National Archives

”

DECLASSIFIED *

Authority

I

•\hG0 j

A

Mr, Hugh Leach* Preaid©nt,
Federal Reserre Beak of Eicfcuaoiid,
Richaoijd* Virgin!*.

Dsar Hr* Leachi
Eeceipt is acknowledged of your letter of April
8» 1956, inquiring as to the procedure to be followed
la the disposition of the copies of the regulation of
the Federal Open Market Coaalttee relating to opea
market operation*# which were forwarded to your bank
l y tills offloe.
a
Copies of the regulations Here sent to all Fed­
eral reserve banks with the thought that they would be
used In filling requests received for the regulation
fro* tl«e to tise«

As the regulation is not a regular

tion of the Board as such, it is not felt that it is
necessary to furnish copies to aeaber basks except upoa
request.




H r y truly yours*

(S ig n e d ) S ,
8* E* Carpenter,
Assistant Secretary.

C s 'p e i V .-

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED '
Authority f c , Q .

Federal R eser ve Bank
O F

Ka

n sas

C it y
A p r il 7 , 1936

Mr. 3 . R. C arpenter, A s s is ta n t S e c r e ta r y ,
Board o f Governors o f th e F ed eral R eserve System
Yfashington, D. C.
JDear Mr. C arpenter:
This w i l l acknowledge r e c e ip t o f th e 300 p r in te d
c o p ie s o f the r e g u la tio n adopted by th e F ed eral Open Market
Committee on March 19, 1936, r e la t in g t o open market op era­
t io n s o f F ed era l Reserve banks, which you a d v is e d in your
l e t t e r o f A p r il 3 , were b ein g forw arded under sepa ra te co v e r
on th a t d a te .
Yours v e ry t r u l y ,

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '
'

Authority 1 ^ i Q - \ b G ^ j

FEDERAL
OF

RESERVE

BANK

BOSTON

A p r il 6 , 1936

Mr. S. R. C arpenter, A s s is ta n t S e c r e ta ry
Board o f Governors o f the F ed eral Reserve System
W ashington, D. G.
Dear Mr. Carpenters
This w i l l acknowledge r e c e ip t o f you r
l e t t e r o f A p ril 5 , 1956.
We a ls o r e c e iv e d in to3ay* s
m ail t h r e e " nun^eT^rTrrEed c o p ie s o f the r e g u la tio n

\




Reproduced from the Unclassified I Declassified Holdings of the National Archives




“
t*

DECLASSIFIED'

Authority ^

H

>0 • \ b G 0 j

j

RECEIVED
H D U A L RESERVE BOARD

Fed eral Reser v e Bank
o f R ic h m o n d

1936 APR 7

A 8
M

April 6, 1936.

Board of Governors
of the Federal Reserve System,
Washington, D. C.

Gentlemen:

Attention of Mr. S.R.Carpenter,
Assistant Secretary.

We acknowledge receipt of 300 copies of the
resolution adopted by the Federal Open Market Committee
on March 19, 1936, relating to open market operations
of Federal reserve banks.
Please let us know what procedure you wish
us to follow in the disposition of these copies.
Very truly yours,

HL-CCP
HUGH LEACH,
President.

49

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

F e d e ra l R eserve Bank
o f
OFFICE

OF

A tlan ta

P fiE S ID E N '




A p r il 6, 1936.

i936 APR 0

Mr, S . R . C arpenter, A s s ista n t S e c r e ta r y ,
Board o f G overnors o f the F ederal R eserve System,
Washington, D. C.
Dear Mr. C arpenter:
I have your l e t t e r
v is in g th a t th e re had been forw arded to
c o p ie s o f the r e g u la t io n adopted by the
ket Committee on March 19th r e la t in g t o
t io n s o f F ederal re se rv e banks.

o f A p r il 3rd ad­
me &00 p r in te d
F ed eral Open Mar­
open market op era­

The c o p ie s o f the r e g u la tio n a r r iv e d
tod a y and w i l l r e c e iv e the p rop er c i r c u l a t i o n .

Very t r u l y y o u r s ,

P r e s id e n t .

Unclassified I Declassified Holdings of the National Archives




Fe d e r a l R e s e r v e

Ba n k

OF

S t. L o u i s
A p r il 6 , 1936

Mr* S . R. C arpenter,
A s s is ta n t S e c r e ta r y ,
Board o f G overnors o f the
F ederal Reserve System,
W ashington, D. C.
Dear Mr. Carpenter:
This i s t o acknowledge r e c e ip t
o f the 300 p r in te d c o p ie s o f the r e g u la tio n
adopted by the F ederal Open Market Committee
on March 1 9 , 1936, r e la t in g t o Open Market
O perations o f F ederal Reserve Banks, w hich
you m entioned as b ein g forw arded in your
l e t t e r o f A p r il 3 ,
lu ‘~
,u

P r e s id e n t.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

/i/




n'PCr/VPn
I\
rv|,

F e d e ra l R eserve Bank

hoard

njh

46

April 4, 1936.

iiear Sirs:
In behalf of Mr. Harrison let me acknowledge
receipt of your letter of April 3 and of the printed
-----

i —

...... .............. mi-------- *-------- liiiiiiaiii

copies of the regulations relating to open market opera­
tions, which have been received to-day.
Very truly yours,

1 W. Randolph Burgess
Vice President

Board o f Governors o f the
F ed era l Reserve System,
W ashington, D. C.
WRB.H

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

v ,0 ^

4/
u




r

■•W
' *

FEDERAL RESERVE BANK

o r
PH ILA D ELPH

rX O
k 6

Q $1
*

A p r il 4 , 1936,

S ir s :
We are in r e c e i p t o f 300 p r in te d c o p ie s o f the
r e g u la tio n adopted by the F ed eral Open Market Com­
m itte e on March 19, r e la t in g t o open market o p e r a tio n s
o f the F e d e ra l r e s e r v e banks.
Thanking you , I am,
Very t r u ly y o u r s ^ ^

^

C
V ic e -P r e s id e n t & C a sh ier.

BOARD OF GOVERNORS
o f the F ed era l R eserve System,
W ashington, D.C.

Reproduced from the Unclassified I Declassified Holdings of the National Archives




_

DECLASSIFIED *
,r-~

„

Authority £ , Q .

April 5, 1956.

Hr* E. Ju Xoune, Pr««identf
FsAeiBl B
tttyf f fh a nf
w li
S t a r Mr* X « » g i

Th«r* *r« btlng fon*u*d#d to y«* today,
iB ta
id r

coT«r# 900 printed copisi of tb*

r*c\0«tiott adopted

by

tk* ?ad*r*l 0p*a *ark*t Cf»»

altt*« #a Harsh it* 1956, rm Un$ to
Xm

*arfc«t

©parationa of Fadaral raaarra baxtka*
?«y

tru^y I t o r i f

(Signed) S, ft Carpenter
B R. C«rp*nt«r,
m
Aaaiatant Sasrataijr*

acw

Reproduced from the Unclassified I Declassified Holdings of the National Archives




”

DECLASSIFIED'

Authority ^

>Q • \ b G ^ 1

A p r il 5, 1956.

Hr* 0. L* Sarrl*ont President,
Federal Eeserre B«»k of Hew York,
lew fork, Kew lork*
Dear M r* Harrisons
There are being forwarded to you today,
under separate corer, 800 printed copies of the
regulation adopted by the Federal Open Market Co»~
aittea on iaroh 10, 1958, relating to open aarket
operatiom of Federal reserve beaks,
Very truly yours,

8* ft. Carpenter,
Assistant Secretary,

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
Authority
■i;

A p r il 5 , 1956.

Hr* I. S. Sinclair, Presl4entf
Federal Reserve Bank of Philadelphia,
Philadelphia, Pennsylvania.
Dear Hr* Sinclair:
There are being forwarded to you today,
u n d e r separata cover, 100 printed copies of the

regulation adopted by the Federal Open Market Com­
mittee on March 19, 1956, relating to open aarket
operations of Federal reserve banks.
Very truly yours,

S« R* Carpenter,
Assistant Secretary,

SRC/acw

Reproduced from the Unclassified I Declassified Holdings of the National Archives




A p r il 5 , 1956.

Ur. M» 1, Fleming, President, Federal Reserve Bank of Cleveland,
Cleveland, Ohio,
D#ar Mr* Fleaing;
T h a r * are being forwarded to you today*

under separate cover, 500 printed copiee of the
regulation adopted by the Federal Open Harket Coaaittee on Itaroh 19* 1056, relating to open ■arJcet
operations of Federal reserve banks.
Very truly yours,

S. R. Carpenter,
Assistant Secretary

Reproduced from the Unclassified I Declassified Holdings of the National Archives




April 5, 1956.

Hr. Hugh Laach, President,
Federal Reserve Bank of Richmond,
Richmond, Virginia.
Beer Hr* Leaotli
There are being forwarded to you today,
under separate cover, 500 printed copies of the
regulation adopted %

the Federal Open Market Co»~

ttittee on March 19, 1956, relating to open market
operations of Federal reserve banks.

Very truly yours,

I* H Carpenter,
*
Assistant Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED '

A p r il S, m $

Hr* Oaoar Ieirto% Preeident,
Federal Reserve Bank of Atlanta,
Atlanta, Georgia*

Dear Sr« lewtons
Thara are being forwarded to you today,
under separate cover, $00 printed ooplea of the
regulation. adopted by the Federal Open Market Cob nittee on March 19, 1956, relating to open aarket
operationa of Federal reaerve banks.
fery truly your*,

I* K* Carpenter,
Aaniatant Secretary

Reproduced from the Unclassified / Declassified Holdings of the National Archives




DECLASSIFIED '

April S, It86

Mr# 0*
Sohallar, Praeident,
Fadaral Eaaarva Bank of Chicago,
Chicago, Xllinoi*.
Daar Hr* SchaXXar:
Thara ara baing forwarded to you today,
radar aapar&ta covar, 800 printed copies of tha
regulation adoptad by the Federal Opan Market Co»-

■ittea on M
arch it, Xt56» relating to opan m r k w t
operation* of Fadaral rasarra banki.
Vary truly youra,

S. R, Carpenter,
A e e ia te n t Secretary

« #

acw

p* —

I
—

- —

1

.................

.... .

—

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED '
r- '

Authority ^

>Q • \ b G ^ (

April 3, 1956.

Hr* M* *cC. Martin, Praaldant,
federal Eeaenre Bank of St* Louta,
St, Louis, Missouri.
Bear

M r,

Martin:
•mere are being forwarded to you today,

under separate cover, §00 printed coplea of the

regulation adopted f y the Federal Open Market Coac
aittee on Maroh 19, 1956, relating to open aarket
operations of Federal reserve banka.
Very truly youra,

3. 1* Carpenter,
Assistant Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED'
Authority 1 5 , p .

April 5, 1986.

Mr. 3 . 8 . P « y to n ,
?*d*r»l SM*rr* Bank Of WnnMpolU,
Mirmaapolia, Minnaaota.
Dear U p * Paytom
Tbare ara baiag for»ardad to you toiay,
under separate c o w , 300 prints copies of tha
regulation adopts l y the Federal Open Sarket Go»a
alttee on Harcte It, 1956, relating to open aarkat
operation# of Federal reaarve banka.
Vary truly yours,

S. R. Carpaatar,
Militant Saeratary*

|
|

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED '

April 3 , 1956

Mr, G. H. Hamilton, President,

Federal Reserve Bank of i£anaa8 City,
Kansas City, Missouri.
Dear Mr. Hamilton;
There are being forwarded to you today,
under separate cover, 500 printed coplee of the
regulation adopted by the Federal Open Market Com~
alttee on March 19, 1956, relating to open aarket
operations of Federal reserve banks.
Very truly yours,

S. H. Carpenter,
Assistant Secretary

... .................................... ..............................— ....... .. .............................— — ■

■

1

'

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED *
Authority

>D

• \b

G

^ \

|

j

April 5, 1956.

V:

Mr. B. A* McKinney, Pre#iderrt,
Fadaral lasarva Bank of Dallas,
Dallas, Taxas#
Baar Mr. Mofclnnay:
Thara ara balng foraardad to you today,
undar saparata corar, 800 priatad copies o f tha
ragulation adoptad by tha Fadaral Opan larfcat Co»~
mlttaa on Xaroh 19, 1958, ralatlng to opan narket
operations of Fadaral rasanra bank;§
*
Vary truly yours*
li.

:u
-

S. R. Carpaatar,
Assistant Saoratary.

B

P

w

—

■

■ ■

"

1

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED '
r-

Authority ^

>0 » \ b *z> ^ |

April Sf 1956.

Mr* W* A* Day, Prealdent,
Federal Reserve Bank of dan Francisco,
San Fraoeiaoo, California.
Bear Hr, Days
There art being forward*} to you today,
under separate oorer, 500 printed eoplea of the
regulation adopted b y the F e d e ra l Open Market Cow*
alttee m March 19, 1956, relating to open market
operations o f F e d e ra l reaerve feenka.
f u r y trul^ youra,
(S^noa) S» & Carpenter

S, B. Carpenter,
Assistant Satretaiy.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

”

DECLASSIFIED'

Authority 1^> Q • \ b G ^ (

Form F. R. 131

BOARD OF GOVERNORS
QF THE

FEDERAL

RESERVE

SYSTEM

Office Correspondence
To

8tr» KltwAllor_________________

DteA s, i« b
a pni
Subject:

— _ _ _ _ _ ---------------- -

From Kr, C a r p o n t a r _____________ __________ _______________ _ __ _ _ __________

It will \ appraciatad i f you will hava fonardid to
m
tha praaidant of aaeh Padaral raearre bank today 800 printad
copiea of tha ragulatlon adoptad fcy tfaa Padaral Open Markat
Coaalttaa on Karoh I9f 1956, relating to optii aarkat oparationa
of Padaral raaarva banks.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

“
r-

Form F. K. 131

DECLASSIFIED'

Authority 1^-} 0 ♦ \

^

|

■'OARD OF GOVERNORS
OF THE

F.JERAL RESERVE SYSTEM

Office Correspondence

Date April 2t 1936.

ibr» Boall__________ ___ ______ __
From Mr*




Subject:_____

___________________

___________________

SP0

Regulation •M®, Open Market Operations, became obsolete
on March 1# 1956, and it la understood that no further copies
of Regulation *1* will be sent out in response to requests
for copies of all of the regulations of the Board«

Regulation

* 1 is not superseded by the new open market regulation for
5*
the reason that that regulation Is Issued by the Federal Open
Market Coattittee rather than by the Board*

Therefore* the new

regulation will not carry a letter as is the case with the
regulations of the Board*

cc« Mr* fcitamiller

aRC/aew

*

1—5
6 8a

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority f c . Q .

Form Ft R. 131
BOARD OF GOVERNORS
OF THE

F E D E R A L RESERVE SYSTEM

Office Correspondence
To __ Files___________________________
From

Date._M
arch

19&6.

Subject:____________________________

/!_ Mr. Carpenter_____________________________________________________________
_
7
The attached regulatIonjrelating to Open Market operations
of Federal reserve banks was approved at the meeting of the Federal
Open Market Committee in Washington on March 19, 1956.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '

© 0

f

I

March 2X, 1956*

Hr# B# A, Xoung, President,
Federal Reserve Bank of Boston,
Boston, Massachusetts.
Dear Mr* loungi
I i accordance with, an understanding reached at the meeting
x
*f i ia Federal Open Market Committee ©a March l$t I an addressing
l
tMa letter to you as President of the Federal Reserve Bank of Boston
and a similar letter to the President or First Vice President of eaoh
of the other Federal reserve banks.
there la inclosed a mimeographed copy of the regulation
relating t# open Market transactions of the Federal reserve banka,
y m m m m *i by t * Federal OpenMarfcet Committee m March IS, liS€.
fa

In $»» course this regulation will be printed and published*
ffcare is also inclosed a confidential oopy of the by-lawn
of the Federal Open Market Committee adopted on March 1 t 1956*
f,

the

Committee decided that there would be no objection to your reading
this oopy of the by-laws to the board of director® of your baxdc at
it» next meeting if you so desire, with the understand!^ that it is
to be treated by the® . s confidential information*
a
Pursuant to the by-law#, the Oomittee selected the following officers*




Chairman
Vice Chairman

M# S* lodes
Qeorge I . Harrison
*

the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED '
Authority £ . 0 -

\bGdl

L

General Counsel
Assistant General Counsel
Economist
Associate Eoononist

Walter Wyatt
J« P* fcreibelbis
X* A* Goldenweiser
*ohn H* Williams

The by-law* provide that the Secretary of the Board of Gov­
ernors of the federal Reserve System shall be the Seoretary of the
Conaittee

that i& hi* absence an Assistant Secretary of the Board

shall serve as Secretary pro tea*
The Conaittee selected the members of the executive committee as fellows t
M* S* Socles* Chairman
Ransom
M« S* Sysmcask
Members of the Board of Governors
George I » Harrison
*
I * J* floating
I
Representatives of the Federal reserve banks*
As the alternates for the members of the Board the Conalttee selected Messrs* Broderick, Morrison and McKee, to serve In the
order stated, and as the alternates for the representatives of the
Federal reserve banks the Conaittee selected Messrs* Hamilton and
McKinney, to serve In the order stated*
The by-laws provide that the Secretary of the Federal Open
Market Conaittee, or, in his absence, an Assistant Secretary of the
Board of Governors, shall act as secretary of the executive oowalttec,
and that the General Counsel of the Federal Open Market Conaittee, or,
In his absence the Assistant Qaneral Counsel of the Committee, shall
act as General Counsel of the executive committee*
The Committee selected the Federal Reserve Bank of Mew lork
to execute trans^Ufcocs for the Federal Open Market Conaittee*




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED
Authority

>D • \ b G ^ (

-5 -

It will be appreciated i t you will aoknewledge receipt
of thie letter*
Very truly f m r * 9
- .

(Signed) Chester Morrill.
Cheater Morrill, Secretary,
federal Open Market Committee*

IaclosoreB.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
Authority

D •\

j

.
| t

March 20, 1956

Umormdm % Mr..firtifealM r*
o

I will appreciate it if you will have pre­
pared for us the aeeeseary letter of transaittal and
copies of the regulations of the Federal Open Market
CcMittee for inclusion with such letter to the
Director, Division of the Federal Register, National
Archives.

Secretary

cm

yd




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED
Authority

>D • \

^ |

REGULATION
FEDERAL OPEN M
ARKET COMMITTEE
March 19, 1956
OPEN M
ARKET OPERATIONS

tiINUTES 01*
SECTION 1 .

MAR 1 9 1936

Pursuant t o the a u th o r ity c o n fe r r e d upon i t by s e c t io n 12A
o f the F ed eral R eserve A c t, as amended, the F ed eral Open Market Com­
m i t t e e p r e s c r ib e s the f o llo w in g r e g u la tio n s r e la t in g to the openraarket t r a n s a c tio n s o f the F ed eral Reserve banks.
The F ed eral Open Market Committee e x p r e s s ly r e s e r v e s the
r ig h t to a l t e r , amend, or r e p e a l t h is r e g u la tio n m whole o r in p a rt
a t any tim e.
SECTION 2.
(a)

DEFINITIONS

Government s e c u r i t i e s . - The term "Government s e c u r i­

t i e s ” s h a ll in clu d e bonds, n o t e s , c e r t i f i c a t e s o f in d eb ted n ess,
Treasury b i l l s , and oth er o b lig a t io n s o f the United S t a t e s , in c lu d in g
o b lig a t io n s f u l l y guaranteed as to p r in c ip a l and in t e r e s t by the
U nited S ta te s .
(b)

O b lig a t io n s . - The term " o b l i g a t i o n s " s h a ll in clu d e

a l l ban kers' a c c e p ta n c e s , b i l l s o f exchange, ca b le t r a n s fe r s , bonds,
n o t e s , w arrants, d eb en tu res, and oth er o b lig a t io n s , in c lu d in g Govern­
ment s e c u r i t i e s , which F ederal Reserve banks are a u th o rize d by law
to purchase in the open market.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

“
r*

Authority

-

(c )

d e c l a s s if ie d ”

2

}Q •\

^

“1
\

-

System open . market a cco u n t, - The term "system open

market a ccou n t" a p p lie s to Government s e c u r i t i e s and o th e r o b lig a ­
t io n s h e r e t o fo r e or h e r e a ft e r purchased in accordance w ith open
market p o l i c i e s adopted by the Committee and h eld f o r the accou n t
o f the F ed eral Reserve bahks.
(d)

Committee. - The term "Committee” s h a ll mean the Fed-

‘e r a l Open Market Committee.
(e )

E xecu tive Committee. - The terta "E xecu tive Committee*1

s h a ll mean the e x e c u tiv e committee o f the F ederal Open Market Com­
m itte e .

SECTION 3*

GOVERNING PRINCIPLES

By the terms o f s e c t io n 12A o f the F ed eral Reserve Act* as
amended, the tim e, c h a r a c te r , and volume o f a l l purchases and s a le s
in the open market by F ed eral Reserve banks s h a ll be governed w ith a
view to accommodating commence and b u sin ess and w ith regard to t h e ir
bea rin g upon the gen era l c r e d i t s it u a t io n o f the cou n try .

SECTION 4.
(a)

FEDERAL OPEN MARKET COMMITTEE
F u n ctio n s . - The Committee s h a ll c o n s id e r the needs

o f commerce, in d u stry and a g r ic u lt u r e , the g en era l c r e d i t s it u a t io n
o f the cou n try , and o th e r m atters having a b ea rin g thereon and con­
s id e r , a d op t, and tran sm it to the s e v e r a l F ed eral Reserve banks, regu­
la t io n s and d ir e c t io n s w ith r e s p e c t to the open-m arket o p e r a tio n s o f




Reproduced from the Unclassified I Declassified Holdings of the National Archives

“
C

DECLASSIFIED *

Authority

; Q ■ \b G ^

\

- 3 -

such banks under s e c t io n 14 o f the F ed eral Reserve A ct.
(b)

P a r t ic ip a t io n in System Open Market A ccou n t. -

Committee from time to time s h a ll determ ine the p r in c ip le s which
s h a ll govern the a l l o c a t i o n among the s e v e r a l F ederal Reserve banks
o f Government s e c u r i t i e s and o th e r o b lig a t io n s h eld in the System
Open Market A ccou n t, w ith a view to m eeting the changing needs o f the
F ederal Reserve banks.

SECTION 5.
(a )

EXECUTIVE COMMITTEE

O rg a n iz a tio n . - The Committee, a t i t s f i r s t m eeting

a f t e r March 1 in each ca len d a r y e a r , s h a ll s e l e c t from i t s own mem­
b e rs an e x e c u tiv e committee c o n s is t in g o f f i v e members.
(b )

F u n ctio n s . - I t

s h a ll be the duty o f the E x ecu tive

Committee:
1.

To d i r e c t the e x e cu tio n o f tr a n s a c tio n s in

the open market in accorda n ce w ith the open-market p o l i c i e s
adopted by the F ed eral Open Market Committeej
2.

To a l l o c a t e the Government s e c u r it ie s and

o th e r o b lig a t io n s h e ld in the System Open Market Account
among the s e v e r a l F ed eral Reserve banks in accordan ce w ith
the p r in c ip le s determ ined by the F ed eral Open Market Com­
m itte e ;
3.

To keep the members o f the F ederal Open

Market Committee inform ed o f a l l t r a n s a c tio n s execu ted
under the d ir e c t io n o f the F ed eral Open Market Committee




The

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

D •\

^ I

- 4 -

and o f a l l a llo c a t io n s and r e a llo c a t io n s o f Government s e c u r i­
t i e s and o th e r o b lig a t io n s h e ld in the System Open Market Ac­
cou n t; and
4.

To perform such oth er fu n c tio n s and d u tie s in con ­

n e c tio n w ith open-market o p e r a tio n s as may be a ssig n ed to i t
from time to time by the F ed eral Open Market Committee.

SECTION 6 .

CONDUCT OF OPEN M
ARKET OPERATIONS

Each F ederal Reserve bank s h a ll engage in open-market opera­
t io n s under s e c t io n 14 o f the F ed era l R eserve A ct o n ly in accordan ce
w ith t h is r e g u la tio n and the d ir e c t io n s is su e d by the Committee from
time to tim e, and no F ed eral R eserve bank s h a ll d e c lin e t o engage in
open-market o p e r a tio n s as d ir e c t e d by the Committee.
T ra n sa ction s f o r the System Open Market Account s h a ll be exe­
cu ted by a F ed eral Reserve bank s e le c t e d by the Committee.

Each F ed eral

Reserve bank s h a ll make a v a ila b le to the F ed eral Reserve bank s e le c t e d
by the Committee such funds as may be n e ce ssa ry to conduct and e f f e c t u ­
a te such t r a n s a c tio n s .

SECTION 7 .

PURCHASES AND SALES OF GOVERNM
ENT SECURITIES

No F ed eral Reserve bank s h a ll purchase or s e l l Government secu r­
i t i e s ex cep t pursuant to a u th o r ity granted by the Committee or in a c c o r ­
dance w ith an open market p o l i c y adopted by the Committee and in e f f e c t
at the tim e.
The Committee r e s e r v e s the r i g h t , in i t s d i s c r e t i o n , t o re q u ire
the sa le o f any Government s e c u r i t i e s now h e ld or h e r e a ft e r purchased by




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED'
-

:

Authority £ , D -

\hG5j

- 5 -

an in d iv id u a l F ed eral Reserve bank or to re q u ire th a t such s ^ d u r itie s
be tr a n s fe r r e d in t o the System Open Market Account in accordance w ith
such d ir e c t io n s as the Committee may make.

SECTION 8 .

OTHER OPEN MARKET OPERATIONS

S u b ject to d ir e c t io n s o f the Committee and the fo llo w in g c o n d i­
t i o n s , each F ed eral R eserve bank may engage in open-market o p e ra tio n s
oth er than the purchase or s a le o f Government s e c u r i t i e s :
(1 )

A ll such t r a n s a c tio n s s h a ll be r e p o rte d d a ily

to the S e cre ta ry o f the Committee on the day they take p la c e .
(2 )

Only a ccep ta n ces and b i l l s o f exchange which

are o f the kinds made e l i g i b l e f o r purchase under the p ro­
v is io n s o f R eg u la tion B o f the Board o f Governors o f the
F ed eral R eserve System may be purchased and the r a t e s o f
d isco u n t s h a ll be e s ta b lis h e d in accorda n ce w ith the p ro ­
v is io n s o f s e c t io n 14(d ) o f the F ed eral Reserve A ct:
P ro v id e d , f u r t h e r , That no o b lig a t io n s payable in fo r e ig n
cu rren cy s h a ll be purchased excep t in accordance w ith d i r e c ­
t io n s o f the Committee.
(S)

Only b i l l s , n o t e s , revenue bonds and warrants

o f S t a t e s , c o u n t ie s , d i s t r i c t s , p o l i t i c a l s u b d iv is io n s or
m u n ic ip a lit ie s which are o f the kinds made e l i g i b l e f o r
purchase under the p r o v is io n s o f R eg u la tion E o f the Board
o f Governors o f th e F ed eral Reserve System may be purchased.




(4 )

No F ed eral Reserve bank s h a ll engage in the

Reproduced from the Unclassified I Declassified Holdings of the National Archives

~

6

-

purchase or sa le o f ca b le t r a n s fe r s f o r i t s own account ex­
ce p t in accordan ce w ith the d ir e c t io n s o f the Committee;
P ro v id e d , That F ed era l R eserve banks may purchase and s e l l
c a b le t r a n s fe r s through the Habana agency in accordance w ith
the r e s o lu t io n s or r e g u la tio n s o f the Board o f G overnors o f
the F ed eral Reserve System governing the o p e r a tio n s o f such
agency.




r

...... ....

............ .................. - ..................... ...... .

i

ii

i

i

,

ii

i

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED
Authority

0 - \b^O

\

REC;,p IN !?lu;s SECTION

F w m I R . 131

BOARD OF GOVERNORS

•f

O F THE

IvIAR'Mi 1338

FEDERAL RESERVE SYSTEM

Office Correspondence
T

D ate....March
Subject: .. F ilin g s o f t M _ _ .le ^ l^ b io n ^ R e l^ m g

"ederal Open Market Committee

t o Open Market O perations w ith the
D iv is io n o f the F ederal R e g is t e r .

From Mr. C h e r r y ,A s s is t a n t Coun sel

A ttach ed i s a proposed l e t t e r t o the D iv is io n o f th e Federal
R e g is te r tr a n s m ittin g an o r ig in a l and th re e c e r t i f i e d c o p ie s o f th e
Committee*s r e g u la tio n r e la t in g t o Open Market O p era tion s.
I
Under the p r o v is id p s o f the Federal R e g is te r A c t , approved
Ju ly 26, 1935, each F ederal Agency which is su e s any document w hich i s
re q u ire d or a u th o rize d t o b e tp u b lis h e d in the F ederal R e g is te r i s r e ­
qu ired t o f i l e the same w ith|the D iv is io n o f the F ederal R e g is te r i f
the document p r e s c r ib e s a penlalty or i f i t i s a document or a c la s s o f
documents determ ined by th e P resid en t t o "have g en era l a p p l i c a b i l i t y
and le g a l e f f e c t ” . IJhen such|a document i s f i l e d , the tim e o f f i l i n g
w i l l be n oted th e r e o n , a copy |will im m ediately be made a v a ila b le f o r
p u b lic in s p e c t io n at the o f f iq p o f the D ir e c to r o f the D iv is io n , and
the document w i l l be p r in te d fo r th w ith in the F ederal R e g iste r* U n til
such document i s f i l e d w ith th^ D iv is io n i t w i l l n ot be v a lid a g a in st
any person who has not had a c tu a l knowledge t h e r e o f ,
!\
S e c tio n I I B o f the r e g u la tio n s is s u e d on March 2, 1936, by
th e D iv is io n o f the F ederal R e g is te r , and approved by the P r e s id e n t,
p ro v id e s th a t a l l documents is su e d by a Federal agency w hich -

|

" in the o p in io n o f the ^ o ffic e r or o f f i c e r s s ig n in g the
same, have gen era l a p p l i c a b i l i t y and le g a l e f f e c t , s h a ll
be forw arded by th e agency is s u in g th e same t o the
ha
D iv is io n . The A d m in istra tiv e Committee sha' ll determ ine
which o f the documents feo forw arded have g en era l a p p lic a ­
b i l i t y and le g a l e f f e c t | and s h a ll cause such documents
t o be f i l e d in the o ffid fe o f the D ir e c t o r and p u b lish ed
in the F ederal R e g iste r* !1
I
S e c tio n I I I o f such r e g u la tio n s p r o v id e s t h a t :
"No documents e f f e c t i v e on ly a g a in st F ederal a g en cies
or persons in t h e ir c a p a c ity as o f f i c e r s , a g e n ts, or
employees t h e r e o f s h a ll bd| f i l e d in the o f f i c e o f the
D ir e c to r or forw arded t o t|ie D iv is io n * * * . ”
The p r o v is io n s o f the law ir| q u e s tio n , however, are n ot en­
c le a r as t o what person or which agency determ ines whether a
p a r t ic u la r document has g en era l a p p l i c a b i l i t y and le g a l e f f e c t , although
a p p a ren tly such power i s c o n fe r r e d upo'4 the P r e s id e n t.
On the oth er

tirely




r

IIJ " " " "

.... .......- I I I . . - " . . .........

. . . . . . . . . . . .... ................ . . . . . .

........

I........

.

i

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED
C

Authority fc-i D ‘ \

0 |

Federal Open Market Committee - - 2

hand, s e c t io n I I B o f the r e g u la tio n quoted above in d ic a t e s th a t
the d eterm in a tion as t o whether a p a r t ic u la r document lias gen era l
a p p l i c a b i l i t y and le g a l e f f e c t i s v e s te d in the ” o f f i c e r or o f f i c e r s
sig n in g the same," s u b je c t t o l a fu r th e r d eterm in a tion by the Adm inis­
t r a t iv e Committee. On t h is b 4 s is , i t appears th a t the D iv is io n o f
the F ederal R e g is te r tak es th<l p o s it io n th a t the d eterm in a tion as t o
whether a document has general^ a p p l i c a b i l i t y and le g a l e f f e c t r e s t s ,
as a p r a c t i c a l m a tter, w ith the Government agency which is s u e s the
document.
\
I t i s a ls o n oted that| s e c t io n I I I o f the r e g u la tio n s quoted
aoove .p rov id es th a t no document^ e f f e c t i v e on ly a g a in s t F ederal a g en cies
sh all^ be f i l e d .
In t h i s c o n n e c tio n , i t would seem th a t the r e g u la tio n
r e la t in g t o Open Market O perations f a l l s w ith in t h is e x c e p t io n , s in ce i t
i s e f i e c t i v e on ly a g a in st Federaf. a g e n c ie s , namely Federal Reserve banks
and th e Committee i t s e l f .
The law , how ever, does n ot make a s p e c i f i c
e x c e p tio n as t o such documents ex cep t in the case o f P r e s id e n t ia l Pro­
clam ation s ana e x e c u tiv e O rders. | I t cou ld be argu ed, however, t h a t ,s in c e
the P resid en t approved the r e g u la tio n s Issued by the D iv is io n o f the
F ed eral R e g is t e r , such approval ife tantamount t o a d eterm in a tion by him
thab documents e f f e c t i v e on ly a g a in s t Federal a g en cies are n ot o f gen era l
a p p l i c a b i l i t y and le g a l e f f e c t .
1
The a t t e n t io n o f the Coninittee i s in v it e d t o one oth er p oin t*
Pursuant, t o a requ est o f the D iv is io n o f the F ederal R e g is t e r , the Board
o f Governors in a l e t t e r dated Febiuary 25, 1936, fu rn ish e d such D iv is io n
w ith a l i s t o f s ta tu to r y c i t a t i o n s W hich c o n fe r a u t h o r it y upon the Board
o f Governors t o is s u e , p r e s c r ib e , or prom ulgate documents which are b e ­
lie v e d t o be o f g en era l a p p l i c a b i l i t y and le g a l e f f e c t .
This l i s t d id
n ot in c lu d e a c i t a t i o n t o s e c t io n 13A o f th e F ederal Reserve A ct under
which the r e g u la tio n r e la t in g t o Opem Market O perations i s is s u e d . In
a memorandum addressed t o the Board 4 i co n n e ctio n w ith such l e t t e r , i t
was s ta te d th a t s e c t io n 12A o f the F e le r a l Reserve A ct:




’ i s not l i s t e d in the attaches! l e t t e r b eca u se, w h ile
the q u estion i s d e b a ta b le , i t i s n ot b e lie v e d th a t
r e g u la tio n s is su e d th ereu n d er are o f g en era l a p p lic a ­
b i l i t y and le g a l e f f e c t . M oreover r e g u la tio n s on t h is
s u b je c t may fr e q u e n tly be o f 4 c o n f id e n t ia l ch a ra cte r
and a c c o r d in g ly i t may n ot be k e s ir a b le t o p u b lis h
them. In any e v e n t, i t i s u n d erstood th a t i t w i l l be
p o s s ib le t o add t o the l i s t o f p r o v is io n s a u th o riz in g
r e g u la tio n s o f gen era l a p p l i c a b i l i t y at a la t e r d a te °
i f t h i s i s d e s i r e d .”
1

Reproduced from the Unclassified I Declassified Holdings of the National Archives

~

DECLASSIFIED *

Authority £ , Q

-

F ederal Open Market Committee — 3

In view o f the apparent u n c e r ta in ty as t o whether the
r e g u la tio n r e la t in g t o Open Market O perations should be f i l e d w ith
th e D iv is io n o f the F ed eral R e g is te r and in view o f the tremendous
im portance o f th e r e g u la t io n , i t would seem th a t any doubt in the
m atter should be r e s o lv e d ip. fa v o r o f f i l i n g th e r e g u la t io n . Whether
such r e g u la tio n i s actually\ p u b lish ed in th e F ederal R e g is te r i s o f
no g re a t im portance* M oreover, i f the r e g u la tio n i s f i l e d in a c ­
cordance w ith th e law , i t s ^ a l i d i t y as a g a in s t persons who have no
a c tu a l knowledge t h e r e o f coufLd n ot be q u e stio n e d .




\
\

R e s p e c t fu lly ,

\Alfred K. Cherry,
A s s is ta n t C ounsel.

i...3 + Q - o ! - ± r

D iv iiim o f th e ;% d * rftl
W *tl«Bftl ArohtaM

^*ahlngtea«

C«

/

L

f .

(fclffltlesaflCIt

fa ocw^limicNi with tifce :>rcrri«i«ft§ of Motion 2 of the
? M m l a g isto r Aet# af>pr©*^u?ttly ts # %mn9 m& the ^pO&tion#
preeeribed % the AMbtfjftrfttl'vji Qcm&tto** of tfat

p la t e r ,

and i p w i d fey tli* M U t a l i 4*ttd M
urati 2, 1956, them are tn a i»
«M »d herewith, for m ine# *» pel&lmX m i three certified ©opie«
<xf « reg«l*tiim rtUtiae; to

;|ta«fe»t iypmmtimm whUh hM been i*»

*ued by the sWUml Opta Market Cimaitteau
Ton *dli wrUi that the inclosed r^pOftticn is ®f.f@otlw only
a 3fti*i»t m&mrnl S m m banka ami tl* conedttee, which & :^ « n a In**
<
r©
etruffleatalitiee, «adf therefore, au*h regulation w r fa ll within thi
tg
el*a*

by aeotioa ill of ^ H q g p t e t & m pmerlbed %

u*

\

AArtaUtVfttli* Coessittee of the

flegiater, dated tlareh 2# 19SG.

However, tfee proptatd regulation 1* c £ extrerae tmp&rtme* and the Cm
**
\

Mtttee feel# that it should he filed *rith your riviaion l t aQoor&tnoe
i
%

with the provision# of the ? M M

m & J k p t A*t in order to avoid a y
ia

possibility *f eafcftrraaaBMmt whioh sight «^rlee beo*uee of the failure
to file suoh regulation*




PlYislffi

th# 'Rtfmml

fhm
„ .

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m g & m tim )m* b * m 1 M o ta pur«w«afc t #
-

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*

»

—

—

—

—

-

by Mtttlcn 11A #f tli» ^itorill fti'urm Aot# *ppr© J D M N 25,
t«M m tN r
3 i5# (Si £t*t» S8l) *s <Mak^»
U
sot iaolud#d in th*
I'j^lNM
PVd

AC
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$ *x«a




dnt#d.

'Hii* atafcttior^ et%*tl<*i w i
w

c|f tb§ & r& of Oeffmar* ef fch P*l**mi
m
»
m 9 i* u *

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , 0 \ t e a i

|
|

1 6 1936

hr*
L Harris#!** .^Trasldaat,
#
Fa4#ral M
aaarva timk of law York*
fcaar Ur* HarrIsosi
?ha su»ai»«rs of tha So**rd of ^ovarmors hara dlaaussa*
^

informally tha tasitatfva ragulatlons a M by-laws for tha iPadaral
ii
^pan »arkat ooaunlttaa* eoplas of whloh w r « aaot to you on &roh
11th*

A m bm of M£$»«tl«Ba as to Kodlflaatloms that *l&ht ba
m r

tut ara taaorparatad In ravlsad drafts of tha ragulfctloas and
by~laws, eoplas of whlah ara submitted harwwlth, for your ooiss3aar*Uor.

If thara ara way ehaxtgas vhlah you would Ilka to

h&va wada In tbaaa drafts# tha Board’s staff will ba glad* at
your raqaaat* to prapara aaasdaaxita iiioorporatirg your ldaas ms
a basis for discussion by tha Cowalttaa#

Vary truly yours,
(Signed) Chestfif M
orctt*

chastar Morrill*
Saaratary*
Ixtolasuras*

<JPB/abb
3 /l 4 /^ 6




Reproduced from the Unclassified I Declassified Holdings of the National Archives

Authority

MAR 1 6

1936

* . J* Fleming* President,
federal M tm 23*»k of Cleveland.
m rw

v#*r H Fleail&fi
r*
The tMbtri of the Board of 'ioiroraors have disouasod
iitfofmlly tho tentative regulations tsd by-laws for the Federal
Upon liarf e Qrnm ittee* copies of which were sent to you m I i r h
et
fae

ilth,

A nuaber of sugf*stlen* as to *#difleatioias that night ho

s*de are Incorporated in rsvised drafts of tho regulations and
hy-laws* ooplot of whiefi are sub*ltted herewith, for your con­

sideration.

If ther# ere any ohan^es wtiieh you would like to

have naade in th#ae drafts* the Board** staff will he glad* at
your request* to prepare assandaents incorporating your ideas as
a basis for discussion by tho Cosmittee*

¥*ry truly yours*
Cet r Mt it
hse or t
Chester Merrill,
Secretary*

(Signed)

Ineloauroe#

s /U /^ 6

p .




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority f c . Q .

MAR 1 6 1936

Hr* i* Ju
f*ro«ido»tf
F«d*rU tooonro ta k of iMlloo*
Ifetr ir* loHinny*

tho asafeoro of tho Boon! of ^ovortsort h*v» ditousiod
iefcraftily tho

rogulotiont »nd by-low* for tho Fod«r*l

um M
p m arket loamfttoo, oopioa of which woro tost to you on K
oroh
11th*

A n sabor of »u&gottSoc« «• to aouIflootloco that aifht 'b
u
o

,r;»d oro lueorporotod Is roviood d ft» of tho ro&ulotloot »*sd
#
r*»
S>y*low coploo of whleh aro tubalttod horowlth, for your oot>of
•ld«r»tlOB*

If there »ro any ohoe^os which you «cw llfeo to
*ld

hovo xado lii thooo drafta, tho Board's staff will bo glad, at
your roquost# to proporo aaoKdstoxitt i&eorporatl&$ your idoas *o
• basis for dlsousslo» by tho Camlttoo*
Vory truly yours.
|SigMd) C tester M
k
orrill

Chostor Horrlii,
Soorotary*
li&olosuros*
JPD/obb
sA V & 6

5 s j, j 5




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

MAR 1 6 1936

Hr* i * I * iMditan, froaidoat*
i I
Fodaral
Bank of ftata*a City*
Baor ir* :aailtoai
Tho aoafcora of tho Board of ^trraraora ha*o dloouaaod

iaforaaily tho taotatiira rogulattoao M by-lawa for tho Fadorol
id
O
poa iorfcwt Comaltt*o« ooploo of vhioh woro tost to you © ioroh
a
llth*

A m btrr of auggaatS o r *
iK

os

to taodlfloatlosia that night ba

mdo oro i»corp©raiod In roviaod drafta of tho rofulatloao and
b y -ia » a ,

eopio* of utiSoti oro oubsittod harwwith, for your om»

•idorotiop*

If tharo oro aay ohoagoo w
hich you would liko to

Imvo *ado la thoto drofta# tho Board*# ataff will Oo &lod# at
your ro^uoot* to proparo oa»ada»ata iaoorporotiag your idaaa at
a Oaala for dloooaaloa ty tho Coanittoo*
Vary truly youra.
( i n d C e t r Mril
S g e ) h s e orl
Chootor Morrill,
Sooraiory*
Xaeloauraa*
3/U/&6




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , p .

CONFIDENTIAL
R evised d r a ft prepared by s t a f f o f
Board o f Governors a f t e r in form a l
d is c u s s io n w ith members o f Board
EXPLANATION
D e le tio n s from p r io r d r a ft s tr ic k e n
ou t - a d d itio n s c a p it a liz e d .

' REGULATION
FEDERAL OPEN MARKET COMMITTEE
March

, 1956

OPEN MARKET OPERATIONS •

SECTION 1 .
Pursuant to the a u th o r ity c o n fe r r e d upon i t by s e c t io n ISA
o f the F ed era l Reserve A c t, as amended, the F ederal Open Market Com­
m ittee p r e s c r ib e s the fo llo w in g r e g u la tio n s r e la t in g to the op en market tr a n s a c tio n s o f the F ed eral Reserve banks.
The F ed eral Open Market Committee e x p r e s s ly r e s e r v e s the
r ig h t to a l t e r , amend, o r r e p e a l t h is r e g u la tio n in whole or in p a rt
a t any tim e.

SECTION 2.
(a)

DEFINITIONS

Government s e c u r i t i e s . - The -term "Government s e c u r i­

t i e s " s h a ll in clu d e bonds, n o t e s , c e r t i f i c a t e s o f in d e b te d n e ss,
Treasury b i l l s , and o th e r o b lig a t io n s o f the United S t a t e s , in c lu d in g
o b lig a t io n s f u l l y guaranteed as to p r in c ip a l and i n t e r e s t by the
U nited S ta te s .




Reproduced from the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED '
Authority

j
C

D •\

_

^ j

r — - ..
I

i

-2 -

(b )

L-437

O b lig a t io n s . - The term " o b lig a t io n s ’' s h a ll in clu d e

a l l bankers* a c c e p ta n c e s , b i l l s o f exchange, ca b le t r a n s fe r s , bonds,
n o t e s , w arrants, d eb en tu res, and o th e r o b lig a t io n s , in c lu d in g Govern­
ment s e c u r i t i e s , which F ederal R eserve banks are a u th o rize d hy law to
purchase in the open market.
(c )

System open market a c c o u n t. - The term "system open

market a cco u n t” a p p lie s t o Government s e c u r it ie s and oth er o b lig a ­
t io n s h eld f o r the accou n t o f the F ed era l Reserve banks under the
e©H%yei DIRECTION o f the
(d )

eCommittee*

Committee . - The term "Committee” s h a ll mean the Fed­

e r a l Open Market Committee.
(e )

E xecu tive com m ittee. - The term 'leE xecutive -eCommittee"

s h a ll mean the e x e c u tiv e committee o f the F ed eral Open Market Com­
m ittee .
SECTION 3.

GOVERNING PRINCIPLES

By the terms o f s e c t io n 12A o f the F ederal Reserve A ct, as
amended, the tim e, c h a r a c te r , and volume o f a l l purchases and s a le s
in the open market by F ed era l Reserve banks s h a ll be governed w ith a
view to accommodating commerce and b u sin ess and w ith reg a rd to t h e ir
bearin g upon the gen era l c r e d i t s it u a t io n o f the cou n try .

SECTION 4 .

FEDERAL OPEN MARKET COMMITTEE

(NOTE: IT IS SUGGESTED THAT PARAGRAPHS ( a ) , ( b ) , a ND ( c ) OF
THIS SECTION COULD VERY W
ELL BE OMITTED AS THEY ARE COVERED
BY THE LAW AND THE PROPOSED BY-LAWS.)




Reproduced from the Unclassified I Declassified Holdings of the National Archives

“

DECLASSIFIED'

Authority

>D • \

^

\

/
''< w

/

'W ,»»/

-5 -

( G)

j

L-457

O rg a n iza tio n . - The Committee cre a te d by s e c t io n 12A

o f the F ed eral Reserve A ct, as amended by the Banking A ct o f 1955,
c o n s is t s o f the members o f the Board o f G overnors o f the F ed eral Re­
serve System and o f f i v e r e p r e s e n ta tiv e s o f the- F ederal R eserve banks
e le c t e d a n n u a lly .
An a lt e r n a t e to se rv e in the absence o f each such rep resen ­
t a t iv e s h a ll be e le c t e d a n n u a lly .
- -

(b )

R ecord s. - The S ecreta ry o f the Committee s h a ll keep

minutes o f a l l i t s m eetings and s h a ll keep a com plete r e c o r d o f the
a c t io n taken by the Committee upon a l l q u e s tio n s o f p o l i c y r e la t in g
to open-m arket o p e r a tio n s and s h a ll r e c o r d th e r e in the v o te s taken
in co n n e ctio n w ith the d eterm in a tion o f open-market p o l i c i e s and the
reasons a ssig n ed t h e r e fo r .

Such MINUTES AND r e c o rd s

s h a ll feeeeiae

remain IN the papepapty CUSTODY o f the Board o f Governors o f the
F ederal R eserve System.
(c)

M eetings. - M eetings o f the Committee s h a ll be h eld at

Washington, D. C ., a t l e a s t fo u r tim es each yea r upon the c a l l o f the
Chairman o f the Board o f Governors o f the F ed eral Reserve System or
at the WRITTEN OR TELEGRAPHIC req u est o f any th ree members o f the
Committee.

DUE ^ - n o t ic e s

o f m eetings c a lle d s h a ll be g iv e s SENT

to

a l l members o f the Committee by the S e c r e ta ry .
(d )

F u n ction s. - I t i s the duty o f the Committee t o con­

s id e r the needs o f commerce and b u s in e s s , the gen era l c r e d i t s it u a t io n
o f the cou n try , and euefe o th e r m atters having a bearin g thereon as




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may-©©me-te-~3:t6-a%%e3?iti©ft, and to c o n s id e r , ad op t, and transm it to
the s e v e r a l F ed eral Reserve banks, r e g u la tio n s and d ir e c t io n s w ith
r e s p e c t to the open-market o p e ra tio n s o f such banks under s e c t io n 14
o f the F ed era l Reserve A ct.

4iffle-d€!4e¥miiie-4he-o|5en-ffiA¥ke4-^ei4:-Gie-s-o±-4h-e--Sy-s4ea-5tnd-Will-no4ify
4;fee-«©v©pal-ff®Gie»al-8es^pv©-,baBks-©£-all-d©eA«4©ft«-wkieh-i!®quip«
ae4ies-©H-%h©£a?-paa?4*
(e )

P a r t ic ip a t io n in System Open Market A ccou n t. -

SeveFEfHeHt-seeupities-afid-e^feep-efeliga^ieRfi-feeid-ifoy-the-Systeffl-QpeH
Maa?fee%-AeeeHft%-w44i-fee-a±leea%ed-aa©»g-%h-6~fievei»a3:-Fedea?a3:-iteGepve
bafikS'-and—feh “ G iRffli-fei
• © ©
fe@©~wiH~a^^-H6't—
SH©fe~"a43:©©a-tioHS'~^3?©]: ^"tiHie— —
H
-feQ tiffl©
%©-m©©;fe-4he-efeaKiging-ii©eds~©l-‘- i s
espe©%i¥e-FedeFal-R©se^ve-'-feaRk6T— §ueh
a ii e e a - t i e n - w i l i - ;fee’-Hia4e-witfe~*the-¥iew-©f~e^w.a4i«iHg-as-l;aa?-as~ppaetie a te le -th e ~ a e t-e a js
BiHg-f3©«itiea-©£-eaek-Fe§e3?ai-8e«ea?¥e~kank--sute;J-ee%-%©
*feh© ?8aiH:fe©ftan©©‘~©iP~a-"i5iii;feate3:© ~i!©s©'P¥'©—
—
-,
Q©si^fea;©H-r

THE COMMITTEE FROM

TIME TO TIME SHALL DETERMINE THE PRINCIPLES W
HICH SHALL GOVERN THE
ALLOCATION AM G THE SEVERAL FEDERAL RESERVE BANKS OF GOVERNM
ON
ENT SECUR­
ITIES AND OTHER OBLIGATIONS HELD IN THE SYSTEM OPEN MARKET ACCOUNT,
WITH A VIEW TO MEETING THE CHANGING NEEDS OF THE FEDERAL RESERVE BANKS.

SECTION 5.
(a )

EXECUTIVE COMMITTEE

O rg a n iz a tio n . - The Committee, a t i t s f i r s t m eeting

a f t e r March 1 in each calen d ar y e a r , s h a ll s e l e c t from i t s own members




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L-4o7

an e x e c u tiv e com mittee c o n s is t in g o f f i v e members.
(b )

Fun c t io n s . - I t s h a ll be the duty o f the E xecu tive

Committee:
1.

To d ir e c t the ex e cu tio n o f purchases and s a le s

o f Government s e c u r it ie s and oth er o b lig a t io n s in the open
market in accordan ce w ith the open-market p o l i c i e s adopted
by the F ed eral Open Market Committee;
2.

TO ALLOCATE THE GOVERNM
ENT SECURITIES AND OTHER

OBLIGATIONS HELD IN TEE SYSTEM OPEN M
ARKET ACCOUNT AM G THE
ON
SEVERAL FEDERAL RESERVE BANKS I N ’ ACCORDANCE WITH THE PRINCIPLE
DETERMINED BY THE COMMITTEE.
To keep the members o f the F ed eral Open Market
Committee inform ed o f a l l tr a n s a c tio n s executed by the Com­
m ittee and o f a l l a llo c a t io n s and r e a llo c a t io n s o f Government
s e c u r it ie s and oth er o b lig a t io n s h eld f o r p a r t ic ip a t in g banks;
and
-§ -4 .

To perform such oth er fu n c t io n s and d u tie s in

c o n n e ctio n w ith open-market o p e ra tio n s as may be a ssig n ed to
i t from time to time by the F ed eral Open Market Committee;
but the e x e c u tiv e committee s h a ll have no a u th o r ity to d e te r ­
mine p o l i c i e s or make d e c is io n s upon q u e s tio n s o f p o l i c y .

SECTION 6 .

CONDUCT OF OPEN M
ARKET OPERATIONS

Each F ed eral Reserve bank s h a ll engage in open-market
o p e r a tio n s under s e c t io n 14 o f the F ed era l Reserve A ct on ly in




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accorda n ce w ith t h is r e g u la tio n and the d ir e c t io n s issu ed by the Com­
m ittee from tim e to tim e, and no F ederal Reserve bank s h a ll d e c lin e
to engage in open-market o p e r a tio n s as d ir e c t e d by the Committee.
0p&iHai!± iy y "i-H~tke“ eaHdHet--ef~epeH“-ffiaFket-epe3?atieBe~£©3?
the-S^/eteffi-9peH-Ma3Pket~Aee©UHty %The purchase or sa le o f o b lig a t io n s
FOR THE SYSTEM OPEN M
ARKET ACCOUNT SHALL BE EXECUTED w iii-tee-m ade
„ %hF©ugfe-tfee BY A F ed eral R eserv e-B - bank SELECTED BY THE COMMITTEE
ef-New~¥e£k.

.iB -the-eendH st-ef-epeH -fflapket-epeF atieH S e~ Each F ederal

Reserve bank, when d ir e c t e d by the Committee, w i l l SHALL make a v a ila b le
to the F ed eral Reserve-B~bank SELECTED BY THE COMMITTEE e£-New-¥epk,
such funds as may be n e ce ssa ry to conduct and e f fe c t u a t e such openmarket o p e r a tio n s and each F ed eral Reserve bank through the F ed eral
R eserve ■ - bank, SO SELECTED SHALL, ©f-New-¥oFk~wiil be c r e d it e d w ith
©
i t s p a r t ic ip a t io n in the purchase o f o b lig a t io n s o r w ith the p roceed s
o f any s a le t h e r e o f.

SECTION 7 .

PURCHASES AND SALES OF GOVERNM
ENT SECURITIES

No F ederal Reserve bank s h a ll purchase or s e l l Government
s e c u r it ie s e x cep t in aocoro.ance with an open—
market p o l i c y adopted
by the F ed eral Open Market Committee and in e f f e c t a t the tim e; and
any Government s e c u r it ie s now h eld by an in d iv id u a l F ed eral Reserve
bank f o r i t s ov.'n account s h a ll be d e liv e r e d in t o the System Open
Market A ccount.




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SECTION 8 .

H
\

\

L-437

OTHER OPEN M
ARKET OPERATIONS

S u b je ct to d ir e c t io n s o f the Committee AND THE FOLLOFv'ING
CONDITIONS, each F ed eral R eserve bank may engage in open-market
o p e ra tio n s o th e r than the purchase or sa le o f Government s e c u r i t i e s j
6Hfeje et-te-tke~fellewiHg--6©Rditi<=>He:
(1 )

A ll such t r a n s a c tio n s s h a ll be re p o rte d d a ily

to the S e cre ta ry o f the Committee on the day they take p la c e .
(2 )

Only a cce p ta n ce s and b i l l s o f exchange which

are o f the kinds made e l i g i b l e f o r purchase under the p ro­
v is io n s o f R egu la tion B o f’ the Board o f Governors o f the
F ederal Reserve System may be purchased and the r a te s o f
in t e r e s t or d isco u n t s h a ll be in accordan ce w ith sch edu les
approved or p r e s c r ib e d by the Board o f Governors o f the Fed­
e r a l Reserve System:

P r o v id e d , f u r t h e r , That no o b lig a ­

t io n s payable in fo r e ig n cu rren cy s h a ll be purchased ex cep t
in accordan ce w ith d ir e c t io n s o f the Committee.
(3)

Only b i l l s , n o te s , revenue bonds and warrants

o f S t a t e s , c o u n t ie s , d i s t r i c t s , p o l i t i c a l s u b d iv is io n s or
m u n ic ip a lit ie s which are o f the kinds made e l i g i b l e f o r
purchase under the p r o v is io n s o f R eg u la tion E o f the Board
o f Governors o f the F ed era l R eserve System may be purchased.




(4)

No F ed eral Reserve bank s h a ll engage in the

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purchase or s a le o f ca b le t r a n s fe r s f o r i t s own account ex­
ce p t in accorda n ce w ith the d ir e c t io n s o f the Committee;
P r o v id e d , That F ed era l Reserve banks may purchase and s e l l
ca b le t r a n s fe r s through the Habana agency in accordance w ith
the r e s o lu t io n s or r e g u la tio n s o f the Board o f Governors o f
the F ed eral Reserve System govern in g the o p e r a tio n s o f such
agency.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

copy kg
F o r m F . R . 131

"ARD

DF

GDVERNDRS

□ F THE

FEDERAL

RESERVE

SYSTEM

Office Correspondence
To

Date

March 12. 1956

Subject

Board o f govern ors__________________

(each member individually)

From_______Mr. Morrill--------------

------

33,^
C O P Y

................
■ *>

For your consideration in connection with the drafts of regu­
lations and by-laws for the Federal Open Market Committee which were
submitted to-you on March 11, you will find attached alternate tenta­
tive drafts of regulations / tnd J>y-laws c ontaining

rovisions dealing

more specifically and in detail with certain matters which were merely
outlined or referred to in the previous drafts.

Copies of the attached

drafts are not being sent to the representatives of the Federal reserve
banks.

CM yd




(Original filed 353.55)

W..S I .........II I
J.-.M
I— I

m —

I — ..... .... -

— U

—
— ^P—

— —

—

——

■ --------=

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March 12 , 1936.
CONFIDENTIAL
Tentative draft prepared by staff of Board of Governors of
the Federal Reserve System reflecting additional suggestions
made by staff as basis for discussion.
EXPLANATION

v

Deletions from prior draft stricken out - additions capitalized.

REGULATION
FEDERAL OPEN MARKET COMMITTEE
March

, 1936

OPEN MARKET OPERATIONS

SECTION 1.
Pursuant to the authority conferred upon it by section 12A of
the Federal Reserve Act, as amended, the Federal Open Market Committee
prescribes the following regulations relating to the open-market trans­
actions of the Federal Reserve banks.
The Federal Open Market Committee expressly reserves the right
to alter, amend, or repeal this regulation in whole or in part at any
time.
SECTION 2.
(a)

DEFINITIONS

Government securities. - The term ’Government securities”
’

shall include bonds, notes, certificates of indebtedness, Treasury bills,
and other obligations of the United States, including obligations fully
guaranteed as to principal and interest by the United States.




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '
r-

Authority ^

}D •\

- 2 x
(b )

^ |

L-435
^

O b lig a t io n s • - The term " o b lig a t io n s " s h a ll in clu d e

a l l ban kers1 a c c e p ta n c e s , billvS o f exchange, ca b le t r a n s fe r s , bonds,
n o t e s , w arrants, d eb en tu res, and oth er o b lig a t io n s , in c lu d in g Govern
ment s e c u r i t i e s , which F ed eral Reserve banks are a u th o rize d by ir.w
t o purchase in the open market.
fe )

System open market :i c c o u n t. - The term "system open
a

market a ccou n t" a p p lie s to Government s e c u r it ie s and oth er o b l i g a - t io n s h eld f o r the account o f the F ed eral Reserve banks under the
^ co n tr o l- o f .the
-(d)

committee *

Committee. - The term "Committee" s h a ll mean the

F ed era l Open Market Committee.
(e )

E x ecu tive com m ittee. - The term "e x e c u tiv e com m ittee"

s h a ll mean the e x e c u tiv e committee o f the F ed eral Open Market Com­
m itte e .

SECTION 5.

GOVERNING PRINCIPLES

By the terms o f s e c t io n 12A o f the F ederal Reserve A ct, as
amended, the tim e, c h a r a c te r , and volume o f a i l purchases and s a le s
in the open market by F ed eral Reserve banks s h a ll be governed w ith
a view t o accommodating commerce and b u sin ess and w ith regard t o
t h e ir b ea rin g upon the g en era l c r e d i t s it u a t io n o f the co u n try .

SECTION 4 .

(a )

FEDERAL OPEN M
ARKET COMMITTEE

O rg a n iz a tio n . - The Committee c r e a te d by s e c t io n I2A

o f the F ed eral R eserve A c t, as amended by the Banking Act o f 1935,




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED •

Authority £ , D .

-3 -

L -4 5 5

consists of the members of the Board of Governors of the Federal. Reserve
System and of five representatives of the Federal Reserve banks elected
annually.
..A S *

An alternate to serve in the absence of each such representative

shall be elected annually, B T A A T R A E S A L B E TITLE T A T N j ^ f
U N LENT HL E N
D O TE D
M E IN S O T E C M IT E O L IN T E A S N E O T E R PR SE TA E F R
E T G F H O M T E NY
H B E C F H E E N TIV O

^

<
f

>

W O S C A T R A E IS E C D
HM U H L E N T
LE TE .
(b)

Records. - The Secretary of the Committee shall keep minutes

o f p|l its meetings.and shall keep a complete record of the action taken

ly the Committee upon a ll questions of policy relating to open-market
operations and shall record therein the votes taken in connection with
the determination of open-market policies and the reasons assigned therefo r.

Such records shall b8gom
tr-<iind. remain ttee»pyopwiy of the Board of

w\

Governors of the Federal Reserve System.
(°)

Meetings. - Meetings of the Committee shall be held at W
ash­

ington, D. C., at least four times each year upon the ca ll of the Chairman

*

o f the Board of Governors of the Federal Reserve System or at the^request

of any three members of the Committee. Notices of meetings called shall ^
j ,»

be gicvefi to a ll members of the Committee by the Secretary.
(d)

Functions. - It is the duty of the Committee to consider

the needs o f commerce and business, the general credit situation of the
country, and flueh other matters having a bearing thereon^ ag aay oeroo to
irtenrOTffmair and to consider, adopt, and transmit to the several Fed­
eral Reserve banks, regulations and directions with respect to the openmarket operations of such banks under section 14 of the Federal Reserve
Act.




J

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority £ , 1 ) .

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mil* fitnm iiiinii tn time

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e r a l_
_
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(f)

ffe^tjeipatioa Id System Open Market Account. - Government
a

securities and other obligations held for the System Open Market Account
w ill be allocated among the several Federal Reserve banks and the Committee

/ ft

w ill adjust such allocations from time to time to meet the changing needs
of respective Federal Reserve banks.

/

K

7

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•

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—

SE TIO 5.
C N

E E U E C M IT E
X C TIV O M T E

Organization. - The Committee, at its fir s t meeting after

(a)

March 1 in each calendar year, shall select from its own members an executive committee consisting of j&ve-aoafeogfly T R E M M E S O T E B A D OYi
HE E BR F H OR
G V R O S O T E F D R L R S R E S S E A D T O R PR SE TA E O T E [
O E N R F H E E A E E V Y T M N W E E N TIV S F H

^

F D R L R S R E B N S.
E E A EE V A K
T E C A M N O T E C M IT E S A L B C A M N O T E E E U E!
H H IR A F H O M T E H L E H IR A F H X C TIV

V

C M IT E .
O M TE
T E S C E A Y O T E C M IT E S A L A T A T E SE R T R O T E
H ERTR F H O M TE HL C S H
CEAY F H
E E U IV C M IT E A D S A L K E M U E O A ITS M E IN S A D F R IS
X C T E O M T E N H L E P IN T S F LL
ET G N UN H
COPIES T E E F T T E M M E S O T E O M fT E
H R O O H E B R F H ^C M T E .
(b)

Functions. - It shall be the duty of the executive committees
1.

To direct the execution of purchases and sales of

Government securities and other obligations in the open market




• f

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L-435
in accorda n ce w ith the open-market p o l i c i e s adopted by the F ederal
Open Market Committee;
2.

To keep the members o f the F ed eral Open Market Commit­

te e inform ed o f a l l t r a n s a c tio n s execu ted by the Committee and o f
a l l a llo c a t io n s and r e a llo c a t io n s o f Government s e c u r i t i e s and
o th e r o b lig a t io n s h e ld f o r p a r t ic ip a t in g banks; and
3•

To perform such o th e r fu n c t io n s and d u t ie s in connec­

t io n w ith open-m arket o p e r a tio n s as &ay be a ssig n ed to i t from
tim e to time by the F ed eral Open Market Committee; but the execu­
t i v e com mittee s h a ll have no a u th o r ity to determ ine p o l i c i e s o r
make d e c is io n s upon q u e s tio n s o f p o l i c y .
SECTION 6 .

CONDUCT OF OPEN MARKET OPERATIONS

Each F ederal R eserve bank s h a ll engage in open-m arket o p e r a tio n s
under s e c t io n 14 o f the F ed eral R eserve A ct on ly in accord a n ce w ith t h is
r e g u la tio n and the d ir e c t io n s is su e d by the Committee from time to tim e,
and no F ederal Reserve bank s h a ll d e c lin e t o engage in open-m arket op era­
t io n s as d ir e c t e d by the Committee.
O r d in a r ily , in the conduct o f open-m arket o p e r a tio n s f o r the Sys­
tem Open Market A ccou n t, the purchase o r s a le o f o b lig a t io n s w i l l be made
BY THE M
ANAGER "O THE.SYSTEM OPEN MARKET ACCOUNT through the F ed eral Re­
F
serv e Bank o f New Y ork.

In the con d u ct o f open-m arket o p e r a tio n s each

F ed eral R eserve bank, when d ir e c t e d by the Committee, w i l l make a v a ila b le
to the M
ANAGER OF THE SYSTEM OPEN MARKET ACCOUNT THROUGH THE F ed eral
R eserve Bank o f New Y ork, such funds as may be n e ce ssa ry t o conduct




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DECLASSIFIED *

-

6

L -435

and e f fe c t u a t e such open-m arket o p e r a tio n s and each F ed eral Reserve
bank through the F ed eral R eserve Bank o f Ng¥ York w i l l be c r e d it e d
w ith i t s p a r t ic ip a t io n in the purchase o f o b lig a t io n s or w ith the
p roceed s o f any s a le t h e r e o f.

SECTION 7 .

PURCHASES AND SALES OF GOVERNM
ENT SECURITIES

No F ed eral R eserve bank s h a ll purchase or s e l l Government
s e c u r it ie s e x cep t in accorda n ce w ith an open-m arket p o l i c y adopted
by the F ed eral Open Market Committee and in e f f e c t a t the oime; and
any Government s e c u r i t i e s now h e ld b^ an in d iv id u a l F ed eral Reserve
bank f o r i t s own accou n t s h a ll bo d e liv e r e d in t o the System Open
Market A ccou n t.
SECTION 8 .

OTHER OPEN MARKET OPERATIONS

S u b je ct t o d ir e c t io n s o f the Committee, each Federal R eserve
bank may engage in open-market o p e r a tio n s oth er than the purchase
o r s a le o f Government s e c u r i t i e s , s u b je c t t o the f o llo w in g c o n d it io n s




(1 )

A l l such tr a n s a c tio n s s h a ll be r e p o rte d d a ily

to the S e c r e ta ry o f the Committee on the day th ey take p la c e .
(2 )

Only a ccep ta n ces and b i l l s o f exchange which

are o f the k inds made e l i g i b l e f o r purchase under the p ro­
v is io n s o f R egu lation B o f the Board o f Governors o f the
F ed eral R eserve System may be purchased and the r a te s o f
in t e r e s t or d isc o u n t s h a ll be in accorda n ce w ith sch ed u les

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“|

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L-435

approved or p r e s c r ib e d by the Board o f Governors o f the
F ed eral Reserve System:

P ro v id e d , f u r t h e r . That no o b lig a ­

t io n s payable in fo r e ig n cu rren cy s h a ll be p u rch ased ' ex­
ce p t in accordance w ith d ir e c t io n s o f the Committee.
(3 )

Only b i l l s , n o t e s , revenue bonds and warrants

o f S t a t e s , c o u n t ie s , d i s t r i c t s , p o l i t i c a l s u b d iv is io n s o r
m u n ic ip a lit ie s which are o f the kinds made e l i g i b l e f o r
purchase under the p r o v is io n s o f R egulatiori E o f the Board
o f G overnors o f the F ed era l R eserve System may be purchased.
(4 )

No F ed era l Reserve bank s h a ll engage in the

purchase or s a le o f c a b le t r a n s fe r s f o r i t s own accou n t ex­
c e p t in accordan ce w ith the d ir e c t o n s o f the Committee;
P r o v id e d . That F ed eral Reserve banks may purchase and s e l l
ca b le t r a n s fe r s through the Habana. agency in accordan ce w ith
the r e s o lu t io n s or r e g u la tio n s o f the Board o f Governors o f
the F ed era l Reserve System govern in g the o p e r a tio n s o f such
agency.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority

FEDERAL RESERVE BAHK OF CLETCUUD

Office of The President




March 12, 1936
Dear Mr. Morrills
Thank you for your confidential letter of March
11-with which you enclose, at the request of Chairman Eccles,
preliminary drafts of regulations and by-laws to be used as
a basis for discussion at the forthcoming meeting of the
Federal Open Market Committee*

I have also received memo­

randum prepared by the Board’s staff calling attention to
some of the points in connection with the regulations and by­
laws which will require special consideration.
Very truly yours,
(Signed) M. J. Fleming
M. J. Fleming,
President.

Mr* Chester Morrill,
Secretary, Board of Governors
of the Federal Reserve System,
Washington, D. C«

Reproduced from the Unclassified I Declassified Holdings of the National Archives

Authority £ . - Q - \ t e a i

|

C o p y

March 11, 1936

Mr. George L. Harrison, President,
Federal Reserve Bank of Hew York,
Ne> Toric, M lork.
e*

CQNFIDEMTTAr.

Dear Mr. Harrisons
In anticipation of the coming meeting of the Federal
Open Market Committee the Board's staff, at the request of
Chairman Eccles, has prepared preliminary drafts of regulations
and by-laws to be used as a basis for discussion#

The drafts

are purely tentative and as yet have not been submitted to or
passed upon by the Board.

Consideration of each draft will no

doubt suggest changes, substitutions or alternative provisions,
and Mr. Eccles has suggested that copies be sent to each member
of the Committee representing the Federal Reserve banks at the
same time that they are furnished to the members of the Board.
Accordingly, for your confidential study, copies of such drafts
are inclosed.
In this connection, there is also inclosed a memorandum
prepared by the Board*s staff calling attention to some of the
points in connection with the regulations and by-laws which will
require special consideration.




Very truly yours,
(Signed) Chester Morrill
Chester Morrill,
Secretary.

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *

Hr# i * J* Flaming* Praai&aat*
fa d a ra l H « t» m
o f C]« v tla a d g
ClavalaacS, hlo*

I N a t *IAt

t«ir isr# Flawlaci
la Antic ipat Ion o f tit# coming ssaatiag o f tha <adar&l
r>p9n ^arfcat C oaaittaa tha Board* a ataff * a t tha raquaat o f

Chi Irm a Eoolaa* ha a p m p * r * 4 rra liia ia a ry drafta of ragu la iio a a
•ad fey»lawa to ba aaad a* a baaia fo r diaauvaton.

T d ra fta
ha

ara p u ra ly ta a ta tlv a aa4 aa yat hum act b«an aubiglttad to or
paata# Mf«m fey tha foarsl*

C© s a tu ra tio n o f aaoh draft will a©

'Soubt auggaat ohaagaa* aubfttitution* or altarmtiva -ro vla io a a *
awl ^r* Eoela# hat aui&aatad that ©O
fslaa ba aant to n o h vmwto&w
o f tha C cm itta a rapraaaat Inn tha cadaral Baaanm U ik i a t tha
tan* t i* a th a t thay ara f w m itftw i to tha siam
bara o f tha toard#

Aaeor<llR£lyt fo r your eaafidNmtial «tudy* oopiat o f m e h drafta
■ara ia e lo a a i*
la th la oeauaoiloa* thara ia a lt * in o lo tad a asafeoraaduK
pmparat! by tfca Board* a a ta ff a a tlla g a tta a tio a to umm o f tha
l»oiata la coaaaa+Joa w ith tha ra p ila tio a e and fcylaw * which w i ll
ra<|uira apaeial eonatdaratioa#
Vary tr u ly yourc*

Inaloaurwa*
0* t

3 / / v /3 4 »




Cbaatar M o rrill*
s«eratary»

IP
Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '

Mr* i* A* iaEiaisay, ?ra«i<ta»tf
Fa<l*r*l B#a*r*» B«aJc o f
C illf t i, fa * * * .

C l li-h im ih

Boar M r 9 iaKiaaay*
la a n tie tjja tlo a o f tho acKlaft « a *tla g o f th# F atoral
Opaa Harkat Ccaaaltta* tha :Bo*raf « a ta ff, a t tha ra$ua*t o f
Chalrwaa S e e l# it hat praparad praltetsm ry d itfk » o f ra p tla tlo a *
a.ad fey-tawa to bm a**d a* it b a il* fo r d l*« tt**l*& »

fha d ra ft*

ara puraly tayitafciva an*! a* ya t h a t* not baaa sufcsaitta** to or
paaaad upon by tha ^oard»

C oa*!d«rm tl*a o f aaeh d ra ft w ill no

doubt au£g**t ahan^aa* s u b s titu tio n * or a lta rm tl'v a p ro v ltla n a ,
aaA i r * &«ola* hat *u g f**t*4 th a t copla* ba *aat to aaeh wanbar
of tha C ensltta# ra p ra ia n tla g tha Fadaral «««#rw baa its a t tha
aaiaa tia a th a t thay are fura l« h *4 t© th© Bsembar# o f tha Board*
Aoaordlngly* fo r >-our a o a flA a n tla l *tt* iy , copias o f *u6h d ra ft*
ara laelosad*
la th is *om ia*tioB # thar# la alao in e lo tad a mvmormn&xm
praparad by th# fc«sar*, » s ta ff © a llla g a tta a tio a to sow* o f tha
p o in t* la eoaaaatlon w ith tha ra gala t ions and by-law# whiah w ill
ra qu ira *p a o ia l e o iis iia ra tlo a #
^ary tr u ly yo u r*,

loolosura**




C haatar M o r r ill,
S*ar*t*.ry#

Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *

Hr* Oooifo «* ftiwiittoii, Frosidoat,
FodoraI Htwrw Bank of Kafttas ^ity,
Saasas &ity, nisoo**ri*

ooypipm uu

Doar Hr* Eas»lXto«i
l*i a n tto tp a tio i* o f th e <?o*tin& so o tin g o f th e fo d o ra l
„Opon Jfark»t O oaaltto* th o Board** s t a f f , a t th« ro q u o st o f Chalnaaa
o o le s , h.aa proparod pro] i* lo » ry d r a ft* o f rogw latloao and by*l«»i
t o b* us«4 &• «. b a s is f o r d tso u ssio tw

?ho d r a f t s aro p u ro ly ton tatlT O

and a s y * t havo no t boom so b o itto d t o or passod «pon by tho ioard#
O o esld o ratio a o f oaoh

it r a

f t w i ll

m

dowbt ssaggost ohaa$os, s u b s ti­

tu tio n s o r a lto r a a tiv o p r o v is io n s , a&i W . I««lo* has s u ^ o s to d t h a t
ooplos bo to u t t o oaoh nwibor o f tho C ow dttoo ro p ro M a tin g th o Fodora l Posorro feaafc* a t th o ssao ti* o th a t thoy oro fu rn ish o d t o th o aoabors
o f th o B o a rd •

io o o rd ia g ly , f o r your a o o f id o n tla l s t u d y , oopios o f ouoh

d r o ft# oro la o lo s o d .
in

t h i s ocnao o tion, th o ro i s a ls o lao lo so d a m aoraado*

proparod by th o -^oord *s s t a f f M U iflg a tto a tio ii Ins

so» o

o f tho- p o in ts

l a oonaootio* w ith th o ro g a la tio a o aad b y la w s whioh w i l l ro ^ u iro
sp o o ia l o o n sld o ra tlo su
f o ry t r u l y y o u rs,

Ohostor H o r r ili
' Soorotary*
in o lo s u ra s .




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED *
Authority 1 ^ >Q • \ h G ^ j

F orm N o.

y » V

■>«— V

_

V W " V

-

»—

— —

Office Correspondence
To

?ha Board of Gowamors

FEDERAL RESERVE

BR
0D
A

Pate M
Sl*Oh 11| H M
H I

Subject

~ Individual copies to the six members)
X
From_

H r. Ito rrU l________

___

-^ J g -_______________________

...

u . f 5 f - ^ /34

/i t o u «U1 flad attaotwd bmmJ> * t m U U y di- ^ « f ft T B 1* BV
tioft^nd a tentative draft aftag~lawa/for diicuaeiao by tha Psdaral
O
pen llarkat Coaaitta© at it* first aaeting, togathar with a ooftr of
I
AiM om dui regarding certain faaturaa of the rcgulatlop and ty«3aws»
latmordmem.wSSithe a¥tKTolH0Kri^^
are being transa&tted today to Messrs* Harrison* Hosing, HcKinnay and
Haailton In ordar that they My haw an opportunity to study thaa prior
a
to the Mating of tha Coaaittae* I f w should ha adviaad of tha aleoo
tion of a representative by tha Chioago and St# Louie hanks in Uaa to
do so w will also sand hia eopiaa of this aatarial* Xt is understood
e
that tha nsathara of tha Board will wish to discuss tha proposad regula­
tion and fey-laws at sone naatlng prior to naxt M
onday.


e .


FILE CO
PY

« J

,

Reproduced from the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED'

|

Authority 1^> Q • \ h G ^ |

j

L-454
CONFIDENTIAL
T en ta tiv e d r a ft prepared by s t a f f o f Board o f Governors
o f the F ed era l R eserve System as b a s is f o r d is c u s s io n
by F ed eral Open Market Committee but n ot y e t c o n s id e r e d
by members o f the Board o f Governors

REGULATION
FEDERAL OPEN M
ARKET COMMITTEE

March

, 1956

OPEN M
ARKET OPERATIONS

SECTION 1 .
Pursuant t o the a u th o r ity c o n fe r r e d upon i t by s e c t io n
12A o f the F ed eral R eserve A ct, as amended, the F ed eral Open
Market Committee p r e s c r ib e s the fo llo w in g r e g u la tio n s r e la t in g to
the open-market tr a n s a c tio n s o f the F ed eral R eserve banks.
The F ed era l Open Market Committee e x p r e s s ly r e s e r v e s the
r ig h t to a l t e r , amend, or r e p e a l t h is r e g u la tio n in whole or in
p a rt a t any tim e.

SECTION 2 .

(a )

DEFINITIONS

Government s e c u r i t i e s . - The terra "Government secu r­

i t i e s " s h a ll in clu d e bonds, n o t e s , c e r t i f i c a t e s o f in d eb ted n ess,
T reasury b i l l s , and o th e r o b lig a t io n s o f the United S t a t e s , in c lu d ­
in g o b lig a t io n s f u l l y guaranteed as t o p r in c ip a l and in t e r e s t by
the U nited S ta te s .




Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED '
Authority

Q • \6 G ^ |

- 2 -

(b )

L-454

O b lig a t io n s . - The term " o b lig a t io n s ” s h a ll in clu d e

a l l ban k ers’ a c c e p ta n c e s , b i l l s o f exchange, ca b le t r a n s fe r s , bonds,
n o t e s , w arran ts, d eb en tu res, and oth er o b lig a t io n s , in c lu d in g Govern­
ment s e c u r i t i e s , which F ed eral Reserve banks are a u th o rize d by law
t o purchase in the open market.
(c)

System open market a c c o u n t. - The term "system open

market a cco u n t” a p p lie s to Government s e c u r it ie s and oth er o b l i g a ^

t io n s h e ld f o r the accou n t o f the F ed eral Reserve banks under the
c o n t r o l o f the e x e c u tiv e com m ittee.
(d)

Committee. - The term "Committee” s h a ll mean the

F ed eral Open Market Committee.
(e )

E x ecu tive com m ittee. - The term "e x e c u tiv e com m ittee”

s h a ll mean the e x e c u tiv e committee o f the F ed eral Open Market Com­
m itte e .

SECTION 5.

GOVERNING PRINCIPLES

By the terms o f s e c t io n 12A o f the F ed eral Reserve A ct, as
amended, the tim e, c h a r a c te r , and volume o f a l l purchases and s a le s
in the open market by F ed era l Reserve banks s h a ll be governed w ith
a view t o accommodating commerce and b u sin ess and w ith regard to
t h e ir b ea rin g upon the g en era l c r e d i t s it u a t io n o f the co u n try .

SECTION 4 .

.

(a )

FEDERAL OPEN MARKET COMMITTEE

O rg a n iz a tio n . - The Committee c re a te d by s e c t io n 12A

o f the F ed eral Reserve A c t, as amended by the Banking Act o f 1955,



Reproduced from the Unclassified I Declassified Holdings of the National Archives

“

DECLASSIFIED'

Authority ^

- 3 -

>0 • \

^ |

L-434

c o n s is t s o f the members o f the Board o f G overnors o f the F ed eral Re­
serve System and o f f i v e r e p r e s e n ta tiv e s o f the F ed eral R eserve banks
e le c t e d a n n u a lly,
-An a lt e r n a t e t o serve in the absence o f each such rep resen ­
ta t iv e , s h a ll be e le c t e d a n n u a lly .
(b )

R e co rd s* - The S e c r e ta ry o f the Committee shaJ.l keep

minutes o f a l l i t s m eetings and s h a ll keep a com plete r e c o r d o f the
a c t io n taken by the Committee upon a l l q u e s tio n s o f p o l i c y r e la t in g
t o open-market o p e r a tio n s and s h a ll r e c o r d t h e r e in the v o te s taken
in con n ection w ith the d eterm in a tion o f open-m arket p o l i c i e s and the
reason s assig n ed t h e r e fo r .

Such r e c o rd s s h a ll become and remain the

p ro p e rty o f the Board o f Governors o f the F ederal R eserve System.
(c)

M eetin gs. - M eetings o f the Committee s h a ll be h eld

a t Washington, D. C*, a t le a s t fo u r tim es each year upon the c a l l
o f the Chairman o f the Board o f Governors o f the F ed eral Reserve
System or a t the re q u e s t o f any th ree members o f the Committee.
N o tic e s o f m eetings c a lle d s h a ll be g iv en to a l l members o f the Com­
m ittee by the S e c r e ta r y ,
(d.)

F u n ctio n s . - I t i s the duty o f the Committee t o con­

s id e r the needs o f commerce and b u s in e s s , the g en era l c r e d it s it u a ­
t io n o f the co u n try , and such oth er m atters having a b ea rin g th e r e ­
on as may come to i t s a t t e n t io n , and to c o n s id e r , ad op t, and tra n s ­
m it t o the s e v e r a l F ed era l Reserve banks, r e g u la tio n s and d ir e c t io n s
w ith r e s p e c t to the open-m arket o p e r a tio n s o f such banks under s e c ­
t io n 14 o f the F ed eral Reserve A ct.



Reproduced from the Unclassified / Declassified Holdings of the National Archives

DECLASSIFIED'
Authority

>D • \ b G ^ |

- 4 -

(e )

|

t-4 5 4

Open-Market p o l i c y . - The Committee w i l l from time to

time determ ine the open-m arket p o l i c i e s o f the System and w i l l
n o t i f y the s e v e r a l F ed eral Reserve banks o f a l l d e c is io n s which re
q u ir e a c t io n on t h e ir p a r t .
"(f)

P a r t ic ip a t io n in System Open Market A ccou n t. - Govern

ment s e c u r it ie s and o th e r o b lig a t io n s h eld f o r the System Open Mar
^ k et Account w i l l be a llo c a t e d among the s e v e r a l F ed eral Reserve
banks and the Committee w i l l a d ju s t such a llo c a t io n s from time to
time t o meet the changing needs o f
banks.

r e s p e c t iv e F ed eral Reserve

Such a l l o c a t i o n w i l l be made w ith the view o f e q u a liz in g

as f a r as p r a c t ic a b le the n et earn in g p o s it io n o f each F ed eral Re­
serve bank s u b je c t t o the maintenance o f a s u it a b le re s e r v e p o s i­
tio n .

SECTION 5 .

(a )

EXECUTIVE COMMITTEE

O rg a n iz a tio n . - The Committee, at i t s f i r s t m eeting

a f t e r March I in each calen d a r y e a r , s h a ll s e le c t from i t s own mem
bers an e x e c u tiv e committee c o n s is t in g o f f i v e members.
(b )

F u n ctio n s . - I t s h a ll be the duty o f the e x e cu tiv e

com m ittee:




1.

To d i r e c t the e x e c u tio n o f purchases and s a le s

o f Government s e c u r i t i e s and oth er o b lig a t io n s in the open
market in accordan ce w ith the open-market p o l i c i e s adopted
by the F ed eral Open Market Committee;

Reproduced from the Unclassified / Declassified Holdings of the National Archives

- 5 -

2.

Ij
-434

To keep the members o f the F ed eral Open Market

Committee inform ed o f a l l t r a n s a c tio n s execu ted by the Com­
m ittee and o f a l l a llo c a t io n s and r e a llo c a t io n s o f Govern­
ment s e c u r i t i e s and o th e r o b lig a t io n s h eld f o r p a r t ic ip a t in g
banks; and
3.

To perform such oth er fu n c t io n s and d u tie s i n

co n n e c tio n w ith open-m arket o p e r a tio n s as may be a ssig n ed to
i t from tim e to time by the F ed eral Open Market Committee;
but the e x e c u tiv e com mittee s h a ll have no a u th o r ity t o d e t e r ­
mine p o l i c i e s or make d e c is io n s upon q u e s tio n s o f p o l i c y .

SECTION 6 .

CONDUCT OF OPEN MARKET OPERATIONS

Each F ed eral R eserve bank s h a ll engage in open-m arket
o p e r a tio n s under s e c t io n 14 o f the F ed era l Reserve A ct o n ly in a c­
cordance w ith t h is r e g u la tio n and the d ir e c t io n s is s u e d by the
Committee from time t o tim e, and no F ed eral Reserve bank s h a ll de­
c l i n e t o engage in open-m arket o p e r a tio n s as d ir e c t e d by the Com­
m itte e .
O r d in a r ily , in the conduct o f open-market o p e r a tio n s f o r
the System Open Market A ccount, the purchase or s a le o f o b lig a t io n s
w i l l be made through the F ed eral R eserve Bank o f New York.

In the

conduct o f open-market o p e r a tio n s each F ed eral R eserve bank, when
d ir e c t e d by the Committee, w i l l make a v a ila b le t o the F ed era l Re­
serve Bank o f New Y ork, such funds as may be n e ce ssa ry t o conduct




Reproduced from the Unclassified I Declassified Holdings of the National Archives

"""""

”
f

DECLASSIFIED *

Authority

; Q • \b G ^ j

- 6 -

|

L-454

and e f fe c t u a t e such open-market o p e r a tio n s and each F ed era l Reserve
bank through the F ed eral R eserve Bank o f New York w i l l be c r e d it e d
w ith i t s p a r t ic ip a t io n in the purchase o f o b lig a t io n s o r w ith the
p roceed s o f any s a le t h e r e o f.

SECTION 7 .

PURCHASES AND SALES OF GOVERNM
ENT SECURITIES

No F ed eral R eserve bank s h a ll purchase or s a i l Government
s e c u r it ie s ex cep t in accordan ce v/ith an open-market p o l i c y adopted
by the F ed eral Open Market Committee and in e f f e c t a t the tim e; and
any Government s e c u r it ie s now h eld tjy an in d iv id u a l F ed eral Reserve
bank f o r i t s own accou n t s h a ll be d e liv e r e d in t o the System Open
Market A ccount.

SECTION 8 .

OTHER OPEN MARKET OPERATIONS

S u b je ct t o d ir e c t io n s o f the Committee, each F ed eral Reserve
bank may engage in open-market o p e r a tio n s oth er than the purchase
or s a le o f Government s e c u r i t i e s , s u b je c t t o the f o llo w in g c o n d it io n




(1 )

A l l such t r a n s a c tio n s s h a ll be r e p o rte d d a ily

to the S e c r e ta ry o f the Committee on the day th ey take p la c e .
(2 )

Only a ccep ta n ces and b i l l s o f exchange which

are o f the k inds made e l i g i b l e f o r purchase under the p ro­
v is io n s o f R eg u la tion B o f the Board o f G overnors o f the
F ed eral R eserve System may be purchased and the r a te s o f
in t e r e s t o r d isc o u n t s h a ll be in accordan ce w ith sch edu les

Reproduced from the Unclassified I Declassified Holdings of the National Archives




DECLASSIFIED'
f

Authority

|

Q • \6 * 5 ^ j

- 7 -

J

L-434

approved or p r e s c r ib e d by the Board o f Governors o f the
F ed era l Reserve System:

P rov id ed , f u r t h e r , That no o b lig a ­

t io n s payable in f o r e ig n cu rren cy s h a ll be purchased ex­
c e p t in accorda n ce w ith d ir e c t io n s o f the Committee.
(3 )

Only b i l l s , n o t e s , revenue bonds and w arrants

o r S t a t e s , c o u n t ie s , d i s t r i c t s , p o l i t i c a l s u b d iv is io n s o r
m u n ic ip a lit ie s which are o f the kinds made e l i g i b l e f o r
purchase under the p r o v is io n s o f R eg u la tion E o f the Board
o f G overnors o f the F ed eral R eserve System may be purchased.
(4 )

No F ed era l R eserve bank s h a ll engage in the

purchase o r sa le o f c a b le t r a n s fe r s f o r i t s own accou n t ex­
c e p t in accorda n ce w ith the d ir e c t o n s o f the Committee:
P r o v id e d , That F ed era l Reserve banks may purchase and s e l l
c a b le t r a n s fe r s through the Habana agency in accorda n ce w ith
the r e s o lu t io n s or r e g u la tio n s o f the Board o f Governors o f
the F ed era l R eserve System govern in g the o p e r a tio n s o f such
agency.

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DECLASSIFIED '
Authority l^ s Q • \

^

j

L-432
CONFIDENTIAL

Memorandum w ith r e s p e c t to suggested
a lt e r n a t iv e p r o v is io n s in t e n t a t iv e
d r a ft s o f r e g u la tio n s and by-law s o f
F ed era l Open Market Committee.
MAR

1 1

1936

REGULATIONS

1.

S e c tio n 4 . paragraph (a ) - The Committee may d e s ir e to

make p r o v is io n w ith r e s p e c t t o the q u e s tio n whether and under what
c o n d it io n s a lt e r n a t e s may atten d m eetin gs.
r*-

2.

S e c tio n 4« paragraph ( f )

- I t would seem im portant f o r

the Committee to c o n s id e r the fo rm u la tio n o f more d e f i n i t e p o l i c i e s
w ith r e s p e c t to a l l o c a t i o n o f o b lig a t io n s h eld in the System Account
than i s suggested in the t e n t a t iv e d r a f t .

I t i s a ls o im portant t o

c o n s id e r whether a l l o c a t i o n s should be made try the E xecu tive Committee
o r by the f u l l Committee.
3.

S e c tio n 5 . paragraph (a ) - I t w i l l be n e ce ssa ry f o r the

Committee t o g iv e c o n s id e r a t io n t o com p osition o f the E xecu tive Com­
m it te e .
S e c tio n 7 - In R eg u la tion M o f the Board o f Governors o f
the F ed eral Reserve System d e a lin g w ith open-market o p e r a tio n s under
the Banking A ct o f 1933 p r o v is io n was made f o r the purchase o f Gov­
ernment s e c u r it ie s ty in d iv id u a l F ed era l Reserve banks under c e r t a in
c o n d it io n s .

This has been elim in a ted in the t e n t a t iv e d r a ft and the

Committee may d e s ir e t o g iv e c o n s id e r a t io n to t h is s u b je c t .
S e c tio n 8 - In the t e n t a t iv e d r a f t , s e c t io n 8 has been
drawn w ith the id e a t h a t , in s o fa r as typ e o f investm ent i s con cern ed,




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e l i g i b i l i t y requirements as defined in Regulations B and E o f the
Board of Governors of the Federal Reserve System sh a ll control but
that the quantity to be purchased or sold or the p olicy with respect
to such operations sh a ll be governed by the regulation and direction
o f the Federal Open Market Committee.

As the volume o f such opera­

tions i s at present not a factor in the credit situ ation section 8
leaves the matter of such operations fo r the present la rg ely in the
d iscretion of each Federal Reserve bank, but reserves fo r the Com
­
mittee the right to control such operations as and when deemed neces­
sary by the Committee.

BY-LAWS

A rticle 1 . section 1 .

The Committee may desire to give con­

sideration to additions to th is section further c la rify in g the statu s,
e le c tio n , and seating o f members to the Committee.
A rticle 1 . section 2.

The Committee may desire to make further

provisions with respect to the question whether and under what condi­
tions alternates may attend meetings*
A rticle 5. section 1.

The Committee may desire to make further

provision with respect to the composition of the Executive Committee.
The Committee may also desire to give consideration to the
inclusion of provisions in the by-laws with respect to the confiden­
t i a l character of i t s deliberations.




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CPTOPSNTIAL

T en ta tiv e d r a ft o f r e g u la tio n - F ederal
Open Market Committee as prepared in
C ou n sel’ s o f f i c e showing suggested
changes by Messrs* G olden w eiser, Sinead,
C layton and Bethea.

J jJ L

" « - *

1«&>

EXPLANATION
Suggested changes o f D
r**
randum-2 / 2 8/3 6 u n d erlin ed in r e d .
Suggested changes o f Mr,
3 / 2 / 3 6 u n d erlin ed in b lu e .
Suggested changes o f Mr,
3 /2 /3 6 u n d erlin ed in lea d p e n c i l .
Suggested changes o f Mr*

G oldenw eiser as per h is memo­
Sinead as p er h is memorandumC layton as per h is memorandumBethea u n d erlin ed in pen.

REGULATION
FEDERAL OPEN MARKET COMMITTEE
March

, 1936

OPEN MARKET OPERATIONS

SECTION 1 .
Pursuant t© the a u th o r ity co n fe rre d upon i t by s e c t io n
12A o f the F ederal Reserve A c t, as amended, the F ederal Open Market
Committee p r e s c r ib e s the fo llo w in g r e g u la tio n s r e la t in g t # the
open-market tr a n s a c tio n s o f the F ederal Reserve banks.
The F ederal Open Market Committee e x p r e s s ly r e se rv e s the
r ig h t t o a l t e r , amend, ti* rep ea l t h is r e g u la tio n in whole o r in
p art a t any tim e ,




SECTION 2 .
(a )

DEFINITIONS

Government s e c u r i t i e s . - The term "Government s e c u r i-

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- 2 -

t i e s " s h a ll in clu d e bonds, n o t e s , c e r t i f i c a t e s o f in d eb ted n ess,
Treasury b i l l s , and o th e r o b lig a t io n s o f the U nited S t a t e s , in c lu d ­
in g o b lig a t io n s f u l l y guaranteed as t o p r in c ip a l and in t e r e s t by
the U nited S t a t e s .
(b )

O b lig a t io n s . - The term ’’ o b lig a t io n s " s h a ll in clu d e

a l l b a n k ers’ a c c e p ta n c e s , b i l l s o f exchange, ca b le t r a n s f e r s , bonds,
n o t e s , w a rra n ts, d eb en tu res, and oth er o b lig a t io n s , in c lu d in g Gov­
ernment s e c u r i t i e s , w hich F ederal Reserve banks are a u th orized by
law t o purchase in the open market*
(c)

System a c c o u n t. -

The term "system a ccou n t" a p p lie s

t o Government s e c u r it ie s h eld f o r the accou n t o f the F ederal Reserve
banks under the c o n t r o l o f the e x e c u tiv e com m ittee.
Committee. - The term "Committee" s h a ll mean the
F ederal Open Market Committee*
E xecu tive com m ittee. - The term "e x e c u tiv e com mittee"
s h a ll mean the e x e c u tiv e committee o f the Federal Open Market Committee,

SECTION 3 .

GOVERNING PRINCIPLES

By the terms o f s e c t io n 12A o f the F ederal Reserve Act as

------------------■
----------- -1 --------iinii*iHir»iTnnr-r~>~rrfri~t -inriTifirf marTi'rrrrnV if"rrnr*"tri-iv*-•'‘ -Tn-T
—t

tv- - ■■- -'-■ ■ ■
■•
■

-•»- -t -

amended the tim e , c h a r a c te r , and volume o f a l l purchases and s a le s
in the open market by Federal Reserve banks s h a ll be governed w ith
a view to accommodating commerce and bu sin ess and w ith regard t o t h c i /
b e a rin g upon the gen era l c r e d it s it u a t io n o f the co u n try .




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- 3 -

SECTION 4 .
(a )

|

L-428

FEDERAL OPEN MARKET COMMITTEE.
O rganiza t io n . - Tho Committee crea ted by s o c t io n 12A

o f the Federal Reserve A c t , as amended by the Banking A ct o f 1935,
c o n s is t s o f the membors o f the Board o f Governors o f tho F ederal Re­
serve System and o f ^ fiv o r e p re s e n ta tiv e s o f the F ederal Roserve
b a nks foT e^oT lT n^^
An a lte r n a te t o sorv c in tho absonce o f each such r e p r o s o n ta tiv e sh a II bo %e a la o e lo c to A a n n u a I T y .an "a l^ crn a t ej s h a ll
be o n t i t l o d t o atten d m eetings o f the '’ ommittoe o n ly in the absence
o f the r e p r e s e n ta tiv e fo r whom such a lt e r n a t e i s e l e c t e d .
The Chairman o f the Board o f Governors o f th o Federal Re­
serve System s h a ll serv e ex o f f i c i o as Chairman o f tho Committee
and in the absonce o f the Chairman at any m eeting e f th e Committee
the Committoe s h a ll e l e c t

& Chairman pro tom*., one o f th o members
-

o f the Board o f Governors of tho F ederal Reserve System.
Tho S e c r e ta ry o f the Board o f Governors o f the F ederal Re­
serve System s h a ll be tho S e cre ta ry o f th o Fodoral Open Market Com­
m ittee^., and in the absence o f the S e cre ta ry a t any m eeting o f tho
Committeo an A s s is ta n t S e cre ta ry s h a ll a ct*
The D ir e c t o r o f tho D iv is io n o f Research and S t a t i s t i c s
o f the Board o f Govornors o f tho F od oral Roserve System s h a ll bo
the Econom ist o f tho Committee,
Th f?

C nimaa.t t a a ..gjatv ll- s

Omit but in clu d e in B y-law s.




-

f

r

.

V

i

r

.

.Syr-f-nm,

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I Market A ccou n t” ■■wfeo*-«a

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a tten d m ootings o f both-- the Fodc ra 1 I

Open Market Committee and i t s E x ecu tive Committee and who s h a ll
ha ndlo
(b )

R ecord s. - Tho S e cre ta ry o f tho Committee s h a ll keep

minutes o f a l l i t s m ootings and s h a ll keep a com plcto r o c o rd o f tho
a c t io n taken by tho Committoo upon a l l q u estion s o f p o l i c y r e la t in g
t o opon-market o p e ra tio n s and s h a ll rocord th e r e in the v o te s taken
in co n n e ctio n w ith tho d eterm in a tion o f opon-market p o l i c i e s and the
reasons a ssig n ed t h e r e f o r .

Such r o c o rd s h a ll bocomo and remain tho

p ro p e rty o f th o Board o f Govornors o f tho Foddrr.l Kosorve System,
M eetin gs, - Xho-

- •Oha-iw&n- o f .the
R on rd . o f

fiO T nr n n r s

n f t h n .................................................................a r ..a.t..j-JncL..j:riqii.a.s± .

n f.,m y. th ru ^ orakflw-.^. ...a.k© 4^®«gftittoQ.
^
f fc
,

M ootings o f tho Committee

s h a ll be h old a t W ashington, D. C, at le a s t fo u r tim es each y oa r upon
tho c a l l ' o f th o Chairman

f tho Board o f Governors o f the F ederal

Rosorvo System or a t the req u est o f any th roe members o f tho Committee,
N oticos o f m ootings c a llo d s h a ll be given t o a l l members o f tho Com­
m ittee by the S e c r e ta ry ,




Note:

E xocu tivo Committoo should have a u th o r ity t o
d esig n a te one or more Federal Roscrvo banks or
ono or more o F fic o r s of* Fodornl Roserve banks to
execu te purchases and salos_ o f Government s e cu r­
i t i e s in i t s b e h a lf*

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-

(d )

-5

-

F u n ction s. - I t i s the duty o f tho Committee t o con­

s id e r tho neods o f commerce and b u s in e s s , tho g en era l c r e d it s it u a ­
t io n o f the co u n tr y , and such other m atters h a v ing a b e a r in g th oroon
as may oome t o i t s a t t e n t io n having a b earin g th e re o n , and to con ­
s id e r , a d o p t, and tra n sm it t o th o s e v e r a l F ederal Roscrve banks,
re gula tio n s F&l&feiag fco-

o f such bank

and d ir e c t io n s w ith r e s p e c t t o the open-market o p e ra tio n s o f such
banks under s e c t io n 14 o f the F odoral Reserve A c t.
(e )

Open-Market p o l i c y . - The Committee w i l l from time t o

time determ ine the open-market p o l i c i o s o f the system and w i l l n o t i f y
tho s e v e r a l F ederal Reserve banks o f a l l d e c is io n s which requ ire
a c t io n on t h e i r p a r t .

i t. ha s.. ~hnr.,n..£iilL y-

SECTION 5 ,
(a )

..» t » - f w » "

Aay

c u t sd-.

EXECUTIVE COMMITTEE
O rg a n iz a tio n . - The Committoe, &t wa i t s f i r s t meet­

in g a f t e r March 1 in each ca len d ar y e a r , s h a ll s e l e c t from i t s own
mombers an e x e c u tiv e committee c o n s is t in g o f th re e members o f tho
Board o f Governors o f th o F ederal Reserve System and two rep resen ­
t a t iv e s o f tho F ederal Reserve banks,
Tho Chairman o f tho Committoe s h a ll bo Chairman o f the
E xecutive Committee.




The S e cre ta ry o f the Committoe s h a ll a c t as the S e cre ta ry

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- 6 -

of the E xecutive Committee and s h a ll keep minutes o f a l l i t s meet­
ings and fu r n is h c o p ie s t h e r e o f t o the members o f the Committee*
(k ) F u nction^. * I t s h a ll be the duty o f the E xecu tive
Committee s
1.

To d i r e c t the e x e c u tio n o f o-Koouto purchases and

s a le s o f Government s e c u r it ie s and other o b lig a t io n s in the
open market in accorda n ce w ith the open-market p o l i c i e s adopted
by the F ederal Open Market Committee;
2.

To a l l o c a t e among the se v e ra l F ederal Reserve

banks the aggregate amount o f Government s e c u r it ie s and other
o b lig a t io n s h eld f o r the system accou n t and t o a d ju s t such
a llo c a t io n s from time t o time t o meet the changing needs o f
r e s p e c t iv e F ed eral Reserve banks.

Such a l l o c a t i o n s h a ll be

made w ith the view o f (a ) en a b lin g each Federal R eserve bank
t o m aintain a s u it a b le re s e r v e p o s it io n and (b ) e q u a liz in g as
f a r as p r a c t ic a b le the net earning p o s it io n o f each

F ederal

R eserve bank$;
3.

To keep the members o f the F ederal Open Market

Committee inform ed o f a l l t r a n s a c tio n s executed by the Com­
m ittee and o f a l l a llo c a t io n s and r e a llo c a t io n s o f Government
s e c u r it ie s and other o b lig a t io n s held f o r p a r t ic ip a t in g banks;
and

Mr. Clayton th in k s a l l o c a t i o n should be by Committee
r a th e r than by E xecu tive Committee.




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4*

To perform such other fu n c t io n s fcnd d u tie s in

c o n n e ctio n w ith open-market op era tion s as may bo a ssig n ed t o
i t from time to time by the F ederal Open Market Committee; but
the e x e cu tiv e committee s h a ll have no a u th o r ity to determ ine
p o l i c i e s or make d e c is io n s upon q u estion s o f p o l i c y .

SECTION b .

CONDUCT OF OPEN MARKET OPERATIONS

Each F ederal Reserve bank s h a ll engage in open-market op era i
t io n s under s e c t io n 14 i|f the F ederal Reserve A ct on ly in accordan ce
w ith t h is r e g u la tio n and the d ir e c t io n s issu ed by the Committee from
time t o tim e, and no F ederal Reserve bank s h a ll d e c lin e to engage in
open-m trket op era tion s as d ir e c t e d by the Committee,
j
:

O rd in a rily , in the conduct o f open-market op era tion s f o r

| the System A ccou n t, the purchase or s a le o f o b lig a t io n s w ^ ^ b e ^ n a d e
i by the Manager o f the System Open Market Account w i l l bo-ma&e through
| the F ederal Reserve Bank o f New Y ork.

In the conduct o f open-market

|
| op era tion s each F ederal Reserve bank, when d ir e c t e d by the Committee,
I w i l l meke a v a ila b le to the Manager o f the System Open Market Account
I
| through the Federal Reserve Bank o f New York, such funds as may be
I
I necessary t o conduct and e f fe c t u a t e such open-market o p era tion s and
i
each F ederal Reserve bank through the Federal Reserve Bank o f New

!

York w i l l be c r e d it e d w ith i t s p a r t ic ip a t io n in the purchase o f o b ­
l ig a t io n s or w ith the p roceed s o f any sale t h e r e o f.

See changes S ec. 4 (a ) Paragraph b.




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SECTION 7*

8

-

PURCHASES AND S.iES OF GOVERNM
ENT SECURITIES

No F ederal R eserve bank s h a ll purchase or s e l l Government
s e c u r it ie s e x ce p t in accorda n ce w ith an open-market p o lic y adopted
by the F ed eral Open Market Committee and in e f f e c t a t the tim e,
ex cep t t h a t :
-

(l)

In an emergency, any F ederal Reserve bank may

purchase Government s e c u r it ie s when n ecessa ry to a f fo r d
r e l i e f in a s it u a t io n in v o lv in g s p e c i f i c banking i n s t i t u ­
t io n s in i t s d i s t r i c t ; and
(2 )

A fte r o b ta in in g the con sen t o f the

of

serve bank may purchase or s e l l Government s e c u r it ie s f o r
other s p e c i f i c p u r p o s e s own acoQugfe>
A ll purchases and s a le s o f Government s e c u r it ie s by any
Federal Reserve bank f o r i t s own account s h a ll be r e p o rte d pgomp- -lyt
to the S ecreta ry o f the Federal Open Market Committee on the day
they are consummated and t o the M nager o f the System A ccou n t; and
?
the e x e c u tiv e committee may make such com pensatory purchases or
s a le s fo r the System accou n t and such r e a llo c a t io n s o f the o b lig a ­
t io n s in the System Account as may be a p p ro p ria te in the li g h t of
purchases and s a le s made f o r t h e ir own account by in d iv id u a l F ederal
Reserve banks.




The Committee reserves the right, in its discretion, to

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r e q u ir e th a t any Government s e c u r it ie s now held or h e r e a fte r p u r­
chased by an in d iv id u a l Federal Reserve bank f o r i t s own a ccou n t
be s o ld or d e liv e r e d in to the System Account*
Any F ederal Reserve bank may purchase United S tates terni

p orary c e r t i f i c a t e s o f indebtedness f o r the accommodation o f the

|
!

Treasury o f the United S ta tes in amounts requ ested by the Treasury

i

and may s e l l p a r t ic ip a t io n s th erein * but such c e r t i f i c a t e s s h a ll
not be held f o r more than 7 days w ith ou t the approval o f the Board
.o f Governors o f the F ederal Reserve System.

SECTION 8.

OTHER OPEN MARKET OPERATIONS

Each Federal Reserve bank may engage in open-market opera
t io n s other than the purchase or s a le o f Government s e c u r i t i e s ,

sub

je c t to the fo llo w in g c o n d it io n s ;
(1 )

A l l such tr a n s a c tio n s s h a ll be re p o rte d d a ily

to the S ecreta ry o f the Committee on the day they tak e p la c e .
(2 )

Purchases o f a ccep ta n ces and b i l l s o f exchange

s h a ll be in accordance w ith the p r o v is io n s o f R eg u la tion B
o f the Board o f Governors o f the F ederal Reserve System and
the ra te s o f in t e r e s t or d is c o u n t s h a ll be in accordan ce w ith
sch edu les approved or p r e s c r ib e d by the Board o f Governors
o f the F ed eral Reserve System*

P ro v id e d , how ever, That no

Omit because par a g r aph 3 o f s e c t io n 14 p ro v id e s th a t purchases
o f United S tates government o b lig a t io n s may be made QKly in
the open TSarEBTrr”*
^
~




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-

10

-

o b lig a t io n s payable in fo r e ig n currency s h a ll be purchased
w ith ou t the s p e c i f i c con sen t of the Board o f Governors o f tho
F ederal Reserve System*
(3 )

A ll purchases by Federal R eserve banks o f b i l l s ,

n o t e s , revenue bonds and w arrants o f S ta te s , c o u n t ie s , d i s ­
t r i c t s , p o l i t i c a l s u b id iv is io n s or m u n ic ip a lit ie s s h a ll be in
accorda n ce w ith the p r o v is io n s o f R eg u la tion E o f the Boi-rd of
Governors of the Federal Reserve System.
(4 )

No Federal Reserve bank s h a ll engage in the pur­

chase or sa le o f ca b le t r a n s fe r s f o r i t s own account w ith out
f i r s t o b ta in in g the approval o f the Board o f Governors o f the
Federal Reserve System, ex cep t th a t F ederal Reserve banks may
purchase and s e l l c a b le t r a n s fe r s through the Habana agency in
accordan ce w ith the r e s o lu t io n s or r e g u la tio n s o f the Board o f
Governors o f the F ederal Reserve System governing the op era tion s
o f such agency.
(5 )

Except as provided ija S e ctio n

supra

.

approvpl—o£..this.-.0omnu11e©, no Federal Reserve bank s h a ll engage
in any open-market t r a n s a c tio n s which are not o f the customary
c h a r a c te r , which do n ot occur in the ord in a ry cou rse o f b u s in e s s,
which are engaged in ■ fo r the purpose o f a f f e c t i n g gen era l c r e d i t
c o n d itio n s or which may have a m a teria l e f f e c t upon gen era l
c r e d it c o n d itio n s *




P rov id ed , however, That any F ederal Reserve

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bank may purchase o b lig a t io n s f o r the purpose o f a ffo r d in g
r e l i e f in a s it u a t io n in v o lv in g s p e c i f i c banking in s t it u t io n s
in i t s d i s t r i c t .




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T en ta tiv e D raft
March 3, 1936

CO'"1 T y p -T ^ l

REGULATION
FEDERAL OPEN M
ARKET COMMITTEE
March

• , 1936

OPEN FARKET OPERATIONS
(rxi&
d
SECTION 1.

Pursuant t o the a u th o r ity c o n fe r r e d upon i t by s e c t io n
12A o f the F ederal Reserve A c t > as amended* the F ederal Open
Farket Committee p r e s c r ib e s the fo llo w in g r e g u la tio n s r e la t in g t o
the open-market tr a n s a c tio n s o f the fe d e r a l Reserve banks.
The F ederal Open Marked Committee e x p r e s s ly r e se rv e s the
r ig h t to a t t e r , amend, or r e p e r l t h is R eg u lation in whole or in
m r t a t any time*

SECTION 2.

(a )

DEFINITIONS

Government s e c u r i t i e s . - The term ” Government s e cu r­

i t i e s ” s h a ll in clu d e bonds, n o t e s , c e r t i f i c a t e s o f in d eb ted n ess,
Treasury b i l l s * and oth er o b lig a t io n s o f the United. S ta te s , in c lu d ­
ing o b lig a t io n s f u l l y guaranteed as t o p r in c ip a l pnd in t e r e s t by
the United S ta te s .
(b )

Ob'1ig a t io n s , - The term ” o b lig a t io n s ” s h a ll in clu d e

a l l b a n k ers’ a c c e p ta n c e s , b i l l s o f exchange, ca b le t r a n s f e r s , bonds,
n o t e s , w arra n ts« d eb en tu res, and oth er o b lig a t io n s , in clu d in g Govern-




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ment s e c u r i t i e s , wh ich ie d e r a l Reserve banks are a u th o rize d by law
t o purchase in the open m arket.
System a c c o u n t. - The term H
system a cco u n t” a p p lie s
t o Government s e c u r it ie s h eld f o r the account o f the F ederal Reserve
banks under the c o n t r o l o f the e x e c u tiv e com m ittee.
(d )

Com m ittee. - The term "Committee" s h a ll mean the

Federal Open Market Committee.
(e )

E xecu tive com m ittee* - The term "e x e c u tiv e com m ittee"

s h a ll mean the e x e c u tiv e committee o f the Federal Open Market Com­
m ittee .

SECTION 3 .

GOVERNING'PRINCIPLES

By the terms o f s e c t io n 12A o f the F ederal Reserve A f t , as
amended, the tim e, c h a r a c te r , and volume o f a l l purchases and sa les
in the open market by fe d e r a l Reserve banks s h a ll be governed w ith a
view t o accommodating commerce and bu sin ess and w ith regard t o t h e ir
bearin g upon the g en era l c r e d it s it u a t io n o f the cou n try .

SECTION 4 .
(a )

FEDERAL OPEN VARKET COMMITTEE

O rg a n iza tio n , - The Committee crea ted by s e c t io n 12A

o f the F ed eral Reserve A ct, as emended by the Banking A ct o f 1935,
c o n s is t s o f the members o f the Poard o f Governors o f the Federal Re­
serve System, and o f f i v e r e p r e s e n ta tiv e s o f the F ederal Reserve ban^s
e le c t e d a n n u a lly .




An a lte r n a te t o serve in the absence o f each such, rep resen -

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t a t iv e s h a ll be e le c t e d a n n u a lly , but an a lte r n a te s h a ll be e n t it le d
t o attend m eetings of the Committee on ly in the absence of the rep ­
r e s e n ta tiv e f o r whom such a lte r n a te is e le c t e d .
(k )

R e co rd s ♦ - The S ecreta ry o f the Committee s h a ll keep

minutes o f a l l i t s m eetings and s h a ll keep a com plete re co rd o f the
a c t io n taken by the Committee upon a l l qu estion s o f p o l i c y r e la t in g
to open-market o p e ra tio n s and s h a ll re co rd th e r e in the v o te s taken
in c o n n e ctio n w ith the determ in a tion o f open-market p o l i c i e s and the
"re a so n s assig n ed t h e r e f o r .

Such re co rd s s h a ll become and remain the

r r o p e r ty o f the Board o f Governors o f the f e d e r a l Reserve System.
(c)

M eetings. - V eetin gs o f the Committee s h a ll be h eld

a t W ashington, D. C ., a t le a s t fo u r tim es each year upon the c a l l o f
the Chairman o f the Board o f Governors o f the f e d e r a l Reserve System
or at the req u est o f any three members o f the Committee.

N otices o f

m eetings c a lle d s h a ll be giv en t o a l l members o f the Committee by the
S e c r e ta ry .
(d )

F u n ctio n s « - I t is the duty o f the Committee to con ­

s id e r the needs o f commerce and b u s in e s s , the g en era l c r e d it s it u a ­
t io n o f the co u n try , and such other m atters having a bearin g thereon
as may come to i t s a t t e n t io n , and t o c o n s id e r , a d op t, and tran sm it to
the several Federal Reserve banks, r e g u la tio n s and d ir e c t io n s w ith
r e s p e c t t o the open-rrarket op era tion s o f such banks under s e c t io n 14
o f the F ederal Reserve A ct,




(e )

Open-Market p o l i c y , - The Committee w i l l from time to

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time determ ine th e open-market p # l i c i e s o f the System and w i l l
n o t i f y tha se v e ra l F ederal Reserve banks o f a l l d e c is io n s which r e ­
q u ire a c t io n on t h e ir p a r t .

SECTION 5 .

(a )

EXECUTIVE COMMITTEE

O rg a n iza tio n . - The Committee, at i t s f i r s t m eeting

a f t e r March 1 in each oalen d ar y e a r , s h a ll s e l e c t from i t s own mem­
b ers an e x e c u tiv e committee c o n s is t in g o f th ree members o f th e Board
o f Governors o f the F ederal Reserve System and two r e p r e s e n ta tiv e s
o f the Federal Reserve banks.
The Chairman o f the Committee s h a ll be Chairman o f the
e x e c u tiv e Committee.
The S e cre ta ry o f th e Committee s h a ll a c t as the s e c r e t a r y
o f th e e x e c u tiv e com mittee and s h a ll keep minutes o f a l l i t s m eetings
and fu r n is h a o p ie s t h e r e o f t o th e members o f th e Committee.
(b )

F u n ction s. - I t s h a ll be the duty o f the e x e cu tiv e

com m ittee:
1.

To d ir e c t the e x e c u tio n o f purchases and s a le s

o f Government s e c u r it ie s and oth er o b lig a t io n s in the open
market in accorda n ce w ith th e open-market p o l i c i e s adopted
by th e F ederal Open Market Committeej
2.

To a llo c a t e among the s e v e ra l F ederal Reserve

banks the aggregate amount o f Government s e c u r it ie s and oth er
o b lig a t io n s h eld f o r th e system account and t o a d ju s t such




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a llo c a t io n s from tim e t o tim e t o meet th e changing needs o f
r e s p e c t iv e F ederal Reserve banks.

Such a l l o c a t i o n s h a ll be

made w ith th e view o f (a ) en a b lin g ocich F ederal Reserve bank
t o m aintain a s u ita b le re se rv e p o s i t i o n and (b ) e q u a liz in g
as f a r as p r a c t ic a b le the net earn in g p o s i t i o n o f each Fed­
e r a l Reserve bank}
3.

To keep the members o f th e Federal Open Market

Committee inform ed o f a l l tr a n s a c tio n s executed by the Com­
m itte e and o f a l l a llo c a t io n s and r e a llo s a t io n s o f Government
s e c u r it ie s and o th e r o b lig a t io n s h eld f o r p a r t ic ip a t in g banks;
and
4,

To perform such oth er fu n c t io n s and d u tie s in

c o n n e c tio n w ith open-market o p e r a tio n s as may be a ssig n ed t o
i t from tim e t o tim e by the Federal Open Market Committeej but
th e e x e c u tiv e committee s h a ll have no a u th o r ity t o determ ine
p o l i c i e s or make d e c is io n s upon q u e stio n s o f p o l i c y .

SECTION 6*

CONDUCT OF OPEN M
ARKET OPERATIONS

Each F ederal Reserve bank s h a ll engage in open-market
o p e r a tio n s under s e c t io n 14 o f the Federal Reserve Act o n ly in a c­
cordance w ith t h is r e g u la t io n and the d ir e c t io n s issu ed by the
Committee from tim e t o tim e, and no F ederal Reserve bank s h a ll de­
c lin e t o engage in open-market o p e r a tio n s as d ir e c t e d by the Committe




O r d in a r ily , in the conduct o f open-market o p e ra tio n s f o r

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the System A ccou n t, th e purchase or s a le o f o b lig a t io n s w i l l be
made by th e Manager o f th e System Open Market Account through the
Federal Reserve Bank o f New York#

In the conduct o f open-market

o p e r a tio n s each F ederal Reserve bank, when d ir e c t e d by th e C#mmittee,
w i l l make a v a ila b le t o th e Manager o f the System Open Market Account
through the F ederal Reserve Bank o f New York, such funds as may be
n e ce ssa ry t o conduct and e f fe c t u a t e such open-market o p e r a tio n s and
each F ederal Reserve bank through the Federal Reserve Bank o f New
York w i l l be c r e d it e d w ith i t s p a r t ic ip a t io n in the purchase o f ob­
lig a t io n s or w ith the p roceed s o f any s a le t h e r e o f .

SECTION 7•

PURCHASES AND SALES OF GOVERNM
ENT SECURITIES

No F ederal Reserve bank s h a ll purchase or s e l l Government
s e c u r it ie s excep t in accordance w ith an open-market p o l i c y adopted
by the Federal Open Market Committee and in e f f e c t a t the tim e, e x ­
cep t t h a t :
(1 )

In an em ergency, any F ederal Reserve bank may

purchase Government s e c u r it ie s when n ecessa ry t o a f fo r d r e l i e f
in a s it u a t io n in v o lv in g s p e c i f i c banking i n s t it u t io n s in i t s
d i s t r i c t ; and
(2 )

A ft e r o b ta in in g the con sen t o f th e Committee,

any Federal Reserve bank may purchase o r s e l l Government secu ­
r i t i e s f o r oth er s p e c i f i c p u rp oses.




A ll purchases and s a le s o f Government s e c u r it ie s by any

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Federal Reserve bank f o r i t s own account s h a ll bo r e p o rte d prom ptly
t o th e S eorota ry o f the F ederal Open Market Committee on the day
th ey are consummated and t o th e Manager o f the System A ccount; and
tho e x e c u tiv e committee may make such com pensatory purchases or s a lo s
f o r th e System account and such r e .d lo c a t io n s o f tho o b lig a t io n s in
the System Account as may be a p p ro p ria te in the l i g h t o f purchases
and s a lo s made f o r t h e i r own accou n t by in d iv id u a l F ederal Reserve
banks•
The Committee r e s e r v e s the r i g h t , in i t s d i s c r e t i o n , t o
re q u ire th a t any Government s e c u r i t i e s now h e ld or h e r e a ft e r pur­
chased by an in d iv id u a l F ederal Reserve bank f o r i t s own account be
s o ld or d e liv e r e d in t o the System A ccount.

SECTION 8.

OTHER OPEN MARKET OPERATIONS

Each F ederal Reserve bank may engage in open-market op era ­
t io n s oth er than th e purchase or s a le o f Government s e c u r i t i e s , sub­
j e c t t o th e f o llo w in g c o n d it io n s :
(1 )

A ll such tr a n s a c tio n s s h a ll be r e p o rte d d a ily t o

the S e cre ta ry o f th o Committee on the day th e y take p la c e .
(2 )

Purchases o f a ccep ta n ces and b i l l s o f exchange

s h a ll be in accordan ce w ith the p r o v is io n s o f R eg u la tion B o f
tho Board o f Governors o f the F ederal Reserve System and the
r a te s o f in t e r e s t or d is c o u n t s h a ll be in accordan ce w ith sched­
u le s approved or p r e s c r ib e d by th o Board o f Governors o f tho




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P rov id ed , however, That no o b lig a t io n s

payable in fo r e ig n cu rren cy s h a ll be purchased w ith ou t the
s p e c i f i c con sen t o f th e Board o f Governors o f th o F ederal Res­
erve System*
(3 )

A ll purchases by Federal Reserve banks o f b i l l s ,

n o te s , revenue bonds and w arrants o f S ta te s , c o u n t ie s , d i s t r i c t s ,
p o l i t i c a l s u b d iv is io n s o r m u n ic ip a lit ie s s h a ll bo in accordan ce
w ith th o p r o v is io n s o f R eg u la tion E o f the Board o f Governors o f
the Federal Reserve System*
(4 )

No F ed eral Reserve bank s h a ll engage in the pur­

chase or sa le o f c a b le t r a n s fe r s f o r i t s own accou n t w ith ou t
f i r s t o b ta in in g the ap p roval o f the Board o f Governors o f tho
F ederal Reserve System, excep t th a t Federal Reservo banks may
purchase and s e l l c a b le t r a n s fe r s through the Habana agency in
accorda n ce w ith tho r e s o lu t io n s or r e g u la tio n s o f the Board o f
Governors o f the F ederal Resorvo System gov ern in g th e o p e ra tio n s
o f such agency*
(5 )

Except w ith th e approval o f the Committee, no Fed­

e r a l Reserve bank s h a ll engage in any open-market tr a n s a c tio n s
which are not o f the custom ary c h a r a c te r , which do not occu r in
the o rd in a ry course o f b u s in e s s , w hich are engaged in f o r th e
purpose o f a f f e c t i n g gen era l c r e d it c o n d itio n s o r which may have
a m a te ria l e f f e c t upon gen eral o r e d it c o n d it io n s :

P rov id ed , how­

e v e r , That any F edoral Reserve bank may purchase o b lig a t io n s f o r
the purpose o f a ffo r d in g r e l i e f in a s it u a t io n in v o lv in g s p e c i f i c
banking in s t it u t io n s in i t s d i s t r i c t *




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September 12, 1955.

,
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Memorandum for the Board
From Mr. Morrill

The last paragraph of section 10 of the Federal Reserve Act as
amended by the Banking Act of 1935, approved August 23, 1935, reads as
follows:
"The Board of Governors of the Federal Reserve System
shall keep a complete record of the action taken by the
Board and f y the Federal Open Market Committee upon all
c
questions of policy relating to open-market operations
and shall record therein the votes taken in connection
with the determination of open-market policies and the
reasons underlying the action of the Board and the Com­
mittee in each instance. The Board shall keep a similar
record with respect to all questions of policy determined
by the Board, and shall include in its annual report to
the Congress a full account of the action so taken during
the preceding year with respect to open-market policies
and operations and with respect to the policies determined
by it and shall include in such report a copy of the rec­
ords required to be kept under the provisions of this
paragraph.”
This provision of law became effective on August 23, 1955, the
date of its approval by the President, and placed upon the Board the re­
sponsibility beginning with that date of keeping certain new records.
As a basis for the discussion of the procedure to be followed
in compliance with this provision of law it should be observed that it pro­
vides for three records, as follows:
(1) A complete record of the actions taken ty the Board of Gov­
ernors of the Federal Reserve System upon all questions of policy relating
to open market operations and with respect to all other questions of policy
determined by the Board. This record is required to be kept of all actions
taken by the Board on questions of policy determined since the enactment of
the Banking Act of 1935.
(2) A complete record of the actions taken by the Federal Open
Market Committee as constituted until March 1 , 1936, upon all questions of
policy relating to open market operations. This record is required to be
kept by the Board as to all actions taken by the committee after the enact­
ment of the Banking Act of 1935, notwithstanding the fact that the members
of the Board are not members of the committee.
(3) A complete record of the actions taken by the Federal Open
Market Committee which is to come into existence on March 1, 1936, under
the terms of the Banking Act of 1935, upon all questions of policy relat­
ing to open market operations. This record is required to be kept by the
Board of all actions on questions of policy taken by the committee, not­
withstanding the fact that the actions taken will be those of the Committee




M u L

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as such and not o f the Board as such.
Inasmuch as the procedure to be followed by the Board with re­
spect to a l l questions of policy determined by i t , regardless o f whether
they re la te to open market operations or not, i s the one of immediate
importance in point o f time, i t w ill be taken up f i r s t in th is memorandum.
1.

Board*s record o f i t s own action s.

I t w ill be noted that the Board as such is required
(1) to keep a record of the actions taken by i t upon a l l ques­
tions of policy relatin g to open market operations and on a l l other ques­
tions o f policy determined by i t in which sh a ll be se t forth (a) the votes
taken in connection with the determination o f such p o lic ie s and (b) the
reasons underlying the action in each instance;
(2)
to publish in i t s annual report a f u l l account o f the ac­
tions so taken during the preceding year; and
(3)
to include in such annual report a copy o f the records
required to be kept under the new provision o f law.
The o f f i c i a l minutes o f the Board are prepared in su ffic ie n t
d e ta il to show, in connection with each entry o f action taken with respect
to any question of policy determined by the Board, the votes taken and
the reasons given as underlying the action taken. However, the minutes
o f the Board are not confined to such questions. They include many d e ta ils
and a great deal of routine business. There are also minutes o f executive
committee meetings in addition to those o f Board meetings. For these
reasons, and in order to carry out the new requirements o f law, i t i s con­
templated that a separate record sh all be established e n title d "Record of
Actions on Questions o f Policy by Board o f Governors o f the Federal Reserve
System required by the la s t paragraph o f section 10 o f the Federal Reserve
Act as amended by the Banking Act o f 1935M This w ill be in addition to the
.
Board’ s minutes which w ill be kept in accordance with e x istin g procedure.
In th is new record would be incorporated entries o f a l l actions
taken by the Board on questions o f policy determined by i t , showing the
votes taken and the reasons given as underlying the actions taken. These
entries would not necessarily be as detailed or voluminous as the minutes
but would contain the required information and be en tirely in harmony with
the minutes.
In th is connection special consideration should be given to the
procedure to be followed with respect to actions taken when a quorum of
the Board i s not actually present. These actions are taken by the execu­
tive committee or an interim committee pursuant to the provisions of the
Board’ s bylaws. However, i t i s believed that such action s, when they con­
stitu te actions or questions o f p o licy, should be incorporated currently




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in the new record, showing, as in the case o f Board meetings, the members
who took the action , without waiting u n til the date on which the minutes
containing such action are approved a t a meeting o f the Board at which a
quorum i s present.
While i t i s believed that in order to comply with the new provi­
sion o f law every action of the Board taken subsequent to August 23, 1935,
making any change in existin g policy as w ell as every action establishing
any new policy should be included in this record, i t i s believed unneces­
sary to include entries o f actions taken subsequent to the enactment o f the
Banking Act o f 1935 which merely carry out or conform to p o licie s adopted
by the Board,prior to the enactment o f the Banking Act of 1935, without
change in such p o lic ie s . For example the grant o f permission to exercise
tru st powers or the issuance of a temporary lim ited voting permit would not
ordinarily be regarded as the determination o f a question o f p o licy. I t
may be proper also to omit from this record actions recorded in the minutes
which merely permit exceptions in particular instances to general p o lic ie s
previously adopted, without the determination by the Board o f any change
therein or o f any new p o licy . In addition, the issuance by the Board o f
rulings merely interpreting the law or the Board's regulations in accordance
with the opinion o f the Board's counsel would not be regarded as action on
questions of p o licy, in the absence of special circumstances.
Sp ecific reference in entries in the o f f i c i a l minutes o f the
Board to the names of individuals, banks, corporations and other organiza­
tions would be eliminated in the new record (unless necessary fo r a proper
understanding o f the record) through appropriate substitutions for such
references, such as the words "an individualM fo r the name o f a person, the
words "a State member bank” or "a national bank" for the name of a sp e cific
member bank, e tc . Portions of the discussion referring to the internal ad­
m inistration o f the Board's a ffa ir s and other d e ta ils in the entries o f the
o f f i c i a l minutes which are not considered to be necessary fo r a proper under­
standing of the action taken and the underlying reasons therefor would also
be eliminated*
A proposed t i t l e page and f l y le a f of the new record to be kept
by the Board and samples o f extracts from the minutes which i t i s proposed
to place in the record are attached*
Under the present procedure, as soon as the o f f i c i a l minutes of
the Board have been drafted a copy i s circulated among the members for
th eir approval and in it ia ls * In order to f a c il it a t e the preparation of the
new record i t is contemplated that there would be included in the covering
circulation sheet accompanying each copy o f the minutes a l i s t b r ie fly de­
scribing the items to be incorporated in the separate record. A sample of
such a circulation sheet i s attached. I t would be considered that the
i n i t i a l s on th is circulation s lip would not only constitute approval of the
draft o f the minutes but also approval of the inclusion in the record of
the items referred to in the l i s t .
I t i s assumed that the Board w ill wish
also to have a copy o f the record as thereafter prepared in accordance




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w ith t h is procedure c ir c u la t e d f o r ap p roval and i n i t i a l s in the same man­
n er as c o p ie s o f the m inutes are now c ir c u la t e d .
With r e s p e c t t o the r e c o r d two forms might be e s t a b lis h e d , the
f i r s t o f which would c o n ta in the e n t r ie s in c h r o n o lo g ic a l o rd e r as they
appear in the m inutes. The o th e r form m ight be one in which the e n t r ie s
would be c l a s s i f i e d and grouped a cco rd in g t o s u b je c t m a tter. However, in
view o f the f a c t th a t the law r e q u ir e s th a t an accou n t o f a l l a c t io n s on
q u e s tio n s o f p o l i c y be in clu d e d in the Board’ s annual r e p o r t and th a t in
such accou n t the d is c u s s io n i s l i k e l y to be in n a r r a tiv e form , p r im a rily
a c c o r d in g t o s u b je c t m atter, i t would seem th a t the r e c o r d in c h r o n o lo g ic a l
o r d e r which co u ld be k ep t up to date c u r r e n tly , to g e th e r w ith an in d ex
which would c l a s s i f y §nd group the e n t r ie s a c c o r d in g to s u b je c t m atter,
would be s u f f i c i e n t w ith ou t the second form o f r e c o r d above m entioned.
£.
-

B oard1s Record o f A ctio n s Taken by E x is tin g
F ed eral Open Market Committee.

As p r e v io u s ly in d ic a t e d , the Board i s re q u ir e d t o keep a r e c o rd
o f the a c t io n s taken by the F ed eral Open Market Committee as now c o n s t i ­
tu ted u n t i l i t i s r e p la c e d by the F ed eral Open Market Committee c r e a te d
by s e c t io n 12A o f the F ed eral R eserve A ct as amended e f f e c t i v e March 1 ,
1936.
The le g a l requirem ents which must be met in t h is co n n e ctio n are
the same as th ose s e t f o r t h on pages 1 and 2 o f t h is memorandum w ith r e ­
s p e c t t o the B oard’ s r e c o r d o f i t s ora a c t io n s . I t i s b e lie v e d th a t the
meaning o f the requirem ents th a t the Board s h a l l keep the r e c o r d and th a t
i t s h a ll r e c o r d th e r e in c e r t a in m atters i s th a t the Board i s exp ected to
make the r e c o r d and th a t mere acceptan ce, and cu stod ia n sh ip o f a r e c o r d p re­
pared tey the com mittee o f m eetings a t which th e Board was n o t p re se n t or
rep resen ted would n o t s u f f i c e .
The q u e stio n o f procedure t h e r e fo r e re q u ir e s
s p e c ia l c o n s id e r a t io n because the membership o f the p re se n t F ed eral Open
Market Committee does n o t in c lu d e any member o f the Board o f Governors and
i t has been the p r a c t ic e f o r the committee t o h o ld m eetings and take a c t io n
a t such m eetings when the Board i s n e ith e r p re se n t n or rep resen ted in any
way. As a r u le the Board has been dependent upon the o r a l r e p o r t s o f the
chairman o f the committee a f t e r i t has h e ld i t s sepa ra te m eetings and taken
a c t io n t h e r e a t . The form al m inutes o f the open market committee have been
r e c e iv e d by the Board a t a c o n s id e r a b ly l a t e r d a te . The requirem ents o f
the law now su g g est the n e c e s s it y o f g iv in g c o n s id e r a tio n b e fo r e the n ext
m eeting o f the F ed eral Open Market Committee t o the q u e s tio n o f the a t ­
tendance o f the Board and i t s s e c r e t a r ia l s t a f f .
The law p ro v id e s th a t
m eetings o f t h is committee may, in the d is c r e t io n o f the Board, be atten d ed
by members o f the Board.




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In t h is co n n e ctio n i t may be p o in te d ou t th a t th ere have been o n ly
two m eetings t h is yea r o f the F ed era l Open Market Committee and th a t in o rd er
t o comply w ith the law th ere sh ou ld be two more m eetings a t Washington during
the rem aining months o f t h is ca len d a r y e a r .
In view o f the e x c e p t io n a l im portance th a t might a tta c h t o a c t io n s
taken by the F ed era l Open Market Committee the q u e s tio n which has been d i s ­
cussed h e r e t o fo r e should be determ ined d e f i n i t e l y whether s te n o g r a p h ic , v e r ­
batim r e p o r t s should be made o f such m eetin gs. I t i s n ot c o n s id e re d th a t such
a r e p o r t i s contem plated by the law , which r e q u ir e s a r e c o r d o n ly o f the a c t io n s
taken on q u e s tio n s o f p o l i c y , o f the v o te s taken in co n n e ctio n th erew ith , and
o f the u n d e rly in g reason s f o r such a c t io n s . However, in some circu m stan ces a
sten og ra p h ic r e p o r t might be u s e fu l f o r r e fe r e n c e purposes and as a b a s is f o r
the re c o rd whicji the Board i s re q u ire d t o e s t a b lis h . The p o s s ib le e f f e c t o f
the making o f a sten og ra p h ic r e p o r t upon the e x te n t and freedom o f d is c u s s io n
w i l l o f cou rse be a f a c t o r in determ inin g t h is q u e s tio n . In any even t the
sten ogra p h ic r e p o r t would n o t be tr e a te d as th e " r e c o r d ” and would o n ly be p la ced
in the B oard’ s f i l e s f o r purposes o f r e fe r e n c e in the d is c r e t io n o f the Board.
I f such a r e p o r t should be d e s ir e d i t w i l l be n ecessary e it h e r to
make arrangements w ith an o u ts id e e x p e r t sten og ra p h ic r e p o r t e r f o r s e r v ic e s to
be rendered from tim e t o tim e as needed o r t o employ and c a r r y an e x p e r t sten o­
gra p h ic r e p o r t e r r e g u la r ly on the p a y r o ll o f the Board. I f an e x p e r t s te n o ­
gra p h ic r e p o r t e r were employed and c a r r ie d r e g u la r ly on the p a y r o ll o f the
Board i t i s l i k e l y th a t th ere would n ot be s u f f i c i e n t sten og ra p h ic r e p o r t in g
work t o keep him c o n s ta n t ly in good t r a in in g , and th ere would be d i f f i c u l t y in
g e t t in g a com petent p erson t o a c c e p t employment in such circu m sta n ces. I f an
arrangement were made w ith an o u ts id e sten og ra p h ic r e p o r t e r c o n s id e r a t io n should
be g iv en t o the d e s i r a b i l i t y o f r e q u ir in g th a t h is t r a n s c r ip t io n s be made a t
the o f f i c e s o f the Board and th a t h is sten og ra p h ic n otes as w e ll as t r a n s c r ip ­
t io n s be l e f t i n the o f f i c e s o f the Board’ s S e c r e ta ry s t a f f . Such a person
n o t o n ly must be u n q u estion a b ly com petent bu t a ls o one who can be r e l i e d upon
n o t t o g iv e any in fo rm a tio n t o any one rega rd in g the m eetings which he a tte n d s.
In r e c o g n it io n o f the f a c t th a t a t p r e s e n t the G overnors o f the Fed­
e r a l re s e r v e banks c o n s t it u t e the membership o f the F ed eral Open Market Commit­
t e e and t h a t, in o rd e r t o in su re the c o r r e c tn e s s o f the re c o rd w ith s p e c ia l
r e fe r e n c e t o the statem ent o f the u n d erly in g reason s f o r a c t io n s tak en , some
p lan should be adopted f o r a v o id in g d e la y in o b ta in in g t h e ir ap p rova l o f the
r e c o r d as w e ll as th a t o f the Board o f Governors o f the F ederal R eserve System,
i t would seem d e s ir a b le th a t c o n s id e r a t io n be g iv e n t o th e esta b lish m en t o f a
proced u re t o be fo llo w e d by the com mittee and th e Board, b e fo r e adjournment o f
the m eetings o f th e F ed eral Open Market Committee, f o r determ ining the con ten ts
o f the r e c o r d . One s u g g e stio n th a t has been made i s th a t a s p e c ia l sub-com m ittee
might be ap p oin ted f o r t h is p u rp ose.
This r e c o r d should be s im ila r in form t o the Board’ s r e c o r d o f i t s
own a c t io n s and i t i s suggested th a t i t be e n t i t l e d "R ecord o f A c tio n s on ques­
t io n s o f p o l i c y by the F ederal Open Market Committee, r e q u ire d by the l a s t par­
agraph o f s e c t io n 10 o f the F ed era l Reserve A ct as amended by the Banking Act
o f 1935” .




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3.

6-

B oards Record o f Actions Taken by Federal
Open Market Committee Established e ffe c tiv e
March 1 . 1936*

When the new Federal Open Market Committee created e ffe c tiv e
March 1 , 1936, begins to hold meetings and take actions the Board w ill be
required to keep a record of such actions and to meet the same le g a l re­
quirements which must be met in connection with the actions o f the present
Federal Open Market Committee and the Board's own action s. These require­
ments are set forth on pages 1 and 2 o f th is memorandum with respect to
the Boardf s record o f i t s own actions.
The questions to be considered in connection with this committee
are d iffe re n t only in that the members o f the Board o f Governors o f the
Federal Reserve System w ill also be members o f the Federal Open Market
Committee, But the duty under the law o f making the record o f the actions
o f the committee i s cast upon the Board o f Governors as such and not merely
upon the Federal Open Market Committee. Aside from t h is , the experience
that w ill have been gained prior to March 1 in complying with the require­
ments of the law w ill very lik e ly dispose o f v ir tu a lly a l l questions o f
.-procedure with respect to the actions of th is committee.
Board's Annual Report
One of the requirements of the law is that the Board sh all in ­
clude in i t s annual report to the Congress a f u l l account o f the actions
taken "during the preceding year with respect to open market p o licie s and
operations and with respect to the p o lic ie s determined by i t and sh all in­
clude in such report a copy o f the records required to be k ep t".
For th is purpose i t i s assumed that the records kept in compli­
ance with th is requirement o f the law should be attached to the annual re­
port as appendices and that the account of the actions taken w ill be a
narrative in orderly form which w ill be included in the text o f the annual
report and ? /i l l be based upon and refer to the records included in the ap­
pendices. While i t may be open to question whether the account in the next
annual report, which w ill be submitted in 1936 for the calendar year 1935,
i s tech n ically required to cover the entire year 1935 or only the period
subsequent to August 23, 1935, i t would not seem necessary to give serious
consideration to th is question as there would seem to be no undue d iffic u lt y
in making the account cover the entire year and i t is assumed that the
Board w ill desire to do so.
Summary
Summarizing the foregoing matters the points to be decided by
the Board cover the determination of the follow ing matters:
1,
The approval o f the proposed procedure and forms fo r keeping
the record o f the Board's action s.




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2.
The procedure and form for keeping the separate record of
the actions o f the Federal Open Market Committee as now constituted, in­
cluding the question of attendance o f the Board and i t s secre ta ria l s t a ff
a t meetings o f the committee, and the matter o f a stenographic verbatim
report of a l l proceedings.
5,
The procedure and form for keeping the separate record of
the actions o f the Federal Open Market Committee created e ffe c tiv e March 1 ,
1938, including the question of attendance o f the Board’ s se cre ta ria l s ta ff
a t meetings o f the committee, and the matter o f a stenographic verbatim re­
port o f a l l proceedings.




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Tentative circulation slip to
accompany Board’s minutes,
X
^Attached is a copy of the minutes of the meet­
ing of the Executive Committee of the Board of
Governors of the Federal Reserve System held on
August 23, 1955.
It is proposed that extracts of the entries
in this set of minutes commencing on the pages, and
dealing with the subjects, referred to below will
be placed in the separate record required to be kept
under the provisions of Section 10 of the Federal
Reserve Act.
Page 1.

1
1

7.

Service of Mr. Harrison as director of
the B. I. S.
Letter re deposit of The Security Bank
and Trust Company, Wharton, Texas.

If you approve these minutes and the foregoing
list, please initial below:

Mr.

Thoms ________

Mr. Hamlin
Mr. Miller

____ „

Mr. James _ _ _____ _
Mr. Szymczak ______ _
Mr. Clayton
X
*The minutes referred to are not attached as this is
merely a draft of the proposed form.

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X-9514-b

T e n ta tiv e cover f o r
Board's record

X

Record o f Actions on Questions o f Policy
by the
Board o f Governors o f the Federal Reserve System
Required by the
Last paragraph o f Section 10
o f the
Federal Reserve Act as amended
by the
Banking Act o f 19S5

X

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Tentative fly leaf
in Board1s record
X
This record has been prepared pursuant to the last para­
graph' of Section 10 of the Federal Reserve Act, as amended by
the Banking Act of 1935, which reads as follows;




"The Board of Governors of the Federal Reserve
System shall keep a complete record of the action
taken f y the Board and by the Federal Open Market Com­
c
mittee upon all questions of policy relating to
open-market operations and shall record therein the
votes taken in connection with the determination of
open-market policies and the reasons underlying the
action of the Board and the Committee in each instance.
The Board shall keep a similar record with respect to
all questions of policy determined by the Board, and
shall include in its annual report to the Congress a
full account of the action so taken during the pre­
ceding year with respect to open-market policies and
operations and with respect to the policies determined
by it and shall include in such report a copy of the
records required to be kept under the provisions of
this paragraph."

X

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X-9314-d

Meeting o f Executive Committee on Friday, August 23, 1935.
PRESENT;

Mr.
Mr.
Mr.
Mr.

Eecles, Chairman
Thomas, Vice Chairman
Hamlin
M iller

The Chairman reported that he had discussed with the Treasury
Department the proposed service o f Mr. Harrison, Governor of the Fed­
eral Reserve Bank o f New York, as a director o f the Bank for Inter­
national Settlements, that he had pointed out that i t was f e l t that
there were important questions o f policy as well as la?/ upon which
the Administration should be f u lly .advised before reaching a conclusion
on the matter, and that he had submitted to the Secretary o f the Treas­
ury copies o f a memorandum on th is subject and an opinion o f the Board’
counsel, which he had been assured would receive careful consideration.
" He stated th at, in view o f the fa c t that he expected to leave Washing­
ton tomorrow, August 24, for the West and would be absent during most
o f the month o f September, he desired to recommend that i f , during his
absence, the question o f Mr. Harrison’ s service as a director o f the
Bank for International Settlements be presented again, action on the
matter be deferred. He suggested, however, th a t, i f in the meantime
the Board were advised that i t had been found to be desirable from the
standpoint o f the Administration to have Mr. Harrison attend the Octo­
ber meeting o f the board of directors o f the Bank for International
Settlements as an u n o ffic ia l observer, the Board grant permission to
Mr. Harrison to do so, with the understanding that he would report
to the Board fu lly in writing in accordance with the requirements o f
the provisions o f section 14(g) o f the Federal Reserve Act.




The matter was discussed, and i t was moved;
(1) th a t, i f the question o f Mr. Harrison’ s
service as a director o f the Bank for International
Settlements be presented to the Baird during Mr.
Eccles* absence, action on the matter be deferred
and$
(2) that i f the Board be advised that i t is
considered by the Administration desirable for Mr.
Harrison to attend the October meeting o f the board
o f directors of the Bank fo r International S e ttle ­
ments in an u n o ffic ia l capacity, the Board be pre­
pared to grant permission to Mr. Harrison, as i t
did upon the occasion o f his attendance at a meet­
ing o f the board o f directors of the Bank for
International Settlements in 1934, with the under­
standing that Mr. Harrison w ill submit a report to
the Board in writing in accordance with the require­
ments o f section 14(g) o f the Federal Reserve Act.
The motion was put by the chair and
was carried unanimously.

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Meeting o f Executive Committee on Monday, August 26, 1935.
PRESENT:

Mr.
Mr.
Mr.
Mr.

Thomas, Vice Chairman
Hamlin
M iller
James

Letter to the Federal reserve agent o f a Federal reserve bank,
ca llin g attention to the analysis o f the report o f examination o f a
State member bank as o f June 1 , 1935, in which reference was made to
an "excess balance” being carried by the member bank with an unincor­
porated firm o f private bankers and in connection with which the ques­
t i o n was raised whether the provisions of Section 19 o f the Federal
" Reserve Act, r e str ic tin g deposits by a member bank with a non-member
"S tate bank or tr u st company" to a sum not in excess o f ten per cent
o f the member bank’ s capital and surplus is applicable to a deposit by
a member bank with such a firm o f private bankers. The le tte r stated
th a t, in view o f the terms o f the lim itation contained in Section 19,
i t appears that such lim itation i s not applicable to a deposit by a
member bank with an unincorporated firm o f private bankers; that the
Board had heretofore considered circumstances having a bearing on th is
conclusion in connection with other provisions o f the Federal Reserve
A ct, and had reached the conclusion (in a ruling published at page 693
o f the Federal Reserve B ulletin fo r September, 1917) that the Federal
reserve banks are not authorized to receive deposits from unincorporated
private bankers under the provisions o f Section 13 o f the Federal Re­
serve Act and (in a ruling published at page 108 o f the Federal Reserve
B ulletin for February, 1935) that amounts due to and from private bank­
ers may not be included
member banks in amounts due to and from
"other banks" in computing the reserves required to be maintained by
member banks under the provisions o f Section 19 o f the Federal Reserve
A ct.
The le t t e r stated further th at, however, the purpose o f the
provision referred to i s obviously to r e s tr ic t the amount o f deposits
o f member banks in banking in stitu tio n s which are not members o f the
Federal Reserve System and th at, therefore, i t i s f e l t that the carry­
ing o f the balance in question i s contrary to the s p ir it and purpose
o f the Federal Reserve Act and should be discouraged, even i f i t i s
not technically in violation o f the le tte r o f the law, and i t i s sug­
gested that the agent advise the member bank accordingly.




Unanimously approved.

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FEDERAL RESERVE BOARD
WASHINGTON

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august 24, 1935.

ADDRESS OFFICIAL. CORRESPONDENCE TO
TH E FEDERAL RESERVE BOARD

SUBJECT:

Reprinting and revision of
Board1s regulations.

Dear Sir:
In view of the amendments to the law contained in the Banking
Act of 1935, the Board is having revisions of the following regulations
prepared:
Regulation A - Discounts under Sections 13 and 13a.
(Will also include provisions re ad­
vances under Section 10(b) as amended.)
Regulation D - Reserves of member banks*
Regulation H - Membership of State banks and trust companies#
Regulation I - Increase or decrease of capital stock of Fed­
eral Reserve banks and cancellation of old
and issue of new stock certificates.
Regulation L - Interlocking bank directorates and other
relationships under the Clayton Act.
Regulation P - Holding company affiliates - voting permits.
Regulation Q - Payment of interest on deposits.
Regulation R - Relationships with dealers in securities*

It will also be necessary to issue an entirely new regulation
regarding loans to executive officers.
Drafts of some of the above regulations have already been sent
to the Federal Reserve banks with requests that they give the Board the




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ben efit of th eir criticism s and suggestions and drafts o f the others lis t e d
above w ill be sent to them as soon as they are ready*
In view of the fa c t that the Banking Act of 19S5 changed the
Board's name to "Board of Governors o f the Federal Reserve System", the
Board i s also considering the ad v isa b ility of reprinting a l l o f i t s other
regulations but knows o f no special reason fo r amending or revising them
a t th is time*

However, the Board would appreciate advice from you at your

e a r lie s t convenience as to whether you or the o ffic e r s o f your bank know o f
any important reason why any of the existin g regulations other than those
lis t e d above should bo amended or revised before they are reprinted*

If

you f e e l that any o f them should be amended or revised, the Board would be
glad to receive your suggestions as to the respects in which they should
be changed.
Of course Regulation M w ill be superseded by a new regulation to
be issued by the Federal Open Market Committee a fte r March 1 , 1936.
Very truly yours,

Chester Morrill,
Secretary.

TO CH
AIRM
EN OF ALL FEDERAL RESERVE BANKS




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F o r m N o . 131

Office CorresponueiL. je
To________ Mr. Efratt---------------------------------- ■
From--------- Mr. Carpenter ------------------- —

FEDERAL RESERVE
BOARD

Subject:
------- —

At th e meeting o f the Board to d a y , th e Governor r e fe r r e d
t o you r memorandum o f August 13, 1935, on the s u b je c t o f sending
t e n t a t iv e d r a ft s o f r e g u la tio n s t o th e F ed eral r e s e r v e banks and,
in accord a n ce w ith h is s u g g e s tio n , the Board a u th orized th e tra n s­
m ission o f t e n t a t iv e d r a ft s o f r e g u la tio n s as agreed upon by mem­
b e rs o f th e s t a f f t o th e F ed eral r e s e r v e banks f o r t h e i r sugges­
t io n s and comments w ith out the d r a ft s bein g f i r s t subm itted t o the
members o f the Board.
I t was u n d erstood , however, th a t th e l e t t e r s tr a n s m ittin g
the t e n t a t iv e d r a ft s o f r e g u la tio n s in each case would c o n ta in a
statem ent t o th e e f f e c t t h a t th e r e g u la tio n a ttach ed had been pre­
pared by th e Board’ s s t a f f , but had not been con sid ered by the
F ederal R eserve Board and, in ord er t o e x p e d ite th e m atter, was
being sen t t o th e F ederal re s e r v e banks f o r t h e i r c o n s id e r a tio n and
comment a t the same tim e th a t c o p ie s were bein g subm itted t o th e
members o f the Board.




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August IS* 1955*

Tentative draft* of revieieiie af
Regulation M ra O
pan Market Opera
tions*

Messrs* Goldenweiser* Snead, Morrill*
Psulger, Parry, Clayton, Thurston
M Wyatt* General Counael.
r*

Xhere are trsnsaitted herewith for your inforaatlon* two tentative
drafts of revisions of Regulation H *hioh have bean prepared by Mr. Benedict
after sms consultation with D Ooldenweiser and the undersigned* O e
r*
n
is based upon the b ill as passed by the House of Representatives and the
„

other upon tbs b ill as passed by tbs Senate#
In view of tha uncertainty as to the for* in which the open aarkct
section of the b ill will finally be enacted* it would not see* worth while
to hsva a staff conference on this subject until after the b ill is enacted*
HowTtr, it will be appreciated i f you will faalliarlse yourself with
these drafts and ba prepared to disouss the subject at a staff cenferenoe
as soon as the b ill is enacted*
M Benedict desires to invite especial attention to the following
r*
points t
(1)

The statement of general principles in section III of the

regulation based upon the b ill as passed by the Senate (entitled "Regu­
lation of the Federal O
pen Market Committee” ) incorporates the wording
of the Senate bill*

D Goldenweiser has suggested that the wording be
r*

changed or elaborated by including provisions siailar to those in the
regulation based on the House bill*

In view of the rejection by th*

Senate of the wording of the House bill* it is bellowed that it would be
inappropriate, i f not Illegal* for the Board to write the provisions of
the House b ill into its regulation* assundng the Senate b ill is the form




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Meao. to Measrs* Goldexnveiaer, Sraead, Morrill*
Paulgar, Parry, Clayton, Thurston
*** 2

finally enacted.
(2)

Jfalthar r*g*lation contains an express proviaian for

absorption into the System account of Goveruaent aeouritiea n hald
ow
Is individual inveataent aeoounta of tha various Fadaral Seaerre banka*
However, thia could be accomplished. if deairable, under tha provision
that no baaka shall hold Governm
ent aaouritiaa except in aooordanoe
•w tha aatabliahad open market polioy (unless in emergencies or In
ith
tha oaaa of temporary eartifloataa of indebtednaae to wcw fliata tha
Treasury) and tha provision permitting tha administrative oomittaa to
allooata holdings to equalise *aa far aa praotioabla tha nat earning
position" of tha various banks*
(*)

In tha regulation baaad on tha b ill as pasaad by tha H
ouaa

tha present fiegulation B of tha Fadaral laaanra Board aa to purohaaaa
of bills of exchange and aeoeptaneee haa baasi inoorporatad aa tha final
saotion* Thia w not faaaibla in tha other regulation which la to ba
aa
adopted by another body* i*e#, tha Fadaral O
pan Market Committee*
(4)

In tha regulation baaad m tha b ill as passad by tha H
ouaa

tha O
pan Market Advisory Committee has baan m
ade tha admlnietrative com
­
mittee with administrative duties similar to thoaa of tha preaent execu­
tive oommittee* This is apparently contemplated by tha H
ouaa bill*
tha other regulation tha executive ooaDBittee haa been oontinoed*
Very truly youra.

falter Wyatt,
General Counael*
Attachments
FB b
P /em



In

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August 15, 1935.
REGULATION OF THE FEDERAL OPEN MARKET COMMITTEE.

OPEN MARKET OPERATIONS

SECTION I

Pursuant to the authority conferred upon it by section 12A of
the Federal Reserve Act, as amended, the Federal Open Market Com­
mittee prescribes the following regulations governing the procedure
to be followed in the conduct of open market operations of the Fed­
eral Reserve banks.
The specific mention in this regulation of any power or author­
ity of the Federal Open Market Committee, of the Board of Governors
of the Federal Reserve System or of the Federal Reserve banks, or
the failure to mention specifically any such power or authority, shall
not be construed as an interpretation of the law as to the existence,
extent, or absence of such power or authority; and the Federal Open
Market Committee expressly reserves the right to alter, amend, or
repeal this regulation in whole or in part at any time.

SECTION II.
(a)

DEFINITIONS

Government securities. - The term "Government securities"

shall include all direct obligations of the United States and all
obligations guaranteed as to principal and interest by the United
States,




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Obligation^. - The term "obligations" shall include all

bankers1 acceptances, bills of exchange, cable transfers, bonds,
notes, warrants, debentures, and other obligations, including Gov­
ernment securities, which Federal Reserve banks are authorized by­
law to purchase in the open market.
(c) System account. - The term "system account” shall include
all(Government securities and other)obligations purchased by the
executive committee in pursuance of an open market policy adopted
Jay the Federal Open Market Committee or held for the account of Fed­

eral Reserve banks.
(d)

Executive committee. - The term ’
^cecutive committee" shall

i^nean the executive committee of the Federal Open Market Committee.

SECTION III.

GENERAL PRINCIPLES

The time, character, and volume of all purchases and sales in
the open market by Federal Reserve banks shall be governed with a
view to accommodating commerce and business and with regard to their
bearing upon the general economic and credit situation of the coun­
try.

SECTION IV.
(a)

FEDERAL OPEN MARKET COMMITTEE

Organization. - The Federal Open Market Committee created

by section 12A of the Federal Reserve Act, as amended by the Bank­
ing Act of 1935, consists of the members of the Board of Governors
of the Federal Reserve System and five representatives of the Federal




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Reserve banks, selected annually as in said section 12A provided.
The committee shall select its own chairman, vice chairman, and
\

secretary.
(b) Meetings. - The committee shall meet in Washington, D. C.,
at least four times each year and oftener if deemed necessary.

Meet­

ings shall be held upon the call of the Chairman of the Board of
Governors of the Federal Reserve System or at the request of any
three members of the committee.
(c) Records. - The Secretary of the committee shall keep a com­
plete record of action taken by the committee at its meetings and
shall record^therein the votes taken in connection with the determination of open market policies and the reasons underlying the ac­
tion of the committee in each instance.
(d) Functions. - It shall be the duty of the committee to con­
sider the economic and credit situation of the country, the changes
in the supply of money (including currency and bank deposits), the
reserve position of member banks, and such other matters as may be
called to its attention by the Board of Governors of the Federal
Reserve System or by any member of the committee, and in the light of
the existing situation to determine and adopt the open market policy
of the Federal Reserve System.

Any such policy shall be subject to

reconsideration at any time after it has become effective and before
it has been fully executed; |and a raeetir^ of the Federal Open Mar­
ket Committee shall be called for that purpose whenever requested by




i

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the Chairman of the Board . f Governors of the Federal Reserve Sys­
o.
tem or by any three members of the committee

The committee will

notify each Federal Reserve bank of all decisions respecting any
such policy.
(e)

Participation by Federal Reserve banks. - All Federal Re­

serve banks- when and as requested by the Federal Open Market Com­
mittee shall participate in open market operations in accordance
with an open market policy adopted by the committee.

If a Federal

Reserve bank’s reserve position makes it inadvisable for it to par­
ticipate to the full extent of its regular allotment, it may make
a recommendation to the executive committee and with its approval
may diminish its participation or refrain altogether from partici­
pation.
i ---- SEGTION V.

EXECUTIVE COMMITTEE

(a) Organization. - The Federal Open Market Committee, at its
first meeting in each calendar year, shall select from its own mem­
bership an executive committee consisting of five members and shall
appoint the chairman thereof.

The executive committee shall keep

minutes of all its meetings and furnish copies thereof to the Federal Open Market Committee, the Board of Governors of the Federal
A
Reserve System and to each Federal Reserve bank.
(b) Functions. - It shall be the duty of the executive commit­
tee:




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(1) fo execute purchases and sales of Government se­
curities and other obligations in the open market in ac­
cordance with open market policies adopted by the Federal
Open Market Committee,
(2) To allocate among all Federal Reserve banks the
aggregate amount of Government securities and other obli­
gations purchased in the open market and held for System
account and to adjust such allocation from time to time
to meet the changing needs of the respective Federal Re­
serve banks.

Such allocations shall be made with the

view primarily of (a) enabling each Federal Reserve bank
to maintain a suitable reserve position, and (b) equal­
izing as far as practicable the net earning position of
the Federal Reserve banks.
(5)

To keep the Board of Governors of the Federal

Reserve System, the Federal Open Market Committee and
each Federal Reserve bank informedAof all transactions
A
executed by the executive committee and of all alloca­
tions and reallocations of Government securities and
other obligations held for system account and
(4)

To perform such other functions and duties in

connection with open market policies as may be assigned
to it from time to time by the Federal Open Market Com­
mittee. .




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SECTION VI . PURCHASES AND SALES OF GOVERNMENT SECURITIES
No Federal Reserve bank shall purchase, hold or sell Government securities except in accordance with an open market policy adopted by the Federal Open Market Committee and in effect at the
time, except that:
(1) In an emergency, any Federal Reserve bank may
purchase arid hold Government securities when necessary
to afford relief in a situation involving specific bank.«*•

ing institutions in its district$ and
(2) Any Federal Reserve bank may purchase for its
own account or independently of the System account, in
the open market, United States temporary certificates
of indebtedness for the accommodation of the Treasury
of the United States in amounts requested by the Treas­
ury and may sell participations therein; but such cer­
tificates shall not be held for more than 7 days without
\

the approval of the Executive Committee.

SECTION VII.

OTHER OPEN MARKET OPERATIONS

•Any Federal Reserve bank may engage in open market operations
other than the purchase or sale of Government securities in accord­
ance with this regulation, subject to the following conditions:
(1)

All such transactions shall be reported daily

to the Federal Open Market Committee and the Board of
Governors of the Federal Reserve System.




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(2) A ll purchases o f acceptances and b i l l s o f ex­
change sh a ll be in accordance with the provisions o f
Regulation B^of the Board o f Governors o f the Federal
Reserve System and the rates o f in terest or discount
sh a ll be in accordance with schedules approved by the
Board o f Governors o f the Federal Reserve System:
Provided, however * That no obligations payable in for­
eign currency sh a ll be purchased without the consent
o f the Board o f Governors o f the Federal Reserve Sys­
tem.
(3) A ll purchases by Federal Reserve banks o f
b i l l s , notes, revenue bonds and warrants o f States,
counties, d i s t r ic t s , p o lit ic a l subdivisions or munici­
p a lit ie s sh all be in accordance with the provisions o f
Regulation E o f the Board o f Governors o f the Federal
Reserve System.
(4) No Federal Reserve bank sh a ll engage in the
purchase or sale o f cable transfers without f i r s t ob­
taining the approval o f the Board o f Governors o f the
Federal Reserve System, except through the Habana agency
in accordance with the resolutions or regulations o f
the Board o f Governors o f the Federal Reserve System
governing the operations o f such agency.




L-113

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SECTION VIII.
(a)

PURCHASES NOT FOR SYSTEM ACCOUNT.

All purchases of Government securities and other obliga­

tions by any Federal Reserve bank for its own account or independent­
ly of the System account shall be reported promptly to the Federal
Reserve Board and to the Chairman of the committee.
may mak

The committee

such compensatory purchases or sales for the System ac­

count and ‘
such reallocations as may be appropriate in the light of
purchases, holdings or sales by individual Federal Reserve banks
f o r their own account or independently of the System account.

(b)

No Federal Reserve bank shall engage in any open-market

transactions which are not of the customary character, which do not
occur in the ordinary course of business, which are engaged in for
the purpose of affecting general economic or credit conditions or
which have a material effect upon general economic or credit condi­
tions:

Provided, however. That in an emergency any Federal. Re serve

bank may purchase Government securities and other obligations when
necessary to afford relief in a situation involving specific bank­
ing institutions in its district.




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August 15, 1935.

REGULATION
, EFFECTIVE
, 1935.
(Superseding Regulation B, Series of 1930, and Regulation M, Series of 1953)

OPEN MARKET OPERATIONS
"O K . .

/
yarded

Pursuant to the authority conferred upon it by section
12A of the Federal Reserve Act, as amended, and by other provi­
sions of the Federal Reserve Act, the Federal Reserve Board pre­
scribes the following regulations governing open market operations
of the Federal Reserve banks and the procedure to be followed in
carrying out open market policies of the Federal Reserve System.
The specific mention in this regulation of any power or
authority of the Federal Reserve Board or of the Federal Reserve
banks, or the failure to mention specifically any such power or
authority, shall not be construed as an interpretation of the law
a£ to the existence, extent or absence of such power or authority$
and the Federal Reserve Board expressly reserves the right to al­
ter, amend, or repeal this regulation in whole or in part at any
time.
SECTION II.
(a)

DEFINITIONS

Government seourlties. - The term "Government se­

curities” shall include all direct obligations of the United States




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and all obligations guaranteed as ta principal and interest by
the United States.
(k)

Obligations. - The term "obligations” shall include

all bankers* acceptances, bills of exchange, oafe$e transfers, bonds,
notes9 warrants, debentures, and other obligations, including Gov­
ernment securities, which Federal Reserve banks are authorized by
law to purchase in the open market.
(c)

System account. - The term "system account1 shall
1

Include all Government securities and other obligations purchased
pursuant to an open market policy adopted by the Federal Reserve
Board or held in connection with such a policy for the account of Fed­
eral Reserve banks.
W)

Committee. - The term "Committee" shall mean the "Open

Market Advisory Committee.1
1
SECTION III.

GENERAL PRINCIPLES

Operi market operations shall be conducted in such manner
as to promote conditions conducive to business stability and to
mitigate by their influence unstabilizing fluctuations in the gen­
eral level of production, trade, prices, and employment so far as
may be possible within the scope of open market operations.




SECTION IV.
(a)

OPEN MARKET ADVISORT COMMITTEE

Organization. - The Open Market Advisory Committee

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created by section 12A of the Federal Reserve Act, as amended by
the Banking Act of 1935, consists of five representatives of the
Federal Reserve banks*

The members of the committee and an alter­

nate to serve in the absence of each of them shall be elected annually
before the end of each calendar year, by the Governors of the
twelve Federal Reserve banks at a meeting of such Governors held
in Washington, D. C., pursuant to call of the Chairman of the committee
or the Governor of the Federal Reserve Board.
be held in September, 1935,

The first meeting shall

Eight of the twelve Governors shall con­

stitute a quorum for such meeting. Separate lists of nominees for mem­
bership on the committee and their alternates; respectively, as nom­
inated by one or more of the Governors of the Federal Reserve banks,
shall be presented to the meeting for balloting thereon.

Each Governor

shall have one vote for each member and each alternate to be elected
which may be cast in person or by proxy.

?he five persons on each
.
’

list having the greatest number of votes sha .1 be duly elected mem­
bers of the committee or alternates, respectively.

A vacancy in the

office of any member of the committee shall, be filled in the
same manner as the office was originally filled.

The terms of the

members of the committee shall expire at the end of each calendar
year and a person elected to fill a vacancy shall serve for the




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ramainder of the term of his predecessor.

L-112

The committee shall

elect its own chairman, vice-chairman and secretary.
(b)

Meetings. - The committee may act at a meeting;

or without a meeting by unanimous written or telegraphic consent
to any action proposed.

Meetings of the committee shall be held

from time to time upon the call of the chairman or upon the call
of the Governor of the Federal Reserve Board.

Meetings shall be

called whenever requested by a majority of members of the committee
or by f majority of the members of the Federal Reserve Board.
t

The

committee shall keep minutes of all its meetings and furnish cop­
ies thereof to the Federal Reserve Board and to each Federal Reserve
bank.
(c)

Functions. - The committee shall consult and advise

with, and make recommendations in writing to, the Federal Reserve
Board from time to time with regard to the open market policy of
the Federal Reserve System, changes in the rates of interest or
discount to be charged by the Federal Reserve banks or in the re­
serve balances required to be maintained by member banks.

The com­

mittee shall also aid in the execution of open market policies adopted
from time to time by the Federal Reserve Board and shall perform such
other duties relating thereto as the Federal Reserve Board may herein,
or otherwise, prescribe.




(d)

Open market policy. - Any open market policy recommended

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by the committee shall be considered by the Federal Reserve
Board,

The Federal Reserve Board shall consult the committee be­

fore making any changes on its own initiative in open market policy,
in the rates of interest or discount to be charged by the Federal
Reserve banks, or in the reserve balances required to be maintained
f y member,.banks; and a meeting of the committee shall be called
c
for consultation thereon with the Federal Reserve Board whenever re­
quested by the Federal Reserve Board.

After consulting with and

considering recommendations of the committee, the Federal Reserve
Board from time to time, shall prescribe the open market policy of
the Federal Reserve System.
Any open market policy recommended by the committee shall
be effective only when and to the extent prescribed by the Board.
Any open market policy shall be subject to reconsideration at any
time after it has become effective and before it has been fully
executed.

The Federal Reserve Board will notify each Federal Re­

serve bank and the chairman of the committee of all decisions re­
specting any such policy.
(e)

Prescribed duties. - It shall be the duty of the

committee:
(1)

To execute purchases and sales of Government se­

curities and other obligations in the open market in accordance
with open market policies adopted by the Federal Reserve Board|




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(2)

“1
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To allocate, pursuant to written or telegraphic

directions from the Federal Reserve Board, the aggregate amount of
Government securities and other obligations held in the System ac­
count, among all Federal Reserve banks, and to adjust such alloca­
tion from time to time to meet the changing needs of the respective
Federal Reserve banks*

Such allocation shall be made with the view

primarily of (a) enabling each Federal Reserve bank to maintain a
suitable reserve position, and (b) equalizing as far as possible the
net earning positions of the Federal Reserve banks;
(3)

To keep the Federal Reserve Board and each Federal

Reserve bank informed of all transactions in the open market for
System account and of all allocations and reallocations of Govern­
ment securities and other obligations held for System accounts; and
(4)

To perform, from time to time, such other duties re­

lating to open market policies as the Federal Reserve Board may
prescribe*

SECTION V.

COMPLIANCE BY FEDERAL RESERVE BANKS

As provided in section 12A of the Federal Reserve Act, as
amended, all transactions of Federal Reserve banks under authority
of section 14 of the Federal Reserve Act, as amended, shall be sub­
ject to the regulations, limitations and restrictions herein pre­
scribed and such others as the Federal Reserve Board may from time to




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time prescribe and each Federal Reserve bank shall purchase, hold
or sell Government securities, bankers* acceptances, bills of ex­
change, and other obligations of the kinds and maturities made
eligible for purchase under Idle provisions of section 14 of the
Federal Reserve Act, as amended, to such extent and in such manner
as may be required by the Federal Reserve Board in order to effectuate
the open market policies adopted by the Board and each Federal Reserve
bank shall cooperate fully, in every way, in making such policies
effective*
SECTION VI.
(a)

PURCHASES AND SALES OF GOVERNMENT SECURITIES

No Federal Reserve bank shall purchase or sell Govern­

ment securities except through the committee or the System account,
and except as elsewhere in this regulation permitted.
(b)

Each Federal Reserve bank shall be deemed to hold

for System account any Government securities purchased for, or
allocated to it by, the committeee, pursuant to authority from the
Board*
(c)

No Federal Reserve bank shall purchase, hold or sell

Government securities except in accordance with an open market policy
adopted by the Federal Reserve Board and in effect at the time, except
that:




(1)

In an emergency any Federal Reserve bank may

purchase Government securities when necessary to afford
relief in a situation involving specific banking in­
stitutions! and

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(2)

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Any Federal Reserve bank may purchase for its

own account or independently of the System account, United
States temporary certificates of indebtedness for the
accommodation of the Treasury of the United States in
amounts requested by the Treasury and may buy and sell
participations therein; but such certificates of partici­
pation shall not be held longer than 7 days without the
approval of the Federal Reserve Board,

SECTION VII*

OTHER OPEN MARKET OPERATIONS

Any Federal Reserve bank may engage in open market operations
other than the purchase or sale of Government securities in accordance
with this regulation, subject to the following conditions:
(a)

All such transactions shall be reported daily to the

Federal Reserve Board.
(b)

All purchases of acceptances and bills of exchange

shall be in accordance with the provisions of Section IX of this regu­
lation, and the rates of interest or discount shall be in accordance
with schedules approved or prescribed by the Federal Reserve Board|
Provided, however. That no obligations payable in foreign currency
shall be purchased without the consent of the Federal Reserve Board#
(c)

All purchases by Federal Reserve banks of bills, notes,

revenue bonds, and warrants of States, counties, districts, political
subdivisions or municipalities shall be in accordance with the provi­
sions of Regulation E«




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(d)

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No Federal Reserve bank shall engage in the purchase or

sale of cable transfers for its own account or independently of the
System account without first obtaining the approval of the Federal
Reserve Board, except through its Habana agency in accordance with
the resolutions or regulations of the Federal Reserve Board govern­
ing the operations of such agency.

SECTION VIII.

(a)

PURCHASES NOT FOR SYSTEM ACCOUNT

All purchases of Government securities and other obliga­

tions by any Federal Reserve bank for its own account or independently
of the System account shall be reported promptly to the Federal Reserve
Board and to the Chairman of the committee.

The committee may make,

or cause to be made by one or more Federal Reserve banks, such com­
pensatory purchases or sales for the System account and such realloca­
tions as may be appropriate in the light of purchases, holdings or sales
by individual Federal Reserve banks for their own account or independently
of the System account.
(b)

No Federal Reserve bank shall engage in any open-market

transactions which are not of the customary character, which do not
occur in the ordinary course of business, which are engaged in for the
purpose of affecting general economic or credit conditions or which
have a material effect upon general economic or credit conditions:
Provided, however. That in an emergency any Federal Reserve bank may
purchase Government securities and other obligations when necessary to
afford relief in a situation involving specific banking institutions in




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its district.

SECTION IX. CHARACTER OF BILLS AND ACCEPTANCES
ELIGIBLE FOR OPEN MARKET PURCHASES

Pursuant to section 1§ of the Federal Reserve Act, the
Federal Reserve Board, exercising its statutory right to regulate
-the character of bills of exchange and acceptances, which may be
purchased by Federal Reserve banks, prescribes that, subject to
other provisions of this regulation,




(a)

Any banker*s acceptance

or bill of exchange

which is eligible for discount under the terms of Reg­
ulation A is eligible for purchase by Federal Reserve
banks in the open market, with or without the indorsement
of a member bank, if—
(1)

It has been accepted by the drawee prior to

purchasej or
(2)

It is accompanied or secured by shipping docu­

ments or by warehouse, terminal, or other similar re­
ceipts conveying security title; or
{3)

It bears a satisfactory bank indorsement;

(b)

A banker's acceptance growing out of a trans­

action involving the importation or exportation of goods
may be purchased if it has a maturity not in excess of

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-

six months, exclusive of days of grace, provided that it
conforms in other respects to the applicable requirements
of Regulation A; and
(c)

A banker*s acceptance growing out of a trans­

action involving the storage within the United States
of goods actually under contract for sale and not yet
delivered or paid for may be purchased, provided that
the acceptor is secured by the pledge of such goods, and
provided further, that the acceptance conforms in other
respects to the applicable requirements of Regulation A.
(d)

A bill of exchange, unless indorsed

by a mem­

ber bank, is not eligible for purchase until a satis­
factory statement has been furnished of the financial
condition of one or more of the parties thereto.
(e)

A banker*s acceptance, unless accepted or in­

dorsed by a member bank, is not eligible for purchase un­
til the acceptor has furnished a satisfactory statement
of its financial condition in form to be approved by the
Federal Reserve bank and has agreed in writing with a
Federal reserve bank to inform it upon request concern­
ing the transaction

underlying the acceptance.

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jrm N o . 131

Office Corresponuek^je

FEDERAL RESERVE

j 0______ Governor Eccles____________ C O P I
prr>m

Mr. Wyatt. General Counsel.

BR
0D
A

pt « « g u S% is, ia5 .
ae
s

Snkjpri; Sending tentative drafts of
new regulations to Federal Reserve
banks for criticism and-commen-t.—

During our conversation yesterday afternoon, you asked me to pre­
pare a memorandum reminding you to take up with the Board the question
of sending tentative drafts of the proposed new regulations to all
Federal Reserve banks with a request that they give the Board their
criticisms and suggestions.
You stated that you would ask the Board to authorize the staff to
send tentative drafts of such regulations to all Federal Reserve banks
without waiting for the members of the Board to examine them, but with
the understanding that they do not commit the Board in any way and that
the Board will have ample opportunity to consider the regulations when
the revised drafts are prepared after receiving the criticisms and sug­
gestions of the Federal Reserve banks.
The enactment of the Banking Act of 1935 will make it necessary to
-revise the following existing regulations:
Regulation
Regulation
Regulation
Regulation

A,
D,
H,
I,

Regulation
Regulation
Regulation
Regulation
Regulation

L,
M,
P,
Q,
R,

Discounts under Sections 13 and 13(a);
Reserves of Member Banks;
Membership of State Banks and Trust Companies;
Increase or Decrease of Capital Stock of Federal
Reserve Banks;
Interlocking Bank Directorates;
Open Market Operations;
Holding Company Affiliates - Voting Permits;
Payment of Interest on Deposits;
Relationships with Dealers in Securities under
Section 32 of the Banking Act of 1933.

In addition, it will be necessary to issue an entirely new regulation
governing loans to executive officers.
If the bill as finally enacted abolishes collateral requirements for
Federal Reserve notes and authorizes the Board to regulate the making
of real estate loans my member banks, it will be necessary to issue new
regulations on these two subjects.
A tentative draft of the proposed new regulation on loans to ex­
ecutive offecers has already been mailed to the Federal Reserve banks;
the revision of Regulation I is on your desk reac " to go to the Fed­
ty
eral Reserve banks; and drafts of the revised Regulations D, H, P, and
Q are practically completed and can be sent to the Federal Reserve
banks as soon as they are made to conform to the bill as finally en­
acted. We have drafts of regulations on rediscounts, real es tate
loans and open market operations; but considerable work will have to be
done on them after the bill is enacted.




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FEDERAL RESERVE

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To_____________________________________________Subject:____________________________________________________
From_________ ______________________________ __ ____________________________________________________________
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16—852

Governor Eccles - 2

Because o f the postponement o f the e ffe c tiv e date o f the corres­
ponding sections o f the Banking Act o f 1955, i t w ill not be necessary
to revise Regulations L and R relating to interlocking bank directorates
and relatio n s with se cu ritie s companies before December.




Respectfully,
(Signed) Walter INyatt
Walter Vfyatt,
General Counsel.

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THE O
PEN MAMET PROVISION OF THE BANKING BILL (H.R. 7617)
AS REPORTED BY THE SENATE SUBCOM ITTEE
M

JUL - 2
No question involved in the discussion o f open market p o lic ie s
or other national credit p o lic ie s i s more important than the question
o f what body should be given the power of formulation and enforcement.
For that reason, the public in terest would be particularly jeopardized
by the amendments proposed by the Subcommittee o f the Senate Banking
and Currency Committee to vest the determination of open market p o licie s
in a hybrid committee con sistin g, in e f f e c t , o f seven members o f the
-Federal Reserve Board and fiv e Reserve bank governors.
I t seems almost axiomatic that the body chosen to formulate
national credit p o lic ie s should have a national viewpoint and should
owe undivided allegiance to the public w elfare.

I t s judgment should

not be warped by the viewpoint o f any particular section of the country
or by the special in terests o f any particular group.

I t should be an

im partial, independent body with a keen and continuous sense o f public
duty.

Every member o f the body should be charged with the d e fin ite

and inescapable resp o n sib ility o f devoting himself to the uninterrupted
study of the complete national economic picture so that the body w ill
be constantly prepared to adopt necessary credit p o lic ie s and to modify
such p o licie s i f modification should become necessary in the public
in te r e s t.
Heads of Reserve Banks Not Q ualified to Serve on Body
Formulating National Credit P o licies
Open market operations are one o f the most important instruments
o f credit control, and whatever the q u alification s of the heads o f the




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Reserve banks to give advice on such matters or to propose policies
for further discussion and consideration, they are particularly dis­
qualified to serve on the body having final authority and responsibility
for such policies.
The heads of the Federal Reserve banks, whether they be known as
governors,^ presidents, or by any other name, are executives of large
institutions with many matters requiring immediate decisions and many
problems for immediate solution.

Naturally, they are primarily con­

cerned with the administration of their own institutions, the peculiar
problems of their own districts and particular needs of their own
member banks#

They have neither the time nor the incentive to turn

from such matters and give proper study and deliberation to the problems
of the national economy or the effect of various forces which might be
loosed by a particular credit policy.

It is inevitable that their

interest in credit policies should be essentially a ’part-time interest”
’
and occasional departures from the daily routine of their executive
duties in order to meet in Washington and formulate such policies cannot
supply that continuity of attention, study, and deliberation which is
necessary for sound judgment upon matters of such intricate nature and
such far reaching importance to the entire nation.
Moreover, this same preoccupation with affairs of their own
banks, their own districts, and their own particular groups of member
banks, impresses upon the Reserve bank governors a point of view which
makes it particularly unwise and dangerous to entrust to them the
power to formulate credit policies for the entire nation*/




As

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indicated by the Governor of the Federal Reserve Bank of N York in
ew
his testimony before the Senate Banking and Currency Committee of u fow
years ago, i t frequently is the duty of the Federal Reserve System to
m
ove in the opposite direction from its member banks.

It must frequently

m
ove in the direction of easy credit conditions when its member banks
are tightening credit conditions; and it must frequently move in the
direction of tighter credit conditions when the tendency of its m ber
em
banks is toward an easier credit condition.

The heads of the Reserve

banks on the other hand, are appointed by, and directly responsible to
boards of directors, two-thirds of whose members are elected by the m ber
em
banks.

From the very nature of things, they are primarily "corporate

managers", and their chief concern is the interests of their m
ember bank
"stockholders’1
.
This over-susceptibility to the influences and special interests of
their m ber banks was illustrated quite forcibly, even i f probably uninten­
em
tionally, by the introductory remarks of the Governor of the Federal Reserve
Bank of Philadelphia in his recent speech before the Pennsylvania Bankers*
Association, wherein he referred to his duty to "m stockholders" - meaning
y
thereby the m ber banks of the Third Federal Reserve District.
em

This m
ay

be a ll very well for the daily details of Reserve bank administration, but
it simply is not reasonable to expect these sam executives to have the
e
objective attitude necessary for the adoption of credit policies contrary
to those pursued by the m ber banks*
em




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Plan f o r H ybrid O rg a n iza tion i s Unsound and Unworkable

D esp ite the ob v iou s d i s q u a l i f i c a t i o n s o f the heads o f th e R eserve
banks t o serv e on th e body having f i n a l a u th o r ity ov er n a tio n a l c r e d i t
p o l i c i e s , th e c r e a t io n o f a new h y b rid o r g a n iz a tio n c o n s is t in g p a r t ly
o f members o f th e F ed eral R eserve Board and p a r t ly o f gov ern ors o f
F ed era l R eserve banks has been p e r s is t e n t ly advanced through a number
o f d i f f e r e n t channels and in a number o f d i f f e r e n t forms*

The d e t a i l s

o f such p r o p o s a ls v a ry , b u t th e id ea i s always th e same - alm ost equal
r e p r e s e n t a t io n o f th e banking in t e r e s t s and th e p u b lic i n t e r e s t , w ith
the l a t t e r a llow ed a b a re m a jority *

Although the names a re changed, th e

b i l l as r e p o rte d by th e Subcommittee would p ro v id e f o r a com mittee con­
s i s t i n g o f f i v e govern ors o f the F ed eral R eserve banks and seven members
o f th e F ed era l R eserve Board*
The v e ry mention o f th e id e a in d ic a t e s i t s tru e natu re as a compro­
m ise between w arring in t e r e s t s - a compromise based n ot upon p r in c ip le
b u t p u re ly upon expediency*

I t i s a scheme t o put the bankers in a p o s it io n

where th ey co u ld c o n t r o l th e d e c is io n s o f th e com mittee by o b ta in in g the
support o f one o r p o s s ib ly two members o f th e Board.

I t i s a p lan t o g iv e

the bankers a c t u a l c o n t r o l w ith ou t l e g a l c o n t r o l o r r e s p o n s i b i l i t y .
Such a body composed o f an alm ost equ al number o f r e p r e s e n ta tiv e s o f
th ese two c o n f l i c t i n g f o r c e s co u ld never be exp ected t o op era te harm oniously
in th e p u b lic i n t e r e s t .

I t would b e u t t e r l y la c k in g in th a t u n d iv id ed

a t t e n t io n t o the g e n e ra l w e lfa r e and th a t s in g le n e s s o f purpose which
sh ou ld be the p r in c ip a l c h a r a c t e r is t ic s o f any body to which i s en tru sted




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the economic welfare o f the nation*

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L-93

Being borne o f a fe e lin g o f

d istru st between two antagonistic fo rc e s, i t would most lik e ly perpetuate
and accentuate such d istru st in a l l i t s proceedings*

Instead o f im partial,

s c ie n tific consideration o f the in trica te economic problems which v it a lly
a ffe c t the in terests o f the nation as a whole, i t s proceedings would
be almost certain to degenerate into open clashes o f in terests or subtle
manoeuvering by which the banker representatives would conspire to win
over one or two members o f the Board and control the d e cision s.

I f th is

were not the situation a l l o f the time i t would in a l l probability be
the situation at the most c r it ic a l times - at the times when there i s a
real c o n flic t between the public in te re st and the s e lfis h in terests of
the banks*

Such an organization would be most impotent when i t should be

most vigorous.

I t would function worst when the public in te re st requires

that i t function best*
I t i s w ell to r e c a ll that there i s nothing new about the proposal
or i t s answer.

When President Vfilson in sisted on the creation of the

Federal Reserve Board, a public body to supervise and direct the a ffa ir s
of the regional banking system contemplated by the Federal Reserve Act,
the bankers sought representation on the Board.

Since the banker-sponsored

Aldrich plan had been rejected , they sought the next best thing fo r their
purposes, and managed to arouse considerable support for th eir plan o f
banker representation on the Federal Reserve Board.

I t was President

Wilson who disposed of the plan by showing that there was no more reason
for banker representation on the Federal Reserve Board than for the




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railroads to se le c t members o f the Interstate Commerce Commission,
The present proposals fo r the creation o f a hybrid body to fo r ­
mulate and enforce national economic and credit p o licie s are but a
revival of th is same old idea.

I t is a revival - or i t might better

be said a continuation - o f the eternal c o n flic t between the general
in terests o f a l l the people and the special in terests o f a few*

The

question i s , w ill the bankers succeed a fte r twenty-two years in having
their scheme adopted! or w ill i t again be understood and rejected as
i t should be?
The Federal Reserve Board i s Best Qualified To
Formulate National Credit P olicies

There i s no need to look beyond the Federal Reserve Board to find
the proper body to formulate open market and other national credit p o lic ie s .
I t i s a public body having back of i t the experience and trad itions o f
twenty-one years o f continuous service to the American public.

I t i s the

body created by the Congress when i t rejected the idea o f a hybrid
organization and determined to have a purely public body to coordinate
the a c t iv itie s of the twelve Federal Reserve banks and see that they
"pursue a banking policy which sh all be uniform and harmonious for the
country as a whole".
Under the origin al Federal Reserve Act and subsequent amendments,
there are carefu lly worked out provisions to insure for the Board con­
tin u ity of p o lic y , trad ition and re sp o n sib ility , and to make i t inde­
pendent o f p o lit ic a l influence, banker in flu en ce, or any kind o f special




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influence.

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Six appointive members with long terms o f o ffic e serve

on the Board with two members o f the executive department of the Govern­
ment.

These appointive members have twelve-year terms o f o ffic e and

are appointed by the President with the advice and consent o f the Senate,
in the same manner as judges 0f -^he United States Supreme Court.

Freedom

from the predominance o f any sectional in terest i s assured by the pro­
vision that' no two members may come from any one Federal Reserve d i s t r i c t .
Independence from banking influence is safeguarded by the provisions
that i t s members "s h a ll be in e lig ib le during the time they are in o ffic e
and fo r two years thereafter to hold any o f f ic e , p o sition , or employment
in any member bank” and that they sh a ll not M
hold stock in any bank,
banking in stitu tio n or trust company” .
The Federal Reserve Board i s continually in session and continually
devoting i t s attention to questions of the national public in te r e s t.

It

i s in a position to in itia t e credit p o lic ie s , to observe the e ffe c t o f
such p o licie s as they proceed, to recognize at the e a r lie st p ossible
moment any undesirable or unanticipated resu lts o f such p o lic ie s , and to
in te n sify , re la x , or change such p o licie s as the need might a r is e .

It

i s able to give undivided and painstaking attention to the one purpose
o f serving the welfare o f the entire nation!

and i t would not deal with

national credit p o licie s in the haphazard, part-tim e fashion that would
necessarily characterize a group composed in whole or in part o f members
primarily concerned with other functions.




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The economic e ffe c ts o f Reserve bank discount rates were
recognized when the Federal Reserve System was established, and
Congress gave the Federal Reserve Board the power to review and
determine the discount rates o f Federal Reserve banks, in order ”to
provide against the p o s s ib ility that the lo c a l bank might be estab lish ­
ing a c’angerously low rate o f interest which the Reserve Board, fam iliar
as i t would be with credit conditions throughout the country, would
deem best to ra ise ” .

Open market operations at that time were not as

w ell recognized as an instrument o f credit policy as at present; and,
- either through oversight or through fa ilu re to r e a liz e their importance,
the Board was given only general regulatory power over open market
operations rather than the sp e cific powers given over discount r a te s .
However, i t is highly important fo r the public welfare that the
viewpoint of the national economy should be paramount not only with
respect to discount rates but also with respect to open market operations.
I t i s essen tial that a l l national credit p o licie s be based upon "conditions
throughout the country"; and the Federal Reserve Board, with i t s experi­
ence in coordinating the a c t iv itie s o f the Federal Reserve banks and
exercising i t s general regulatory powers to keep the p o licie s o f the
Federal Reserve banks in accord with sound public p o lic y , is the lo g ic a l
body to be entrusted with the resp o n sib ility fo r formulating national
cred it p o lic ie s .
With such an experienced public body already in existence, there
i s no need to create another body or to look elsewhere fo r an appro­
priate repository for the public trust involved in the authority and




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resp o n sib ility fo r the formulation o f national credit p o licie s*

If

the Federal Reserve Board i s not s u ffic ie n tly independent, the defect
should be corrected.
be made so*

I f i t i s not s u ffic ie n tly competent, i t should

I f i t i s lacking in any other q u a lific a tio n , the de­

ficie n cy should be supplied| but i t i s at le a s t something substantial
to build upon, and i t should not be discarded or shunted aside fo r an
im practical, hybrid organization*




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NOT TO BE PUBLISHED

THE OPEN-MAMET PROVISIONS OF THE BANKING ACT
OF 1935 ARE CONSISTENT WITH THE UNDER­
LYING PRINCIPLES OF THE ORIGINAL
FEDERAL RESERVE ACT.

m

n

To co n ce n tra te in the F ederal Reserve Board the u ltim ate
a u th o r ity over the open-market p o l i c y o f the Federal Reserve Sys­
tem i s c o n s is t e n t w ith the purpose and in te n t o f the o r ig in a l
Federal Reserve Act*

The " c h i e f pu rposes” o f the Act were s ta te d

by Mr. G la ss, Chairman o f the House Banking and Currency Committee
on page 11 o f the Committee Report dated September 9* 1913, as
fo llo w s :




" E s s e n tia l Features o f Reform*
The oth er plans b e fo r e the committee or examined by
i t have lik e w is e been found u n s a t is fa c t o r y - some f o r
reasons analogous to those w hich made the A ld r ic h b i l l
u n a cce p ta b le , oth ers because o f d e fe c t iv e d e t a i l , erro n ­
eous p r i n c i p l e , or f a u lt y c o n s t r u c t io n . An e f f o r t was,
however, made t o a s c e r t a in the c o n s titu e n t elem ents o f
these measures and o f the A ld r ic h b i l l , common t o a l l ,
wfeieh should be recog n ized and p rovid ed f o r in any new
plan because rep resen tin g the fundamentals o f l e g i s l a ­
t io n .
I t is b e lie v e d th a t th ese are as f o llo w s :
1. E stablishm ent o f a more n e a r ly uniform r a te o f
d iscou n t throughout the United S t a t e s , and th ereby the
fu r n is h in g o f a c e r t a in kind o f p re v e n tiv e a g a in st ov er­
expansion o f c r e d i t w hich sh ou ld be s im ila r in a l l p a rts
o f the co u n tr y .
2 . General economy o f re se rv e s in ord er th a t such
re serv es might be h eld ready f o r use in p r o t e c t in g the
banks o f any s e c t io n o f the cou n try and f o r en ab lin g
them to go on m eeting t h e ir o b lig a t io n s in s te a d o f su s­
pending payments, as so o ft e n in the p a s t.
3.
Furnishing o f an e l a s t i c cu rren cy by the a b o l i ­
t io n o f the e x is t in g bon d -secu red note is su e in whole
or in p a r t, and the s u b s t it u t io n o f a f r e e l y issu ed and
ad equ ately p r o te c t e d system o f bank n otes w hich should
be a v a ila b le t o a l l in s t it u t io n s which had the p rop er
c la s s o f paper f o r p r e s e n ta tio n .

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4 . Management and commercial use o f th e funds o f the
Government which are now is o la t e d in the Treasury and sub­
tr e a s u r ie s in la r g e amounts
5. General s u p e rv is io n o f the banking bu siness and fu r ­
n ish in g o f s tr in g e n t and c a r e fu l o v e r s ig h t .
6. C rea tion o f market f o r commercial paper.
Other o b je c t s are sou gh t, in c id e n t a lly , in th ese p la n s,
but they are not as b a s ic as the c h i e f purposes thus enum­
e r a t e d ."
'“No one o f the r e g io n a l banks a c tin g alon e c o u ld fu r n is h "a
c e r t a in kind o f p re v e n tiv e a g a in st over expansion o f c r e d it which
should be s im ila r i n a l l p a rts o f the cou n try ’1.

T h e re fo re , the

Federal Reserve Board was c r e a te d and g iv e n the power to req u ire the
tw elve re g io n a l banks to "pursue a banking p o lic y w hich s h a ll lie
uniform and harmonious f o r the country as a w h o le ".
There is abundant evid en ce th a t the fram ers o f the l e g i s l a ­
t io n f u l l y re co g n ize d th a t some o f the purposes s ta te d above should
be under the c o n t r o l o f the r e g io n a l banks and th a t others should be
under the c o n t r o l o f a c e n t r a l o r g a n iz a ti# n .

Although i t was b e lie v e d

th a t such ro u tin e m atters as the d e c is io n upon the e x te n s io n o f c r e d it
to a p a r t ic u la r borrow er or the d isco u n tin g o f a p a r t ic u la r loan
should be l e f t to the judgment o f the r e g io n a l bank, i t was c l e a r l y
understood th a t im portant m atters o f p o l i c y which would have a p r o ­
found e f f e c t upon the economic l i f e

o f the e n t ir e n a tio n should be

v ested in a n a tio n a l o r g a n iz a tio n w ith a n a tio n a l v ie w p o in t.
I t should be observed , however, th at t h is p r in c ip le o f c e n t r a l­
iz in g c o n t r o l o f the broad n a tio n a l fu n ctio n s o f the Federal Reserve
System in a Government board was n ot in the minds o f the fram ers o f the




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A ct during the e a r ly sta ges o f i t s development but was f i r s t sug­
g ested by P resid en t W ilson in 1912 and la t e r was a cce p te d by th e
other men r e s p o n s ib le f o r the enactment o f the l e g i s l a t i o n .

The

circum stance under which P re s id e n t W ilson suggested the c r e a t io n
o f the Federal Reserve Board "as a cap ston e" t o the F ed eral Reserve
System i s r e la t e d by Senator G la ss , on pages 81 and 82, o f h is
book "An Adventure in C o n stru ctiv e F in an ce".




"December 26, 1912, was a d e s p e r a te ly c o ld day.
The snow a t P rin ce to n was two f e e t deep. Dr. W i l l i s ,
the committee e x p e r t, had accompanied the chairman,
prepared t o answer or d iscu ss any p u re ly t e c h n ic a l
q u e s tio n th a t mipht be p r o je c t e d .
I had made a w r it ­
ten d iv is io n a l memorandum o^ the b i l l I d e s ir e d t o
o u t lin e to Governor W ilson . The l a t t e r had a severe
c o ld and was propped up on p illo w s in bed . He had
c a n c e lle d every oth er engagement f o r th e day, and a t
once i t was suggested th a t he l e t us come another
time when he might be in b e t t e r trim ; b u t he i n s is t e d
on p roceed in g w ith the b u s in e s s , so in t e n t was he on
a speedy and sweeping curren cy reform . For two hours
th e s it u a t io n was review ed a n d 'th e chairm an’ s memoran­
dum d is s e c t e d .
Toward the end, Mr. W ilson announced
i t as h is judgment th a t we were ’ f a r on the r ig h t t r a c k ’ ;
but o f fe r e d q u ite a few s u g g e s tio n s , the most n ota b le
b ein g one th a t r e s u lte d in the esta b lish m en t o f an a l ­
t r u i s t i c fe d e r a l Reserve 'Board at W ashington to super­
v is e 'the p roposed system . We had c o m m itte d th is fu n c t io n to the C om ptroller o^ the Currency, a lrea d y t s a r i s t i c
head o f the n a tio n a l banking system o f the co u n try . Mr.
W ilson la u g h in g ly s a id he was f o r ’ a p len ty o f c e n t r a l­
iz a t io n , but n ot f o r to o much’ . T h e re fo re , he asked th a t
a sep a ra te c e n t r a l board p r o v is io n be d r a ft e d , t o be used
or n o t , as might subsequently ¥e determ ined, ’ as a cap­
s t o n e ’ t o the system w hich had been o u tlin e d to him.*1

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In c a r r y in g out the p la n o r ig in a te d fey P re sid e n t W ilson
f o r v e s t in g im portant m atters o f n a tio n a l p o l i c y a f f e c t i n g the
cou n try as a whole in a Government board, the House Committee on
Banking and C urrency, in i t s r e p o r t on th e o r ig in a l F ederal Re­
serv e A c t, made i t c le a r th a t c o n t r o l over r o u tin e o p era tion s o f
^banking was t o be p la ce d in the r e g io n a l banks and th a t the d e t e r ­
m ination o f n a tio n a l p o l i c i e s was to be v e s te d in th e F ederal Re­
serv e Board.

This i s c l e a r l y shown by th e fo llo w in g pages in

the r e p o r t on th e o r ig in a l F ed eral Reserve Act subm itted t o the
House o f R ep resen ta tiv es by Mr* G la ss, on b e h a lf o f th e Banking
and Currency Committee, under date o f September 9 , 1913 ( p p .16,
18,19 and 4 2 ):
’’ * * * In ord er th a t th ese banks may be e f f e c t i v e l y
in s p e c te d , and in order th a t th ey may pursue a banking
p o l i c y which s h a ll be uniform and harmonious f o r the
cou n try as a whol e , th e committee p rop oses a gen era l
board o f managemen t i n t r usted w ith the power t o o v e rlo o k
and d i r e c t th e gen eral fu n c tio n s o f th e banks r e f e rred t o .
To t h is i t a ssig n s th e t i t l e o f ’ The F ederal r e se r v e b o a rd ’ .
★ * ★ m
a

*

*

*

*

*

*

*

*

*

*

" * * *
on ly f a c t o r o f c e n t r a liz a t io n which has
been p rov id ed in th e com m ittee’ s p lan i s found in th e
F ederal re se rv e b oard , which i s t o be a s t r i c t l y Govern­
ment o r g a n iz a tio n cre a te d f o r the purpose o f in s p e c tin g
e x is t in g banking in s t it u t io n s and o f r e g u la tin g r e la t io n ­
ships between Federal re se rv e banks and between them and
the Government i t s e l f .
C arefu l study o f the elem ents o f
the problem has con vin ced the com mittee th a t ev ery element
o f advantage found t o e x is t in c o o p e r a tiv e or c e n t r a l banks
abroad can be r e a liz e d by the d egree o f c o o p e r a tio n which
w i l l be secured through the reserv e-b a n k p lan recommended,
w h ile many dangers and p o s s i b i l i t i e s o f undue c o n t r o l o f




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the resou rces o f one s e c t io n by another w i l l be av oid ed .
Local c o n t r o l o f banking, lo c a l a p p lic a t io n o f resou rces
t o n e c e s s i t i e s , combined witti fe d e r a l s u p e r v is io n , and
lim it e d by Fed era l a u th o r ity t o compel th e .jo in t a p p lic a ­
t io n o f bank resou rces to the r e l i e f o f dangerous or
s tr in g e n t c o n d itio n s in any l o c a l i t y are the c h a r a c t e r is ­
t i c fe a tu r e s o f the plan as now put forw a rd . * * * I t is
proposed th a t the Government s h a ll r e t a in a s u f f i c i e n t
power over the r e s erve banks to enable i t to e x e r c is e a
d ir e c t in g a u th o r ity w fien n ocessa ry t o do s o , but that i t
s h a ll in no way attempt t o c a r r y on through i t s own mech­
anism the ro u tin e op era tion s o f banking which req u ire
d e t a ile d knowledge o f l o c a l and in d iv id u a l c r e d i t and
which determ ine th e a c tu a l use o f the funds o f the commun­
i t y in any g iv en in s ta n c e . In oth er w ords, the r e s e r v e bank p lan re ta in s t o the Government power over the e x e r ­
c is e o f the b road er 'banking f u n c t lo n s , w h ile 1 t le a v e s “to
in d iv id u a ls and p r iv a t e ly owned in s t it u t io n s the a c tu a l
d ir e c t io n o f Routine*

f,In t h is s e c t io n p r o v is io n has been made f o r the
c r e a t io n o f a gen era l board o f c o n t r o l a c tin g on b e h a lf
o f the N ational Government f o r the pureose o f ov erseein g
the reserv e banks and o f a d ju s tin g the banking tra n s a c ­
t io n s o f one p o r t io n o f the cou n try , as w e ll as the Gov­
ernment d e p o s its t h e r e in , t o th ose o f oth er p o r tio n s* * * *
The power o f ca rry in g on the r e g u la r rou tin e every -d a y b u s i­
ness o f th e Federal reserv e banks and o f determ ining the l o c a l p o l i ­
c ie s was en tru sted to t h e i r r e s p e c t iv e boards o f d i r e c t o r s , but the
Federal Reserve Board was cre a te d as "a gen era l board o f management”
en tru sted w ith the power to o v e r lo o k and d i r e c t the g en era l fu n ctio n s
o f the banks in order th a t the Board, on b e h a lf o f the Government,
might r e t a in power over the e x e r c is e o f the M
broader banking fu n c tio n s
a f f e c t in g the cou n try as a w hole.




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The cx p e rio n co o f tho Federal Reserve System has demon­
s tr a te d th a t tho f i x i n g o f d iscou n t r a te s and the c o n t r o l o f
Open-market o p e ra tio n s are c o r r e la t iv e instrum ents o f c r e d it
c o n t r o l ond th a t t 1 e same p r in c ip le s which caused the fram ers
o f th e F ederal Reserve A ct t o grant f i n a l determ in a tion over
d is c o u n t"r a te s to the F ederal Reserve Board l o g i c a l l y req u ires
v e s tin g o f c o n t r o l o f open-market o p e ra tio n s in the same board .
„ S e c tio n 14(d ) o f the o r ig in a l Federal Reservo A ct v e ste d f i n a l
d eterm in a tion o f the d isc o u n t r a te in the Federal Reserve Board
by tho follov d .n g language:
"Every F ederal r e s e r v e bank s h a ll have power:
*
*
*
*
*
” (d ) To e s t a b lis h from tim e to tim e, s u b jo c t to
review and determ in a tion o f the F ederal Reserve Board,
r a te s o f d isco u n t t o be charged by the Federal reserv e
bank f o r cach c la s s o f paper, which s h a ll be fix e d
w ith a view o f accommodating commerce and b u s in e s s ;”
The f o llo w in g statem ent rega rd in g t h is s e c t io n i s made at
page 53 o f th o House Report on th o o r ig in a l A c t:
” * * * The power granted in s u b s e ctio n (d ) to f i x
a r a te o f d iscou n t i s an obvious in c id e n t to the
e x is t e n c e o f the r e se r v e banks, but the power has been
v ested in tho Federal re se rv e board t o review t h is
ra te o f d isc o u n t when f ix e d by tho l o c a l re se rv e bank
at it s d is c r e tio n .
This i s in te rd o d t o p ro v id e a g a in st
the p o s s i b i l i t y that the lo c a l bank might be e s t a b lis h ­
in g a dangerously low r a te o f in t e r e s t , which th e r e ­
serve b oa rd , fa m ilia r as i t would be w ith c r e d it con­
d it io n s throughout the cou n try, would deem b e s t t o r a i s e . ’*
Although th e language o f s e c t io n 14(d ) making the power o f
the F ederal Reserve banks to f i x d iscou n t r a t e s ,




’’ s u b je c t t o review

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and d eterm in a tion o f the F ederal Reserve Board" seems c le a r enough,
the q u esti# n was r a is e d in 1919 as t o -whether the power o f the
Board was not lim ite d t o review in g and approving or d isa p p rov in g
r a te s o f d iscou n t made by th e F ederal Reserve batiks.

At t h is tim e

i t was contended th a t the Board had no power t o i n i t i a t e r a te s or
t o d ir e c t- s p e c i f i c changes and a lt e r a t io n s t h e r e o f.

This q u e stio n

was subm itted t o th e A cting a tto r n e y General by Senator G la ss, a t
th a t tim e S ecreta ry o f the Treasury, and, in an op in ion rendered
on December 9, 1919, A ctin g A ttorn ey General A lex C. King h eld th a t
the Board had the power t o determine r a te s o f d iscou n t and t o r e ­
qu ire such r a te s t o be put in to e f f e c t by the Reserve banks. 32
O pinions o f the A ttorn ey G en eral, page 81.

In h is O pin ion , the

A ctin g A ttorn ey General sta te d the fo llo w in g s
" I t i s q u ite ev id en t that i f the F ed eral Reserve
Board is c o n fin e d t o th e power to review and approve
or disapprove r a te s o f d iscou n t made by the Federal
re se rv e banks, and is w ith out power t o i t s e l f d ir e c t
s p e c i f i c changes, the words ’ and determ ination * are
w h o lly w ith ou t s ig n ific a n c e *
The very s ig n if ic a n c e o f
the word ‘ determ ination* used in such a co n n e c tio n ,
c a r r ie s w ith i t th e r ig h t t o pass upon and t o d ecid e
and f i x , and thus determ ine what should be done. Coup­
lin g t h is w ith the power giv en the F ederal Reserve
Board t o su p ervise the bu sin ess o f each F ederal Reserve
Bank, ta k in g a ls o in t o c o n s id e r a t io n the recommendations
contem plated by th e A d visory C ou n cil t o the Federal Re­
serve Board in rega rd to d iscou n t r a t e s , such power
would be f u t i l e i f such Federal Reserve Board could n o t ,
i f a g reein g t o such recommendations d ir e c t them t o be
c a r r ie d o u t.
I th in k i t is q u ite c le a r t h a t the F ederal
Reserve Board is the u ltim a te a u th o r ity in regard t o
r e d is c o u n t ra te s t o be charged by the sev era l fe d e r a l
re se rv e banks and may p r e s c r ib e such ra tes*




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” The scheme o f th e e n t ir e a c t is t o have F ederal r e ­
serve banks in d if f e r e n t p a rts o f the cou n try so th a t
t h e ir op eration s" may be accommodated to t h e bu sin ess
needs o f each s e c t io n and t o v e s t f i n a l power in th e Fed­
e r a l Keserve .board, so as t o insu re a conduct of‘ bu sin ess
by each bank -which w i l l n ot be d etrim en tal t o the ca rry in g
out o f the e n t ir e 'p la n l Tlie powers o f the F ederal Reserve
Board are t h e r e fo r e to be e x e r c is e d in regard t o each re ­
serve bank as the c o n d itio n s surrounding sa id bank may d i c ­
t a t e , keeping in view the gen era l purpose and p lan o f the
F ederal Reserve Act* Bearing in mind such gen era l p u rp ose,
I am o f the o p in io n th a t the fe d e r a l Reserve Board has th e
r ig h t under th e powers c o n fe r r e d by the Federal Reserve A ct,
t o determ ine what r a te s o f d isco u n t should be charged from
time t o time by a F ederal r e se r v e bank, and under t h e ir
powers o f review and s u p e r v is io n , t o r e q u ir e such r a te s t o
be put in to e f f e c t by such b an k ."
The statem ent o f th e A ctin g A ttorn ey General th a t th e scheme
o f th e e n t ir e F ederal Reserve Act w&s t o v e s t f i n a l power in the Fed­
e r a l Reserve Board over the o p era tion s o f the Reserve banks "s o as t o
in su re a conduct o f b u sin ess by each bank which w i l l not be d etrim en ta l
t o th e ca r r y in g out o f the e n t ir e p la n ” is e s p e c ia lly s i g n i f i c a n t .

Sub­

sequent e x p e r ie n c e , how ever, has dem onstrated th a t the F ed eral Reserve
Board would be p ow erless t o ca rry out a p lan o f c r e d i t c o n t r o l through
th e d eterm in a tion o f the d isco u n t ra te w ith ou t having the c o r r e la t iv e
power t o c o n t r o l the open-market o p era tion s o f the F ederal Reserve
System,
A r e c o g n it io n o f the c lo s e r e la t io n s h ip between open-market
o p era tion s and c o n t r o l o f the d iscou n t ra te appears in th e fo llo w in g
passage from page 52 o f the Report o f the House Banking and Currency
Committee upon the o r ig in a l Federal Reserve Acts
“ I t w i l l have been observed th a t th e t r a n s a c tio n s
a u th orized in s e c t io n 14 ( s e c t io n 13 o f p resen t Federal




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Reserve A ct) were e n t i r e l y o f a nature o r ig in a t in g w ith
member banks and in v o lv in g a r e d isc o u n t o p e r a tio n .
It
i s c l e a r l y n ecessa ry t o extend the p erm itted tr a n s a c tio n s
o f the F ed eral re se rv e 'banks beyond t h is v ery narrow
scope f o r two rea son s:
1. The d e s i r a b i l i t y o f en a b lin g Federal re se rv e banks
t o make“'"th eir ra te o f d iscou n t e f f e c t i v e in th e g en era l
market at those tim es and*under th ose c o n d itio n s w h e n r e ­
d isco u n ts were s la c k and when t h e r e fo r e th ere might have
be'en accum ulation o f funds in th e re se rv e banks w ith ou t
any m otive on th e p a r t o f member banks to ap p ly f o r r e d is ­
counts or perhaps w ith a stron g m otive on t h e i r p a rt not
t o do s o .
2 . The d e s i r a b i l i t y o f opening an o u t le t through which
the funds o f F ed eral re se rv e banks might be p r o f i t a b l y used
a t tim es when i t was sought t o f a c i l i t a t e tr a n s a c tio n s in
f o r e ig n exchange or to re g u la te g o ld movements.”
A s t r ik in g j u d i c i a l r e c o g n it io n o f th e im portance o f openmarket o p era tion s as an instrum ent o f c r e d it c o n t r o l and o f the
c lo s e r e la t io n s h ip between such o p e ra tio n s and th e determ in a tion
o f th e d iscou n t ra te is found in th e case o f R a ich le v . F ed eral
Reserve Bank o f Hew Y ork, 34 Fed. (2 ) 910 (C .C .A . 2nd, 1 9 2 9 ).

In

th a t case th e p l a i n t i f f brought s u it on August 6 , 1928 to e n jo in
the F ed eral R eserve Bank o f New York from (a ) spreading propaganda
con cern in g an a lle g e d money shortage and in c r e a s in g volume o f
c o l l a t e r a l lo a n s ,

(b ) s e t t in g about t o r e s t r i c t the supply o f c r e d it

a v a ila b le fo r investm ent purposes by engaging in open-market tra n ­
s a c tio n s through th e sale o f i t s s e c u r i t i e s , ( c ) r a is in g th e r e d is ­
count r a te f o r i t s member banks in ord er t o reduce the volume o f
s e c u r it y lo a n s , and (d ) c o e r c in g member banks to c a l l c o l l a t e r a l
loan s by d e c lin in g t * r e d is c o u n t e l i g i b l e com mercial paper f o r such'
member banks.




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The United S ta tes D i s t r i c t Court d ism issed th e b i l l f o r
la c k o f e q u ity and the C ir c u it Court o f Appeals su sta in ed the
a c t io n o f the low er c o u r t .

Although the d e c is io n o f the C ir c u it

Court o f Appeals was based upon the f a c t th a t the Federal Reserve
Board, which was not jo in e d in the b i l l , was an in d isp e n sa b le
p a rty d efen da n t, th e co u rt a ls 6 rendered a d e c is io n upon the m erits
a f th e c a s e .

In i t s o p in io n , the co u rt emphasized the in terd ep en ­

dence o f the d iscou n t r a te and open-market o p e ra tio n s in the f o llo w ­
ing languages
'’ The fo r e g o in g p r o v is io n s enable the F ederal Re­
serve Bsnks, w ith out w a itin g fo r a p p lic a t io n s from
t h e ir member banks f o r loan s or r e d is c o u n t s , to ad*
ju s t th e gen era l c r e d it s it u a t io n by purchasing and
s e l l i n g in the open market the c la s s o f s e c u r it ie s
th a t th e y are p erm itted to d eal in . The power ’ t o
e s t a b lis h from tim e t o tim e, s u b je c t t o review and
d eterm in a tion o f the F ed eral Reserve Board, r a te s o f
d isco u n t t o be charged by the F ederal Reserve B ank,’
appears in the a c t (12 USCA § 357) w ith the open
market pow ers. The two powers are c o r r e la t iv e and
enable the F ed eral Reserve Banks t o make t h e ir r e d is ­
count ra te s e f f e c t i v e »n~
' ....... '
" ''
r
The c o u r t a ls o passed upon the c o n s t i t u t i o n a l i t y o f the gran t
o f power t o the F ederal Reserve System to c o n t r o l the d isco u n t ra te
and open-market op era tion s*
"W hile i t is a lle g e d in the b i l l th a t th e r e d is ­
count ra te ’ has been a r b i t r a r i l y and unreasonably
r a i s e d , ’ i t was f o r the d efen dant, s u b je c t t o the su­
p e r v is io n o f the Federal Reserve Board, to determine
what would be a rea son a b le r e d is c o u n t .
I t is n ot con­
tended th a t the p r o v is io n f o r f i x i n g r a te s o f d iscou n t
is u n c o n s t it u t io n a l, nor would i t seem even rea son a b le
t * argue th a t i t i s , a f t e r such d e c is io n s as F ir s t
N ation al Bank v . F ellow s ex r e l , Union Trust Cot , 244
U .S . 416, 37 S, C t. 734, 61 L. Ed. 1233, L .R .A . 1918C,




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283, Ann. Cas. 1918E, 1169, and W e s t fa ll v . United
S ta te s , 274- U.S. 256, 47 S . C t .6 2 9 , 71 L.Ed. 1036 as
w e ll as the Legal Tender Cases, 110 U.S. 421, 4 S,C t
122, 28 L. Ed. 204, Farm ers’ and M echanics’ N ational
Bank v , D earing, 91 U .S. 29, 23 L. Ed. 196, and
MoCullooh v , Maryland, 4 Wheat, 316, 4 L.Ed, 5 7 9 .t!
In d is c u s s in g whether the F ederal Reserve Board was an
in d is p e n sa b le p a rty to the l i t i g a t i o n , the cou rt s a id :
" I t i s s p e c i f i c a l l y empowered to r e g u la te open
market t r a n s a c tio n s , to review and determ ine r a t e s o f
d isco u n t and to make r e p o r ts as t o c o n d itio n s in the
Federal Reserve System.
In such c i r c um stances, the
Bank i s , as to the m atters com plained o f h e re , a gov­
ernmental agency under the d ir e c t io n o f the f e d e r a l
Reserve Board. I f the p l a i n t i f f p r e v a ile d in h is con­
t e n t io n the "Bank would be en jo in e d from f i x i n g a d i s ­
count r a te which the Board had presu m p tively d ir e c t e d .
Such a s it u a t io n under fa m ilia r p r in c ip le s renders the
F ed eral Reserve Board an in d is p e n sa b le p a rty t o the
s u i t . A lc o h o l Warehouse Corp# v , C a n fie ld , 11 Fed,
(2d) 214.
The above o p in io n con ta in s an a ccu ra te a n a ly s is o f the r e l a ­
t io n s h ip between the d isco u n t r a te and open-market o p e ra tio n s and
e s ta b lis h e s c le a r ly th a t the c o n t r o l o f open-market o p e ra tio n s f a l l s
w ith in th e c la s s o f F ederal Reserve p o l i c i e s which a f f e c t the e c o ­
nomic l i f e

o f the e n t ir e n a tio n .

I t i s obviou s t h e r e fo r e th at sin ce

the u n d erlyin g p r in c ip le o f the o r ig in a l F ederal Reserve Act was to
p la c e the d eterm in a tion o f n a tio n a l p o l i c i e s in the F ederal Reserve
Board, a Government body having a n a tio n a l v ie w p o in t, and th a t s in ce
the c o n t r o l o f open-market o p e ra tio n s is such a m atter o f n a tio n a l
im portance a f f e c t i n g the econom ic l i f e o f the whole n a tio n , th is
power should be v e s te d in the Federal Reserve Board ju s t as the power
t o determ ine the d isco u n t ra te i s v ested in the Board




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Open-market op era tion s o f the F ederal Reserve System, as
th ey are known to d a y , date from the year 1922.

P rior to th at

tim e, p r a c t i c a l l y a l l o f the re so u rce s o f the System had been u t i l ­
iz e d in su p portin g the Government’ s bond is s u e s f o r the purpose o f
ca rry in g on the w ar.

This support was giv en by the F ed eral Re­

serve banks by d is c o u n tin g paper secured by Government o b lig a t io n s *
The liq u id a t io n o f 1920 and 1921 caused a la r g e s c a le rep ay­
ment by member banks o f t h e ir d iscou n ted paper and r e s u lte d in a
sharp d e c lin e in the earning a s s e ts o f th e Federal Reserve banks.
However, th ere was in the market a la r g e amount o f Government s e c u r ­
i t i e s and in order t o o b ta in enough earn in g a s s e ts to meet t h e ir
expenses the F ederal Reserve banks began t o purchase th ese s e c u r i t i e s .
B efore many weeks had elap sed i t was d is c o v e re d th a t the purchases o f
Government o b lig a t io n s by the Federal R eserve banks was having an
u n foreseen but none the le s s profound in flu e n c e upon the volume and
cost o f c r e d it.
N a tu r a lly , most o f the purchases were made in New York C ity
which was the p r in c ip a l market f o t Government s e c u r i t i e s .

I t was

o b serv ed , however, th at the s e l l e r s o f the bonds would d e p o s it the
amount paid t h e r e fo r in New York banks and the banks would put the
money t o t h e ir account at th e New York F ederal Reserve Bank and
would use i t to e x tin g u is h t h e ir ind ebted n ess t o such Reserve bank.
The payment o f the member bank’ s indebtedness to the Reserve bank
n a t u r a lly r e s u lte d in a d ecrea se o f th e earn in g a s s e ts o f such Re­
serve bank so th a t the purchase o f Government s e c u r i t i e s by a F ederal




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Reserve bank in the i n t e r io r in crea sed the earning a s s e ts o f
such Federal Reserve bank at th e expense o f the F ederal Reserve
Bank ©f New York.

I t was a ls o observed th a t th ese u n coord in ated

purchases were u p s e ttin g the Government bond market and t h is was,
• f co u r s e , d is tu r b in g t o th e Treasury.
As a r e s u lt o f th ese o b s e rv a tio n s i t was d ecid ed at a
co n fe re n ce o f Governors o f the F ederal Reserve banks held in May,
1922* th a t the open-market o p e ra tio n s o f th e F ederal Reserve banks
should be c o o rd in a te d and, a c c o r d in g ly , a com mittee o f f i v e Gover­
nors was appointed t o perform t h is fu n c t io n .
This committee fu n c tio n e d f o r about a year and during th a t
tim e i t was c l e a r l y observed th a t purchases o f Government s e c u r i­
t i e s r e s u lte d in decreased d iscou n ts and in no in cre a s e in the
t o t a l darning a s s e ts o f the Federal Reserve banks taken c o l l e c t i v e l y .
As a consequence, the C onference o f Governors o f the Federal Reserve
banks d ecid ed th a t ” investm ent p o l i c y should g iv e minor co n s id e r a ­
t i o n t o th e q u e s tio n o f earnings and con sta n t c o n s id e r a t io n t o the
e f f e c t s which open-market o p e r a tio n s have upon the c o n d it io n and the
cou rse o f the money market and the volume o f c r e d i t ” .
R e a liz in g th a t open-market o p e ra tio n s on a System b a s is would
d ep riv e th e Federal Reserve Board o f th e power o f e f f e c t i v e c r e d it
c o n t r o l through the d eterm in a tion o f the d iscou n t r a t e , the Board in
1923 r e co g n iz e d the open-market committee which had been formed at
the G overnors’ C onference in 1922 and announced th a t from th a t time
on open-market o p e r a tio n s should be engaged in o n ly w ith th e approval




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•df the Board.

In 1930 the Board announced th a t as a r e s u lt o f

a meeting attended by r e p r e s e n ta tiv e s o f the tw elve Federal Re­
serve banks, th e number o f members on the committee in charge o f
open-market o p e ra tio n s was in crea sed from 5 t o 12 so as t o in clu d e
r e p r e s e n ta tiv e s o f a l l the Reserve banks.

By en a ctin g the Banking

A ct o f 1933, C on gress, f o r the f i r s t tim e, gave the open-market
committee an o f f i c i a l le g a l s ta tu s and a ffir m e d the p r in c ip le th a t
the open-market p o l i c i e s o f the System should be s u b je c t t© the
approval o f the Federal Reserve Board by th e fo llo w in g p r o v is io n :
” (b )
No Federal reserv e bank s h a ll engage in openmarket o p e r a tio n s under s e c t io n 14 o f t h is A ct excep t
in accordance w ith r e g u la tio n s adopted by th e Federal
Reserve Board. The Board s h a ll c o n s id e r , adopt, and
transm it t o the committee and t o th e s e v e ra l Federal
re se rv e banks r e g u la tio n s r e la t in g t o th e open-market
tr a n s a c tio n s o f such banks and the r e la t io n s o f the
Federal Reserve System w ith fo r e ig n c e n t r a l or oth er
f o r e ig n b a n k s.1
’
The p r o v is io n o f the above s u b s e ctio n th a t no Federal Re­
serve bank s h a ll engage in open-market o p e ra tio n s ex cep t in a c c o r d ­
ance w ith r e g u la tio n s adopted by the Board was rendered i n e f f e c t i v e ,
however, by the enactment o f s u b s e ctio n (d ) o f s e c t io n 12A which
reads as f o llo w s :
” (d )
I f any Federal re se rv e bank s h a ll d ecid e not t o
p a r t ic ip a t e in open-market o p e ra tio n s recommended and
approved as p rov id ed in paragraph (b ) h e r e o f, i t s h a ll
f i l e w ith the chairman o f th e com mittee w ith in t h i r t y
days a n o t ic e o f i t s d e c is io n , and transm it a copy t h e r e o f
t o the Federal Reserve B o a rd .”
Under the p r o v is io n s o f s e c t io n 205 o f the proposed b i l l ,
s e c t io n 12A o f the Federal Reserve Act would be c l a r i f i e d and r e v is e d



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so th a t open-market p o l i c i e s proposed by a committee r e p re s e n t­
in g the Reserve banks, or in i t i a t e d by the Board a f t e r c o n s u lta ­
t i o n w ith the com m ittee, would be bin d in g on a l l F ederal Reserve
banks•
R epresenta t i o n Of Feder a l Reserve Banks on
Board Cont r o l l i ng Open -Market O perations
The q u e s tio n has a r is e n as to whether the f i n a l a u th o r ity
over open-market op era tion s o f the System should be v e ste d s o l e l y
in the Federal Reserve Board as provided in the b i l l which passed
the House or whether such a u th o r ity should be v ested in a group
composed o f members o f the Board and r e p r e s e n ta tiv e s o f the Federal
Reserve banks as proposed in the o r ig in a l b i l l and as advocated by
the American Bankers* A s s o c ia t io n .

I t must be r e a liz e d th a t such a

p ro p o s a l is in e f f e c t the c r e a t io n o f another Board in which would
be v e s te d f i n a l a u th o r ity over one o f the most im portant instrum ents
o f c r e d it c o n t r o l.

This w ould, o f co u rse , r e s u lt in a d i f f u s i o n

r e s p o n s i b i l i t y and would c r e a te the u n d e sira b le p o s s i b i l i t y o f a
c o n f l i c t between the group en tru sted w ith c o n t r o l over open-market
o p era tion s and the Federal R eserve Board w hich would r e t a in power
t o determ ine the d is c o u n t ra te and t o e s t a b l i s h re s e r v e requ irem en ts.
Such a c o n f l i c t might a r is e where a m a jo r ity o f the members o f the
Board thought th a t one course o f a c t io n should be taken and a m ajor­
i t y o f the group v ested vdth c o n t r o l o f open-market op era tion s
thought a d i f f e r e n t cou rse should be pursued.

In such a c a s e , two

b od ies w ith power t o make f i n a l d e c is io n s on d i f f e r e n t phases o f




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the same problem would be w orking a t cro ss purposes w ith each o t h e r .
That t h is p ro p o s a l f o r r e p re s e n ta tio n o f p r iv a t e in t e r e s t s
upon th e Board charged w ith r e s p o n s i b i l i t y f o r the form u la tion o f
n a tio n a l monetary p o l i c i e s

is con tra ry t o th e u n d erlyin g p r in c ip le s

o f the Federal Reserve Act and i s a r e v iv a l o f an id ea which was
r e je c t e d by P resid en t W ilson and by Congress when th e o r ig in a l Act
was under, c o n s id e r a tio n is shown by the f o llo w in g .
In h is book "An Adventure in C on stru ctive F in ance” Senator
Glass r e la t e s th a t the bankers made a d esp erate f i g h t to have
in s e r te d in the o r ig in a l Federal Reserve A ct a p r o v is io n g iv in g
them the r ig h t t o have r e p r e s e n ta tiv e s s e le c t e d or at le a s t nominated
by them in clu d ed in the membership o f the Federal Reserve Board, In
the fo llo w in g passage from pages 112 to 114 o f h is book Senator Glass
t e l l s how th is q u estion arose and a ls o shows th a t at the o u ts e t he
was d e f i n i t e l y committed to g iv in g the banks r e p r e s e n ta tio n on the
Board:
” I t was a t t h is po^nt that the P resid en t had us come
to the White House fo r a con feren ce con cern in g th a t fe a tu r e
o f the b i l l th a t gave th e banks m in ority r e p re s e n ta tio n on
the F ederal Reserve Board. I was very d e f i n i t e l y committed
to g iv in g the banks some v o i c e . Senator Owen, o f the Sen­
ate com m ittee, had sid ed w ith Mr, Bryan in o p p o s it io n . At
the White House con feren ce McAdoo agreed at f i r s t w ith me;
bu t la t e r in the evening be proposed a compromise. The
P resid en t d ecid ed a g a in st banking r e p r e s e n ta tio n . This was
one o f the c r u c ia l q u e s tio n s the P resid en t had to determ ine.
I t was ev id en t i t might in v o lv e the f a ilu r e o f l e g i s l a t i o n
by e m b itte rin g the ban k ers' should they be e n t ir e ly e x clu d ed .
I f they should be in clu d e d , Bryan and h is fo llo w in g might
r e v o lt.
I had urged the ’ e s s e n t ia l in ju s t i c e and p o l i t i c a l
in e x p e d ie n c y 1 o f denying the banks m in ority r e p r e s e n ta tio n .
The P resid en t was not both ered about the p o l i t i c a l phase;




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- 17 but he was w i l l i n g t o d is c u s s the j u s t i c e o f the th in g .
So convin ced was I that the P resid en t was wrong in h is
c o n c lu s io n th a t I sent him th is n o te ; which is reproduced
here t o in d ic a t e that the P resid en t was not e a s i l y p er­
suaded nor the chairman o f the committee e n t ir e ly com­
p la is a n t i
” 'A t the r is k o f b ein g regarded p e r tin a c io u s I am
goin g t o ask i f you w i l l not c o n s id e r the a d v is a b ilit y
o f m od ify in g somewhat your view o f bank r e p re s e n ta tio n
on the proposed F ederal Reserve Board. The m atter has
giveli me much con cern , and more than ever I am con vin ced
th a t i t w i l l be a grave m istake to a lt e r so r a d ic a lly
the fe a tu r e o f th e b i l l in d ic a t e d . Last n i t e , when I
came back to my h o t e l , I found Mr. B u lklev w a itin g , and
he sa t w ith me u n t il past one o ’ c lo c k t h is m orning.
Knowing th a t he was so e a r n e s tly f o r a government note
issu e and fo r government c o n t r o l, I imagined he would
be d e lig h t e d w ith the suggested a lt e r a t io n .
I t o ld him
o f the change w ith ou t f i r s t in d ic a t in g my own view ; and,
much to my astonishm ent and g r a t i f i c a t i o n , he in s t a n t ly
and v ig o r o u s ly p r o te s t e d , saying he had regarded the
ex ten t to which we had a lrea d y put the government in
c o n t r o l, to g e th e r w ith the tremendous power o f the Board,
as the r e a l weakness o f the b i l l .
He a ls o said we cou ld
not escape the charge o f exp osin g the banking bu sin ess
o f the cou n try to p o l i t i c a l c o n t r o l . As in d ic a te d to you
la s t n ig h t , Mr. B u lk ley is a stron g man o f the committee
w ith whom we must reck on ; hence h is view o f th is proposed
a lt e r a t io n f u l l y confirm s my b e l i e f th a t i t would prove
an alm ost ir r e t r ie v a b le m istake to lea v e the banks w ithout
r e p r e s e n ta tio n on the c e n t r a l board . You w i l l note th at
the b i l l r e q u ir e s the th ree members s e le c t e d by the banks
t o sever a l l bank con n ection s b e fo r e q u a lify in g . Might i t
not be w e ll at le a s t to take Mr. McAdoo’ s su g g estion and
have the P resid en t s e le c t th ese men from a l i s t proposed
by the banks? With high esteem , e t c . ’ . ”
Im m ediately fo llo w in g the q u o ta tio n o f h is l e t t e r t o P resid en t
W ilson , Senator G lass goes on t o s ta te th a t he soon was won over t o
the P r e s id e n t ’ s view o f the m a tter.

The manner in which the p rop osa l

fo r banker r e p r e s e n ta tio n on the Federal Reserve Board was d efea ted
by P resid en t W ilson and the c o n c lu s iv e reasons fo r h is p o s it io n are




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- 18 shown in the f o llo w in g passage from pages 115 and 116 o f Senator
G la s s 1 book:
"The P resid en t was adamant; and, i f th ere was ever
a la p s e , I soon was to r e v iv e the c o n v ic t io n th a t Mr.
W ilson knew more about th ese m atters than I d id . As
a n t ic ip a t e d , when th e b i l l was in trod u ced in C ongress,
bankers r a is e d an uproar about t h is p r o v is io n . With
s c a r c e ly suppressed s a t i s f a c t i o n , I headed a d e le g a tio n
o f them t o the White House t o con vin ce the P resid en t he
was"wrong. Forgan and Wade, Sol W exler and P e r r in , Howe
and oth er members o f the Currency Commission o f the Amer­
ic a n Bankers A s s o c ia tio n c # n s t itu te d th e p a r ty .
The
f i r s t tw o, perem ptory and a r b it r a r y , used t o having t h e ir
own m y , d id n ot mince m a tters. They e v id e n tly were not
awed by ’ t i t l e d con sequ en ce’ , f o r th ey spoke w ith f o r c e
and even b it t e r n e s s *
S ol W exler and P e rrin were suave
and c o n c i l i a t o r y .
The P resid en t was cou rteou s and con ­
ta in e d ,
These g rea t ban kers, a r b it e r s f o r yea rs o f the
c o u n tr y ’ s c r e d i t s , were grouped about the P r e s id e n t’ s
desk in the E xecu tive o f f i c e a d jo in in g the Cabinet room.
I sa t o u ts id e th e c i r c l e , having a lre a d y v o ic e d my own
d is s e n t from th e P r e s id e n t ’ s a t t it u d e . P resid en t W ilson
fa c e d th e group a cro ss the desk; and as th ose men drove
home what seemed t o me good reason a f t e r good reason f o r
banker r e p r e s e n ta tio n pn the c e n tr a l b oard , I a c t u a lly
e x p erien ced a sense o f r e g r e t th a t I had a p art in sub­
je c t i n g Mr. W ilson t o such an f r d e a l . When th ey had
ended t h e ir arguments Mr. W ilson , tu rn in g more p a r t ic u ­
l a r l y t o Forgan and Wade, sa id q u ie t ly :
’ W ill one o f
you gentlemen t e l l me in what c i v i l i z e d cou n try o f the
e a rth th ere are im portant government boards o f c o n t r o l
on w hich p r iv a te in t e r e s t s are r e p r e s e n te d ? ’ There was
p a in fu l s ile n c e f o r the lo n g e s t s in g le moment I ever
sp en t; and b e fo r e i t was broken Mr. W ilson fu r th e r in ­
q u ir e d : ’ Which o f you gentlem en th in k s the r a ilr o a d s
should s e l e c t members o f th e I n t e r s t a t e Commerce Com­
m is s io n ? ’ There cou ld be no co n v in cin g r e p ly t o e it h e r
q u e s tio n , so th e d is c u s s io n turned t o oth er p o in ts o f
th e cu rren cy b i l l ; and, n otw ith stan d in g a desp erate
e f f o r t was made in the Senate t o give the banks minor­
i t y r e p r e s e n ta tio n on the re se rv e b o a rd , the p r o p o s it io n
d id not p r e v a i l , ”
P resid en t W ilson again con firm ed t h is p o s it io n in h is message
t o the j o i n t s e s s io n o f Congress on January 23, 1913, in the fo llo w in g
language:




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"The c o n t r o l o f the system o f banking and o f is su e
which our new laws are t o s e t up must be p u b lic , not
p r iv a t e ; must be v ested in the Government i t s e l f , so
th a t the banks may be the instru m en ts, not the m a tters,
o f b u sin ess and o f in d iv id u a l e n te r p r is e and i n i t i a t i v e . ”
That the stand taken by P resid en t W ilson a g a in st r e p re s e n ta ­
t i o n o f p r iv a te in t e r e s t s on the Federal Reserve Board was adopted
by Congress i s shown by the fo llo w in g passage from page 20 o f the
Statement o f View s, accompanying the Senate R eport on the o r ig in a l
^Federal Reserve A ct (R eport 133, Part 2)?
"Many o f the b ig banks q u ite u rg e n tly in s is t e d th a t
the bankers should have r e p r e s e n ta tio n upon the F ederal
re se rv e board . This was denied f o r the obvious reason
th a t the fu n c t io n o f the Federal re se rv e board in super­
v is in g the banking system i s a governmental fu n c t io n in
which p r iv a te persons or p r iv a te in t e r e s t s have no r ig h t
t o r e p r e s e n ta tio n excep t through the Government i t s e l f .
The preced en ts o f a l l c i v i l i z e d governments is a g a in s t
such a c o n t e n t io n .”
The p resen t p ro p o sa l t o v e s t c o n t r o l over open-market op ^ rr

a tio n s in a j o i n t board c o n s is t in g o f members o f the F ederal Reserve
Board and r e p r e s e n ta tiv e s o f the F ederal Reserve banks s e le c t e d by
d i r e c t o r s , tw o -th ird s o f whom are e le c t e d by the member banks, is
m erely an e f f o r t t o r e v iv e the p r in c ip le urged by Bankers Forgan,
Wade, W exler, P e r r in , Howe, and o th e r s , which was v ig o r o u s ly and con ­
v in c in g ly denied and d e fe a te d by P resid en t W ilson .

G uiding P r in c ip le t o be Follow ed by F ederal Reserve
Board in Determ ining Open-Markot P o l i c i e s
The Banking Act o f 1935 as o r ig in a lly in trod u ced was c r i t i c i z e d
on the ground th a t the Federal Reserve Board was g iv en an u n lim ited d i s ­
c r e t io n as t o the purposes o f th e open-market o p e ra tio n s o f the System.



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However, t h is c r i t i c i s m was elim in a ted in the House o f Repre­
se n ta tiv e s "by in s e r t in g in s e c t io n 204(b) o f the b i l l the f o llo w ­
in g statem ent o f o b je c t i v e :
" I t s h a ll be the duty o f the Federal Reserve Board
to e x e r c is e such powers as i t p o sse sse s in such manner
as t o promote c o n d itio n s conducive to b u sin ess s t a b i l i t y
and to m itig a te by i t s in flu e n c e u n s t a b iliz in g flu c t u a ­
t io n s in th e gen era l le v a l o f p r o d u ctio n , tr a d e , p r ic e s ,
and employment, so fa r as may be p o s s ib le w ith in the
scope o f monetary a c t io n and c r e d i t a d m in is tr a t io n ,"
That such a mandate is in harmony o f the purposes o f the
^ o r ig in a l F ederal Reserve A ct is shown by the fo llo w in g q u ota tion
from page 7 o f the Statement o f Views accorpanying the r e p o rt o f
the Senate Committee on Banking and Currency (R eport 133, p a rt 2 ) :




"The c h ie f purposes o f th e banking and currency b i l l
is t o g iv e s t a b i l i t y t o the commerce and in d u stry o f the
United S ta te s , p reven t f in a n c ia l p an ics or f in a n c ia l
s t r in g e n c ie s ; make a v a ila b le e f f e c t i v e commercial c r e d it
f o r in d iv id u a ls engaged in m anufacturing, in commerce,
in fin a n c e , and in b u sin ess t o t v:e ex te n t o f t h e ir ju s t
d e s e r t s ; put an end t o the pyram iding o f the bank r e se rv e s
o f the country and the use o f such re se r v e s f o r gambling
purposes on the s to c k exch a n ge."