The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
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F1DIRAL Of®N MARKET CCMITTSI
HELD AT WASHINGTON, D. <3*
FEBRUAFY 26^1936.
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The meeting was called to order at 10:05 a. m., there bei^g present
Governor Harrison, chairman, 8nd
Governors Young, Fleming, Seay, Sohaller, and
Deputy Governor?Burgess, secretary.
Tfre report of operations was distributed and after discussion was
accepted and ordered filed.
There followed a discussion of maturities of holdings in the System
Account is March and April, and the effect of these on the distribution of
maturities in the account and on earnings*
was also discussion of the
facts that the provisions of the Banking Act of 1935 for a new open market com
mittee become effective on March first, but that it would probably be impossible
to organize the committee for some days thereafter, and that in the meantime
some action with respect to the Treasury offering to be announced on March 2
should be taken promptly by the Reserve System*^ Governor Harrison said he had
discussed the matter with Governor levies and that they had agreed that it would
be desirable for the committee to continue to act until the organization of the
new committee*
The committee were unanimously of the opinion that if, in connection
with March financing, the Treasury offers securities in exchange for Treasury
notes maturing April 15, the $132,386,000 of these notes in System Account
should be sold in the market and replaced to the extent of about $50,000,000
with Treasury bonds, and the balance with Treasury notes or bills.
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understood, however, that in view of prospective changes in the organization
of the open market committee this proposal would be submitted to the Board of
Governors of the Federal Reserve System and carried through only if they were
in agreement#
There followed a brief discussion of the Treasury financing program*
At 10:55 the meeting adjourned to the Treasury.
The meeting reconvened at the Treasury at 11 o'clock, there being
present in addition to thf1 committee
Secretary Morgenthau, Chairman Eccles, Dr. Viner, and
Messrs. Bell, Haas, and Upham*
There ensued an informal discussion of various proposals as to
Treasury March financing*
The meeting adjourned at 12:15 p. m*
W. Randolph Burgess,
Secretary*
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f
MINUTES OF THE MEETING OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
JANUARY- SI* 1936
The meeting was called to order at 10:45 a. m.
The following were
present:
Governor Harrison, chairman, Governors-Young, Norris, Fleming,
Seay, Newton, Sehfclldr* Martin, Geery, Hamilton, McKinney,
and palkinsj and Deputy Governor Burgess, secretary,.
Governor Harrison indicated that the meeting was held at its own call
in accordance with the unanimous vote of the meeting on December 17 to 18.
Governor Harrison said he understood that due to the imminence of a change in the
membership in the Board of Governors Of the Federal Reserve System the present
Board was not in a favorable position aow to carry through any action recanmended,
but that fact he said did not absolve t.h& committee from considering and express
ing its views upon important
questions of policy.
These views would at least
be available to the new Board as soon as organized even if the present Board
should take no action.
On motion the secretary’s report of operations and the preliminary
memorandum were accepted and ordered filed, and the actions of the executive
committee since the last meeting were ratified.
The secretary read a letter fjom the Board of Governors of January 20
with respect to one of the resolutions adopted by the committee at its meeting on
December 17 and 18.
There ensued a general discussion with respect to the points of view
which had been expressed, both inside and outside the Reserve System concerning
various proposals for dealing with excess reserves.
In the course of this dis~
cussion it was brought out that the situation had been somewhat altered by the new
budgetary proposals, and the effect on the budget of Supreme Court action with
respect to the A. A. A. and the possible passage of a bonus bill •
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During this discussion Governor Young left the meeting.
The committee discussed various methods by which, if it was thought
advisable, the relationship between Federal reserve policy and fiscal policy might
be recorded and possibly presented to the Administration.
f~There was also a discussion of the question raised at the meeting of the
executive committee on January 3, whether an increase in Treasury balances in the
Reserve banks should be used as a method of reducing the volume of excess reserves.
There was general agreement that this was not an effective and suitable method of
dealing with excess reserves since its results could only be temporary and would
be too limited in amount, and its use would, involve complications because of
possible conflicts of interest between the Treasury and the Reserve System. \
There was further discussipn of the relation of the budget to Federal
Reserve action during the course of which Governor Harrison read paragraphs from
the President's budget message of December 89 and his Atlanta speech of November
29, both of which appeared to justify the impression generally held by the com
mittee at its last meeting, that a tapering off of the deficit was probable.
Governor Norris presented for discussion, and to ascertain the general
sense of the meeting a tentative draft of a resolution as follows:
RESOLVED, that until further action by this Committee,
or by the new Open Market Committee which will succeed it on
March 1st, the System follow the policy of investing the
proceeds of maturing Treasury Bills in Treasury Notes, having
a maturity of three to five years, to such an extent as will
yield approximately the same return in interest.
Further, that a public statement be made that this policy
will effect a gradual reduction in the System’s total holdings
of Government securities, but that this reduction will be
entirely in Treasury Bills, and that there will be an actual
increase in the holdings of longer-term securities. \
Cln discussing this resolution, Governor Norris stated that a primary
consideration should be the proper administration of the Federal Reserve System*
The System to offset current maturities in the System account was now buying
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Treasury Bills it did not want at practically no yield.
Under the resolution it
would be necessary to purchase about one dollar of notes for every ten dollars of
bills which were allowed to mature.
In this way the longer-term government
market would be supported, and the action would probably not influence rates beyond
the Treasury bill market.
Governor Norris indicated that he would not want to
offer the resolution formally until after it had been ascertained that the
Treasury Department would interpose no objection to the procedure indicated.]
In the course of a general discussion Governor Seay pointed out that
Governor Norris's proposal would go a very short distance in diminishing excess
reserves.
Governor Harrison raised the question whether the suggested resolution
would not be confusing when considered in relation to the December recommendations,
as the two resolutions might appear to be contradictory or to represent a change
of views.
Governor Calkins indicated the belief that any reduction in the holdings
of government securities by the Reserve System would have large effects, in view
of probable increased Government borrowing, and the risk involved in action of
this sort would be greater than in December.
Governor Martin then offered the following resolution:
RESOLVED that certainty of recovery has not developed to such
a point that action by this committee might not be detrimental.
Therefore no action is the proper action at the present time,
but that the situation should be again reviewed about the middle
of February.
In the course of the discussion of this resolution it was pointed out
that it would not be consistent with the December resolution.
The resolution was
not seconded.
There was then an informal discussion of proposals for a resolution which
should have the effect of reaffirming the resolution adopted at the meeting in
December, and Governor Calkins indicated he was prepared to offer such a resolution
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subject to detailed wording.
A rough draft resolution was read by the Chairman.
The meeting adjourned at 12:45 to reconvene at 2 p. m* with the under
standing that in the meantime the proposed resolution would be put into more
finished form.
.
The meeting reconvened at 2:00 p. m. with the same attendance except
that Governor Young and Governor Seay entered the meeting shortly after it had
convened.
The following draft resolution was then read:
(This draft includes a few later minor changes)
The Committee has considered the preliminary memorandum
and has reviewed the credit situation.
It is the sense of
the Committee that, so far as business, credit, and banking
conditions are concerned, there is nothing in the present
situation to prompt the Committee to change its views as ex
pressed in its resolution adopted on December 18, which the
Committee respectfully renews.
I
The Committee recognizes that the risks of action are
I somewhat increased by the present budgetary situation, but it
recognizes also that the longer action is delayed, the greater
* are the dangers resulting from the combination of inordinately
large excess reserves and an unbalanced budgetary position, and
the greater will be the difficulty of taking remedial action.
Viewing the situation as a whole, the Committee strongly
believes that action looking toward a substantial reduction in
excess reserves should be taken as soon as this may be feasible,
in the judgment of the Board of Governors of the Federal Reserve
System, having in mind the advantages of a coordinated program
of recovery.
I
An informal expression of view indicated that a majority of those
present were favorable to the resolution.
After discussion it was agreed that authority voted to the executive
committee of the Federal Open Market Committee at three previous meetings to make
shifts of maturities in the System open market account, should be continued as
necessary in the proper administration of the account to enable the executive
committee to replace maturities from time to time and to make shifts in maturities
to meet changing market conditions.
With respect to the amount of authority which
the committee should have in shifting from shorter maturities to bonds, it was
agreed that some limited authority was advisable in order to deal with any market
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situation that might arise.
It was therefore unanimously
VOTED that superseding previous authorizations, the executive
committee be authorized to make shifts between maturities of
government securities up to $300,000,000, provided that the
amount of securities maturing within two years be maintained
at not less than $1,000,000,000 and that the amount of bonds
be not over ^300,000,000.
It was also agreed that authority should be given to the executive
committee to buy or sell (which would include authority to allow maturities to
run off) securities for System account within limits as to amount, in order that
the committee might be in a position to act promptly if circumstances not now
foreseen should make action appear desirable before a further meeting of the full
committee.
It was therefore unanimously
VOTED that the executive committee be authorized to buy or
sell up to #250,000,000 of government securities, subject to
telegraphic approval of a majority of the Federal Open Market
Committee and the aporoval of the Board of Governors of the
Federal Beserve System.
These motions would continue in effect similar authority voted at the
meeting of the committee on December 17-18, 1935.
The question of another meeting of the committee was discussed, and in
view of the uncertainties with respect to System organization it was agreed that
adjournment should be sine die.
At 2:35 Governor Eccles entered the meeting.
Governor Harrison showed him the resolution which had been proposed, and
Governor Eccles stated that he saw no reason why the resolution should not be voted
on and indicated that the question of dealing with excess reserves was probably more
a problem for the future when the new Board will hove been organized.
Governor Harrison stated the view that if it were felt that banking and
credit conditions indicated the need for System action, but that this action was
hindered by other elements in the government program, it.was at least the duty of
the System to present the case to the Administration in some appropriate manner.
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situation that might arise.
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It was therefore unanimously
VOTFD that superseding previous authorizations, the executive
committee Vbe authorized to make shifts between maturities of
government^ securities up to $300,000,000, provided that the
amount of securities maturing within two years be maintained
at not lesa than $1,000,000,000 and that the amount of bonds
be not over\$300,000f000.
It was also Agreed that authority should be given to the executive
committee to buy or sell\which would include authority to allow maturities to
run off) securities for Sys\em account within limits as to amount, in order that
the committee might be in a tosition to act proliiptly if circumstances not now .
foreseen should make action aippear desirable before a further meeting of the full
committee.
It was therefore!unanimously
VOTED that the executive committee "be authorized to buy or
sell up to |250,000,000 of government securities, subject to
telegraphic approval a\f a majority of the Federal Open Market
Committee and the approval of the Board of Governors of the
Federal Reserve System.
These motions would contiVue in effect similar authority voted at the
meeting of the committee on December ^17-18, 1935.
The question of another meeting of the committee was discussed, and in
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view of the uncertainties with respect \o System organization it was agreed that
adjournment should be sine die.
At 2:35 Governor Eccles entered Uhe meeting.
Governor Harrison showed him the Vesolution which had been proposed,
and Governor Eccles stated that he saw no objection to it, but indicated that the
question of dealing with excess reserves was probably more a problem for the
future when the new Board will have been organized.
Governor Harrison stated the view tham if it were felt that banking and
credit conditions indicated the need for System action, but that this action was
hindered by other elements in the government progrebi, it was at least the duty of
the System to present the case to the Administration\in some appropriate manner.
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Governor Harrison inquired about the results of the questionnaire
relative to excess reserves which had been sent by the Board of Governors to each
Federal Reserve Bank on December 19 and Governor Eccles indicated that he would
send copies of the compilation of the replies to the members of the committee.
Governor Eccles left the meeting at this point.
Governor Harrison explained that the New York bank had forwarded to the
Federal Reserve Board a study of the investment position of member banks in the
Second District with the suggestion that the same sort of analysis might be
interesting on a countrywide basis.
Governor Eccles had suggested that copies
of the study might well be distributed to the other Reserve Banks.
As those
present indicated an interest in the study, copies of the memorandum embodying it
were then distributed.
A copy of this memorandum is attached to these minutes.
The resolution on page 4 was then passed by the following vote:
Yes
Governors Harrison
Norris
Fleming
Seay
Schaller
Geery
Hamilton
McKinney
Calkins
No
Governors Young
Newton
Mart in
Governor Martin explained that his negative vote was based on the
belief that the facts do not yet show clearly that business has recovered suf
ficiently to make it wise to take action of this sort.
\ Governor Eccles re-entered the meeting at this point and discussed
briefly the question of excess reserves. J*'During the course of this discussion
he pointed out that he did not yet feel seriously concerned about the effect of
excess reserves, since there had as yet been no excessive credit expansion;
ex
pansion was in fact desirable in the mortgage field and in the capital goods in
dustries as a means of putting people to work.v
The better the terms under which
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money could be affered, the greater the probability of its use.
A wider use of
money in these directions would tend to solve the budget problem, he seid.j
It was his view that the only danger lay in the difficulty of preventing
the excessive use of funds for speculative purposes, for the bidding up of prices
of existing properties, rather than for increased employment.
He indicated,
however, that this problem could be dealt with in part at least by regulations
with respect to the use of credit for carrying securities.
Too long a delay,
however, in dealings with excess reserve would mean that when action was taken it
could only take the form of a reversal of policy, and when this took place there
would be more banks which had used excess reserves so fully that they would be
vulnerable when reserve requirements were finally increased.
He raised the
question whether the policy could not be adopted of preventing further accumulation
of excess reserves beyond |3,000,000,000.
If that were done, then a decrease of
a billion dollars at any time would bring the volume of excess reserves within
range of flexible operations in the open market.
In the course of general discussion Governor Harrison raised the question
whether action which might be taken to reduce excess reserves through an increase
of reserve requirements should not perhaps be accompanied by a reduction of discount
rates as an indication that the System was not in fact desirous of restraining the
use of credit but rather desired without reversing its easy money policy to correct
a situation
now fraught with possible dangers.
Governor Eccles raised the question whether it might not be desirable at
the same time to make an announcement that the Reserve System would loan at par on
government bonds.
Governor Harrison raised the question whether there needed to be any
public statement following this meeting of the committee, and it was agreed by
Governor Eccles and the governors present that it would be desirable to have no
publie st at eme nt. ^
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There then ensued an informal discussion with respect to the organiza
tion of the new open market committee, during the course of which a majority of
those present indicated informally that they believed the alternate provided by
the law should, be from a different Reserve Bank from that of the member of the
committee.
The meeting adjourned at 3;40 p* m.
W* Randolph Burgess,
Secretary.
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COHFTDENTIAI.
TENTATIVSHBfefeFT SUBJECT TO CHAM>E
MINUTES OF THE MEETING- OF THE
EXECUTIVE COMMITTEE OF THE
FEDERAL OJFEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
JANUARY 3, 1956.______
11 3/3 4
The meeting was called to order at 10:37 a, m., there being present
Governors Young, Fleming, Seay, and Schaller, and
Deputy Governor Burgess, Secretary,
Mr. Burgess explained that Governor Harrison was unable to be present
because of illness.
On motion Governor Young was designated chairman pro tem.
^~Mr. Burgess reported that the Federal Reserve Bank of St. Louis was
desirous of increasing its participation in the System account by #15,000,000 in
order to better its earnings
It was agreed that the committee would have no
objections if the New York and Chicago banks, which had a considerable overage in
their holdings on the basis of the formula now used, were willing to reduce their
participations by this amount.
There ensued a brief discussion of Treasury financing in anticipation
of a later meeting with the Treasury.
There was also a brief discussion of the practice which might be followed
by the Treasury with respect to government deposits in the Reserve banks.
At 11:00 o ’clock the meeting adjourned to meet with the Secretary of the
Treasury in his office, there also being present;
Governor Eceles, Under Secretary Coolidge, and
Messrs. Viner, Bell and Upham in behalf of the Treasury.
There was first an informal discussion with respect to the amount of
balances the Treasury should keep with the Reserve Banks and the relation of that
Question to Federal reserve policy concerning excess reserves, '"it was generally
agreed that it should not be the function of the Treasury to manage excess reserves,
but Dr. Viner raised the question whether the Treasury should not stand ready to
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increase or decrease its balances at the request of the Federal Reserve System as
a means of supplementing their credit policy.
It was agreed, however, that this
question needed mature consideration in view of the possible difficulties or
public misunderstandings which might arise with respect to such an undertaking.
It was suggested that the question might well be discussed by the next meeting of
the Federal Open Market Committee.
In the meantime Secretary Morgenthau indicated that the Treasury in
tended to keep its balances in the Reserve Banks as nearly as possible between
|500,000,000 and $600^000,000.
Those present were in agreement with this.
There then ensued an informal discussion of the Treasury financing
program and especially the question of sales of additional Treasury bills.
final conclusion was reached.
The meeting adjourned at 12:05 p, m.
W. Randolph Burgess
Secretary.
No
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CONFIDENTIAL
MINUTBS OF THE MEETING OF THE FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C., DECEMBER 17-18, 1935_____
The meeting was called to order on December 17 at 10:10 a,‘m.‘, there
being present:
From the Board of Governors of the Federal Reserve System,
Chairman Eccles,
Governors Hamlin, Miller, James, O ’Connor, Thomas and Szytoczak.
From the Federal reserve banks $
Governor Harrison, chairman, Governors Young, Norris, Fleming,
Seay, Newton, Schaller, Martin, Geery, Hamilton, McKinney,
and Calkins *
Deputy Governor Burgess.
Messrs. Williams (New York) and Strater (Cleveland).
From the staff of the Board of Governors,
Messrs. Morrill, Clayton, Goldenweiser, Thurston, Thomas,
Curry, Gardner, Garfield, Bethea, Carpenter, and Thompson,
Governor Harrison stated that it was proposed that this first joint meet
ing with the Board of Governors should be devoted to hearing the reports of
specialists who had been studying the credit and financial situation and the problems
before the System.
He then turned the meeting over to Chairman Eccles, who first
called upon Dr. Goldenweiser for a review of the credit situation*
Dr. Goldenweiser then reviewed fully various aspects of the business and
credit situation and discussed alternative policies which might be adopted by the
Federal Reserve System.
After the completion of Dr. Goldenweiserfs statement, there ensued a
brief general discussion of some of the points in his statement.
Chairman Eccles then called upon Dr. Williams, who reviewed the general
question of excess reserves and the methods which might be adopted for dealing with
them*
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At the conclusion of Dr. Williams1 statement, there was a brief general
discussion and a number of those present asked questions which were answered by
Dr* Goldenweiser and Dr. Williams.
In the course of the discussion Mr. Miller pointed out that the powers
granted by the law to raise reserve requirements were granted "to prevent injurious
credit expansion.”
Mr. Miller raised the question how far action under this law
could be justified at a time when no injurious expansion had yet taken place, and
there was some brief discussion of this question in the course of which Dr.
Goldenweiser suggested that the discussions at the time the legislation was passed
made it clear that the legislation was specifically directed to dealing with the
problem of excess bank reserves.
Others pointed out that the power was one of
prevention rather than correction and this implied action in advance of expansion.
At 11:50 a. m . , the Board of Governors of the Federal Reserve System and
staff members left and the meeting reconvened with only the representatives of the
Federal reserve banks present.
A final form of the preliminary memorandum on credit conditions was
distributed in substitution for the tentative draft which had been circulated by
mail.
It was thereupon unanimously
VOTED that the report on operation be accepted and placed
on file and the operations since the last meeting of the
full committee be ratified.
It was also unanimously
VOTED that the preliminary memorandum in its final form be
accepted and placed on file.
Governor Harrison reviewed the action of the Board of Governors on the
resolution adopted at the last meeting of the committee as to shifts between
maturities of government securities in System account.
He reported that at first
the Board had limited its approval to the action necessary to replace maturities
between the date of approval and the next meeting of the committee, and that when
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the difficulty of operating under that approval had been pointed out, the Board had
reinterpreted its action to extend its approval to shifts in maturities of Treasury
bills and Treasury notes in an aggregate amount not exceeding $300,000,000.
Governor Harrison reported that he had made this question the occasion for dis
cussing with Chairman Eccles the desirable procedure to be followed with respect to
questions of this sort, and had pointed out that just as the committee gave the
Board an opportunity to make suggestions with respect to its minutes and the form
of its resolutions, it was also desirable that the Board of Governors should give
the committee an opportunity to make suggestions with regard to proposed Board
action before it was finally taken.
Gheririnan Eccles had informally agreed to this
suggestion.
After some informal discussion of the action which the committee should
take with resppct to operating authorities, it was agreed to leave such action un*r
til after a consideration of general credit policy.
Governor Young then raised the question whether the committee did not
have before it the resolution adopted by the Federal Advisory Council, which had
asked that its action be referred to the Federal Open Market Committee.
Governor Harrison re-Qorted that he had requested the Board to send a copy
of the resolution of the Federal Advisory Council to all governors and he read the
letter from Chairman Eccles, with which the Councilrs recommendation had been
transmitted to him as chairman of the Open Market Committee.
s'
^After further informal discussion of the Council’s action, Governor Norris
presented the following resolution which was seconded by Governor Young,
form includes later changes).
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That the participation of the Federal Reserve System
in the Treasury Bill market no longer serves any useful
purpose; that the System retire from this market by allowing
the present holdings of these Bills to run off as they mature
and that public notice be given to that effect, with such
explanatory statement as may seem advisable.
(this
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PI n discussing the motion, Governor Norris pointed out that while action
was not necessary, it was highly desirable as the excess reserves constituted a
source of danger.
He indicated that even now there was some evidence of inflation
ary results from the excess reserves, especially in the bond market, where a
r
Z 3/4fo bond of a rural county seat could be sold at a premium.
\
This kind of situa
tion constituted an incentive to communities to spend money unwisely^
Governor Norris stated the belief that a reduction in the Treasury bill
holdings of the Federal reserve banks would have a more desirable effect on the
public, the Treasury, the banks, and the reserve banks than an increase in reserve
requirements, which he believed would make banks more cautious in making loans and
would constitute a hardship on some banks with only moderate amounts of excess
reserves.
He believed that the limitation of any reduction in securities to the
Treasury bill market would avoid most of the possible harmful effects.
With respect
to the earnings of the reserve banks, he pointed out that an addition of
50,000,000 to the five year note holdings of the banks would bring in as much yield
as $500,000,000 of Treasury bills.
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\There ensued a general discussion of Governor Norris’ resolution, during
the course of #iich Governor McKinney pointed out that country banks had available
considerable excess funds outside of their excess reserves on deposit with the re
serve banks, and Governor Calkins raised the objection that the resolution attempted
to lay down a policy for eight months ahead, which went beyond the province of the
present committee.
There was further objection that the Treasury bill was almost
ideal for holding by the Federal Reserve System and it was undesirable that the
System should dispose of all of its Treasury bills.
Governor Calkins also raised
the point that any action, either in reserves or securities, mi^ht be misinterpreted
as a reversal of policy, and that the most that should be considered would be some
very moderate and tentative proposal.
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Governor Martin read a statement, a copy of which is attached to these
minutes, advocating that no action should be taken at the present time because of
danger of discouraging efforts toward recovery.
The meeting adjourned at 1:17 p. m.
The meeting reconvened at 2:37 p. m.
Governor Norris* motion was reread, in slightly revised forir from the
first reading and there ensued a general discussion of this resolution and of the
reasons which might be cited in its support in the record of the committee.
pin the course of discussion Governor Harrison pointed out that in order
to deal fully with the problem of excess reserves, it will probably be necessary,
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sooner or later, to use both methods of control.
He raised the question of what
would be the effect on banks if reserve requirements are increased after the sale
of a large amount of government securities had materially reduced the amount of
excess reserves leaving individual banks less prepared to stand an increase in
requirement
Governors Norris and Calkins took the position that the more flexible
method should be used first and the more rigid method afterwards, whereas Governor
Harrison favored the adjustment of reserve requirements first, leaving later ad
justments to be made by open market operations.
Governor Seay made the point that allowing maturities of bills to run off
would not have any appreciable effect on the amount of excess reserves.
Governor Harrison presented for consideration the question whether there
might be any advantage in adjourning until the middle of January, when some present
uncertainties might be more clear, including,
1.
The effect of the removal from the market of more than
$>600,000,000 by the Treasury through an increase in
its balances with the reserve banks.
2.
The nature of the budget message.
3.
The extent that business might be affected by a slack season.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
AuthonXv^p/oLr;^
6
After further general discussion, Governor Harrison asked and received
permission to read a memorandum on Excess Reserves and Federal Reserve Policy.
A
copy is attached to the minutes.
Aft er some further discussion a vote was taken on Governor Norris’
resolution and it failed of adoption by a vote of seven to five, as follows:
Yes
Governors Young
Norris
Schaller
Geery
Hamilton
j
yj
/) >
No
Governors Harrison
Fleming
Seay
Newton
Martin
McKinney
Calkins
Governor Calkins wished the records to show that he voted no because the
resolution would commit the System too far into the future.^/
Governors McKinney and Harrison wished the record to show that they be
lieved an increase in reserves should precede a reduction in security holdings as
a means of reducing excess reserves.
Governor Martin then presented, tentatively, for consideration, the
following motion:
At this time the danger of discouraging recovery is of
such weight that it is desirable to take no action until the
general factors in the business situation become more settled.
The possibility at this time has not developed into a probability
though it may do so at any time. It is therefore moved that
this meeting adjourn until some day in the middle of January for
a review of the situation.
v
After further discussion Governor Schaller read the following motion,
which had been agreed to by the board of directors of the)Chicago/ reserve bank:
After a careful review of the report of the meeting
of the Federal Open Market Committee held in Washington, D. C.,
October 22 to October 24, 1935, inclusive, and presented to us
by our member of that committee, the Board of Directors of the
Federal Reserve Bank of Chicago expresses concurrence in the
conclusions reached at said meeting and especially as set out
in the resolution prepared and delivered to the Board of
Governors.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority £)C
Qrckrjaii^:
7
^j
This Board fully realizes that the application of any
of the methods of credit control suggested lie within the power
of the Treasury Department and the Board of Governors, to be
used wben, in their judgment, it is necessary. However, in a
spirit of cooperation with both of these agencies we desire to
call their attention to a feeling of growing uneasiness in the
minds of the public as to possible credit inflation, caused by
repeated reference to this danger by our press and public
speakers.
We cannot help but feel that for the moment our great
est potential danger is from our excessively large bank reserves,
caused by a rapid rise in bank deposits, through gold imports
and governmental financing, the control of which might well be
considered our first objective.
I
*
We, therefore, as a Board, desire to respectfully
suggest for earnest consideration by the Board of Governors of
the Federal Reserve System, an increase in reQuired reserves
against bank deposits in Central Reserve and Reserve City banks
to possibly twenty-five per cent of the increase now permitted
by law, thereby not only fortifying our banking structure to
this extent, but giving assurance to business and the public that
the levers of control are operative and in the hands of authori
ties who are reedy to use them. We believe that such action ac
companied by a proper statement of its objectives would be
favorably interpreted by the financial and business interests
rather than otherwise.
We recognize that in addition to the measure referred
to, that of an increase in required reserves, consideration may
properly be given to another effective power in the control of
inflationary tendencies, under which credit may be withdrawn
from the market either by the sale or by the maturity without
replacement of Government securities held in the Federal Reserve
System. However, because it is considered that the application
of such a measure might be reflected in the market for Government
bonds at this particular time, we are disposed to suggest the
primary consideration of an increase in reserve requirements.
There ensued a discussion of these different proposals.
j
j
The discussion of this general question was suspended in order to deal
•
with the necessary operating resolutions.
After discussion it was agreed that authority voted to the executive
committee of the Federal Open Market Committee at two previous meetings to make
shifts of maturities in the System open market account, should be continued as nec
essary in the proper administration of the account to enable the executive committee
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority £ j C O
f^ ja ^
8
to replace maturities from time to time and to make shifts in maturities to meet
changing market conditions.
With respect to the amount of authority which the
committee should have in shifting from shorter maturities to bonds, it was agreed
that some limited authority was advisable in order to deal with any market situation
that might arise.
It was therefore unanimously
VOTED that superseding previous authorizations, the executive
committee be authorized to make shifts between maturities of
government securities up to $300,000,000, provided that the
amount of securities maturing within two years be maintained
at not less than $1,000,000,000 and that the amount of bonds
be not over $300,000,000.
It was also agreed that authority should be given to the executive com
mittee to buy or sell (which would include authority to allow maturities to run off)
securities for System account within limits as to amount, in order that the com
mittee might be in a position to act promptly if circumstances not now foreseen
should make action appear desirable before a further meeting of the full committee.
It was therefore unanimously
VOTED that the executive committee be authorized to buy
or sell up to $250,000,000 of government securities, sub
ject to telegraphic approval of a majority of the Federal
Open Market Committee and the approval of the Board of
Governors of the Federal Reserve System.
This motion continued in effect a similar authority voted at the meeting
of the committee on October 22-24, 1935.
Governor Young wished to be recorded as voting in favor of both of these
motions on the belief that failure to act on the recommendation of the Advisory
Council might create a situation under which these authorizations might be necessary.
There followed a renewed discussion of the proposals read by Governor
Schaller.
At 4:25 p. m . , by agreement, a recess was taken to attempt to draft a
motion which would embody this proposal.
At 4:37 the meeting reconvened and a vote was taken on the following
resolution:
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority S g O f d g r j a t & e
E1SOLV1D that it is the sense of this eommittap that for
reasons outlined in the resolution adopted by this committee
at its meeting last October, supplemented by the memoranda
presented to the committee, that the Board of Governors
should now favorably consider some early increase in the
reserve requirements of member banks.
The resolution was lost by a vote of seven to five, as follows.
Yes
No
Governors Harrison
Fleming
Schaller
Geery
McKinney
Governors Young
Norris
Seay
Newton
Mart in
Hamilton
Calkins
Governor Norris asked to be recorded as voting no on the ground that he
favored some action, but preferred action in the open market . )
Governor Seay asked to be recorded as voting no because he prefers to
see action deferred until after the first of the year, when the situation mightJ
be clearer.
Governor Hamilton indicated that he voted no because the resolution
included country banks.
He said that he would vote for a resolution limiting
the increase to reserve city and central reserve city banks.
Governor Martin indicated that his negative vote was on the ground that
the situation was such as to make it undesirable to act at this time.
Governor Harrison left the room for a few minutes to confer with
Chairman Eccles*
At 5:10 Governor Harrison returned and reported that Chairman Eccles
expressed the hope that the open market meeting would not finally adjourn tonight
but would reconvene in the morning.
It was so voted and the meeting adjourned
at 5:12 p. m . , to reconvene as a Governors’ Conference.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
- 1 ■~ -
Authority
j
10
*^
In the course of the Governors* Conference a discussion arose as to the
interpretation of the Banking Act of 1935 with respect to the power of the reserve
banks to exchange government securities directly with the Treasury when an exchange
offering was made.
It was agreed that it would be undesirable at this time to
raise the legal question and that instead it would be better to replace all maturing
issues in the open market.
The meeting reconvened at 10:15 a. m . , on December 18, there being present
the Governors of all the reserve banks, Deputy Governor Burgess, Secretary, and
Mr. Strater of Cleveland.
Governor Harrison indicated that he was concerned about adjourning the
meeting with the record as it was.
It was clear that the majority wanted to take
some action, but were divided as to the method.
They had before tham a unanimous
recommendation of the Federal Advisory Council to take some action.
The committee
would appear to be functioning badly if it favored some action but was unable to
agree upon the method to be employed.
The question might be asked why those who
favored action through the raising of reserve requirements did not support open
market action.
His response would be that the greatest likelihood of agreement on
action on the part of the reserve System lay in the proposal to increase reserve
requirements.
After some further discussion, a draft resolution was read (this form
includes later revisions).
The Committee has considered the preliminary memorandum
and a memorandum on excess reserves and Federal reserve policy
and has discussed various aspects of the credit situation.
The Committee finds that continued improvement has been
made in business and financial conditions since its last meeting
but the country is still short of a full recovery and there does
not appear to be anything in the situation which makes it necessary
for the reserve system now to reverse its policy of easy money.
It is still the unanimous opinion of the Committee that the primary
objective of the reserve system should be to lend its efforts to
ward the furtherance of recovery-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
AuU>°rt
11
^ It is the view of the Committee, however, that the
amount of excess reserves of member banks constitutes a source
of danger for the reasons expressed in the reports before the
Committee at its October meeting and those considered at this
meeting. The Committee believes, therefore, that action should
be taken as s^on as possible without undue risk to absorb a
part of these excess reserves as a safeguard against possible
dangers, and not as a policy of credit restraint*^
^
3
tn
<i
Two principal methods of accomplishing this have been
discussed by the Committee: (a) permitting the present system
holdings of Treasury bills to mature without replacement, and
(b) raising reserve requirements. Some of the members of the
Committee would prefer the employment of method (a) and others
would prefer method (b).
Those members of the Committee who prefer method (a),
that is, the reduction of holdings of short-term Government
securities by the system, are so strongly of the opinion that
some early action should be taken that they join with those
members favoring method (b), an increase in reserve requirements,
in a recommendation that the Board of Governors of the Federal
Reserve System should consider some early and substantial in
crease in the present reserve requirements of member banks which
were fixed at a time when the gold base of the country was sub
stantially lower than it is now. The Committee refrains from
recommending or suggesting any precise time or percentage of
increase or the classes of banks to be affected believing that
the time or amount and character of action would, of course, have
to be determined by the Board of Governors in the light of all
the conditions as they appear at the time action is actually
taken, not only business and credit conditions but also the
banking situation particularly as it may be affected by the
Government's fiscal policy.
Governor Calkins indicated that he feared the psychological effect on the
banking fraternity of an increase in reserve requirements, even if it were confined
to reserve and central reserve cities.
There ensued a general discussion of this
question in the course of which Governors Martin and Newton stated their belief
that there was no need for action at the present time, and Governors Hamilton and
Geery stated a preference for action in the open market.
Governor Geery suggested tentatively a proposal to allow Treasury bills
to run off without replacement until the next meeting, but to recommend that if the
Board of Governors does not approve this action, the recommendation be made that
the Board should consider an early increase in reserve requirements.
..... r" 1111.. -..... Reproduced from the Unclassified I Declassified Holdings of the National Archives
^ e classif Te d
Authority CJCOrgUr V j i & i
12
There ensued some discussion of this general proposal, in the course of
which Governor Norris stated that he believed some action was desirable and that
he was therefore prepared to approve action by a method different from the one he
preferred for the sake of securing agreenent to some action.
By an informal vote, ten of those present, all excopt Governors Martin
and Newton, indicated that they favored some action at this time.
Governor Young moved that the action taken in all the votes of yesterday
be rescinded.
This motion was defeated by a vote of nine to three, as follows:
Yes
Governors Young
Hamilton
Seay
No
Governors Harrison
Fleming
Newton
Schaller
Martin
Geery
Norris
McKinney
Calkins
Governor Harrison then read, as amended, the resolution presented earlier,
on pages 10 and 11, and this resolution was moved and seconded.
Governor Geery made a substitute motion as follows:
RESOLVED that the System allow its holdings of Treasury
bills to run off without replacement as they mature be
tween now and March 1st.
If, however, the Board of
Governors does not approve of this method, the committee
then recommends that the Board give consideration to some
early substantial increase in reserve requirements.
i
After discussion, a vote was taken on this motion and it was lost by a
vote of eight to four, as follows:
Yes
Governors Young
Geery
Hamilton
Calkins
No
Governors Harrison
Fleming
Newton
Schaller
Mart in
Norris
McKinney
Seay
Reproduced from the Unclassified I Declassified Holdings of the National Archives
13
There ensued a discussion of the earlier motion in the course of which
Governor Hamilton made the following motion, as an amendment:
While the committee has agreed that it is necessary
to take steps to curb or correct the condition of excess re
serves, the committee is of the opinion that should reserve
requirements be raised, the Board of Governors should give due
consideration to the inadvisability of raising reserve require
ments for other than reserve city or central reserve city banks.
In supporting this motion, Governor Hamilton stated that an increase in
reserve requirements of member banks would be a handicap tending to prevent non
member banks from joining the Federal Beserve System,
The motion was not seconded, a number of those present pointing out that
in their districts the reserve requirements of nonmember banks were higher than
those for member banks.
It was also suggested by a number that it would be better
to avoid detailed suggestions in a recommendation to the Board of Governors regard
ing the increase in reserve requirements*
There was further consideration of the possibility of adjournment without
definite recommendation and a motion to that effect by Governor Young was lost by a
vote of nine to three, as follows:
Yes
Governors Young
Newton
Martin
No
Governors Harrison
Fleming
Seay
Schaller
Norris
Hamilton
Geery
McKinney
Calkins
A vote was then taken on the original resolution in its revised form as
given on pages 10 and 11, as follows:
Yes
Governors Harrison
Fleming
Norris
Seay
Schaller
Geery
Hamilton
McKinney
J
No
Governors Young
Newton
Martin
Calkins
j
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority Q c Q r d M C j a ^
14
It was understood, as at the meeting of October 22-24, that any action
"of this sort should be taken only in coordination with Treasury policy.
It was then moved that the Chairman of the committee be requested to call
a meeting on or about January 15.
'This motion was passed by a vote of eleven to
one, Governor Fleming voting no.
r
*
Governor Fleming wished to be recorded in the negative on the ground that
he was opposed to the fixing of a date until after the committee had been informed
of the reaction of the Board of Governors.—
The meeting adjourned at 12:15 p* m . , to reconvene as a Governors*
Conference.
At 12:55 p. m , , the meeting reconvened as a joint meeting of the Federal
Open Market Committee and the Board of Governors of the Federal Reserve System,
there being present:
From the Board of Governors of the Federal Reserve System:
Chairman Eccles,
Governors Hamlin, Miller, James, Szymczak and Thomas.
From the Federal reserve banks:
Governors Harrison, Young, Norris, Fleming, Seay, Newton,
Schaller, Martin, Geery, Hamilton, McKinney and Calkins,
Deputy Governor Burgess, Secretary, and Mr. St rater.
From the staff of the Board of Governors of the Federal Reserve System:
Messrs. Morrill, Clayton, Golderiweiser, Thurston,
Carpenter and Thompson.
The resolution adopted by the committee was read and there ensued a
general discussion of the meaning of the resolution.
The meeting adjourned at 2:3j5 p. m . , with the understanding that the
Board of Governors would meet by itself to consider any suggestions it might have
to make to the Committee with respect to the resolution or with respect to a
public statement.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
~
*
15
The meeting was again called to order at 4:15 p. m * , as a joint confer
ence, the same people being present 0
Board o
•Mr. Bofth<*a ■e-f the staff of the -
uovernots of the Federal Reserve System was also present.
Chairman Eccles read a draft of a-proposed statement to the press and-
there ensued a general discussion of this statement.
It was then moved and unanimously carried that a committee consisting of
Chairman Iccles,' Governors Miller, Harrison and
Young and Messrs. Goldenweiser,
Thurston and Burgess be asked to draft a statement.
The members of the Board of Governors of the Federal Reserve System and
the staff representatives then left the meeting.
Governor Harrison stated that he feared that any press statement might be
a source of embarrassment to future action though it was agreed that there was
nothing inconsistent between*a press statement of the
sort proposed and the resolu
tion which had been adopted. Governors Young and Harrison and Deputy Governor
Burgess were authorized to confer with the representatives of the Board of Governors
and agree on some form of public statement and also to make any slight modifications
in the resolution which might be necessary to bring the two into conformity.
At 5:10 p. m . , the meeting adjourned.
At 5:29 p. m., the meeting reconvened with the same attendance and the
following press statement was read and unanimously agreed upon.
The Board of Governors of the Federal Reserve System and
the Federal Open Market Committee have given extended considera
tion to the general business and credit situation and to the
recommendation of the Federal Advisory Council and are of the
opinion:
1. That continued improvement has been made in business and
financial conditions but that the country is still short of a full
recovery.
2. That the primary objective of the System at the present
time is still to lend its efforts to a furtherance of recovery.
3. That there is at the present time no evidence of overexpansion of business activity or of the use of business credit.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c la s s ifie d
Au*°rity Q C Q f d s c j a t ) ^ :
16
4.
That the present volume of member bank reserves, which
have been greatly increased by imports of gold from abroad, con
tinues to be excessive, far beyond the present or prospective
requirements of credit for sound business expansion*
Therefore, the special problem created by the continuing
excess of reserves has had and will continue to have the unremit
ting study and attention of those charged with the responsibility
for credit policy in order that appropriate action may be taken
as soon as it appears, to be in the public interest*
At 5:40 p. m * , the meeting adjourned.
W. Randolph Burgess,
Secretary.
—
..........
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"SicLAssiniB
i
Autho'i‘y 3 c o r d Sr j a ^ e !
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!
...
STATEMENT BY GOVERNOR MARTIN
READ AT MEETING OF OPEN MARKET COMMITTEE
_________ ON DECEMBER 17, 1955
There were approximately $2,400,000,000 of Government bonds belonging to
the System when the Open Market Committee ceased purchasing in the Fall of 1933.
There has been no increase in the holdings of Governments since then.
In February, 1934, largely as the result of open market purchases of
Governments, the excess reserves of member banks were $890,000,000.
The excess
reserves since that time have increased to the extent of #2,100,000,000, giving
total excess reserves of approximately $3,000,000,000.
This increase of $2,100,000,000 in excess reserves is approximately the
same as net gold imports for approximately the same period.
Since February 1* 1934, the date of devaluation, the Government has
transferred $825,000*000 to the gold certificate fund of the Federal Reserve Board.
This next to gold imports has been the largest influence in creating excess reservesIt seems clear then that a large part of the $8,100,000,000 excess reserves is the
effect of gold imports.
It would be desirable to find out, if possible, what portion of the gold
imports belongs to nationals of foreign countries.
If, as it seems probable, the
larger portion of this belongs to foreign nationals, then it is on short time de
posit in this country or
else invested in short maturities and probably to a less
extent invested in American securities which have an immediate market on the Exchange.
In any event, it would seem that the balance owned by foreign nationals is a demand
obligation liable to be withdrawn at any moment.
If this is true, then that part
of the excess reserves the result of gold imports should not be allowed to become
a base for credit extension in this country.
The System, by the sale of its
$2,400,000*000 of Governments, could prevent these gold imports as excess reserves
being used as a basis of credit.
However, from what we can learn of the world
situation, there seems no immediate danger of the withdrawal of gold, as the United
States is the most stable country in the world at present.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
i
Authority SSC0 [ d M r m 5 (p'
2
The Federal Advisory Council in its consideration of Open Market
Operations of November 21, 1935 recommends that the System sell its Governments and
says "The controlling reason for this is the indisputable fact that so long as
Government bonds are held under the ownership of the System, either the currency of
the country or the reserves of member banks, to a corresponding extent, are de
pendent entirely upon a Government obligation".
Under the present existing condi
tions this "corresponding extent" is not such an extent as to cause any fears as to
the soundness of either the currency or reserves of member banks.
The fact is that
on December 4, 1935, the twelve Federal reserve banks had gold reserves amounting
to $7,410,000,000, which less the notes in actual circulation amounting to
13,648,000,000, leaves $3,762,000,000 of gold available for reserve against deposits,
which at the same time totalled $6,231,000,000.
'I'his means that without disturbing
our present holdings of Government securities the System has 100% gold reserves on
Federal Reserve Notes and approximately 60% gold reserves against deposits.
This
certainly would seem a safe situation so far as gold backing is concerned.
It is true that we are fe.eling some stirrings of recovery and the indexes
show improvement, but there is grave question whether these conditions are not still
so predicated on artificial stimulants that with a lessening of the stimulants the
impetus of recovery will show gradual slacking.
After having "primed the pump” it
seems foolish to take any chance of retarding the natural flow of the pump.
Outside
of the stock market, there seems little evidence of business going too fast.
That
condition, if it is considered wise, can be safeguarded by the raising of margins
on stock market collateral and the remedy can be applied at the spot where the
swelling is.
It is true that the System having an excess reserve of ^3,000,000,000
affords the possibility of a run-away condition, but we should not be fooled by
considering a possibility as a probability.
Such a possibility will undoubtedly
develop into a probability, but the conditions at present do not offer sifcns of an
immediate probability.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
m
'c l a S S f /e o
Authority CK-proUr /
3
In any action taken at the present time there is too great danger of
discouraging efforts toward recovery;
in fact, the danger of retarding recovery is
too great to take the risk of any action not more clearly indicated than at the
present time, whether it be the sale or run-off of Governments or the increase of
reserve percentages*
One of the hardest things for h soldier under fire is to remain quiet
and do nothing until the proper moment for action arrives.
By nervousness, result
ing in too much movement, although it is a relief to him, he may sacrifice his
whole command.
There is a possibility which we feel sure will develop into a probability,
but until the fact that it is more probable develops, it would seem that no action,
which after all is very important action, should be taken.
Rie time is here for
moment by moment vigilance and preparation for immediate action when the signs are
more pronounced.
There is no difficulty in calling a meeting of the Open Market
Committee whenever necessary*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
AuthorityQ c D f ^
CONFIDENTIAL
MINUTES OF THE MEETING OF THE
EXECUTIVE COMMITTEE OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
NOVEMBER 22, 1935
The meeting was called to order at 9i45 a. m., the following being
present:
Governors Young, Fleming, Seay, and Schaller, and
Deputy Governor Burgess, secretary.
On motion Governor Young was elected chairman pro tern#
The secretary's report of operations since the last meeting of the
committee was submitted and accepted.
There ensued a brief discussion of the Treasury financing problem in
December.
At 10:00 a. m. the meeting adjourned to Secretary Morgenthau's office.
The following were present in addition to the committee:
Secretary Morgenthau, Governor Eccles, Under Secretary Coolidge,
and Messrs. Bell, Haas* and Pgham
There followed a general informal discussion of proposals for Treasury
financing in December.
The meeting adjourned at 11:00 a. m
W. Randolph Burgess,
Secretary
M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authorfty&eafcc/aftffo!
/ 0 — 2- 2. ~
MINUTES OF !BE MEETING- OB' THE FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C., OCTOBER 22, 23, and 24, 1 9 3 5 _
d U + u U f"
^ ^
3
The meeting was called to order on October 2 2 at 10:30 a. m., there
being present:
Governor Harrison, chairman, Governors Young, Fleming, Seay,
Newton, Schaller, Martin, Geery, Hamilton, and Galkins*
Deputy Governors Gilbert and Burgess, secretary.
Mr. Strater was also present.
The preliminary memorandum on credit conditions and the report of opera
tions were submitted.
letter was read from the Board of Governors of the Federal Reserve
System pointing out the requirements of section 10 of the Federal Reserve Act as
amended by the Banking Act of 1935 with regard to the record to be maintained in
*
connection with the determination of open market policies^
A copy of the letter
is attached herewith.
After discussion it was unanimously
V0TEJ) that to meet the requirements of law a record be.kept,
as suggested by the Board of Governors of the Federal Reserve
System, setting forth such actions as may be taken by the
committee upon questions of policy relating to open market
operations, the votes taken in connection therewith, and the
reasons underlying each such action, and that this record be
transmitted to the Board of Governors of the Federal Reserve
System,
Thereupon Governor Harrison left the meeting to report this action to
Governor Eccles and returned shortly indicating that Governor Eccles had agreed
to the suggested procedure on behalf of the Board.
At this point Governor Norris entered the meeting.
It was unanimously
VOTED that the report of operations be accepted and
placed on file, and that operations in the System*s
special investment account since the last meeting of the
committee be ratified.
a
><*
/
Reproduced from the Unclassified I Declassified Holdings of the National Archives
The preliminary memorandum on credit conditions was also accepted and
placed on file.
There then ensued an extended discussion of the general credit situation
and particularly of the existing large excess of bank reserves and methods which
might be employed to absorb part of these reserves in order that the System might
be in a position to deal more readily with any future overexpansion of credit.
|During the course of this discussion the different members of the committee re-
I viewed the
I securities
advantages and disadvantages at this time of a sale of government
or changes in reserve requirements of member banks, a number of the
governors expressing preference for the first method and a number expressing
preference for the second, while still others were doubtfulj>f the destrjg&llity
of any action at this time.
The discussion also involved consideration of the
various methods which might be employed in carrying out either of these two
general lines of action, the desirability of a public statement in connection with
them, and the relationship between Federal reserve policy and Treasury policy.
The opinion was expressed by a number of the governors that some definite
action at this time to reduce the amount of excess reserves would be reassuring to
• the public as indicating that those charged with responsibility in connection with
j monetary policy were prepared to exercise the instruments of restraint in their
I control if and when necessary.
The meeting adjourned at 12:57 p. m. for lunch.
At 2:30 p. m. the meeting reconvened, there being present the same
persons as in the morning meeting.
Discussion was resumed of the same questions
as in the morning meeting.
In the course of this discussion a number of those present emphasized
that as far as the credit picture was concerned there appeared to be no necessity
for any reversal in a policy now directed toward stimulating recovery, but the
Reproduced from the Unclassified I Declassified Holdings of the National Archives
question was whether without impeding recovery there was something that could be
done to pave the way for later control, and there was the further question whether
any action that was taken could be explained publicly in such a way as to avoid
misunderstanding as to its real purpose.
After a further general discussion it was agreed that Governor Eccles
should be asked to join the meeting for an informal discussion prior to any
attempt to formulate the views of the meeting.
At 3:10 Governor Eccles entered the meeting.
Governor Harrison summarized for him the opinions which had been ex
pressed in the course of the preceding discussion.
Governor Harrison’s statement
was supplemented by a number of the other governors.
Governor Eccles reviewed in some detail the recent changes in the
credit situation and the problems now confronting the Federal Reserve System.
With respect to the instruments available to deal with excess reserves
Governor Eccles was inclined to favor increase in reserve requirements as the
most feasible method, though the dangers of possible public misunderstanding should
receive serious consideration.
After some general discussion Governor Eccles left the meeting at 4:55.
It was agreed that the meeting would reconvene in the morning, and that
in'the meantime those present should consider the form of a resolution which
might set forth the opinion of the committee.
The meeting adjourned at 5 p. m.
At 10:15 on October 23 the meeting reconvened with the same attendance
as on the preceding day.
There was a brief discussion of the maturity of secur
ities held in the System account, and the accounts of the several Federal Reserve
Banks.
It was suggested, and a number of those present agreed, that it might be
desirable for the System when appropriate opportunity arises to increase its hold
ings of longer term securities provided an adequate amount of short term securities
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authoriu
f
I
CX.O,^CJ'Xi%.
^
is always held for purposes of control.
4
~
The point was made that some increase
in long term holdings might at times aid in a proper adjustment between the rates
on short term and longer term securities and at the same time might aid in main
taining the earnings of the Reserve Banks should there be further declines m
yields on government securities.
Governor Harrison reported that he had talked with Mr. Coolidge, the
Under Secretary of the Treasury, to see if the Treasury had any views with respect
to Federal reserve policy at this time, and that Mr. Coolidge had indicated that
he believed the Treasury would not desire to take any position which would in any
way tie the hands of the Federal Open Market Committee.
There ensued a discussion of the resolution which might be adopted as
setting forth the views of the committee, and drafts prepared by Governor Norris
and Governor Young were read and discussed.
A draft prepared by Governor Harrison
was then read and, after discussion and amendment it was unanimously agreed that
this resolution be the sense of the meeting, with the understanding that a further
draft should be submitted for review as to detailed wording.
At 12:00 m* the meeting was adjourned as a meeting of the Federal Open
Market Committee and reconvened as a Governors Conference.
At 12:50 p. m. the meeting reconvened as a Federal Open Market Committee
meeting.
I
The resolution previously considered was read as amended and unanimously
adopted, as follows:
!
:
|
,
I
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I
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}
The Committee reviewed the preliminary memorandum sub
mitted by the Chairman and discussed at length business and
credit conditions and the banking position in relation to
them.
It was the unanimous opinion of the Committee that the
primary objective of the System at the present time is still
to lend its efforts towards the furtherance of recovery.
While much progress has been made, it cannot be said that business activity on the whole is yet normal, or that the effects
of the depression are yet overcome.
Statistics of business
activity and business credit activity, both short and long
term, do not now show any undue expansion. -In these circumstances, the Committee was unanimously of the opinion that
there is nothing in the business or credit situation which at
this time necessitates the adoption of any policy designed to
retard credit expansion.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Author/tv C l c p r ^ r
But the Committee cannot fail to recognize that the rapid
growth of bank deposits and bank reserves in the past year and
a half is building up a credit base which may be very difficult
to control if undue credit expansion should become evidenti
The continued large imports of gold and silver serve to increase
the magnitude of that problem. Even now actual reserves of
member banks are more than double their requirements, and there
is no evidence of a let-up in their growth. That being so, the
Committee is of the opinion that steps should be taken by the
Reserve System as promptly as may be possible to absorb at least
some of these excess reserves, not with a view to checking some
further expansion of credit, but rather to put the System in a
better position to act effectively in the event that credit ex
pansion should go too far.
Two methods of absorbing excess reserves have been dis
cussed by the Committee:
(a) the sale of short term Government
securities by the Federal Reserve System, and (b) the raising of
reserve requirements.
While the Committee feels that method (a), if employed,
would have the dual effect of absorbing excess reserves and im
proving the position of the Reserve Banks, nevertheless, there
are two risks in this method, first, that it may be a shock to
the bond market, inducing sales of securities by banks all over
the country; second, that however it may be explained publicly,
it may be misconstrued by the public as a major reversal of
credit policy, since this method has iiever been employed except
as a means of restraint, which is not desired at this time. A
majority of the Committee is opposed to the sale of Government
securities at this time, believing that its advantages do not
now justify the risks involved in this method of dealing with
the subject.'
There are also risks incident to method (b), - raising
reserve requirements. This method of control is new and untried
and may possibly prove at this time to be an undue and restraining
influence on the desirable further extension of bank credit. The
Committee feels, therefore, that before this method of dealing with
the problem of excess reserves is employed, it would be wise for
the Board of Governors of the Federal Reserve System to mak^ a
thorough study, through the twelve Federal Reserve Banks, of the
amount and location of excess reserves by districts and by classes
of banks, in order thus to determine whether, or to whet extent if
at all, an increase in reserve requirements might interfere,with
the
extension of loans and investments of member banks.
/
In view of the monetary powers now possessed by the Treasury,
the Committee is impressed with the importance of advising with
the Treasury relative to any steps that may be taken by the Reserve
System in order as far as possible to insure reasonable coordination
of action.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Furthermore, the Committee recognizes the possible
dangers of the public misunderstanding of any action which
may be taken in this matter, and would favor a careful pub
lic statement before action is taken*
In making these suggestions to the Board of Governors
regarding reserve reciuirenients, the Committee recognizes
that it is going somewhat beyond its own immediate jurisdic
tion, but it has found it impossible to consider open market
operations independently from the whnle credit situation and
other Federal Reserve policies.
After discussion it was agreed that the authority previous3.y granted to
the executive committee of the Federal Open Market Committee to make shifts of
maturities in the System open market account should be continued, as necessary in
the proper administration of the account, to enable the executive committee to re
place maturities from time to time and to make shifts in maturities to meet changing
market conditions.
Therefore, it was unanimously
VOTED that superseding previous authorizations, the executive
committee be authorized to make shifts between maturities of
government securities up to $300,000,000, provided that the
amount of securities maturing within two years be maintained at
not less than $;1,000,000,000 and that the amount of bonds be
not over §500,000,000.
It was also agreed that authority should be given to the executive com
mittee to buy or sell (which would include authority to allow maturities to run off)
securities for System account up to a certain amount, in order that the committee
might be in a position to act promptly if circumstances not now foreseen should
make action appear desirable before a further meeting of the full committee.
There
fore, it was unanimously
VOTED that the executive committee be authorized to buy or
sell up to $250,000,000 of Government securities subject to
telegraphic approval of a majority of the Federal Open Market
Committee and the approval of the Board of Governors of the
Federal Reserve System.
This motion had the effect of continuing a similar authority granted at
the meeting of the committee on May 27.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority CK O iiU r
/
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I
I J-OSXi:I
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7
At 1:10 p. m. the meeting adjourned.
At 10:09 a. m. on Thursday, October 24, the meeting reconvened as a
joint conference of the Board of Governors of the Federal Reserve System and the
Federal Open Market Committee.
There were present:
From the Board of Governors of the Federal Reserve System:
Governors Eccles, Hamlin, Miller, James, Thomas,
Szymczak, and 0*Connor.
From the Federal Open Market Committee:
The same persons as were present on the preceding two days.
Under Secretary Coolidge.
From the staff of the Board of Governors of the Federal Reserve
System:
Messrs. Morrill, Goldenweiser, Bethea, Carpenter, and
Thompson.
Two memoranda prepared by the Board*s staff on ’’Business and Credit
Conditions” and on ’’International Gold and Capital Movements” were distributed.
Governor Harrison reported to the meeting the action of the Committee on
the preceding two days, summarizing the subordinate motions and reading in full
the resolution with respect to credit policy.
Under Secretary Coolidge outlined to the meeting the purposes of the
Treasury with respect to the sale of savings bonds, and after a brief discussion
of this subject, left the meeting*
There ensued a brief general discussion of the conclusions of the Federal
Open Market Committee.
At 11:04 the meeting adjourned as a joint conference of the Board of
Governors of the Federal Reserve System and the Federal Open Market Committee.
W» Randolph Burgess,
Secretary.
as
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority S k O r d g r iQiiSip'
i\
3 3 3MEETING 0 F MSMBIRS OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT lASHIHxTC^f, AUGUST 29, 1935
'
& L *
of ✓ /
The members of the cosmittee met at 10:30 a. m. in the office of the
Board of Governors of the Federal Reserve System, there being present:
Governors Young, Seay, Flaming, and Schaller, and
Deputy Governor Burgess, secretary*
It was agreed that Governor Young should be temporary chairman.
The secretary distributed the report of operations, which was reviewed#
Attention was called to the fact that the total' shifts between matur
ities made under the authority of the last meeting of the full committee to make
shifts to total $250,000,000 had largely exhausted this authority, and it was
agreed to recommend to all members of the Federal Open Market Committee that
they approve by letter an additional $100,000,000 of shifts pending a further
meeting of the conmittee.
After an informal discussion of Treasury financing problems those
present adjourned to the Treasury Department*
At eleven o ’clock the members of the executive committee met with the
Secretary of the Treasury, the Under Secretary, and Messrs. Bell, Haas, and
Upham.
There ensued an informal discussion of Treasury financing problems.
In the course of the discussion Under Secretary Coolidge raised the
question of the printing of new Federal reserve notes with the present redemption
clause to replace old notes stating they were redeemable in gold at the Treasury*
He indicated that the Treasury had no appropriation to use in replacing old notes
in the hands of the Federal reserve banks with notes of the new form, but that
any Federal reserve bank that wished could obtain the new notes at its own expense.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authoriiy C X .Q n .U r i j { ) ^
£
*
2
After further discussion of Treasury financing problems the members
of the committee met separately at 12:40 p. m., and after discussion agreed that
if the suggested Treasury refunding program is put into effect the Fourths in
the System account should be replaced by notes unless other arrangements should
be agreed upon by telephone.
The meeting was concluded at 12:45 p. m.
W. Randolph Burgess,
Secretary.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authoritya c O f d s r I Q t & e l
/'
CONFIDENTIAL
SUBJECT TO CHANG®
MINUTES OF THE MEETING OF THE
EXECUTIVE COMMITTEE OF THE
FEDERAL OPEN MARKET COMMITTER
HELD AT WASHINGTON, D. C.
JUNE 19, 1935.
£>//*?/3 sT
The meeting was called to order in the Federal Reserve Board offices
at 10:32 a. m . , there being present:
Governors Young, Seay, and Fleming, and
Deputy Governors Preston and Burgess, secretary.
On motion Governor Young was elected temporary chairman.
There was a general discussion of Treasury financing policy*
There was also a brief discussion of the possibility of aiding a
better distribution of government securities among Federal reserve banks by
some adjustment in the amount of Treasury currency allotted to the different
banks*
The secretary reported that Mr. Staead's office was preparing figures
showing the shipment of Treasury currency to each Reserve bank.
At 11:00 a. m. the meeting adjourned to the office of the Secretary
of the Treasury in the Treasury building, there being present in addition to
those listed above:
Secretary Morgenthau, Governor Eccles, and Under Secretary Coolidge,
and Messrs# Bell, Haas, and Upham.
There took place a discussion of the Treasury financing program
until September 15, including a discussion of the continuation of financing
through offerings of bonds for tenders, the refunding of Fourth 4 l/4 per cent
bonds, and the possibility of a note or bond issue for cash subscriptions in
July or August as a principal means of securing the necessary amount of cash*
The meeting adjourned at 12:00 m*
W. Randolph Burgess,
Secretary.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority S iO ld e r V3& & S
m rn x m m iA L
m & F T subject to change
3
MINUTES m THE MEETING OF THE
m ICUTIfB OJIiHWfi OF M l
m m M L omi m m m < m m r m
held A3* u m iw m m , d. o.
June 7, 1955.
3
3
.
3 ' ^
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i
^
fo/7/3 5
rf f
The meeting was called to order at 10:30 a. m., there being presents
Governor Harrison, chairman, Governors Young and Seay, and
Deputy Governor Burgess, secretary*
The secretary reported that Mr, Schaller and Mr. Fleming had been unable
to come because of other commitments.
There was general discussion of the Treasury offering of bonds for
tenders just completed.
The secretary reported messages from the Chicago and
Cleveland banks» indicating that the banks in those districts had not generally
reacted favorably to this method of financing.
There was a general discussion of the effects of a proposed Treasury
offering of four or five year notes on June 15 in exchange for June 15 and August
1 maturities upon the portfolio of the Reserve banks, which included #185,000,000
of these maturities.
The exchange of these maturities for four to five year
notes would have the effect of lengthening the maturities in the System account
somewhat .
The secretary reported that in accordance with proposals at the meeting
of the Federal 0 p m Market Committee on May 27 the Federal Reserve Bank of
Minneapolis had taken #5,000,000 and the Federal Reserve Bank of Richmond
#3*153,000 of government securities from the System participation of the Chicago
bank*
At 11:30 the meeting adjourned to the office of Under Secretary Cfrolidge
in the Treasury, Mr. Coolidg© and Governor Eccles also being present.
There en
sued an informal discussion of the results of the trial on June 5 of the offering
of bonds for tenders as a method of Treasury financing.
of proposals for t o # 15 financing*
There was also discussion
- /
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
A^
^
8 c 0 r d g r j 9^
I
l
At 12:00 o ’clock the meeting adjourned to the Secretary of the Treasury's
office and in addition to those listed above the following were present:
Secretary Morgenthau, Mr* Bell, Mr. Haas, and Mr. Upham.
After a further discussion there was general agreement that a five year
note at an interest rate of 1 1 /2 per cent would be appropriate for the refunding
of June and August maturities on June 15.
There followed a full discussion of
the methods which the Treasury might use to obtain new funds between June 15 and
September 15.
The governors present reported the reactions in their districts
from the method of offering bonds for tenders, and the secretary of the edUinittee
reported the information on this subject received from the Federal reserve banks
of Cleveland and Chicago.
While the majority of those present felt that the
method of inviting tenders might well be established as a possible method to be
used from time to time, Governor Harrison and Mr. Burgess expressed the ^iew
that the traditional plan of borrowing money by the Treasury has on the whole
worked satisfactorily, the country is accustomed to it, and the Treasury has by
that plan successfully and profitably financed itself during recent difficult
years.
In those circumstances there is some question of the advisability of
adopting a new method as a principal means of securing new money just at this time
when the Treasury financing program is progressing so satisfactorily and when the
reports from various districts indicate considerable dissatisfaction with the new
method not only on the part of dealers but by bamks both large and small.
However, it was agreed that no final decision was necessary at the
moment on this question, and that the cosaaittee would meet again with the Secretary
in about two weeks*
The meeting adjourned at 12:30 p. m.
W. Randolph Burgess
Secretary
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
^thorny S c o r e r
M T A C T m - a w e ■aroujMPT" i
w
w
MINUTES OF QHE JOINT MEETING OF THE
FSCBRAL OPEN MARKET COMMITTEE WITH THE
FEDERAL RESERVE BOARD
HELD AT WASHINGTON, D. C.
MAY 28, 1935
The meeting was called to order at 11:00 a. m., there being present the
following:
from the Federal Reserve Board
Governor Eccles, Chairman, Vice Governor Thomas,and
Messrs, Hamlin, Miller, James, Szymczak, O ’Connor, Clayton,
Morrill, Carpenter, and Goldenweiser.
From the Committee
Governors Young, Harrison, Norris, Fleming, Seay, Newton,
Schaller, Martin, Geery, Hamilton, McKinney, and
Deputy Governor Day,
Mr. Strater was also present.
Governor Harrison reported to the meeting the action of the committee at
its meeting the previous day, and explained that in connection with the motion
authorizing purchases or sales after telegraphic approval of the committee and
approval of the Federal Reserve Board, it was the unanimous opinion of the consulttee that no purchases or sales should be undertaken at the present time*
There ensued a general discussion of open market policy, in the course
of which question was raised concerning the position of the Federal Reserve Bank
of Chicago, and the correspondence between that bank and the Federal Reserve Board
was read.
Copies of this correspondence are attached to these minutes.
With respect to the distribution of government securities between
Federal reserve banks, Governor Harrison reported the discussions of the committee
on the preceding day and indicated that the various Federal reserve banks now
holding less than their pro rata.share were to explore the question of increasing
their holdings, and that some shift in securities would probably result*
In the
course of this discussion Governor Schaller asked Governor Eccles whether the
Federal Reserve Board approved the request of the Federal Reserve Bank of Chicago
that some of the other banks take over a portion of its holdings of government
Reproduced from the Unclassified I Declassified Holdings of the National Archives
2
securities.
Governor Eccles stated that the Board was not in a position to
force the banks to take any of Chicago’s holdings, but would have no objection
to their doing so,
There ensued further discussion of the policy to be pursued, at.the
conclusion of which there was unanimous agreement on the part of all those present
that no sales of government securities should be made at this time, but there was
agreement that the System should be prepared to act promptly when the time came
for a change in open market policy.
The meeting adjourned at one p. m.
George L. Harrison,
Chairman, Federal Open
Market Committee*
m
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
I
Authority £ ^ 0 ^
IQ tm
rniliTFlTTrt DRAFT - SUBJE® TO _ ___
-------------------- ~
_____ _
MBTOTES OF THE HUTTING OF TE* HBOOTITE OOtHXTTBS
OF THE FBDSRAL OPTO MARKET CXMMITOE
HELD AT WASHIHOTOH, D. C.
APRIL 17, 1936
_____
-^2 ^,
^
'^a^ /, 7 / 7
'
/ '
The meet ing was called to order at 1®$4Q a* m# in the offices of the
Federal Reserve Board, there being present
Governor Harrison, chairman, Governors Young, Seay, and
Schaller, and Deputy Governor Burgess, secretary.
The secretary’s report of operations was reviewed and accepted.
At this point Governor locles entered the meeting#
After a brief general discussion the meeting adjourned to the Treasury
Department«
At 11:00 a. m. the committee met with the Secretary of the Treasury in
his office, there being present in addition to those noted above Secretary
Morgenthau, Under Secretary Ooolidge, and Messrs. Bell, Haas, and Upham.
There was a brief informal discussion of the program the Treasury might
follow in its issue of Treasury bills in ensuing weeks.
The meeting then proceeded to an infonnal discussion of the proposals for
an offering of obligations to refund the First Liberty Loan bonds which had bees
called for redaction on June 15 next.
The meeting adjourned shortly before 12;00 su and reconvened at 12:00 m*
in the offices of the Federal Reserve Board.
After discussion it was voted under general authority to make shifts be
tween maturities voted by the Open Market Committee on February 5 to convert the
holdings of First Liberty Loan bonds in system account into Treasury notes if such
notes should be offered as part of a conversion program, or into other obligations
available in the market.
In this connection it was suggested that consideration
be given to exchanging a part of the maturing obligations into short term bonds
£>/'¥/35- i j U 4
3 2 3 .3 -a- - /
met
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Author
rather than Treasury notes in order to secure a better yield.
After discussion it was also voted to authorize shifts between maturities
in the System account up to #25,000,000 if they should be neoessary as an influence
towards maintaining an orderly market»
It was understood that this authority would
not be exercised with the aim of pegging the market at any point, but solely if nec
essary to avoid disorderly conditions in the bond market.
^
2h view of the infoimal suggestion which the Secretary of the Treasury* .
had made two weeks before over the telephone that consideration might be given to a
reduction in the System portfolio of goverrsnent securities, the question was raided
whether it would be wise at this time to make some sales of such securities*
It
i
was noted that when the suggestion had been discussed by telephone two weeks ago |
with the members of the executive comaittee and with Governor Bccles, it was not
believed wise to take any action.
It was also pointed out that the Treasury was
not now in favor of making such sales at the present time.
Governor Schaller and
Governor Seay emphasised the desirability of making sales as a means of securing
more flexibility for the portfolio when it could be done properly and without dis
turbance^
Governor Harrison suggested that the principal question was whether sales
should be made simply for the purpose of establishing the principle of flexibility
before the System was prepared to make sales as a part of a general credit policy
of restraint.
Governor Harrison also reported discussions which had been held during
past months by the directors and officers of the Federal Reserve Bank of tfew York
with respect to this question, and by agreement the Secretary read a confidential
memorandum which had been prepared for and approved by the directors of the New York
bank on March 21, 1935 as representative of the views of that bank at that time*
A copy of this confidential memorandum is attached herewith*
Kfi
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority
IQ T gfol
3
After further discussion and review of the question it was unanimously
decided to take no action at the present time*
The meeting adjourned at 1:15 p* m.
At 2:30 p. m. the meeting reconvened, the same persons being present*
It was suggested that a full meeting of the federal Open Market Ctomittee
should be held in the latter part of May or early in June at the time when June
financing would be discussed.
There ensued a discussion of the distribution of government eecurifips
among the Reserve banks.
GoTernor Schaller pointed out that the holdings of;* the
Chicago bank were larger than their fair proportion on the basis of the method of
allotment now being used.
The question was raised whether there should be an
attempt to make redistribution of securities to bring the holdings in&9 better
conformity with the present allotment ratios*
Question was also raised whether
and on what basis the Hew York and Chicago banks might throw into System account
their present outright holdings of government securities*
After discussion it was decided not to attempt any major readjustment at
present, but to make a gradual redistribution by filling requests for additional .
allotments i&olly from the participation of the Chicago bank in the System account
until a better equalization of holdings had been reached, and it was understood
that the Secretary would communicate with banks showing a deficit at the end of
April*
The question of further sales of 2 7/8 per cent bonds was discussed and
it was agreed that such sales would be arranged as and when market conditions are
appropriate.
Governor Young raised the question whether it would not be wise to
anticipate maturities of notes when they were within six months of maturity. The
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
,
J
4
committee was in sympathy with this idea in so far as it could be arranged with
advantage in the market from time to time.
There was some informal discussion of the amount of Treasury balances in
the Reserve banks, and attention was called to the fact that these balances were
larger than usual.
There was some informal discussion of the financial implications of the
bill for social security.
The meeting adjourned at 2!50 p. m,
W. Randolph Burgess,
Secretary.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority d C O f d s r i a ^ p i
J? 3 -3#"2
COHFIBECTTIAL '
J A '* '- '
"} l U 'K . . !
- SUBJECT TO CHANGE
MINUTES OF THE MUTING OF THE EXECUTIVE COMMITTEE
OF THE FEDERAL OPEN MARKET COIMTTIE
HELD AT WASHINGTON, D. C*
MARCH 13, 1935*
o, j I '/
The meeting was convened at 10:40 a. m* at the offices of the Federal
Reserve Board, there being present
Governors Young, Fleming, Seay, and Schaller, and
Deputy Governor Burgess, secretary*
In the absence of Governor Harrison, Governor Young was elected chairman
pro tern.
Mr. Burgess reported that in accordance with the agreement of the
members of the committee by telephone, and under authority of the resolutions
adopted by the Federal Open Market Committee on February 4 to buy, sell, or shift
up to $250,000,000 of government securities, one half of the called Fourth 4 1/4
per cent Liberty bonds held in the System open market account had been delivered
to the Treasury for conversion into the new 2 7/8 per cent bonds, and that there
was still held in System account #42,367,700 of these bonds.
While the committee
had authorized the sale of these bonds in the market when possible, (with
corresponding purchases of other maturities) the market for Fourths had not been
strong enough to carry out the operat ion without interfering with the conversion*
Mr* Burgess reported that the Federal Reserve Bank of Hew York had followed the
same procedure as the committee with respect to its holdings of %12,000,000 of
Fourth 4 1/4 per cent Liberty bonds.
After discussion it was agreed that the remainder of these bonds in the
System account should be sold in the market if it could be done without depressing
the market and thus interfering with the conversion#
If this was not possible it
Was agreed that they should be converted into the new 2 7/8 per cent bonds with
Reproduced from the Unclassified / Declassified Holdings of the National Archives
the understanding that an attempt would be made later to shift into other maturi
ties a sufficient amount to avoid relatively excessive holdings of a single bond
issue.
Mr. Burgess also reported that under the agreement of the committee to
buy up to $25,000,000 of bonds in order to maintain an orderly market, the follow
ing purchases had been made:
For System Account
$
750,000 - 3
$ Treasury bonds 1951-55
775,000 - 3 l/2$ Treasury bonds 1949-52
4.050.000 - Fourth Libertys, for later delivery
1.100.000 - 3
$ Treasury bonds of 1951-55 for later delivery
2.240.000 - 3 1/8$ Treasury bonds 1949-52 for later delivery
System holdings of Treasury bills had been reduced by an
amount cor
responding to the amounts of the above purchases actually delivered.
As the
market improved it might be possible to resell to the market some of the bonds
delivery of which had not yet been taken.
He also reported that the Treasury had
now undertaken to make purchases of called Fourths for its own account in order
that the System might not be loaded up with too large an amount of this maturity
in view of its already large holdings.
There was then a brief discussion of the question whether the Treasury
should call for redemption on June 15 any or all of the First Liberty Loan Bonds
now outstanding.
At 11:00 a. m. the committee adjourned to the office of the Secretary of
the Treasury, there being present in addition to the committee,
Secretary Morgenthau, Under Secretary Coolidge, and Messrs.
Bell, Haas, and Upham.
Governor Young reported the action of the committee with respect to its
holdings of called Fourth 4 l/4 per cent Liberty Bonds, and with respect to
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3
purchases of bonds in the market to maintain an orderly market#
There ensued a
discussion of the proper function of the Federal Reserve System with respect to
the government security market, in the course of which there was pointed out the
necessity for a bank of issue to maintain a large proportion of its assets in short
term securities which can be liquidated rapidly at a time when it becomes the duty
of the bank to exercise restraint,*
There followed an extended informal discussion on the question of whether
the Treasury should call for redemption on June 15 the first Liberty Loan bonds.
All the members of the executive committee with the exception of Governor Seay
recommended that the First 4 1/4 per cent bonds be called, but that the First
3 1/2 per cent bonds should not be called at this time.
Governor Seay recommended
that both issues should be called#
At about twelve o ’clock the meeting adjourned briefly to Under Secretary
Coolidgefs office where the discussion was continued.
At 12:20 p. m, the committee returned to the Federal Reserve Board
offices*
After a brief further informal discussion of general iliatters* the
meeting adjourned at 12:45 p. m.
W. Randolph Burgess,
Secretary.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Autl>orityO C Q f^ I Q ^ I
QONFIDEOTIAL
— TKWTATIVT THRATTT *■ SUBJECT TO ■
CSiAMGR —
^
MINUTES OF THE MEETING OF THE EXECUTIVE: COMMITTEE
OF THE FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. 0.
FEBRUARY 27, 1935.
y r~ ' ^ S ~ S
^
hV
% S
The meeting was called to order at 10:30 a# m * , there being present
{
t
Governor Harrison, chairman, Governors Seay and Schaller, and
Deputy Governors Paddock and Burgess, secretary.
r^Governor Harrison raised the question whether it was wise for the Treasury
J
to continue the procedure of having the Under Secretary visit New York immediately
before a new issue.
He pointed out the danger that the Treasury might be criticized
for unavoidably giving scan© informat ion concerning the forthcoming issue to those
few people who participated in the interviews in advance of a general announcement.
There was an informal discussion of this and related quest ionj|J
At eleven o fclock the meeting adjourned to the office of the Secretary of
the Treasury there being present, in addition to the committee,
Secretary Morgenthau, Governor Eccles, Under Secretary Coolidge,
and Messrs. Bell, Haas, and Upham of the Treasury Department.
The Secretary of the Treasury indicated that the Treasury proposed to
increase the amount of #10 silver certificates to be issued, because it had not
been possible to put into circulation the full amount of currency required by silver
purchases without going beyond the #1 and $5 denominations#
There ensued a detailed discussion of proposals for the forthcoming
Treasury issue with respect to the character of the offerings* their maturity, and
rate •
r I n the course of this discussion Governor Harrison pointed out that governs
ment securities had been rising in price with great rapidity to a record high in
1
spite of an enormous Treasury deficit.
As a result the present position might be
3 3 3, 3 - A. - /
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d e c l a s s if ie d
A u th o rty & Q rfa / a f t % |
considered in some measure vulnerable and interfered somewhat with the distribution
of new issues*
He said he had no detailed suggestion to make just now, but be
lieved from time to time consideration should be given to plans which might prevent
too rapid increases of prices in brief periods of time and which might insure a
more health^ state of the market
! There was also discussion of the desirability of the Under Secretary
visiting New York inanedietely before the issue, and it was agreed that for the
4
future it might be desirable to avoid visits just at these times, with the under
standing that the governors of the Reserve banks represented on the committee would
be of all possible assistance to the Treasury in exploring market conditions*j
At 12?15 p. m* the cOnmittee left the Treasury for the offices of the
Board, and at 12:50 p* m* reconvened there*
Governor Harrison reported briefly upon the status of the Banking Act of
1935*
The secretary of the cosanittee reported that the results of the first
month of operation in 1935 showed that several of the Reserve banks were operating
at a deficit oj* at a very small surplus.
He indicated that a request for a
further allotment of government securities had been received from the Richmond bask
and might be expected from other banks.
It was understood that adjustments be
tween banks would be made when requested on the general basis of the computed
figures as to the requirements of the several banks for expenses,' dividends, and
chargeoffs.
The meeting adjourned at Is15 p* m*
W. Randolph Burgess
Secretary
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DECLASSIFIED
A u t h o r i t y IQ e g fo l
CONFIDENTIAL
3
5 ^ , 3
MINUTES OF THE MEETING OP THE EXECUTIVE COMMITTEE
OF THE FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
EEBRUAHY SO, 1065•
The meeting was called to order at 10:15 a. m., there being present
Governors Harrison, chairman, Fleming, Seay, and Sehaller
Deputy Governors Paddock and Burgess, secretary*
The secretary’s report on open market operations was distributed and
ordered accepted and placed on file.
There ensued an informal discussion of
banking legislation ar.d of Treasury financing*
At eleven o'clock the meeting adjourned to the office of the Secretary
of the Treasury, there being present in addition to the members of the committee
Secretary Morgenthau, Governor Eccles, Under Secretary Coolidge,
Messrs. Bell, Haas, Uphaic, of the Treasury*
The Secretary discussed with the committee proposals for Treasury
financing, including the suggestion that the Treasury might issue nine months
discount bills in addition to six months bills and gradually increase the total
amount of bills outstanding and including also problems of financing operations
on March 15*
The committee was asked to meet again with the Secretary on Wednesday,
February 27, for further discussion of March financing*
At 11:50 a. m* the committee adjourned to the offices of the Federal
Reserve Board, and after general informal discussion adjourned at 1:30 p. m*
W. Randolph Burgess
Secretary
I
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DECLASSIFIED
A
I
u t h o r i t y la t& p l
/
3
CONFIDENTIAL
3 3 . 2 - * *
' J~ » .
Ca/»y
, nrnam m vii n ^ r r
u r ~ ~ T TTI THr™™
^
MINUTES OF THE MEETING OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. G.
FEBRUARY 5, 1935.
h
1 J /
^
The meeting was called to order at 10;40 a# m., there being present
orris, Flenmng,
Governor Harrison, chairman, Governors Norri
Seay, Newton, Schaller, Martin, Geery , Hamilton^
McKinney, and Calkins
Deputy Governors Paddock and Bargess, secretary.
In accordance with the regulations governing the organization of the
Federal Open Market Committee which provide that the election of chairman,
secretary, and executive committee for the ensuing ye^r should take place at
the first meeting in each calendar year, the following were on motion elected
to these positions:
Chairman, Governor Harrison
Secretary, Deputy Governor Burgess
Members of executive committee, representatives of the
Federal Reserve Banks of Boston, New York, Cleveland,
Richmond, and Chicago.
It was further
VOTED that the chairman of the full committee be chairman
of the executive committee.
After discussion it was
VOTED that the action of the executive committee on January
25 which had been approved by all members of the full committee
by telegraph, and by the Federal Reserve Board, be ratified.
^~There ensued a discussion of the responsibility of the Federal Heserve
System for the status of the government security market in view of the fact that
under recent conditions the government security market had become a dominating
factor in the money market.
There was also discussion of the possible effects
upon the government security market and the money market of different possibilities
http://fraser.stlouisfed.org/
JLotc^
Federal Reserve Bank of St. Louis
i-/f/ 3 *
3 33*
J
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
I
Authority
of action by the Supreme Court with respect to gold clause legislation.
In the course of this discussion it was generally agreed that it was
neither possible nor desirable to peg prices of government securities at any point,
but that it might be desirable in certain conditions to ease movements in either
direction.\
There was also some discussion of the probable results of any reductions
in System holdings of government securities which would appear in the weekly state
ment, and it was the general opinion that under present conditions the results of
sales might be seriously adverse to the position of the government bond market.
The report of operations and the preliminary memorandum on money market
conditions were distributed and some time was taken for those present to review
the two documents.
It was then
VOTED that the report of operations and the preliminary
memorandum be received and placed on file.
There was a brief general discussion of the formulae which should be
used in determining the participations of the several banks in any purchases or
sales which might be made.
It was thereupon
VOTED (l)
that the several banks should participate in
sales in accordance with the ratio of their
holdings in the System account to the total
account.
(as shown in Column 3 in Exhibit C of the
report of operations.)
(2)
that banks should participate in any pur
chases in accordance with the ratio of their
requirements for expenses, dividends, and
chargeoffs to the System total.
(as shown under Column C in Exhibit C of the
report on operations.)
(3)
Special requirements of individual banks
should be adjusted by the executive committee.
(4)
The basis of participation should be recon
sidered at any time that a change in conditions
appeared to make such reconsideration desirable.
There followed a discussion of future program pending a further meeting
of the full committee, and it was
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d e c l a s s if ie d
Author!ty B c O r d M r m ^ p 1:
3
VOTED that subject to the approval of the Federal Reserve Board,
and superseding previous authorizations, the executive committee
be authorized to buy, sell, or make shifts between maturities of
government securities up to $250,000,000 and that it be further
authorized to buy, sell, or make shifts between maturities of an
additional #250,000,000 on telegraphic approval of a majority of
the open market committee in case of emergency requiring action
before a meeting of the full committee could be arranged.
There ensued an informal general discussion o f banking legislation, in
the course of which Governor Harrison reported the activities of the legislative
commi ttee.
The meeting adjourned at 12; 20 p. m.
The meeting reconvened at 12:30 p. m., the following being present from
the Federal Reserve Board in addition to members of the Federal Open Market
Committee:
From the Federal Reserve Board
Governor Eccles, and Messrs, Hamlin, Miller, James, Thomas
and Szymczak.
From the Board’s staff
Messrs. Morrill and Clayton.
Governor Harrison reported thevaction of the committee and summarized
briefly their discussions.
After a brief general discussion the meeting adjourned at 1:15 p. m.
W. Randolph Burgess,
Secretary.
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/
DECLASSIFIED
I
u t h o r i t y IQfgfol
/
<30k f h t o t i a l
333. 3
MINUTES OF THE MEETING OF THE EXECUTIVE COMMITTEE
OF THE FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C., JAN. 25, 1935
'/ -K
The meeting was called to order at 10;45 a* m. in the officeis of the
Federal Beserve Board, there being present
Governor Iccles,
Governors Young, Fleming and Schaller, and
Deputy Governors Burgess and Hutt.
In the absence of Governor Harrison, Governor Young was elected chair
man pro tern.
|*~Governor Eccles raised the question whether the government security
portfolio of the Reserve banks might not well be made more flexible, rather than
being static at the same constant amount.
J
He also stated that the Treasury had
been concerned over the extremely rapid rise in government bond prices, and raised
the question whether the Reserve banks could not operate in the market to exercise
some restraining influence on either excessively rapid rises or declines in prices
of government securities in order that the market might be maintained in sound
condition in anticipation of government financing in MarchJ
It was the view of the Treasury that this was more logically the business
of the Beserve banks than of the Treasury, involving as it does the regulation of
the money market.
While a certain amount of influence over the market could be
exerted by making shifts between maturities in the System Account the question had
been raised whether the purpose could not be accomplished better by some changes
in the total portfolio of securities held by the Reserve banks.
On other grounds
there was, moreover, a considerable argument for greater flexibility in the
portfolio,.
Inhere ensued general discussion of the implications of this course in\
- eluding the question of the possible adverse reaction of the public and the market
Reproduced from the Unclassified I Declassified Holdings of the National Archives
2
to any sale of government securities by the Reserve banks.
There was also dis~
cussion of the recent effect on the market of anticipation of action by the
Supreme Court^j
At 11 o fclock the meeting adjourned to reconvene in a few minutes in the
office of the Secretary of the Treasury.
The Secretary and the Under Secretary
were present in addition to those listed above.
The Secretary raised the same question as had Governor Eccles of the
desirability of flexibility in the system Account rather than the holding of a
static fixed amount of securities*
Governor Eccles pointed out that if the System Account were to show any
reduction it would be necessary to isdue a carefully prepared statement giving
the reasons for the change.
After further discussion of recent and possible market conditions it
was
VOTED that a wire be sent to all members of the Federal
Open Market Committee to request them subject to the approval
of the Federal Reserve Board to authorize the executive
committee, pending a meeting of the full conanittee in the near
future, to make purchases or sales or shifts between maturi
ties in the System Account up to a total of $250,000,000.
This authorization is in addition to the authorization to make
shifts between maturities up to 100 million dollars voted at
the December 17 meeting. This authorization is desired
primarily to place the System in position to use its influence
towards preventing any possible disturbances in the market
pending a meeting of the full committee.
After some informal discussion of Treasury financing the meeting ad
journed at twelve o ’clock and returned to the Federal Reserve Board offices where
it reconvened.
After discussion the motion given above was put in its final form and
there was an informal discussion of possible operations under this motion in which
the dangers of adverse public reaction which might arise from fluctuations in the
mmmmm
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d e c l a s s if ie d
3
portfolio were emphasized and a number of those present expressed the hope that
it might not be necessary to show any change in the total of the account in the
near future.
It was also suggested that a great deal could be accomplished in
dealing with the market by shifts between maturities in the account without any
change in the total.
The meeting adjourned at 12:25 p. m.
The meeting reconvened at 3:30 p. m,
There was an informal general
discussion of Treasury and Federal reserve problems.
The meeting adjourned at 4:25 p. m.
W. R, Burgess,
Secretary,
Reproduced from the Unclassified I Declassified Holdings of the National Archives-
DECLASSIFIED
Authority
'
/
3 ^ 3
MINUTES OF THE MEETING!- OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
DECEIVER 17, 1954
- 3 - ^ '- ' !
I x I'7 / s y
The meeting was called to order at 10:30 a. m., the following being
present:
Governors, Young, Norris, Seay, Fancher, Geery, and Martin.
Deputy Governors Burgess, Johns, and McKay
On motion Governor Young was elected chairman pro tem.
The secretary’s report of operations was distributed and after discussion
it was
VOTED that the report be accepted and placed on file
It was
VOTED to ratify the action of the executive committee in replacing
Treasury notes which matured on December 15, with other issues, this action having
previously received telegraph approval of all governors.
After discussion the following action was taken with respect to maturi
ties in the portfolio which might have to be dealt with prior to another meeting
of the committee.
VOTED that the Executive Committee be given authority to
replace the Treasury notes maturing on March 15 and the
maturities of called 4th 4 1/4$ Liberty Bonds in System
Account either in the market or with any securities which
the Treasury may offer in exchange.
There was a brief discussion of the desirability of the System’s being
prepared to make shifts between maturities in the System portfolio, if, that should
appear desirable as an aid to maintaining stability in the government security
market, either in connection with Treasury financing operations or at other times.
It was then
VOTED that the Executive Committee be given authority to
make exchanges between maturities in the System Account
up to a total of |100,000,000.
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w £c l a s s i w
I5
AuthorityS c Q z i g r
10 *^ 1
2
The members of the Federal Reserve Board were then invited to join the
meeting, and at 11 o ’clock they entered the room, the following being present in
addition to the committee:
From the Federal Reserve Board:
Governor Eccles and Messrs. Hamlin, James, Szymczak,
and Thomas
From the Federal Reserve Board staff:
Messrs. Goldenweiser, Morrill, Smead, Wyatt, Bethea,
Carpenter, and Walters
Governor Eccles discussed with those present certain aspects of the bank
ing situation and of the function of the Federal Reserve System under present
conditions,
fIn
the course of the discussion Governor Eccles raised the question
whether it would not be a mistake for the Federal Reserve System to confine its
i
purchases solely to short term government securities and whether it would not be
wise in the interest of public cpnfidence for the Reserve,System to exercise
leadership by some further)shifts in the portfolio from short to long time govern
ment bonds on appropriate occasions
Governor Eccles also suggested the desirability of a broadening of the
eligibility provisions of the Federal Reserve Act which would encourage the private
banking system to support the markets for longer term credit.
In reply to questions Governor Eccles said he did not have any specific
suggestions to make at this time with respect to the relationship of the Federal
Reserve System to the government security markets, but believed that the Reserve
System should be prepared if and when necessary to support this market vigorously
and independently without waiting for a request from the Treasury*
There1was extended general discussion in the course of which Governor
Young reported to the members of the Federal Reserve Board the action which had
been taken by the Open Market Committee.
The meeting adjourned at 12:50 p> m.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority B
t O
n
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3
The meeting reconvened at 3:45 p. m. following a meeting of the committee
on legislative program.
Mr. Coolidge was present in addition to the members of
the committee, and Governor Eccles entered the meeting later.
There followed an informal discussion of Treasury financing including a
discussion of means of avoiding padding of subscriptions, Federal reserve policy
in purchasing long time government securities, etc.
In the course of this discussion Under Secretary Coolidge stated his
belief that the Federal Reserve System had done all that was necessary to insure
proper absorption of government bond issues, though be suggested that in the future
the Federal Reserve System might give consideration to making purchases for its own
account rather than for various Treasury accounts in easing off the market at
times of violent breaks, with the thought that readjustments of maturities might
perhaps he made later through purchases by the Treasury for its investment accounts
from the Federal reserve banks.
The meeting adjourned at 5:15 p. m.
W. Randolph Burgess,
Secretary.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
I
AuthorityQ c Q s k r i s n ^ l
S'
CONFIDENTIAL
MINUTES OF THE MEETING OF TH! EXECUTIVE COMMITTEE OF THE
FEDERAL OPEN MARKET COMMITTEE
HELD AT WASHINGTON, D. C.
NOVEMBER 27, 1934.
/ ?/ 2 c/
f7 ^ I *'
The meeting was called to order at 10:40 a. m., in the offices of the
Federal Reserve Board, the following bei*g present;
Governors Young, Norris, Fancher, and Schaller, and
Deputy Governor Burgess#
Governor Black was also present.
In the absence of Governor Harrison, Governor Fancher was elected
chairman pro tern.
The report of operations was distributed and reviewed, and there was a
preliminary discussion of the problema-presented by December 15 financing,
S
At 11 o*clock the committee left the offices of the Federal Reserve Board
,, end met with the Secretary and Under Secretary of the Treasury at the Treasury
Department, Governor Eccles also being present*
There ensued an extended dis
cussion of the problem of Treasury financing in December,and various proposals
were explored^
At 12:45 the meeting left the Secretary*s office and met briefly
with the Under Secretary in his office where the discussion was continued.
The meeting adjourned at .1:10.
The meeting reconvened at 2i00 in the offices of the Federal Reserve
Board, there being present the above mentioned members of the executive committee*
After discussion of the position which the Federal Reserve Banks should
take with respect to December 15 operations, the committee
VOTED to telegraph all members of the Federal Open Market
Committee requesting approval for exchanging the maturing
issues in System Account either by exchange subscription or
by operations in the market, the policy of the committee in
carrying out exchanges to be detennined by the needs of the
market as related to the Treasury program and the maintenance
of a proper distribution of securities in the System Account*
3 3 3, 3 - a. - /
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I D ecla ssified H o ld in g s o f th e N ational A rchives
d e c l a s s if ie d
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2
The committee also
VOTED to request approval for effecting exchanges between
maturities in the System Account up to a total of $100,000,000'
if it appears desirable in furtherance of the purposes noted
above, with the understanding that there would be no increase
in the total portfolio other than a temporary one.
There then ensued a discussion of the disposition of the reserves of
$4,112,611 set up by the Federal reserve banks at the close of 1933 against depre
ciation in government securities in System Account, and the disposition of
|6,600,000 of realized profits on sales of government securities during 1934 now
held in suspense account.
In view of the very large holdings of government secur
ities in the Federal Reserve System, many of which are entered on the books at
relatively high prices, and in view of the possibility at some time of losses on
sales of government securities, the committee
VOTED That if a satisfactory accounting procedure could be
arranged it did not favor distribution to the different
Reserve banks of profits realized on sales of government
securities this year, and now held in suspense account, and
that it favored continuing as reserves the amounts set aside
at the end of 1933 as reserves against depreciation.
At 2:45 Governor Black and Under Secretary Coolidge and later Governor
Eccles entered the meeting and there ensued a further discussion of the Treasury
financing program*
At 3:30 those present, with the exception of Governor Norris, adjourned
to the Treasury Department where discussions of Treasury financing problems were
continued with Secretary Morgenthau.
At 4:15 the committee returned to the Federal Reserve Board offices and
the members of the committee discussed informally with Dr. Goldenweiser and Mr.
Stark the program of the System committee on legislation.
The meeting adjourned at 4:45 p. m.
W. Randolph Burgess,
Secretary.
R ep rod uced from th e U ncla ssified / D ecla ssified H o ld in g s o f th e N ational A rch ive s
DECLASSIFIED
/
CONFBTOTIAL
MINUTES OF MEETING OF
FEDERAL OPEN MAMET COMMITTEE
HELD AT WASHINGTON, D. C.
September 21, 1934.
3 3 3.3-4-/
The meeting was called to order at 10:45 o fclock a. m., the following
being present:
Governor Harrison, chairman, Governors Young, Norris, Fancher,
Black, Schaller, Martin, Geery, Hamilton, McKinney, Calkins
and Deputy Governors Peple and Bounds, acting secretary.
The secretary’s report of operations was distributed and ordered filed.
The preliminary memorandum was also distributed.
The chairman discussed
this memorandum with reference to the bond market and particularly to the govern
ment bond market, pointing out that the immediate problem^was to determine how the
Treasury and the Federal Reserve System can best cooperate to assure sources of
government financing.
In this connection the desirability of selling early matrui-
ties now held in the open market account up to possibly $50 millions, and buying in
replacement thereof called 4ths which would then be exchanged for 4 year notes, was
discussed.
The chairman reported that Undersecretary Coolidge had already requested
the Federal Reserve Bank of New York to purchase this morning called 4ths for Treasury
account, and had suggested that it would be helpful if the system open market account
would make the exchange suggested above with informal understanding that the Treasury
would take back the 4 year notes the following week in exchange for some shorter
maturities.
Following discussion it was
VOTED
to authorize the Executive Committee, if advisable, to sell up to
$50 millions of short maturities and to buy a like amount of called 4ths, it being
understood that the called 4ths purchased would be exchanged for 4 year notes.
It was understood also that the Executive Committee was authorized in
its discretion to negotiate with the Treasury for the subsequent exchange of the
4 year notes for shorter maturities held by the Treasury in various investment
accounts.
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2
Governor Martin entered the meeting at this point.
The chairman raised the question as to whether the practice of all re
serve banks was uniform with respect to the granting of loans secured by government
obligations.
A poll of those present indicated that all reserve banks were now
lending the full par value, although two of the banks had a rule limiting such loans
to an amount less than par if and when the bonds dropped a certain number of points
below par.
The chairman stated that he had raised the question because of the pos
sibility that the Treasury might ask the Federal reserve banks concerning their
practice in this regard, and also in view of the possibility that it might be sug
gested that a public announcement to this effect be made.
Discussion of the ques
tion indicated general agreement with the present policy of lending at par, but
considerable question as to the wisdom of making any public announcement partly be
cause of the commitment involved in so doing, and partly because of the danger of
its being interpreted as an artificial effort to support the government market.
Upon motion of Governor Calkins it was
VOTED
that it be the policy of all Federal Reserve Banks under present
conditions to lend to member banks up to the par value upon the security of obliga
tions of the government, it being understood that no publicity would be given it
since this action did not reflect any material change in policy, which policy was
already well understood by member banks, and it was believed that any public
announcement might do more harm than good.
The chairman referred to discussion at a previous meeting regarding the
possibility of the Treasury using part of the stabilization fund for the purpose
of acquiring a part of the government bond portfolio of the reserve banks.
Governor Norris pointed out that the Treasury has over $£ billions cash balance
at this time and in addition $2,800 millions in the stabilization fund for which
it had no present use, and in view of these large balances, he added, the Treasury
might well reduce both its balances and its debt by buying up to .^2 billions of its
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obligations from the Federal reserve banks upon an agreement by the banks to
purchase a like amount in new securities from the Treasury upon request any time
prior to December 31, 1936*
He pointed out the effect this operation
upon the current earnings of the Federal Reserve System.
would have
He suggested that the
profit upon the bonds sold to the Treasury offset this loss of current income*
Governor Black suggested that the System should offer to take from the
Treasury additional securities as needed provided the Treasury would agree to buy
from the System a like amount within a specified time.
There m s some doubt whether
the Treasury could or should make any such contract of repurchase.
There followed
considerable discussion concerning the merit of the Reserve System in effect under
writing the governments credit by a definite offer to take whatever might be
necessary of Treasury issues.
While it was generally agreed that the System should
under present conditions do all it properly can to assist the Treasury in its financ
ing program it would not be advisable from the point of view of the Treasury or the
System to make any offer which might be construed as equivalent to an offer to under
write financing of the Treasury deficit*
After discussion Governor Black offered the following resolutions;
which,
upon motion duly made and seconded, was adopted:
That it is the sense of the conference that the Federal Reserve System is
deeply interested in the present, as in the past, financing of the Treasury, and
1
instructs the chairman of the Federal Open Itoket Committee to convey to the
i
i
Secretary of the Treasury the Reserve Systemfs interest, and to advise the Secretary
j
f
of the Treasury that the System will continue its active aid in this financing and
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will be pleased to consider such suggestions as may be made for further cooperation*
The meeting adjourned for lunch*
Afternoon Session
Undersecretary Coolidge attended the afternoon session for a brief periods
He stated that the Secretary would very much appreciate the System’s offer for
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cooperation in the financing of the current issue and added that as a matter of
fact the System had through the, Federal Open Market Committee cooperated fully in
the past, and he did not himself see any way in which greater cooperation could be
given at the moment.
He reported concerning the current offering and added that
while it was impossible to estimate at this time with respect to the December
financing, it was expected that the Treasury would run into December with large
balances which it was believed would reduce somewhat the amount of the offering
to be made at that time.
The Chairman reported to Undersecretary Coolidge that the conference
had been wondering what, if anything, the Reserve System could do to allay fear
which seems present in places regarding the government bond market.
Mr. Coolidge
said he could think of no way or of nothing that the System could do that would be
helpful more than it has already done.
The meeting adjourned at 3 o ’clock p. m.
R. Leslie Rounds,
Acting Secretary.
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CONFIDENTIAL
FE3 2 8 L
MINUTES CF THE MEETING OF THE
SYSTEM COMMITTEE ON THE RECOVERY PROGRAM - X
WASHINGTON» D. C*t SEPTEMBER 6 AND 7, 1934
T
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The meeting was called to order at 10:50 a# m*, there being present:
Governor Harrison, chairman, and Governors Thomas, Young,
Fancher, Schaller,
Deputy Governors Hutt and Burgess, secretary, and
Messrs. Goldenweiser and Williams*
There was first a discussion of the organization of the committee, and
it was voted that Governor Harrison should continue to act as chairman and Mr*
Burgess as secretary#
Question was raised as to the relationship between this committee and
the committee of Federal Reserve Agents for the study of legislative suggestions,
consisting of Messrs. Peyton, Newton, and Williams, and Mr* Stephens, ex officio*
it was generally agreed that some plan should be worked out for cooperation be
tween the two groups, and Governor Harrison was asked to discuss the question
with Governor Thomas*
Governor Black entered the meeting at this point*
J *
Governor Harrison reviewed previous discussions as to the most effective
means for considering banking legislation, and called attention to the unanimous
y
agreement of the joint conference in June that the President should be asked to
appoint a commission for the study of banking legislation*
Governor Black suggested that the desirability of that procedure hinged
on the character of commission which might be appointed, and expressed doubt
whether in practice a commission could be assured qualified to deal understandingly
with the Federal Reserve System*
After some further discussion no action was
taken on this question*
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Governor Black and Governor Thomas both commented on the desirability
for more widespread public and particularly congressional information with respect
\I
to the operations of the Federal Reserve System*
It was generally agreed that
whatever report the committee might make should be directed in part at least toward
this end, and should include some review of the purposes and accomplishments of
the Federal Reserve System*
Dr. Goldenweiser reported as to what research workers might be available
to assist the committee in its work* and after discussion it was moved and carried
that Mr. W. R. Stark be employed on a month to month basis by the committee, his
salary to be subject to the approval of the Federal Reserve Board*
Dr. Williams suggested that it was of importance to determine what the
emphasis should be in the study.
essarily be highly controversial#
An historical defence of the System would nec
A discussion centered upon the structure of
the banking system could include a review of the Systen’s experience with least
danger of controversy, would attack the real point of weakness, and lead to con
structive conclusions.
It was agreed that the committee and its investigators should cooperate
as closely as possible with the Treasury study on banking headed by Professor
Jacob Yiner# |
The meeting adjourned at IS noon.
At 2:45 p* m. the meeting reconvened, there being present:
Governor Harrison, chairman, and Governors Thomrs, Black,
Young, Fancher, and Schaller#
Deputy Governors Burgess and Hutt, and
Messrs. Goldenweiser and Williams.
There was further discussion of the character of the proposed report,
and question was raised as to the audience to which the report should be ad
dressed.
It was agreed that the report should be written in simple language,
should be brief, and should be of such character that it might be addressed to
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the President, the Secretary of the Treasury, or Congress*
It was suggested
that it should be in effect a report and recommendation on the banking structure
of the United States made by the Federal Reserve System*
There than ensued an infomal discussion of the outline of topics which
Dr. Goldenweiser had submitted for the consideration of the committee.
outline is attached to these minutes*
This
The discussion which was wholly preliminary
covered the following points#
A (1), Whether the prestige of the System might be
J
strengthened by leaving bankers off the boards of directors
of the Federal reserve banks#
/
(2) What changes might be made in the composition of
the Federal Reserve Board. Upon this point it was agreed
that the various suggestions which have been made should be
assembled and scrutinized.
(3) Whether the governors of the Reserve banks should
be members of the boards of directors#
(4) Whether the examination function, if it were un
dertaken by the Federal Reserve System, should be centralized
in Washington or decentralized in the several reserve districts.
Decentralization of supervision and of the insurance of deposits
might answer one of the criticisms to unified banking, namely,
that it would tend toward bureaucracy and undue centralization#
(5) Whether the Federal Advisory Council should be partly
composed of business men, and whether if the Council is to
function more vigorously it should not have a larger executive
staff#
The opinion was expressed by some that the Council
should be abolished#
(6) Whether the open market committee, acting with the
Federal Reserve Board, did not in effect constitute the
nearest approach in this country to a central bank: so far as
credit policies are concerned#
(7) Whether the capital stock of the reserve banks should
continue to be owned wholly by the member banks, or be other
wise distributed#
The general feeling was that stock ownership
by the banks had proved desirable#
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(8)
In connection with the question of personnel it
Y/as pointed out that uncertainties as to the future of the
System increased the difficulty of getting the best personnel.
(9) The relationship between getting the best men for
directors of the Reserve banks and the relative balance of
responsibility between Washington and the banlcs was discussed#
(10) The general question of the relation of the central
banking function to the government was discussed. In this
connection two separate movements were noted, a movement to
make the bank of issue a Treasury bank, and another movement
to make it an independent government body.
(11) Whether there should not be some regular arrangement
for a form of franchise tax by which some payment should be unde
to the Treasury at times when the Reserve System has surplus
earnings.
(12) Whether the new reserve requirements plan should be
further recommended by this committee.
(13) Whether the old eligibility requirements have not
been outgrown, and whether the provision for 10b loans should
not be made permanent.
(14) The general question whether the function of a bank
of issue is of such character that general rules may be laid
down for its operation.
The meeting adjourned at 5:30 p. m. to reconvene at 9:30 a. m. the
following morning.
The meeting reconvened on Friday morning, September 7, at 9:30 a. in.,
there being present:
Governor Harrison, chairman, and Governors Thomas, Sclialler,
Deputy Governor Hutt, and
Messrs. Goldenweiser and Williams*
Governor Harrison reported that he had discussed with Secretary Morgenthau
the activities of the System committee with respect to the proposed stock talcing
report, and Secretary Morgenthau expressed a desire to cooperate and was entirely
agreeable to the committee’s employing ^r. Stark, whose resignation from the Treasury
is to take effect September 15*
It was suggested and agreed that for the present the activities of the
committee be given no publicity*
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The meeting was interrupted at this point for the holding of a brief
meeting of the Executive Committee of the Federal Open Market Committee but re
convened shortly as the Conmiittoo on Recovery Program#
It was agreed that the unification of the banking system was the central
problem of tho committee and might require the appointment of a sub-committee.
With respect to the insurance of deposits it was suggested that if the
bank examinations are decentralized by reserve districts deposit insurance should
be organized on the same regional basis.
At this point Governor Black entered the meeting.
Dr. Goldenweiser suggested that deposit insurance funds should be used
to prevent bank closings rather than to pay off deposits after closings.
It was agreed that insurance of deposits, branch banking, and unified
tanking were all parts of a single problem.
There ensued a general discussion of branch and chain banking, at the
conclusion of which it was agreed that each member of the committee should write
out his
ideas on the subject and submit then to the chairman, and that this pro
cedure would probably bo better than the appointment of a sub-committee at this
time.
It was agreed that for the present it would be well for the committee to
avoid discussion of monetary policy in the proposed report.
r
There ensued a discussion of publicity and public relations, in which
the importance of such work was emphasized.
Governor Black and Governor Thomas
both spoke strongly in favor of more adequate publicity.
\
Question was raised
whether the Reserve System should have same form of publicity bureau^J
It was agreed that a meeting of the Governors Conference and the Open
Market Committee should be called in the hear future, which would discuss tho
problem of publicity, industrial loans, etc.
The meeting adjourned at 11:15 a. m.
W. RANDOLHI BURGESS,
Secretary.
m
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
COMFlDIHtlAL
MINUTES OF THE MEETING OF THE EXECUTIVE COMMITTEE OF THE ^ 7 ?
— /
FEDERAL OPEN MARKET COMffTTEE
,
HELD AT WASHENGTON, D . C .
AUGUST 8, 1934
,
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There were present for the meeting
Governor Harrison, chairman, Governors Norris, Faneher, and
Schaller, and Deputy Governor Burgess, secretary.
At 10?45 a* m.f the committee met with the Federal Reserve Board, there
being present
From the Federal Reserve Board
Governor Black, Messrs* Miller, Hamlin, and Thomas,
Undersecretary Coolidge,
From the Board staff
Messrs. Morrill, Wyatl, Goldenireiser, Martin and Jones*
j*
Governor Harrison reported upon his recent trip abroad, the meeting
having been called at his request for that purpose*
At 12:00 o ’clock the ccumittee adjourned from the Board offices to the
Treasury and, in company with Governor Black, met with Secretary Mbrgenthau, who
discussed with them informally the method of handling silver certificates to be
issued against purchases of silver by the Treasury.
The Secretary stated that
his present plan was to issue up to §100,000,000 of silver certificates, and he
trusted the Reserve banks would cooperate by receiving and paying out these silver
certificates in the normal course of business#
There was some discussion of the method by which these certificates
should be distributed, and it was agreed that further consideration would be given
by the individual meidbers of the committee*
There was also discussion of the method of dealing with any shortage of
tenders for the $150,000,000 of bonds of the Home Owners Loan Corporation being
offered that afternoon*
The meeting adjourned at one o’clock*
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Tlie meeting reconvened at 2:15 p* m. in the offices of the Federal
Reserve Board with Governor Black*
Governor Harrison referred to the fact that
at the last joint conference in June the members of the Executive Committee of the
Federal Open Market Committee had been asked to serve as a continuing committee to
study ways and means of aiding the recovery program, as well as to study necessary
changes in the banking system*
It was recognized that there was probably little
specific action, other than what has already been taken by the Federal Reserve
System to aid directly in recovery, except through the extension of industrial
loans under the Act of June 19, 1934*
In this connection, reference was made
to the fact that commercial bankers are reported to be hesitant to participate in
these 5-year industrial loans for fear that such loans will be criticized by bank
examiners*
Governors Harrison and Fancher were appointed a committee to discuss
this question with the Secretary of the Treasury*
There ensued a discussion of plans for studies of changes in the bank
ing system*
It was agreed that in order to conduct sue
desirable to place the responsibility on a small group
agreed that Dr. Goldenweiser and Dr. John Williams shou
work and that they should associate with themselves Mr. Walter Stewart if he were
available and, if not, that some other outsider should be considered*
Governor
Black indicated that he would like to add to the committee of governors for the
purpose of these studies a member of the Federal Reserve Board, in order that the
Board might have representation on the comnittee*
It was felt that this would be
advisable*
The Secretary’s report of operations was distributed and considered*
There ensued a discussion of the disposition of profits on securities sold and
those present agreed that it would be desirable to use realized profits to write
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down the book value of government security holdings rather than to distribute them
as income.
It was recognized that this procedure involved a number of accounting
problems which should be given careful study before the end of the year.
Governor Black reported that the directors of the Federal Reserve Bank
of Atlanta had expressed a desire to discontinue the Havana Agency, and reported
that both representatives of the State Department and the principal banks having
branches in Cuba had expressed themselves as opposed to the discontinuance of the
Agency.
Governor Black pointed out that the law provided that the Board can re
quire any bank to establish a foreign agency.
He raised the question whether
some means could be devised by which the expenses and risk of maintaining the
agency could be distributed among the twelve Federal reserve banks rather than
having it all fall upon the Atlanta bank.
Governor Harrison suggested that con
sideration should be given to the possibility of using one or more of the commer
cial banks having branches in Havana as agencies of the System*
The meeting adjourned at 3:15 p. m.
W. Randolph Burgess
Secretary.
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confibential
MINUTES OF THE MEETING OF THE FEDERAL OESN MARKET COMMITTEE
HELD AT
____________ WASHINGTONt D. 0., JUNE 36, 1954__ __________
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b I 7 ~ (o j 3 y
The meeting was called to order at 12:45 p« m«, there being present:
Governor Harrison, chairman. Governors Young, Norris,
Fancher, Seay, Schaller, Martin, Geery, Hamilton,
McKinney and Calkins, and Acting Governor Johns*
* The chairman reported that at the last meeting of the executive committee,
held, in Washington on May 23, there had been some discussion with the Secretary of
the Treasury with respect to the possible utilization of the stabilization fund for
the purchase of government securities in the open market*
At that time the
executive committee had expressed doubt as to the wisdom of such purchases, and th®
i
Secretary of the Treasury had advised the committee that he would make no further
purchases of government securities out of that fund at least until after June 15*
The chairman reported that last week (June 20) the Secretary had advised him that
the Treasury Department had no present intention of using the stabilization fund
for the purchase of government securities, and that in no event would that fund be
used for that purpose in the future without first advising the Chairman of the
Federal Open Market Committee and giving him an opportunity to express the
Committee^ views on the subject*_^
The chairman then referred to discussions which have taken place from
time to time in the past about the possible sale of government securities out of
the System account to the Treasury, payment to be made out of the stabilization
fund, and stated that on June 20 he had discussed the matter more formally with
Treasury officials who expressed considerable interest in the possibility of pur
chasing up to $500 million of the System*s longer maturities, but felt that in view
of the fact that conditions in the government security market are now most satis**
factory and in view of the Secretary1s prospective absence until August 1, further
consideration of the matter should be postponed until his return in August*
Qijttbu* $ j ^ V 3 ^
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The chairman pointed out that in view of the likelihood that we would
not have another meeting of the full committee prior to August, it might be appro
priate to consider giving the executive committee some authority in the matter#
After discussion it m s unanimously.
VOTED that subject to the approval of Federal Reserve Board
the executive committee be authorized to sell up to §500
million of the System’s holdings of government securities
to the Treasury, if and when it seems desirable, it being
preferred that any securities so sold should bo of the
longer maturities#
In the course of the discussion of this matter it was pointed out that
in determining the amount of any securities so sold to the Treasury, the earning
position of the System should be taken into account, and that the position of
individual reserve banks might have to be protected by the usual transfers within
the System.
Any profits from the sale of securities would be allotted among the
Federal reserve banks in the usual proportions#
Governor Harrison reported that with the approval of the Federal Reserve
Board, he was planning to sail for Europe the end of June to be at Basle during a
meeting of the directors of the Bank for International Settlements at Basle on
July 9, that he would probably visit Paris and London after that meeting, and ex
pected to be home before the end of July#
The meeting adjourned at 1:30 p. m#
George L* Harrison,
Chairman#
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MINUTES OF THE MEETING OF EXECUTIVE COMMITTEE OF THE
FEDERAL OPEN MARKET COMMITTEE
H M D AT WASHINGTON, B. C.,
_______
MAY 23, 1934
the meeting was called to order at 10:15 a. m., the following being
present:
Governor Harrison, chairman, Governors Young, Horris, and Schaller
and Deputy Governor Burgess, secretary.
Governor Black was also present
©i© secretary presented a report of operations which was carefully
reviewed.
There ensued a discussion of the proper balance of maturities in the
System account*
was called to the reduction in yield on the securities
in the account and the need of some of the Reserve banks for additional earnings,
I
SJ
There was discussion as to whether some shift into longer maturities might exert
a wholesome influence toward a reduction in the long term rate of interest^/
Question was also raised whether there was a possibility of a purchase of govern
ment securities from the Federal Reserve System by the Treasury for the account
of the stabilization fund.
These questions were discussed wholly tentatively
without any conclusion being reached.
At 18:20 Secretary Morgenthau, Under Secretary Coolidge, Dr. Viner, and
Mr. Bell, joined the meeting.
There ensued an extended informal discussion with
regard to Treasury financing on June 15*
The meeting adjourned at 1:30 p* su
W* Randolph Burgess,
S e c re to ry
4
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i ' i ' *' ‘v '•"■-‘t c - i
OCWIBBITIAL '
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MINUTES OF THE MEETING OF EXECUTIVE COMMITTEE OF THE
FEDERAL OEEN MARKET COMMITTEE
HELD. AT 77ASHINGT0N, D* C.,
_________ ______ APRIL 2, 1934___________________
The meeting was called to order at 10:35 a# m*, there being present:
Governor Harrison, chairman, Governors Young, Norris, and Schaller,
and Deputy Governor Burgess, secretary#
From the Federal Reserve Board
Governor Black
From the Treasury
Secretary Morgenthau, and Messrs* Smith, Coolidge, Bell,
Stark, and Lanston.
The Secretary of the Treasury presented the Treasury problem of financing
to be carried through in April, and there ensued a general discussion of the ques
tions of the amount of money to be raised, type of securities to be offered, and
the program to be followed with respect to calling a portion of Fourth 4 1/4$
Liberty Loan Bonds*
At 12:40 this meeting adjourned, and the committee reconvened without the
Treasury representatives, though Secretary Morgenthau, Mr. Coolidge, and Me. Smith
were later present during a part of the meeting*
The report of operations and the preliminary memorandum were distributed
to those present and were discussed*
It wag pointed out that the System held $59,000,000 Fourth 4 l/4% bonds
which were called for redemption on April 15, and also held §57,000,000 of 3$
Treasury notes maturing May 2, and that in case the Treasury made an exchange
offering on April 15 for these two issues a decision would have to be reached as
to the extent to which the System would exchange its maturing issues for the new
offering#
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Reproduced from the Unclassified I Declassified Holdings of the National Archives
2
The intimation hav-L^g been given that tlae new issue
would probably
be of ten-twelve year bonds, there was recognition of the fact that a twelve-year
maturity was rather long for Reserve Bank purchase, and that tho inclusion of such^
bonds in the System portfolio would bo at variance with previous policy#
Governor
Harrison suggested, however, that as the System has cooperated so closely with the
government in its program of financing it should be careful now to avoid any action
which might impede or unnecessarily give the impression of impeding Treasury under
takings#
Any attempt by the System suddenly to sell its maturities on a large scale
and replace them with shorter obligations might interfere with the success of the
Treasury refunding issue • ^furthermore, the System has a responsibility for the
long term money market, upon the revival of which the return of business prosperity
depends in considerable measure#
In the course of discussion it was also pointed out that the earnings
problem was likely to be increasingly important for the Reserve banks, and sane
block of bonds with a good yield might be desirable from that point of view*
It
appeared that for some time to come the Reserve banks would be dependent for earn
ings on the yield from their government holdings, which was steadily declining#
The
System was moreover likely to hold a substantial amount of governments for some time
to come, some relatively small part of which might both safely and profitably be
composed -of longer time higher yield securities#
After extended discussion it was agreed by all those present that in
connection with the April 15 financing the System should follow the same procedure
that was followed on March 15;
that is, if favorable opportunity arises, either
in the market or with the Treasury itself, maturing issues should be sold and re
placed with short governments to the extent that this can be done without dis
turbance to the market;
and that the balance of th$ maturities not so disposed of
should be offered in exchange for the new Treasury issue#
There ensued a general discussion of pending legislation#
The meeting adjourned at 2:00 p# m#
W# Randolph Burgess,
Secretary*
^
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Note changes from preliminary draft.
Believe new sentence on page 2 should be
brought to Governor Black*s attention.
dov^ftior Black for initial.
Please note particularly new sentence at top
of page Z of mimrtes.
Return to Mr. Carpenter.
^
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DECLASSIFIED
Authority £ ^ > 1^
I Q
t l
5
l c \
MINUTES OF Uffi MEETING OT THE IBIERAI, OPEN MAHCJT COMMITTEE
3 / J/ ' '
HELD AT
SASHIN3TON, D. C., MARCH 5, 1934
The meeting was called to order at 4:00 p. m., there being present;
Governors Young» Norris, Seay, Schaller, Martin, Geery,
Hamilton, McKinney, and Calkins*
Acting Governor Johns, and
Deputy Governors Homing and Burgess, secretary.
In the absence of Governor Harrison, Governor Calkins was elected ch£ ii>*
man pro tern.
The preliminary memorandum and report of the operations were distributed.
There ensued a discussion of tfea maturities of securities held in the
System Account• It was pointed out that approximately $150*000>000 of the holding®
would mature an March 15» and that at that time the Treasury would probably issue
in exehenge a Treasury note of several years* maturity.*^ was further pointed out
that in view of the scarcity of short tena Treasury obligations available in the
market it would be very difficult to replace any considerable amount of the
maturity with short term securities from the market without disturbing the market
question was therefore raised whether the System
&>uld be prepared to reduce its holdings of nearby maturities by exchanging the
maturing issue for the new notes.
It was noted in this connection that nearby
holdings had been built upto an unusually large figure in view of the uncertain
ties of the recent period.y In the eours© of this discussion the opinion was ex
pressed by a number of those present that the exchange suggested should not bf»
considered a precedent to be followed
nearby maturities in the account,
90
far as to reduce below a round amount the
It was agreed that it would be desirable to
continue to M i n tain a large amount of very short issues,
so as to be prepared
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2
to dispose of securities rapidly if the occasion shoulc. arise, jln view of market
conditions end with the understanding that no precedent was created} it was then
VOTED to convert the whole or any part, as might be determined
by the executive committee, of the $150*000,000 of March
maturities into any new note offering which mi ?ht be offered
by the Treasury.
It was then pointed out that the System held $59,000*000 of Fourth 4 1/4
Liberty bonds which had been called for redemption on April 15 nexti and in view
of the possibility that a bond issue might be offered by the Treasury in replacement
ol these maturing bonds the System*s policy with respect to maintaining its bond
holdings might be considered.
After discussion it was
VOTED that the executive conmittee be given authority to
replace the whole or any part of the Fourth 4 l/4s called
for redemption on April 15 with securities of such maturities
as the conmittee may determine.
The secretary reported that* in view of considerable difficulty that was
being experienced in replacing current maturities of Treasury bills with short
obligations, the executive committee had agreed when necessary to replace a small
portion of the maturities with longer term issues.
In view of the fact that the amount of holdings in the System Account had
not been changed for some weeks and in view of the very large and increasing excess
of reserves of member banks question was raised as to continuation of authority for
purchases remaining in the hands of the executive conmittee, and after consideration
it was
VOTED that the authorization to the executive committee for
the purchase of government securities, renewed last on October
10 * be reduced to $100,000,000.
The meeting adjourned at 5«00 p. m,
W. Randolph Burgess,
Secretary*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Auth°rityScQfdgr_ lat&e'
3 3 3 .3 '^'/
*9 "
OOTFI33SRTIAX.
VVw^v
m m AL CSPM MAEEET COMMITTEE
HELD iff
FEBERAL RESERVE BANK OF NEW ?YCEK> OCTOB® 3.5, 1933.
The meeting was called to order at 10*30, there being present:
Governor Harrison, chairman, Governors Young, Norris, and Fancher,
and Deputy Governors McKay and Burgess, secretary.
Governor Harrison reported on recent developments with respect to the
financial program of the administration, including the plan for purchases of gold.
There ensued a discussion of the program of purchases of government
securities, and the question was raised whether it would be desirable to stop
purchases at once.
The point was made that to do so
would involve an abandonment
of a program of gradual reduction of purchases which had been carefully outlined
at the meeting of the Federal Open Market Committee in Washington cm October 10,
1933.
A further objection lay in the probable depressing effect on the bond
market of a sudden interrupt ion of security purchases at a time when the bond
market was already adversely affected by recent developments.
After discussion it was generally agreed that the policy of gradually
diminishing purchases should be followed, and it was moved and carried that dur
ing the coming statement week purchases of 14) to $18,000,000 should be made
unless subsequent developments make it appear inadvisable.
Mr. McKay voted in
the negative.
There was a discussion of the question of allotment of securities be^
■
tween
Federal reserve banks, and it was agreed for the current statement week
for the coming week to continue to base allotments on the percentage of each
bank’s total reserves to the total reserves of the System.
Mr. McKay stated that
the Chicago bank, by reason of the action ©f its executive committee, was not in
3 - <1 ** I
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a position to participate for more than 12$*
It was agreed that other banks
should be offered such amount of Chicago's participation as that bank did not take#
^ T h e question was then raised concerning the policy which should be fol
lowed with respect to the conversion of approximately $84,000,000 Fourth 4 1 / 4 $ _
Liberty Bonds in
I
~^prTI 15.
System account vStich had been called for redemption next
It was suggested that, generally speaking, any considerable holding
of long term bonds was a violation of the principle of central banking.
It was
emphasized, however, quite apart from the desirability of cooperating in every
way with the Government, that with their present large holdings the Reserve banks
had a practical selfish consideration in the status of the government security
market, and that the value of the holdings might be seriously affected by any
failure of the conversion plan.
\\
After extended discussion the following motion was passed, to be sub
mitted to all members of the Federal Open Market Committee for their concurrences
Voted to request the members of the open market committee to
give the executive committee authority to offer for conver
sion all or such part of the called Fourth 4 1/4$ bonds in
the System portfolio as may in the judgment of the committee
seem advisable from time to time in the light of all the cir
cumstances.
The meeting adjourned at 12:55 p . m .
W. Randolph Burgess
Secretary
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CQNFID1NTIAL
HELD AT WASHINGTON. D« C., TUESDAY, OCTOBER 10, 1953*
The meeting was called to order at 5 p. m«, there being present:
From the Federal Reserve Board
Governor Black, and Messrs* Hamlin, Miller, James,
Thomas and Szymczak.
f
from the Federal reserve banks
Governor Harrison, chairman, and Governors Young,
Norris, Fancher, Martin, Geery, Hamilton, McKinney,
and Calkins,
Acting Governor Johns, and Deputy Governors Peple
and M<&ay*
From the Federal Reserve Board Staff
Messrs* Morrill and Martin, „
^Governor Harrison outlined to the conference briefly the discussion
which took place at the meeting of the executive comaittee in Hew York on
September 21, at which time, he pointed out, the committee agreed that there m s
then little, if any, necessity for the further purchase of government securities
from the point of view of the prosent credit and banking position alone.
He
referred to tho fact that money rates in tho principal centers are the lowest of
m T time in their history;
at any’time since 1917;
that tho borrowings of member banks are lower than
that excess reserves are now at their highest level,
about 800,000,000^ and that in these circumstances it might well be argued that
further purchases of government securities are no longer required as a means of
pressure towards o^ansion of credit.
The question for the conference to decide,
thoroforc, was whether under those conditions there wore other reasons, apart from
the ordinary central bank objectives, for continuing open market purchases, and
if so* in what amounts or at what rate*
Digitized
C Ufor FRASER
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Governor Black expressed the view that open market operations to date
had no doubt been effective, as Governor Harrison had stated, in making for great
ease in the credit position, and that they had also been a most important factor
to date in minimizing the pressure for more drastic inflation;
that all things
considered, he thought it would be advisable to continue open market operations
lest a cessation now might sooner or later force radical ateps*
Mr. Miller questioned whether there was any real risk in farther pur
chases of government securities, and expressed the opihion that we should con
tinue them for a while at least#
The only real question in his mind was at what
rate they should be made, that is* whether at the same or a lo^er rate*
pMr. James felt that there was little that could be done that would be
of effect until the various functions of the government were co-ordinated in re
pairing the banking position, and that we must also 1 ind ways of affording a
compensatory return for money.
In this connection, Governor Young expressed the
view that it is possible to get money rates so low as to be a deterrent to its
use.
But apart from that, Governor Young said that in the present state of
affairs, and possibly for political reasons, it might be advisable for a time to
continue to buy securities but at as low a rate as is possible without precipitat
ing other difficulties.j
Governor Hamilton stated that most commercial banks are suffering frcm.
a loss of earnings.
He felt that the program for the issue of capital stock to
the Reconstruction Finance Corporation was an excellent idea,
but it was diffi
cult for him to see how the banks could use the money thus obtained.
Governor Young reiterated his belief that having commenced the program
of cpen market purchases it might be harmful to stop entirely just now, but that
we should ease off in our purchases, if possible, beginning this'week.
Governor
Harrison questioned whether this particular week was a good week to begin reduc
tions if only because of the possibly bad repercussion on the new Treasury issue
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to be announced on Thursday.
Governor Martin stated that while he felt that we should continue the
program for the time being, nevertheless we must keep more and more in mind the
necessity for giving banks an opportunity to make some earnings.
Governor Norris remarked that we have well over two billion dollars of
goveriL.ient securities, which form over 95% of the assets of the Federal reserve
banks.
also mentioned the fact that money rates are now so low that many
banks have no incentive to make loans since many loans at present rates involve
I
\j
& risk with but little return.
Furthermore he is of the opinion that the majority
of the American public is against inflation and for sound money.j
In this connec
tion he felt that the opinions expressed by the American Federation of Labor and
the American Legion are significant, and that it is possible that the talk of in
flation is more noisy than real.
On the whole, however, he felt that we should
be prepared to buy government securities for a few weeks or months longer, if
necessary, pending the formation of a monetary policy, although if continued too
long the only effect of them will be to weaken the banking structure of the country
by reducing rates to a point which will yield little return to the banks and deter
them from making loans.
He called attention to the fact that increased employment
V
s
depends in large part now on a revival of the heavy goods industries which in turn
depend upon reopening of the capital markets.
Mr, McKay stated that the Federal Reserve Bank of Chicago has participated
in the program thus far reluctantly, and that the directors seeing no great good
resulting from the program, felt that there was no need now to continue*
He said,
therefore, that his directors preferred not to proceed any further unless directly
requested to do so under the terms of the Thomas amendment.
Governor Fancher said there was some question in his mind as to the ad
visability of changing the System policy at the moment although he favored doing so
as soon as possible.
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Mr# Hamlin concurred with the views of Governor Black and Mr# Szymczak
who felt that we should continue the program at least until January 1. j ^ M r . ’Thomas
favored a continuation of the policy inasmuch as he feared that stopping purchases
would be construed as a signal for deflation.
I
part of the problem*
Psychology, he said, is the largest
He would, therefore, prefer to see purchases increased
rather than reduced^
At 5 p* m* the Federal Reserve Board withdrew from the meeting and the
Federal Open Market Committee continued its discussion*
Governor Harrison presented to the conference the preliminary memorandum
as well as the Secretary’s report of open market operations since the last meeting*
Both were considered and ordered placed on file.
After further discussion of the arguments in favor of and against further
purchases of government securities it was voted unanimously that the minutes of
the meeting of the executive committee held in New York on September 21 be approved
and ratified.
It was then unanimously voted that subject to the approval of the
Federal Reserve Board,
the authority granted to the executive committee at the
meeting of the Open Market Policy Conference on April 22, as amended, to purchase
up to $1 ,000 ,000,00 0 of government securities be continued and reaffirmed for tho
unused portion of the authority*
During the discussion of this resolution it appeared to be the opinion
of all those present that from the point of view of the present credit and banking
position alone, there was little, if any, necessity for further purchases of govern
ment securities, and that, therefore, it would seem to be advisable in the present
circumstances gradually to reduce the rate of purchases as soon as and to the ex
tent that it is possible to do so without adverse effect upon the government’s
program of recovery.
It was recognized, however, that in view of existing un
certainties and the possibility of the development of now conditions or policies
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that cannot now bo foreseen, the executive conmittee should be free, pending
another meeting of the Federal Open Market Committee, to uso its discretion as
circumstances dictate*
At this point the executive committee took up for consideration the
question of the amount of purchases for the current statement week, and it was
voted that $35,000,000 should be bought.
Mr. McKay voted in the negative and
stated that in view of the action taken by his directors it would be impossible
for the Chicago bank to participate in these purchases;
whereupon all the other
Governors present said that they would recommend that their banks take their pro
rata share of the purchases which otherwise would have been allocated to the Chicago
bank.
The meeting adjournod at 6:30 p. m.
The meeting of the Federal Open Market Committee reconvened Thursday,
October 12, 1933, at 11:15 a. m #» there being present:
From the Federal reserve banks
Governor Harrison, chairman, and Governors Young,
Norris, Fancher, Martin, Geery, Hamilton, McKinney,
and Calkins,
Acting Governor Johns, and Deputy Governors Peple
and McKay.
Governor Harrison stated that in view of the discussion which had taken
place in the past two days about the effectiveness of further open market opera
tions under present conditions, he thougjht it would be helpful if the conference
would formally express its views to the Federal Reserve Board regarding the usual
objectives of open market operations, reviewing what had been accomplished thus
far toward improving the banking position of the country and in creating a credit
position which would make possible an expansion of both short time and long time
credit as soon as there might be need or demand for it, and pointing out the
deterrents to the desired expansion of credit in present circumstances*
After
further considerable discussion, the following resolution was unanimously adopted
as an expression of the views of the committee:
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"In their participation in the extensive open market
program which the Reserve System has conducted for a number of
^months past, the Federal reserve banks have been actuated by
their desire to contribute to the fullest extent within their
power to the national recovery effort*
In furtherance of that
desire, and as a result of our observation of the cpea market
operation, we believe that we may render a helpful service by
recording our present views.
"The System’s holdings of government securities now
amount to the unprecedented sum of $2,344,000,000, more than ten
per cent of the Federaldebt.
Excess reserves of member banks are
now nearly $800,000,000, member bank indebtedness to the Reserve
banks has been reduced to the smallest figure since August, 1917,
and short time money rates have been forced down to the lowest
*
level in our history.
When to these facts it is added that the
volume of currency outstanding is approximately |5,600,000,000>
far in excess of that outstanding in 1929, and that bank reserves
are greater than at any previous time in our history, it would
seem that our monetary problem today is not so much one of cor
recting a deficiency in the supply of basic money, whether by
Federal Reserve credit or by government currency, as of achieving
an effective use and turnover of the already existing supply.
/
♦’Open market operations, as a means of stimulating business recovery, axe ordinarily designed to force banking funds,
first, into the short time money market, and subsequently, as
short time rates are lowered, into the intermediate and long time
capital markets.
In the present instance, it seems clear that
neither of these major purposes is yet accomplished.
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nAs to short term credit, there are still grave ob
stacles both for borrowers and for lenders.
Many business
concerns, whose worth has been diminished by the unprecedent
ed shrinkage in values and by several years of unprofitable
operation have been either unable or afraid to draw upon the
available credit supply.
At the same time many of the banks,
partly by reason of their former unfortunate eaperiences and
partly by reason of new uncertainties incident to the in
auguration of the deposit insurance and other features of the
Banking Act of 1933, have felt it necessary to pursue a policy
of extreme liquidity.
The result is that, notwithstanding
the Reserve System’s open market purchases and the consequent
large increase in bank reserves, loans and investments of member
banks have been virtually stationary for four months, and net
demand deposits are less today than at the end of May^
In ad
dition, some $4,000*000,000 of deposits remain locked up in closed
or unlicensed banks..
O ’N'ot only has there been no espansion in the volume of
short term bank credit, but the desired pressure of funds into
longer uses in the capital goods industries seems to be blocked
by lack of confidence in the future position of the dollar and
uncertainty with respect to monetary policy in general, and also
by the liabilities imposed by the Securities Act of 1933 and the
Banking^Ac^of. 1933.
pletely stagnant;
The capital issues market remains com
and coupled with this fact is the fact that the
recovery in business from March to August, though unprecedented
for extent in so short a period, revealed a serious lack of balance
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in the pronounced lagging of the capital goods industries,
ifoich are responsible for over 60 per cent of present unemployment._j>It is worthy of special mention, also, that during the
recent recurrence of inflationary agitation the bond market lost
one-third of its advance since March.
The bearing of a declining
bond market upon the condition of banks and upon the prospect for
reviving the capital goods industries through the long time money
market requires no elaboration#
"In our judgment, these conditions indicate that the
effectiveness of open market operations, in so far as banking and
credit factors are concerned, will depend in large measure upon
the early adoption of a broader program, designed to strengthen
confidence and to encourage the flow of credit, both short time
and long time, into uses which make for a well-balanced and
enduring recovery."
The meeting then adjourned as a meeting of the Open Market Committee
and after a brief meeting with the Federal Reserve Board as a Governors Conference
reconvened as a meeting of the Open Market Committee with the Federal Reserve
Board, the following being present in addition to the representatives of the
Federal Reserve banks.
From the Federal Reserve Board
Governor Black, and Messrs. Hamlin, James, Thomas,
S zymc zak, and 0 *Connor •
From the Federal Reserve Board staff
Messrs. Morrill and Carpenter^
Governor Harrisen advised the Board of the action taken by the Federal
Open Market Committee in voting unanimously that the authority granted to the
executive committee to purchase up to $1 ,000 ,0 0 0,00 0 of government securities be
continued and reaffirmed for the unused portion of the authority, and he stated
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that, immediately after the action of the Committee, the executive committee met
and authorized the purchase of #35,000,000 of government securities during the
current statement week, which meant that the securities had to be purchased not
later than Wednesday, October 11, 1935, and, not having an opportunity to submit
the resolution to the Federal Reserve Board for approval, a purchase of the author
ized amount was consummated under the previous authority granted to the executive
committee*
Governor Harrison also informed the Board of the views set forth above
which were expressed by the members of the Federal Open Market Committee during
the discussion in their separate meeting of the Committee’s action, and he read
the memorandum of open market policy which had been adopted by the Committee as an
egression of its opinion#
Governor Black raised the question whether the memorandum was to be
understood as being confidential between the Federal Open Market Committee and the
Federal Reserve Board, and Governor Harrison stated that it was understood by the
members of the Coumittee that it was to be treated as strictly confidential by
them, and that, while the Committee would have no objection to the submission of
the memorandum to the Secretary of the Treasury or to the President of tho United
States, if the Board decided such action would be helpful, it was to be held
otherwise in strict confidence#
The meeting adjourned at 1;15 p» m*
George L. Harrison,
Chairman*
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y g m m s OJ MEETING OF EXECUTIVE COMMITTEE OF THE
r a W U L CPW 1MRXET 0014UTTEE
f/ l it3 3
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SHPTMB2B 3 1 , 1 9 5 5
The meeting was called to order at 10*50 a« m#, there being presesttf
Governor Harrison, chairman, Governors Young* Norris and
Fancher, and Deputy Governors HciCay and Burgess, secretary#
The report of operations and the preliminary memorandum on credit condi
tions were distributed and read*
Governor Harrison reviewed recent developments with respect to monetary
policy, referring particularly to the relation between Federal reserve policy and
the monetary policy of the Jjiministration*
jGovornor Harrison read a memorandum regarding a conversation on September
16 with Governor Black concerning open market operations.
'The following paragraphs
are quoted from this memorandum:
i-""
1
"As I see the picture, I said, we now have,
largely through open market operations and a rot urn flow of
currency, created approximately $700,000,000 of excess
reserves and a very easy money market position#
Certainly
from the point of view of the credit and banking situation
there would appear to be no need for any further purchases
of Government securities.
Our operations to date, together
with other factors, have resulted in placing the banks of the
country as a whole in a position to make a very substantial
scansion of bank credit as soon as there is a demand for it
by borrowers entitled to have it on the basis of good credit
risk.
Consequently, further purchases of Government securi
ties in the open market must be justified by factors outside
the immediate banking and credit picture or, to put it differ
ently, outside those matters specifically and immediately with
in the jurisdiction of the Federal reserve banks, as central j
banks.
y
T»»yor some weeks now, under the authority granted by
th$ Qpen Market Comaittee with the approval of the Federal
Keaerve Board in Hay the Executive Committee has been making
weekly purchases partly bocauso of the need for creating an
easy baling position but in latter weeks largely because wo
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have been informed by Governor Black, Secretary Woodin,
Mr. Acheson, Mr* Sprague and others from Washington,that this
is an import ant and advisable way for the Federal reserve
banks to cooperate with the Government’s program of recovery
and an especially weighty factor in minimizing the risk of
drastic methods of currency inflation, such as greenbacks, I
explained to Governor Black, however, that I had some hesita
tion in recommending a continuance of open market operations
for these reasons alone, unless I was definitely sure that his
views as to the need for these purchases represented the views
of the Federal Reserve Board as a whole. In other words,
there being no clear cut need from the banking and credit
position, I wanted to be sure that the Federal Reserve Board
considers that a continuance of open market purchases are
advisable or necessary as a contribution to the Governmental
program of recovery and also as a substantial means of minimi z - /
ing the risk of greenbacks.
"Governor Black said he understood my position per
fectly; that he agreed with it entirely; and that I was quite
right in assuming that the Federal Reserve Board, as well as he,
felt that it is advisable to continue open market purchases at •
about the present rate."
There ensued a general discussion in which those present all indicated
general agreement with the view which Governor Harrison had expressed to Governor
Black in the memorandum;
namely, that the committee saw no present need for
further open market operations purely on the basis of monetary considerations as
they appeared from the strict viewpoint of the bank of issue.
But it was agreed
that because of the other considerations mentioned in the memorandum it was de
sirable for the present to continue purchases.
It was voted that purchases not
to exceed $36,000,000 be made in the current statement week with the understanding
that a lesser amount might be purchased if a change in conditions appeared to make
that advisable.
At this point Secretary Yfoodin entered the meeting, and in the course of
the discussion Secretary Woodin stated that a continuation of open market operations
at about the recent scale was very desirable as an aid to the Administration program.
Secretary Woodin left the meeting shortly thereafter.
The question of the allotment of purchases of securities was then dis
cussed and consideration was given particularly to a proposal made by Deputy
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Governor McKay of the Federal Reserve Bank of Chicago by which the participation
of the Federal Reserve Bank of Chicago might be somewhat reduced*
In the course
of this conversation Governor Black called Governor Harrison by telephone to say
that it might be disturbing at this time to make any considerable change in the
open market program either withsrespect to the amounts purchased or the method of
allotment*
Governor Black saw no objection, however, to the slight change in basis
of allotment outlined below*
After farther discussion.it m s voted that the general program of allot
ting new purchases of government securities on the basis of excess reserves be
continued, but that in the application of this formula the minimum reserve per
centage considered should be 50$ rather than 55$.
This change was believed to
be justified in view of the considerable evening up of reserve percentages which
has resulted from the distribution of new security purchases*
Changes in the
ratios of participations of the twelve banks are given in the attached exhibit.
There was some further discussion of the amount of securities to be
purchased during the statement week, and it was agreed that if the dollar should
be very weak in the foreign exchange markets, consideration might properly be
given to reducing somewhat the rate of purchases*
The meeting adjourned at 12:45 p* m*
Y/. Randolph Burgess,
Secretary*
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DECLASSIFIED
!cckc/a&^;
per cent Distribution of Excess Reserves
of Federal Reserve Banks on September 15, 1935
Over 40$
iver 45$
Over 50$
Over 55$
8.6
9*1
9.7
11*0
25,9
22.4
20.0
15.5
Philadelphia
5.9
5*7
5.4
4.8
Cleveland
7.1
6 .8
6,5
5.9
Richmond
4.2
4.2
4.5
4.5
Atlanta
3.1
3,1
3.1
5.1
Chicago
28.1
29.6
31.8
55.9
St. Louis
4.2
4.2
4.5
4.4
Minneapolis
2 .2
2U
2 .0
1 .8
Kansas City
4.0
4.1
4.1
4.2
Dallas
1.4
1.4
1.5
1 .2
San Francisca
7.3
7.5
7.5
7.7
Boston
New York
Total
ioo.o$
10 0 *0 #
1 0 0 .0$
1 0 0 .0 $
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Auth°nty 8c0fdgr_ is&5fo\
3 2
HELD AT WASHINGTON* D. 0.. JULY 30 , 1933*
3,
r]j ?
The meeting was called to order at 10:45 a* m., with Governor Black in
the chair, there being presentX
From the Federal Reserve Board
Governor Black and Messrs* Thomas and Szymczak.
From the Federal reserve banks
Governors Harrison, Fancher, Se&y, Martin, Geery,
Hamilton, McKinney and Galkins, Acting Governor
Johns and Deputy Governors Paddock, Hutt, MoKlay
and Buigess*
From the Federal Reserve Board staff
Messrs. Morrill, Wyatt, Goldenweiser, Smead and
Carpenter.
Governor Black suggested that the committee tfiich was called together
under the terms of the Glass bill should proceed to organize and meet again later
with the Federal Reserve Board.
The Federal Reserve Board representatives then
left the meeting.
It was moved and carried that Governor Harrison be appointed chairman of
the committee*
It was agreed that the question of the appointment of e vice chairman
be postponed*
It was moved and carried that Mr. Burgess be appointed secretary of the
committee*
It was moved and carried that the committee 7ms in favor of the appoint
ment of an executive committee of five and, subject to the approval of the Federal
Reserve Board as to there being an executive commit tee, it was voted that the
following should constitute that committee:
The representatives of the Boston,
New York, Philadelphia, Cleveland and Chicago banks, the representative
New York bank to act as chainnan of th<= "Executive Committee*
http://fraser.stlouisfed.org/
A-fcfei,.
Federal Reserve Bank of St. Louis
/ o/ v / 3 °
5 3-1. 3 - a
-/
of the
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July 22, 1933
The coimittee then proceeded to consider the tentative draft of
regulations governing open market operations, and after extended discussion the
following changes were agreed upon unanimously:
Section
I - No change*
«
JX . n
»
n
in _ n
i*
M
IV - (a)
(b)
That in the last sentence the word "vice
chairman1* be omitted, and the following
clauso added after the word "secretary":
"...and in the absence of the chairman at
any meeting of the committee the committee
shall appoint a chairman pro torn#*
At the end of the paragraph insert the words
"and each Federal reserve bank."
It was also agreed that the attention of the
board should be called to a difference be
tween the wording of this paragraph and the
law on the question of the attendance of
board members at meetings of the committee.
(c)
That the words "for its approval" should be
inserted after "Federal Reserve Board," in
the last lino on page 2 .
(d)
That the words "and as" be omitted in the
last line*
(e)
That the last clause beginning "and of any
other decisions" be omitted#
(f)
That in the second line after the words
"participate in" there be inserted the
words "any specific."
That the last sentence of this paragraph be
omitted.
(g)
Section V
- (a)
(b)
That this entire paragraph be omitted.
That at the end of this paragraph the follow
ing irords be added "and to each Federal
reserve bank."
That in the last line of paragraph (1) the
wards "or prescribed" be omitted.
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3
Ju-i-y 22, 1933
That in the last two lines of paragraph
(2 ) tlio clause "and shall be subject to
change by the Federal Reserve Board in
its discretion" be omitted.
That in the first line of paragraph (3),
after the words Federal Reserve Board,
there be added "and each Federal reserve
bank."
That in the second line of paragraph (4)
the words "or prescribed" be omitted.
Section VI
- That in the second and third lines the
wards "or prescribed" be omitted*
That in the second line of paragraph (1)
the word "sole" be omitted.
That the entire paragraph at the bottom
of page five and at the top of page six,
relating to the agreement to sell at the
request of the Federal Reserve Board, be
omitted.
Section VII - That in the third and fourth lines of
paragraph (2 ) the words "or prescribed"
be omitted*
That in the second line of paragraph (4),
after the words "cable transfers," there
be added "for its own account."
I*hat paragraph (5) be omitted entirely.
That the last paragraph be omitted entirely.
There ensued a brief discussion of the regulate .ms relating to foreign
transactions.
The meeting adjourned at 12:40 p* m.
The meeting of the committee reconvened at 2:15 p. m*, with the same
persons present*
t—*
| There was a further general discussion of the regulations relating to
foreign transactions.
Governor Harrison pointed out that the regulations in a
number of cases appeared to go beyond the law and he called attention to some of
J
the difficulties which would be encountered in attempting to operate under these
regulations.
He stated the view that a much briefer regulation which simply
quoted the law or paraphrased it would be much easier to operate and would at the
Reproduced from the Unclassified I Declassified Holdings of the National Archives
^EcI^ssiFliB
Authority cK O fiU r
4
July 22, 1933
same time leave the Federal Reserve Board free to amend the regulations later,
if necessary^
It was agreed that a further discussion of this regulation would be
postponed until Friday, and that in the meantime Governor Harrison would review
the question of the nature of these regulations with Governor Black#
Governor Harrison then reviewed briefly his recent trip abroad.
Governor Harrison also reviewed discussions he had held with stock ex
change authorities and some of the New York bankers on the question of bank margins
on security loans, and indicated that effective action in New York with raspect to
this problem was sometimes hampered by compctitive practices of interior banks*
Ho suggested that the governors of other reserve banks discuss with their principal
bankers the practices which they wore following with respect to margin require
ments on security loans, with a view to maintaining sound and conservative practices.
At 4 p. m* members of the Federal Reserve Board joined the meeting, there
being present, in addition to the committee, - Governor Black and Messrs* Hamlin,
Miller, James, Thomas, Szymczak and O ’Connor; also Messrs* Morrill, Goldenweiser,
Wyatt, Smead and Carpenter.
Governor Harrison then reported, on behalf of the
committee, the changes in the draft of open market regulations which the committee
suggested,
f~There was a discussion of the question whether, under the law, a bank
was required to designate a particular individual as its representative on the
committee, or whether the bank might designate (for example) the principal execu
tive officer, so that the bank might always be represented on the committee.
There was also a discussion of the broad question of the extent of the Federal
Reserve Board’s responsibility for open market operations and particularly the
question whether the Federal Reserve Board has the power under the new law to
prescribe as well as to approve of such operations* \
Reproduced from the Unclassified I Declassified Holdings of the National Archives
5
July 82, 1933
f
' Governor Black then reported to the meeting a proposal made by the Farm
Credit Administration that the Federal reserve banks should purchase Federal Land
Bank bonds (possibly under repurchase agreement) in order to enable the Federal
Land Banks to purchase farm mortgages from closed banks and thus aid in their re
opening.
The primary questions with respect to this proposal were the legal
status of such purchases and the desirability of the reserve banks acquiring long
term assets of this sort.
Governor Black asked that the members of the committee
give consideration to this proposal^
During the course of the meeting a memorandum prepared by the Division
of Analysis and Research of the Federal Reserve Board on current credit conditions
was distributed to members of the committee.
The meeting adjourned at 5:22 p. m.
On Friday, July 21, the meeting of the committee reconvened at 10:20
a. nu, there being present the same representatives of the reserve banks, except
Governor Hamilton and Deputy Governor Paddock, who joined the meeting shortly
thereafter.
After a further discussion of the regulation with respect to foreign
operations of the reserve banks the following motion was unanimously carried:
Since the terms of Section 10(g) of the Glass bill
set forth e:sqplicitly and in some detail the terms and condi
tions under vs/hich Federal reserve banks may engage in foreign
transactions, it was the view of the governors that the board
issue a regulation simply quoting or paraphrasing this
section of the law, with the assun$>tion of course that such
regulation be subject to amendment or amplification if in the
light of experience such action seems advisable.
(There was a discussion of the proposal of the Farm Credit Administration
and the governors indicated that they did not believe the proposal was one in
i
si
.
which it would be desirable for the Federal reserve system to participate.I
Reproduced from the Unclassified I Declassified Holdings of the National Archives
6
July 22* 1933
At 11:10 a. m. members of the Federal Reserve Board joined the meeting,
there being present, - Governor Black and Messrs. Hamlin, Miller, James, Thomas
and Szymczak, and Messrs# Morrill, Wyatt and Carpenter.
The resolution adopted by the committee with respect to foreign opera
tions of the Federal reserve banks was read and discussed.
In response to a
question, Governor Harrison pointed out that the draft regulations which had been
submitted to the committee were more detailed and cumbersome and difficult to
operate, than he believed necessary under the law.
He pointed out that some of
the provisions would be embarrassing to effective operations*
Governor Harrison reported the views expressed by the governors present
with respect to a purchase of Federal Land Bank bonds by Federal reserve banks.
At 11:27 a. m. Mr. Sprague, Financial Executive Assistant to the
Secretary of the Treasury, was invited to join the meeting and to discuss with the
governors and the board current problems of Treasury financing.
cussion of this subject ensued.
An extended dis
During the course of this discussion Messrs.
Goldenweiser, Smead and Harlan (of the Treasury) entered the meeting.
Mr# Sprague particularly desired the views of those present with respect
to the effect of fluctuations of the dollar on the ability of the Treasury to sell
its obligations, and raised the further question whether the present was not a
suitable time for interior banks to become interested in making tenders for
Treasury bills.
He also requested that some of the governors confer with Mr'.
Acheson, at his home, during the course of the day.
At this point Messrs. Sprague and Harlan left the meeting.
It was mo¥ed and carried that the chair appoint a conmittee of four
governors to call on Mr. Acheson*
y
\After some discussion individual members of the board and many of the
governors expressed the view that fluctuations in the value of the dollar created
a serious obstacle to an adequate program of long term Treasury financing.f
Reproduced from the Unclassified I Declassified Holdings of the National Archives
7
July 22, 1933
It was agreed, hoY/ever, that it would not be appropriato to adopt a formal resolu
tion on the subject.
Before the adjournment of the meeting there were distributed to the
committee and the members of the Board the usual report of operations of the Open
Market Committee and the preliminary memorandum on credit conditions.
The meeting adjourned at 12:45 p. m.
The meeting reconvened at 2:23 p . m., there; being present from the
Federal Reserve Board, - Governor Black and Messrs. Hamlin, James, Miller, Thomas,
Szymczak and O ’Connor; the same representatives of Federal reserve banks; and
from the Federal Reserve Board staff, Messrs. Morrill, Goldenweiser, Wyatt, Smead
and Carpenter.
Mr. Goldenweiser reviewed briefly the business and credit situation.
There ensued a discussion of open market policy, f Governor Black stated
the view that it was desirable to continue the present power of the committee and
that in view of the uncertainties of the situation it was extremely difficult to
tell in advance how much of that power it might be desirable to use.
Each of the
governors 7/as asked to give his view and they all concurred in the general view
expressed by Governor Black, though a number also stated that they would prefer to
see no further purchases and favored a conservative course.
Governor Seay ex
pressed the view that if further extensive operations were undertaken they should
be at the request of the Treasury^
In response to a question by Mr. Miller as to what might be the basis
for decisions by the executive conanittee as to purchases, Governor Harrison statod
(1 ) that there was a government program 'Broadly designed to result in raising
prices and that the System’s object should be to facilitate and not deter that
program; (2 ) that at the moment there ware large-excess reserves, so that on
strictly monetary grounds there was no occasion to buy at present; (3) that a
further serious decline in prices of securities and commodities might affect
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
I
yacoakrja^el
Author,-,
...
j
_
Q
July 22, 1935
confidence and that some purchases might be helpful under these conditions; (4)
that other conditions might arise making purchases desirable $ such as a risk of
failure of some government issue, too great a tightening of money rates due to a
transfer of money out of New York* or other unforeseen events.
In view of these
considerations a renewal of the authority appeared desirable*^ Individual members
'A
•
of the Federal Reserve Board expressed general agreement with these views*
There was some discussion of the probable action of the board with
respect to the issuance of a regulation dealing with rates of interest on time de
posits, and it was indicated that a tentative draft would be reedy shortly and
would be sent to the Federal reserve banks for comments.
A question was raised as to the effect of the Glass bill on the service
of bankers as Class A directors, and it was indicated that the board’s counsel had
not yet aade a ruling on that matter.
Governor Hamilton raised the question whether there bad been any indica
tion that the reserve banks would be called upon for any special work in connection
with the examination
of banks for the Insurance Corporation.
The secretary of
the'board replied that there had been no such indication, but that the prospect of
additional examination work made it desirable for the Federal reserve agents to
consider strengthening their examining forces.
Mr. O ’Connor requested that each of the governors should send him the
names of a number of outstanding state bankers in each state that he might have a
list of people from whom he could obtain information.
There was a brief discussion of the possible effects of increases in
brokers loans on credit conditions and the procedures which might be adopted to
deal with them*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Auihoriiv
9
July 22, 19£3
The representatives of the Federal Reserve Board l e f t the meeting at
3:08 p. m.
Governor Harrison requested. Governors Fancher, Seay, Martin and Calkins
to visit Mr. Acheson.
After a further discussion of open market policy it was unanimously
voted to be the sense of the committee that, subject to thr approval of the Federal
Reserve Board, the resolution of the Open Market Policy Conference of April 22,
as modified’by telegraphic vote after the executive committee meeting of May 23,
authorizing the executive committee to make purchases of up to one billion dollars
of government securities be reaffirmed and continued for the unused portion of
the authority*
A
It was agreed that it would be undesirable to include in this resolution
\
any authority to sell, though there was some discussion of the importance of
being prepared to sell securities promptly if the occasion arose.j
There was some informal discussion of the program to be pursued in the
present week, some of the governors expressing the opinion that, in view of the
severe reaction in the commodity and security markets, it might be wise to continue
purchases for the current statement week rather than showing a change of policy by
discontinuing purchases altogether.
It was agreed, however, that this question
could be determined more wisely later.
TGovernors McKinney and Hamilton discussed informally the question of
loans by reserve banks to agricultural credit corporations and after general
discussion those present appeared to be in agreement in seeing no objection to
such loans being made by reserve banks.
Governor Calkins raised the question whether some action ought to be
taken with respect to the report of the committee on branch banking, and it was
agreed that the Federal Reserve 3oard be asked to furnish the governors with
copies of this report in order that a decision might be nBde as to whether or not
INI
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
A u t h o r i t y IQZtfpl
10
July 22, 1933
it should be published.
Governo rs Fancher and McKay were asked to serve as an informal
committee to confer with the Federal Reserve Board as to progress on the pension
plan#
©te meeting adjourned at 3s45 p. m.
W. Randolph Burgess,
Secretary, Federal Open Market Committee*
@FedFRASER