The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Form P. R. 567
END SHEET
KINO OF MATERIAL OR NUMBER
3 3 3 .- C
name o r s u b je c t
Open Market P o lic y Conference
Open Market Operations
DATES ( I n c l u s i v e )
1931 -
PART NUMBER
P art 2
-l
1933
Reproduced from the Unclassified / Declassified Holdings of the National Archives
.
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„noo F e d e r a l R e s e r v e B a n k
24 ^3o
,
*
o f Ric h m o n d
.....
“
June 23, 1933
Honorable Eugene R. Black, Governor,
Federal Reserve Board,
Washington, D. C.
Dear Governor Black:
In the absence of Governor Seay* who Is away
taking a short but much-needed rest, I wish to acknowl
edge receipt of your letter of June 22nd, in reply to
his of the sixteenth* Upon receipt of your letter I
called up Governor Seay over the long-distance phone
and read it to him, and he wishes me to acknowledge re
ceipt of it to you with appreciation*
With kind regards, I am,
Sincerely yours,
Chas* A. Baple
Deputy Governor
CAP:N
-(
Reproduced from the Unclassified / Declassified Holdings of the National Archives
i-' t
's.'
c - t
Jwm 22, 11/33
0@oKg« J« 8oay* G em m ae t
Fedora& Reserve Bank,
Hlohmond, Virginia*
Doar Governor Soayt
I law* you? w r y kind le t t e r o f
Jim® Ifith^/aatd upon reoeivi& g I t I telephoned you*
1 appreciate wary auoh tho s p ir it
in ifctiek your la t t o r « a « w ritten * I to g to adrieo
th at I discussed i t with tho Board At i t * la s t
m eeting and am enabled to sta te th at the a ctio n *
o f tho Executive C oonitto* aro in U n a with tho
d e sire s o f tho Board and th a t m w i l l , o f e<**ree*
be glad fo r tho reserve bank* t o act togeth er ia
p a rtio ip a tln g in current market o p e ra tio n *.
With
w warm regard* alw ay*, I m
Sincerely yowra,
Governor*
V LJ*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
-J
f
“
ERAL R E SE R V E B
K
of
R ic h m o n d
a n k
JUN16 1933
June 16, 19&3.,
Dear Governor Blacks
I am writing to thank you for calling me on the phone
this morning to explain the position relative to the open market
transactions now being carried on.
»
X believe you know that I am willing and this bank is
willing when the System acts in matters of this nature to act as
a body, even when the independent judgment of different banks
does not approve} and that spirit has always governed administra
tors of the several Federal Reserve Banks.
As I have written
before, while it is impossible to force judgment, it is entirely
possible to surrender itj and if the Federal Reserve Board thinks
that it is desirable for all of the Federal Reserve Banks to act
as a unit in participating in current market operations, we will,
upon being so advised, very cheerfully go along with the program.
The Federal Reserve Board, under the law, clearly has
the power to approve or disapprove open market transactions, and
if we can construe the approval of the Federal Reserve Board in
this case as meaning that the System should act as a unit, it will
be perfectly satisfactoiy to us.
GJS-GCP
(Dictated but not
read before leaving
the city.)
Honorable Eugene R. Black, Governor,
Federal Reserve Board,
Washington, D. C.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
■C - l
Imm 15, 1933
Mr* w. w. Hoxton. Chalmm, '
Federal Reserve Saak,
Richaond, V ir g in ia .
Dear Sir* Horton;
I m » delighted to receive your
letter.of June
1 hope you will find am oport unity
to discuss with Governor 3eay the topic «hlch was
discussed between ua ahen 1 had the pleasure of
aoeing yon in aahington recently.
Mrs# Black and I enjoyed ao raieh
seeing you and I hope that matters will work out
ao that w© n*y often have an opportunity'of being
with you.
I am also planning to see Mr*
Delano tomorrow, since he waa kind enough to call
on m yesterday when unfortunately I wa* out*
With ev&ry good wiahf I aa
Sincerely yours.,
Governor*
B~C
Reproduced from the Unclassified / Declassified Holdings of the National Archives
F e d e r a l R e s e r v e B a n i^
I
of
Ric h m o n d
/
June 12, 1953
I
PERSONAL
J0,o
J O jj
Hon. Eugene R. Black, Governor
Federal Reserve Board
Washington, D. C.
Dear Governor:
I find on my desk this morning a cony of the telegram/
sent on Saturday by Governor Seay to Burgess^ New York. I notice
that Governor Seay also sent a copy of this telegram to you. Inas
much as I left Richmond for Washington about noon on Saturday I did
not know about this telegram when you and I were talking on the
Washington roof, although had I seen it in advance I would have
interposed no objection on account of the action of our Board taken
at our meeting last Thursday.
I think the feeling of all of us has been a wish to
cooperate in every way possible with our Government. We do not
wish of course, to buy big blocks of governments at this time, on
our own initiative, or on the initiative of the Executive Committee
of the Open Market Conference, but I do believe that nobody would
object to going along if we should receive assurances from some of
ficial and authoritative source such as the Secretary of the Treas
ury or the Federal Reserve Board that the purchases are to be made
in furtherance of the Government’s needs and wishes.
This morning I repeated to Seay what you had to say
on Saturday night and I think it will be very helpful if you would
have a talk with him over the telephone on this subject. He is
leaving for a two weekfs vacation on, or about June 16th# As I told
you our Board of Directors gave him full discretion in the matter of
joining in or abstaining from further purchases of governments at this
time, and our Board concurred in the views which he expressed and
which were set forth in his letter to Dr.
a copy of which
also, I understand, was sent to you.
If he is itoade to understand
by you that the present open market policy is disigned to meet the
wishes of the Treasury Department, even though /the Treasury Depart
ment does not come out flatfootedly and say s o l it seems to me that
there would be a chance to harmonize the whol? situation.
Sincerely
W. W. Hoxton
Chairman
Reproduced from the Unclassified / Declassified Holdings of the National Archives
jb *
j
JU N 1 2
1933
M
r.Hamiin_VC»^C.,Copy of talsgraa fro* IM in l Baawnr* Baalc
Rlr» J s m c s
k
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Mr. Morrill...... y jjjg O T lV l COJOCTTI1 HAS JGaUB UPC# SOUVHAT SHAIUB WSCHA3® 07
Hr. McCI»ll«n(j.,i<.-„ -_____
*$„W )*n: ____ „„.jfv M M p n 148 obhuwt sta tb o h t vane T *w a « n tic is i amount is
Jw ^ ^ T W W ' * « i n B
thds n s abbot •7 ,000,000 u n
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Mr. Simm—.Jr.-.X,..,,.,.,,,
Mr. G otaw ha,-„BH U B-JtParaU TO U X I DI8THIB0TI0S 18 ACC0HDAH01 WITH m e BIT ASK
Hr.
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orNdxran o s a ra s a m ss rb c w t u c o too® shabs or tb> m iPleasenot©*toitial
*nd(,iurai, i:;r^<;,efxJHlsIS
n s ^ , 0 ,. win, roc k ih b ii a w is i n ar m a s i f tod
TO T4K1 THIS PARTICIPATION.
it06 m
C o p y of reply f r m Federal Beserve Bank of RiehBO&d
June 10, 1993
BDHG»S
Sit.
n
JRX GL4D ton ARE D1CRSASING TBS AMOUNT OF PUB3HASBS B3SA0SB 11
JSS WOT IN SYMPATHY AS 801 BSING MADS*
U
Wills ACCSPT Otm AM0TM1NT
FOR CURRSNT FSRIOD, BUT our DIRECTORS FULLT 8UPF0RTXD TBS POSITION
TAON IN XT Utfffi TO TOU, AND UNLSS8 TOURS PUBCHASSS ARB MADS AS
INWCATSD UKTHAT LSTTSR, VS VILL NOT VISE TO FART1CIFATS.
iiis
SSAY
^ 6A - / 5 3
' 7
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3 ? 3,
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n o t o n ly t o m
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o p p o r t e f t lt y o f 4 i# « i# * in « t b * a o t t o r f u l l y .
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Reproduced from the Unclassified / Declassified Holdings of the National Archives
3
JOIK 3, 1935.
M r* O a o rg a ? • S e a y , O o r o n io r ,
TO doaal a » im
B a n k o f R io b x a c n d ,
R lo h ia o p d , V i r g i n i a .
D * a r Q o v a ra o r S o o y i
A a o o ip t i s a o lc iio id L a & is a A cxf
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a a n a d a ta a d d ra a a a d b y y o u t o f i r *
B u rg a a a a a s e c r e t a r y
o f tfe o O p a o Ifa x ta a t P o lia y C a o fo r a a o a *
Y o u r l a t t a r * * 1^ tb o
to
tb a a t t e n t i o n
ix io lo a u r o v l l l b o b r o u g jh t
o r H » o o m b a ra o f t h a B o a rd *
T a ay t iu ly
y o u ra ,
S e o r a ta r y <
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J.-C
Reproduced from the Unclassified / Declassified Holdings of the National Archives
-
^
WCIROiLATKW ^
f
\
Mr.
F e d e ra l R e se rv e
of
B ank
Ric h m o n d
^rJimes
-- >
3 3 3.
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June 2,
Please note ■initial and
Return to SeereWf** Office
federal Beserve Board,
Washington, $• C.
Bear Sirs:
For the information of the Board, I an enclosing
copy of a letter which I have today written to the Secretary
of the Open Market Policy Conference relative to matters about
which tha Board already has knowledge*
Very truly yours,
GJS-CCP
1 Bad.
/L e e ^
7 f /
m 4 h e * W il# ^ ^ # i ^ s if ie c l Holdinj^&WWWational Archives
FE D E R .
„ F
SER VE
B A N K
O F
R k
Ihr
S ID
lune f, 1IS5.
Dr. I. Baadelph Burges#, Secretary,
Open iarket Policy Conference,
Federal. Seserve Bank of Se* fork,
lew Xork City,
Dear Dr* Burgeses
ie art ia receipt of your letter of the 1st, with which was trans**
ait ted the iittalft* of the ISMwativo Com dXtm of the Open iarket Folios Coa~ '
ferenee*
He n o t * w i t h r e s p e c t to th e f i r s t p u rc h a s e o f $£fi,OQOf OQG o f g o v e rn *
sent bonds t h a t th e S e c r e ta r y o f th e tr e a s u r y s t a t e d t h s t th e t r e a s u r y had no
o p p o s it io n to o f f e r to open a a r k e t p u rc h a s e s , b u t t h a t fa® fsifc tfe©:^® was 110
n e c e s s ity for T re a s u ry a p p r o v a l of the p r o p o s a l*
the ia p r e s s io n r m m i m with
m that it was b e c a u s e of the i n f l a t i a n a r j ? p ro g raia o f the Administration t h a t
th e Conferenee of Governor® p a s s ed their r e |o X t m o a to p u rc h a s e a b i l l i o n dol
lars o f governm ent bonds t o meet th e r e q « m ^ i w k of the treasury.
X i 'is
also lay l&pression that i f the p r o p o s a ^ w ^ n iy lN ^ lA io E i& l bonds apart f r o a
t h i s pro g ram had th e n been a a d e , i t m i d N A t h a v e been passed, h y th e g o v e rn o rs !
and a p a r t f r o a t h i s prograa we do r ^ ^ ^ d ^ f v e i t is either n e c e s s a ry o r a d v is a
ble to add to the Systen holding^^^^^imerit securities.
As you knos| we have (wartic m *itea in the two purchases made since
that time, hut if it is aofr*\u^ftctherpice of the trea«ttry1« desires and pur
poses, we w i H g X think, recon iHifcsi^r position as to future participation,and I
shall bring the mtter bApre ouJj directors at their next
fhis progra* of
in amount up to a billion dollars wan initiated
at the Governors1 Conference and not by the Federal fteserve Board and apparently
not by the treasury Department* and, while we are willing to go along with a
Systsas program of purchase, if it is uiaply a waiter of voluntary consent by each
Federal Reserve Bank* in which entire freedom of Judgment will be conceded to it,
as heretofore, we will look upon the Mtter in a different light.
At the conference, 1 think the opinion wa© held that we were aboat to
launch upon a long, program, and, as preparatory to that9 it was proposed that a
redistribution or re&llotaeni of %8tea holdings should first be »»de§ but the
way in which we have began these purchaser doss not conform, in our opinion, to
the feeling held by the last conference. I think that is «hown|;
, at le&st in
part, fey Governor Touag1# expression of opinion ia the Executive Coaalttee aeeting«
1 think 1% is also shown by the dissent of two other Federal Eeserve
Banks, in addition to ourselves* to asy ohange in the resolution ass then passed.
It soeos manifest to m that if the federal Eeserve Banks go in^o the aarket
and purchase at the offering price government securities prior to- a treasury of
fering for the purpose, as it has been expressed, of toning up the »&rk@tt we
are patting up the securities upon ourselvesf. and if this action is to be pursued
mm
fifedH oldjftia t t jb e-National Archives
/t,V
j
Dr, *# It* Surgeon* Secretary,
Open i&rket Policy Conference,
Federal Heeervo Bank of Mew fork#
-2-
^une ®# 11SS
end of tho purchase of one billion dollar#, if sad#, it seeas to me It
foil to result ultimately in a very large loss to the fyvtea*
Iter©
least, that probability| and since, according to th® tenure of the reso
passed, thia program wa§ intended. to »#et government requirement#, the
t r m m v f should faol and b&¥« responsibility for the consequences.
to the
cannot
la, at
lution
le note that th® Executive Cw& t t e e expressed itself on ®o»t natter©
rather ©xtraneou# to open narket policy operation#*
le dissent fro* the feel
ing expreaaed in the last paragraph of your letter, that the present requirements
of the Federal Haaorve Board- a# to adnis.ion of state -banks are saore strict than
ciromwitaacoa require* and, alao, to the implication that the Comptroller is too
strict in the reopening of closed banki*
le, of course, are judging this matter
by our 0*0 experience.
0o far, ve tmvm not only approved the rehabilitation
plana of that office, hut we have been glad to see the Comptroller m atrict as
ha la.
Oar directors feel that tfela is an opportuni ty such as n«*ver has been
offered to allow only #ound banka to open and renaln open, and they are in en*
tire concurrence with strict requirements.
Referring onca nore to %#tem holding® of government securities and
tho rwdiatrlbation on aone reviaed allotnont plan, we know how difficult it is
to define a scientific or equitable plan of distribution when the factor* la each
Federal Boaorve Bask, are varied to begin with and are constantly changing;. ■ *o
think that the depoait and currency liabilitie# aa well aa the capital liabili
ties should be taken into the picture.
It may be that adjustment* according to
the reserve ratio (which reflect all of these different factor®} would be the proper
guide*
If» therefore, we are about to enter upon a long program of purchasing
goveranant aecuritie® In huge amount, during which it w i U not be a natter of
voluntary participation by each or any Federal Eeservo Sank but in accordance
with a well defined Syatem policy, then we think it should ®o be outlined fro*
the be.ginni.iiit and a plan of pro rata distribution should at least be worked out
in conjunction with the. Federal ftoeorve Board#
nothing said In thin letter should be construed aa unwillingness to
go along with a definite policy determined fcy the Federal ftoaorve Board, which
hae, ae we know, ultimate control over open market tranaactlons •• all of it in
furtherance of treaaury requirements under the ■&o-oalled inflation bill. If it
i# going to remain throughout a natter of voluntary participation by each Feder
al R eserve Bank, in which everybody is willing to concede the exercise of inde
pendent Judgment, it i» wholly ..another natter.
Jmdgumt is a quality with which
it i# inpoaeible to compromise, but judgment can be abrogated and any policy fol
lowed which ha# been laid down' by those In superior authority.
I an sending a copy of thin letter to the Fed ral Reserve Bonrd*
" -f
'*
Very truly yours,
♦.
GJS-GCP
*
gsoeoe J. m m t
Governor.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
L
...... ..
......................................
w"2
" v w - v*. - I|
F e d e r a l R e s e r v e Ba n k
of
R ic h m o n d
May 24, 1935.
Dear Governor Blacks
’"V:
^
On yesterday^! sent you telegraphic correspondence with
Governor Harrison relating to the resolution passed at the last
Open Market Policy Conference with respect to the further purchase
of government securities.
I am now sending copies of exchange of
telegrams with New York today concerning the purchase of $25,000,000
of government securities, which we were advised the Executive Com
mittee of the Open Market Policy Conference determined upon yester
day.
lou will observe our position*
We are willing to go
along with the plan of the President with respect to that portion
of what is known as the Inflation Act which refers to negotiations
with Federal Reserve Banks for the purchase of government bonds*
Preparatory to acting under that bill, the last conference expressed
the opinion that there should be a readjustment in the System of hold
ings of government bonds.
At that time I agreed provided it was
pursuant to a policy laid down by the Federal Reserve Board*
We already have more government securities than we think
we should have, and we are not agreeable to a voluntary readjustment
between Federal Reserve Banks which will give to those Federal Reserve
Banks whose reserve ratios are high some proportion of the holdings
of other Reserve Banks whose ratios are low.
I have therefore made
it plain in my telegram that, while we are willing to go along in
furtherance of a specific plan approved and inaugurated by the Federal
Reserve Board in pursuance of the policy of the President, we are not
willing otherwise to increase our holdings of government securities.
I am firm in the conviction that if we purchase any such
amount of government securities as is contemplated, it will result in
a heavy loss to the Federal Reserve System, and while we are willing
to join in any plan which the Board makes a System plan, both with re
spect to the adjustment of the present System holdings and future pur
chases, we are not willing to take over from the other Federal Reserve
Banks simply because our reserve ratio is high, any proportion of the
bonds which they now have*
I trust that you will consider this as the expression of en
tire willingness to cooperate upon a System plan, but in our opinion
it should be a coordinated System plan.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Copy for Governor Bj.ack
Federal Reserve Board.
COPY OF TELEGRAM FROM DR. W. RANDOLPH BURGESS
New York, May 24, 1935
Seay
Richmond, Va.
In accordance with a vote of the Executive Committee of the Open Market
Policy Conference meeting yesterday concerning which you have been ad
vised by Governor Harrison1s telegram, there has been purchased for de
livery today $25,000,000 of Government securities.
Pending a final
working out of a satisfactory plan for allotment based upon reserve per
centages, purchases made for delivery today will be allotted on the
basis which has been used heretofore.
On this basis your allotment
will be #1,250,000.
Kindly advise us by wire if you will take this
amount.
Burgess.
COPY OF TELEGRAM IN REPLY TO ABOVE
RICHMOND, May 24, 1935
Burgess
New York
We will accept our pro rata of purchase of $25,000,000 governments, but
we will not consent to any allotment of bonds already held in the System
that is not a part of a specific plan, approved and inaugurated by the
Federal Reserve Board in pursuance of the policy proposed in the infla
tion bill.
Seay.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
^
^ 3 S , C - /
May 24, 1933.
Mr* Georg* J* Seay, Gorexnor,
Federal Reserve Bank,
Richmond, Va*
Dear Governor Seay:
Thank you very much for your letter of
May 2 ^/sending me the pamphlet THE PRESIDENT*S MONETAHT
PROGRAM*
I m going to read It with great interest,
and appreciate your courteay in sending it to ne*
With warn regards, I am
Sincerely youra,
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Mr. Hamlin
Mr. James
..........w
F e d e r a l R e s e r v e Ba n k
Mr. Miller__ _________
of
Ric h m o n d
3
24 1933
i
\, <
r''-■'
Ur !4arrio8»^ j8fe#&fV
Mr.
Mr.
Mr,
Mr.
Mr.
Morrill
McClellar
Wyatt
.............................
.....................................
Please note-irj^W
and return HSjJJftVERNOIL
TTTr,
THE
GOVERNOR
EHoERVE BOARD
May 23, 1935*
Governor Black.
j received today a telegram frcai Governor Harrison, sent
from Washington, relating to the proposed change in regard to the
purchase of government bonds adopted at the last conference, with
which you are doubtless familiar*
I venture to send you a copy
of my reply.
-
Xuu. s'- »
I sent you on reatardaW copy of a paapblet written by
Dr* Lionel D« Edie, in which he emphasizes the opinion that purchas
es of governments should not be focused entirely upon the New York
mon$- market, overconcentrating and oversatorating that market with
money) but such purchases should be decentralized in a manner that
will put surplus funds into each of the Federal Reserve Districts.
That is very firmly my opinion.
It is futi3e to argue that funds put into the market for
government securities chiefly in Sew York will overflow into other
districts.
If Governor Harrison happens to be in Washington when this
reaches you, I wish you would show him that pamphlet of Dr. Edie*s.
Washington, D. C.
1 3 3
Reproduced from the Unclassified I Declassified Holdings of the National Archives
M IS C . 1 0 5
FEDERA
CONFIRMATION
Rr
ERVE BA N K O F RlC
M
4D
OUTGO ING PRIVATE W IRE TELEGRAM
SEN DER
GJS-CCP
J O Harrison
Care Federal Reserve Board
hashington
T IM E W R IT T E N
DEPARTM ENT
Bank Adra.
O
J?•
CH ARGE SYM BOL
OC-1
•
DATE
May
1‘elegraia received.
I do not approve amendment of the Conference resolution as
suggested, nor do I approve purchases in one iaarKet, as heretofore made, believing
it to be futile now as it was before, nor do I approve adding further to D/stem
holdings of Governments except at the behest of the treasury and in direct furtherance
of Treasury plans, j
wikh Glass that we should not be clogged up with
government bonds anc^any action of that kind should be at the direct request or
suggestion of the Treasury in conformity with the inflation act
Seay
C O N F IR M A T IO N
Reproduced from the Unclassified / Declassified Holdings of the National Archives
T E L E G R A M
FEDERAL RESERVE BOARD
W ASH INGTON
Hsy 23, 1933
J• 0. Calkins
Sea Fraoclaeo
Richmond
w« b . oeery
'Sinneapolis
i « S# Johns
A tlm ta
G. H» Hamilton
Km mm City
f « MeC« F art in
St* Louis
1* A* McKinney
Dells*
#* «r* s m r
At & m ettin ? e f th e Sxseeitlve Committee o f th e Opes Market P o lic y
Conference in
m eting ton t h is mem la g i t m e unanimously voted th at
the au th o rity given to th e Executive Coaa<tee a t the l a s t naeting
o f the Open la ifc e t p o lic y Coaferenee which lim its the ri^ h t to purchase
§ovaram nt s e c u r itie s e ith e r in the maifcat or d ir e c t Horn th* Treaenry
* t e meet Treasury re^u trcB aats" m onM he amended so aa t o remove th et
r e s tr ic tio n in order th at purchases o f s e c u r itie s m y h e wide promptly
i f ia th# jndgaent o f the Committee such purchases e r e oo Beidered de*
s ir e b le A e th e r o r net to m e t Treasury requircem nts
STOP
T h is a c tio s
wonId enlarge the powers o f th e Executive CosBaittee so a s t o conform t©
the broader e e tlo n o f th e Federal Bessrve Board In approving the reaolu t ion
of tte
Opm Market P olicy Conference w ithout lim ita tio n as to Treasury re
quirement®. STOP
em endm st, tent
A m ajority of the Conference has agreed to th is proposed
I m a id ap p reciate an e a r ly exjreastosi o f ya w v ia we STOP
For your fa r th e r inform ation ik e eosaaittee haa voted to huy twenty f i v e
m illio n o f s e c u r it ie s t h is statem ent weak
GaerfS L H arrison
■iU
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Q -!
F e d e r a l R e s e r v e Ba n k
of
Ric h m o n d
May 22, 1935,
Dear Governor Black:
i I sent you as a member of the Executive Committee
of the Ofeen Market Policy Conference copies of my corre
spondence with Dr* Burgess, Secretary of that conference,
being in the nature of comments upon the minutes of the
meeting*
I happened to receive a few days ago a pamphlet,
written by Dr. Lionel D. Edie, on THE PRESIDENT'S MONETARY
PROGRAM, in which you will find expressed, on pages 12 and
13, the opinion I expressed in the correspondence with Dr.
Burgess*
that purchases of government securities,
however made, should be decentralized, and that the surplus
funds created theretjy should penetrate each Federal reserve
district and not be concentrated in New York, as has been
the case heretofore.
Renewing my good wishes as expressed to you by
telegram, I am,
Yours most sincerely
GJS-CCP
Hon. Eugene R. Black, Governor,
Federal Reserve Board,
Washington, D. C.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3
1933
Msy
Hr* George J* Seay* Qowaraor#
Federal Beserwe Bank of Richaond,
Richmond, Virginia#
Dear Ooveraor Seagrt
Receipt ia acknowledged of your latter of May 13,
m
m
.......
1 9 3 ^ inaloaing copy of a latter addressed by you, under
data of lay 8* 1933# to Doctor Burgess, aa Secretary of the
Open Market Policy Conference*
this le tte r, which ooaaents
upon tha atoutes of the last conference and states your o «
position taken at that conference, which you advise was ful
ly supported by your Board of Dirtotors at Its last meeting*
is being brought to tha attention of the ambers of the
Federal Reserve Board#
?ery truly yours,
r -
ISipetf) Chester
Cheater M orrill,
Secretary
w m /u t
3
3
C -/
Reproduced from the Unclassified / Declassified Holdings of the National Archives
F e d e r a l R e s e r v e Ba n k
,
of
1
Ric h m o n d
0/
May IS, 18-53
r!^sa note -inftfsf *nd
Federal Reserve Board,
<*
Washington, D. C.
Dear Sirs:
We are today in receipt of a telegram from Dr. Bur
gess, Secretary of the Open Market Policy Conference, stating
that the Board has approved the action of the last conference
with respect to the purchase of United States government se
curities from the Treasury.
For the information of the Board, I am sending a
copy of a letter written to the Secretary of the Open Market
Committee (Dr* Burgess) commenting upon the minutes of the last
conference, and stating say own position taken in the conference,
which was on Thursday fully supported toy our Board of Directors.
Very truly yours:
GJS-CCP
1 Encl.
Jl> W . o j
S ‘IH-I
Izl
"inn
AJSJL
vW
SB
U
D ER,
S E R V E B A N K O F Rh
\b
ND
May 8, 1955*
Dear Dr* Bargees:
I am in receipt of your letter of the 6th, accompanied by a tenta
tive draft of the minutes of the Open Market Policy Conference, which I have
read with care, as you suggest*
Subsequent events have made it plain that our action at that con
ference may be fraught with very grave consequences, although we fully realized
it at the time*
The text of the minutes reflects the discussion of the sug
gestion then made that it might be necessary to cooperate with the Treasury
hy purchasing government securities in the market, in order to support sueh
securities and make public issues possible upon better terms.
I stated then,
and I state now, that the terms of the resolution reflect «y opinion, which
is that, if circumstances require us to purchase any large amount of govern
ment securities, we should buy them directly from the Treasury, and thus force
the Treasury, in effect, to make us its direct instrumentality of expansion,
or inflation, which of course is the purpose of.the Act, and thus make the
Treasury responsible for what might follow*
^
I stated then, and I state now, 'WiS^iAthe Federal Reserve Banks
are required to purchase up to three bi^tt&n d o i M w of government securities,
it is easily conceivable that the enttfecraital &£ock of Federal Reserve Banks
might be wiped out by market decline^iksiJn securities and leave us in the
position in which member banks ajXgge^Aro country have been placed by depre
ciation of their investments* Q T e ^ m e N ^ t h e y were very short-time securi
ties this might not oceur in ttflory, atileast, because such securities would
be maturing and in theory
coliietible at par j but in fact we would
have to take other securities
place, for, as Mr* Glass stated, we
could not possibly marketlthe sororities*
I still think thaSt-ifero form of inflation, hy "negotiation” id%h the
Federal Reserve Banks for the purchase of government securities, is the least
harmful of any proposed in the bill, because it is more subject to scientific
control and would be credit inflation pure and simple*
Mr* Glass thinks that
the issue of Treasury currency to the extent of three billions of dollars would
be less harmful, in which I do not agree with him*
In making these statements I simply wish to emphasize what I stated
at the time in voting for the resolution as phrased*
1 was not then and am
not now in favor of purchasing any very large amount of government securities
except through and at the behest of the Treasury Department*
I voted for the
resolution as it was the sense of the conference that^j^system of allotment of
existing holdings should be worked out) but at the same*! stated that it was
essential, in mj opinion, for the Federal Reserve Banks to be operated as a
system if we were to engage in wholesale purchases or even redistribution of
government securities now held*
Therefore I would prefer incorporating in the next to the last para
graph of the minutes some allusion to the necessity of operating the Federal
-
2-
Reserve Banks as a system, under the control of the Federal Eeserve Board,
and requiring the approval of the Board as much as in the purchase of one
billion dollars of new securities, as specified in the last paragraph of the
minutes.
We of course could not purchase any such volume of government se
curities as specified in the inflation bill without the waiver of reserve
requirements, and without coordination of all the banks under the supervising
authority of the Board.
lours very truly,
GJS-GCP
(Signed) GEORGE J, SMI,
Governor.
Dr* W. R. Burgess, Secretary,
Open Market Policy Conference,
Federal Reserve Bank of New Tork,
Mew Tork City.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
'{
'F o r m 118 b
.
,
; f (j
T E L E G R A M
FEDERAL RESERVE BOARD
WASHINGTON
May
Haxriooa
12, 1 9 3 3 .
Moo Tosric
fb o Sfcderol
M m r w Boord bos givoa c a r e fu l co n sid eration to tho
r e so lu tio n s adopted o t tho w e tin g on A p ril 32^ I f r a s je f the Open Market
P o lic y C onfereaoe, ond M o requested ao to adr is e you th a t i t au th orizes
the execu tive c o n a ltte e o f tbo conference to preeeed w ith it o proposed
purchases o f ^felted S ta te s Goveraaent s e c u r itie s up to an aggregate o f
# 1 ,0 0 0 ,0 0 0 ,0 0 0 *
Ia gran tin g t h is a u th o rity tha Board wiXX eapoot to bo
kept laforn ed cu rren tly by tbo e x e c u ti™ coM tlttee o f it o progra* o f
,r*
purchases aad oo to any developw m te i s tho s itu a tio n which
tho a p p lic a tio n o f tbo psograsu
my
a ffe c t
Tbo Board id XX h aw tho whole m atter o f
opon aarfcet p o lic y sad o* con stan t review , and w ill ad vise tho o o m itte e
o f oho&jges to bo aode in tho p g o g m i i s order aore f u l l y to a d ju st i t to
tho rsqu iraosn ta o f the n a tio n a l s itu a tio n .
M orrill.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
333-C-l
MAY 3W33
Mr. George !• Harr1b on, Chairman,
0;>en Larfcet Policy Conference,
c/o Federal Heserve Bank yf Hei? York,
i;ow York, Kew York*
i)oar Governor narriaom
This letter will c o n f i m the advice given you by
Governor ioyer over the telephone on Wednesday of last week
that the federal iieaervo Board ia In agreement with tho pro
posal, embodied in a resolution adopted by the Open rteifcet
Policy Conference at i ts meeting in
aohin-ton on April &£,
1933, that the executive committoo of the Conference work
out a new ayateta of allotment of existing holdings, m
well
as future purehaaea, of Government eecurities for Oysters
aecount*
It is reaueated that the now method of allotiaont
be submitted to the Board before being laade effective*
Aa ftovernor Moyer alao advised :/ou, action on the
other resolutions adopted by- tha Conference at its raeetim
on April 82 haa been deferred pending further con ddera-
tion by the Board*
ttojr tw o * n » » ,
(Siguerf) Chestsr Morrill
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Resolution
It is the sense of the conference that while, as a
general principle, the average maturity of Government securi
ties held in the system account should be kept as short as
possible, nevertheless, in the present emergency, and especially
in view of the need of full cooperation with the Treasury in
meeting its fiscal problems, the executive committee should be
authorized from time to time to shift maturities in the system
account as conditions in the market or requirements of the
Treasury appear to make that advisable.
Furthermore, it is
understood that in replacing maturities in the system account,
the executive committee will use its discretion in the light
of existing conditions and this resolution in selecting
replacements«
(Unanimous)
Z lS J L ..
3
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3' 3 1 .
Resolution
It is the sense of the Open Market Policy
Conference that, subject to (the)approval of the Federal
Reserve Board, the executive committee be authorized to
arrange with the Secretary of the Treasury from time to
time to purchase up to $1,000,000,000 of Government
securities to meet Treasury requirements®
(Unanimous, with Deputy Governor McKay not voting)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
J 3 3 .-C V
It
i»
tilt seAfl»
a x a o u tlv a o o M K ltto a
I*
of
th e
o o o fa r a n o a th a t tb o
laatru otad to
mwk out a
eyoto &
o f a il o t n o n t o f o x lfttlfig hoX&l&ga a.- w all a * n o n p w r e h a a a a o f Oororsnoiit o a o u rltio a w ith « ulow to o x rlv ia g
a t a aoco a q u it a b l* ra la tie a a k ip
of
ii> e m
o f tho ooi^MPal SWtioiNiX vooow o ImurAco*
p a r o a a ta « * a
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Excerpt from th© Minutes of the Meeting of
the Federal Reserve Board with the Governors
of the Federal Reserve Banks, April 22, 1933.,
" 3 3 3 ~ ^ “7
Governor Harrison stated that a meeting of the Open Market Policy
Conference was held this morning at which the following resolution was
adopted, Deputy Governor McKay not votings
* 5j< * * * *
Governor Harrison stated that the resolution was approved in this
form with the idea, not that all purchases of securities made pursuant there
to would be made directly from the Treasury Department, but that purchases
would also be made in the open market whenever conditions made such action
desirablej that it was the feeling of the conference that the resolution was
necessary to prepare the System to make arrangements with the Secretary of
the Treasury along the lines proposed in the Thomas Bills and that, even if
that bill is not enacted into law, it is felt that the committee should be
free to act if a situation developed which would require the Treasury Department
to turn to the Federal reserve banks for assistance*
Governor Harrison then presented the following resolutions which he
stated had been unanimously approved by the Conference:
* j(e * *
Governor Harrison stated that, in approving the first of the two
resolutions quoted above, it was not intended that there should be any
change in the fundamental policy of maintaining a portfolio of Government
securities with short maturities, but that the resolution would give to the
committee authority to adopt a more liberal policy as to longer maturities
than it has had in the past, and, as there does not seem to be much need
to anticipate a major liquidation of the System account, it was felt that
consideration might be given to the advisability of acquiring longer
maturities, at the appropriate time, for the purposes (1) of avoiding the
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Excerpt - 2
wide spread between the yields on short and long term maturities, and (2)
of toning up the market for short maturities "which would enable the Treasury
Department to market an issue of securities without the assistance of
the Federal reserve banks, where such assistance might otherwise be necessary.
Governor Harrison added that it m s not considered that the situation
required immediate action by the Federal Reserve Board on these resolutions.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Form No. 181
Office Correspon^ei.
To
FEDERAL RESERVE
Mr. Gardner________________ ____
In accordance with our telephone conversation, there is
attached hereto a copy of the letter addressed by the Board to
the Chairman of the Open Market Policy Conference on July 20/ ad
vising of approval by the Board of the action taken by the Open
Market Policy Conference at its meeting on July 14t 1932.
No action was taken by the Board and no communication was
sent to Governor Harrison following the meeting of the Conference
on November 15, 1932, at which it was expressed as the consensus
of the Conference that no change should be made at that time in
the amount of System holdings of Government securities.
There is also attached a copy of a letter addressed to
Governor Harrison under date of January 6, 1955j with regard to
the resolution adopted by the Conference at its meeting on January
5.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
.
)
F e d e ra l R eserve B a nk
o r
N
e w
Y
o r k
January 9, 1935*
Dear Mr, Morrill:
\
Let me acknowledge yonr l e t t e r , 6
confirming the approval by the Federal Reserve Board of
the resolution adopted by the Open Market Policy Conference
at its meeting on January 5, 1953.
Very truly yours,
W. Randolph Burgess
Secretary, Open Market
Policy Conference,
Mr. Chaster Morrill,
Secretary, Federal Reserve Board,
Washington, D. 0.
wrb/ h
Reproduced from the Unclassified / Declassified Holdings of the National Archives
H Sf
IJ
T H E 3ECSI0S
FEB
?, a
September 2U, 1929
—
A
-11944
-j
Meeting of the Open Market Investment Committee
Action recommended:
The Committee recommended that it be authorized to purchase not to
exceed $25>000*000 a week with the understanding that such purchases be
made under the following conditions and with the understanding that there
be a careful review of the consequences of such purchases:
"For the purpose of avoiding any increase and, if pos
sible, facilitating some further reduction in the total vol
ume of member bank discounts during the fall season, if this
can be done without stimulating unnecessary or abnormal ex
pansion of member bank credit, the Committee favors a further
increase of the open market holdings of the Federal reserve
banks*
It favors an increase of these holdings by the con
tinued purchase of bills if they can be obtained in sufficient
amounts to accomplish this purpose*
If bills cannot be ob
tained in sufficient amounts without interfering with the
present distribution, it favors the purchase of Government
certificates of the short maturities.M
Reasons given for action;
"During the past eighteen months interest rates in this country have
gradually risen and money, especially for new undertakings, has become
more difficult to obtain.
While business continues at a high level, there
are some indications of a possible impending recession.
"Rates in many foreign centers have risen even more markedly and the
loss of reserves of central banks threatens further increases in rates
and probable curtailment of Europe^ capacity to buy this country^
products.
'•In accordance with the System policy adopted on August 8th seasonal
requirements,for Federal reserve credit have been met -by bill purchases,
and in fact such purchases have been sufficient to reduce rediscounts to
some extent.”
*******************
HGovernor Harrison presented the report of the Committee and its rec
ommendations to the Board,
In presenting these recommendations Governor
Harrison indicated that the proposal for a possible purchase of Govern
ment securities was made only to provide for the contingency of not being
able to secure a sufficient amount of bankers acceptances to meet the
seasonal expansion in Federal reserve credit and make some additional pro
vision for reduction in the total of member bank borrowings.
The proposal
to bring about some reduction in these borrowings was not made with the
Reproduced from the Unclassified I Declassified Holdings of the National Archives
2.
thought that it would he possible to bring about any substantial ease in
the money market under present conditions, but rather with the thought
that some reduction in this indebtedness would be a necessary pre-requi
site to any future easing of interest rates generally, as aoon as that
became possible without the risk of unnecessary or abnormal expansion of
member bank credit.
He emphasized the fact that money rates both in
this and in other countries appeared to have risen continuously toward
higher levels, and that the proposed purchase of Government securities,
if necessary as a supplement to purchases of bills, might be a helpful
influence toward preventing further stringency of money and paving the
way in the future for a restoration of more normal monetary conditions
throughout the world.
HThere ensued a discussion of the proposals made.
In particular,
Mr. Cunningham raised a question whether a further reduction of bill rates
might be possible.
Upon this point it was the general feeling of the
members of the Open Market Committee that a further reduction of these
rates at this time would be undesirable, as an artifically low rate and
would tend to impede or even undo the distribution of bills.”
Board action;
At a meeting of the Board on October 1 a letter to the Chairman of
the Open Market Investment Committee was approved.
The letter, in part,
follows:
MThe Board approves of your program to continue the pur
chasing of bills, if necessary supplement the program by pur
chasing short-term Government securities for those reserve
banks that desire to participate for the purposes mentioned
in your recommendation ....
HIn authorizing such purchases the Board is approving
mainly for seasonal reasons and such approval should not be
interpreted as a reversal of former policies.M
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Ci
3.
November 12, 1929
—
Meeting of the Open Market Investment Committee
Action recommended;
MThe Committee therefore recommends that the present limit of
$25 *000,000 per week on the purchase of government securities be removed
and that the Committee be authorized ... to purchase not to exceed
$200,000,000 of government securities, ... in order that it might be em
powered and prepared to make purchases of government securities as and
when it may seem to be necessary for the purposes, or in the contingen
cies outlined below, but only with the understanding that there be a
careful current review by the Federal Heserve Board and the Committee
of the consequences of any such purchases that may be made. 11
Reasons given for action:
"Since the meeting of the Committee on September 2U, the credit sit
uation has changed abruptly*
There has been a severe liquidation of
credit against securities under circumstances which constitute a serious
threat to business stability at a time when there were already indica
tions of a business recession.
This seems clearly to indicate the need
of having the Federal Reserve System do all within its power toward assur
ing the ready availability of money for business, at reasonable rates,
"In view of these circumstances and for the purpose of avoiding any
increase, and if possible facilitating some reduction, in the total vol
ume of member bank discounts, the Committee believes that the System
should be prepared to increase the open market holdings of the Federal
reserve banks through the purchase of bills if they can be acquired in
sufficient amounts without interfering with their present desirable dis
tribution, and if not, through the purchase of Government securities*"
Board action:
A letter was addressed by Governor Young to Governor Harrison on
November 1 3 , 1929 advising him that in the opinion of the Board thst the
general situation was not sufficiently clarified for the System to formu
late and adopt a permanent open market policy at that time.
On November 2 5 , 1929 Governor Young again addressed Governor Harri
son as follows:
"The Board has reconsidered this action and has voted to
approve the general principles as to future policy laid down
in the report of the Open Market Investment Committee and the
resolution adopted by the Board of Directors of the Federal
Reserve Bank of New York at its meeting on November 7 th, which
you transmitted to the Board with your letter of the same
date.
Accordingly, the Board authorizes the Open MarketInvestment Committee to purchase, from time to time, not to
exceed in the aggregate $200,000,000 of Government securities,
with the understanding that if at any time the Board feels
that purchases are being made too rapidly, it will so express
itself to the Committee and reconsider the whole situation, ’1
Reproduced from the Unclassified I Declassified Holdings of the National Archives
a
u.
January 28 and 29 * 1930
—
Meeting of the Open Market Investment Committee
Action recommended:
The Committee recommended that the minimum huying rate for 'bills be
reduced so that the Federal reserve banks might have such flexibility in
their bill operations that the present portfolio might not only be main
tained but might, if necessary, be increased to such extent as to pvoid
the hardening of rates which might result from a seasonal demand for ad
ditional reserve credit, and that, in the judgment of the Committee, no
open market operations in Government securities were necessary at that
time, either to halt or to expedite the present trend of credit.
Reasons given for action;
The Committee felt that it would have had an unfortunate effect upon
business if the demand for additional spring business, concurrently with
the running off of the bill portfolio, should result in a hardening of
rates, in view of the following:
11The facts appear to be: (1) The
panicky feeling has subsided; (2) A business recession has taken place,
the extent or duration of which is not yet possible to determine; 3
Money has been made available to commerce and industry at more reason
able rates; (H) Liquidation is progressing in an orderly fashion; (5) Re
discounts have been reduced to under $U50,000,000; (6) However, there is
a large volume of security loans in member banks which they are anxious
to get reduced; (7 ) Liquidation has been slower in country banks than in
the city banks.1*
()
Board action:
The Board subsequently authorized reductions in discount and buying
rates, but, took no action on that section of the recommendation affect
ing the security portfolio.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
5March. 2U and 25, 1930
Meeting of the Open Market Investment Committee
Action recommended*
The Committee recommended that no further purchases of Government se
curities he made, and that in the interest of flexibility and preparedness
for the unexpectedness, the Committee favored a reduction to 2 l/2 per
cent in the minimum buying rate on bills.
It was the sense of the meet
ing, however, that in the absence of some development that could not then
be anticipated, bills should not be bought below 3 per cent.
Reasons given for action:
•’While Treasury tax period operations have distorted the near-time
view of the money situation, it is clear that since the meeting of the
Committee on January 28 and 29 money conditions have eased substantially
and money has become more freely available and the ease has been extended
from the short time to the long time money market,
“The Committee believes the steps already taken by the Federal Re
serve System in easing the money market through open market operations
have gone as far in providing the stimulus of easy inoney for business use
as seems desirable at this time.
The Committee believes that at present
there is no occasion for further purchases of Government securities.H
Board action:
On April 7» 193^ the Board voted to approve the report of the Com
mittee, withjthe exception of the suggestion that the minimum buying rate
be reduced, which was held under review.
Note:* Between March 6 and lU, 1930 $5^»000,000 of Government securities
originally acquired for the account of the Federal Reserve Bank of New
York were taken over as a part of the open market investment account.
At the meeting of March 2U Governor Young and Mr, Case reviewed the oc
casion for the purchase and a general discussion ensued. “In the course
of this discussion it was brought out that the primary purpose of the
transaction was to attempt to aid business which had developed a more
serious depression than had been anticipated at the time of the previous
meeting,
A number of the governors indicated that they had not been in
sympathy with this purchase of Governments and felt that money rates had
been eased more rapidly than was desirable,
A number of the other gov
ernors indicated that they were in accord with the procedure which had
been followed,”
Reproduced from the Unclassified I Declassified Holdings of the National Archives
6.
May 21 and 22, 1930
—
Meeting of the Open Market Policy Conference
Action recommended:
No affirmative recommendation ae to open market operations was made,
hut it was the sense of the Conference, that, in view of existing circum
stances, if the situation should so develop as to require an open market
operation by the system the members of the Conference will be prepared
to reconvene or else to act promptly on the recommendations of its Execu
tive Committee,
Reasons given for action;
HThe Conference has considered a preliminary memorandum reviewing
domestic business and credit conditions and has discussed at length the
present trends in world trade, commerce and commodity prices. Particular
consideration was given to the rapidly declining volume of our export
trade and its probable relation to the decline in commodity prices in
this country.
HIt appears to the Conference that conditions in business, agricul
ture and trade are still seriously depressed, not only in this country
but evidently throughout the rest of the world as well.
It is the
sense of the Conference that these conditions merit continuous careful
observation by the Federal Reserve System in order that the System will
be prepared to act promptly in the event that conditions further develop
in such a way as to make action seem advisable.11
Board action:
No action appears to have been taken by the Board until the receipt
of a telegram from Governor Harrison on June 30, 1930*
(See page 7A.)
Note*- ‘’Governor Young indicated that a number of suggestions had come
informally before the Federal Reserve Board from various quarters, in
cluding the following:
wl.
A sale of securities for the purpose of checking specula
tion, improving bank earnings, and aiding the liquidation
of security loans,
H2.
A sale of $200,000,000 of Government securities to bring
about an adjustment of System earning assets so that re
discounts might be approximately equal to the total of
Government securities and bankers acceptances held, this
sale of securities to be simultaneous with reductions in
the discount rates of a number of the reserve banks.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
7*
M3*
One reserve bank in order to increase its earnings was
coneidering the desirability of its b-uying for its own
account in the market $5^0*000 a month of Government
securities.
ttU,
A proposal to purchase Government securities and reduce
discount rates to secure a deliberate inflation of credit
for the benefit of business, particularly through the
bbnd market.
M5*
To do nothing now but to be prepared to meet autumn sea
sonal requirements for Federal reserve credit (computed
at between $350»000»000 and $1+00,000,000) by purchases
of Government securities and increeses in bill holdings.
MThere followed a brief discussion of the implications of the find
ings of the last meeting of Governors on March 25*
Governor Young in
dicated that he had hesitated to vote favorably on the New York appli
cation for a three per cent discount rate because of the position of
Governors at that meeting on March 25*
Governor Harrison indicated
that the New York Reserve Bank he was sure did not want to be in a posi
tion of feeling th&t they were violating the spirit of the findings of
the Open Market Policy Conference in making a change in discount rate
following such a conference, particularly when a number of weeks had
elapsed after the conference*
The decision as to disco-unt rates he
regarded as primarily the responsibility of the boards of directors of
the respective reserve banks subject to the review of the Federal Re
serve Board, and he did not believe the action of the Open Market
Policy Conference should be regarded as in any way restricting freedom
of action on discount rates*
A number of other governors indicated
their agreement with Governor Harrison,s statement,H
Reproduced from the Unclassified I Declassified Holdings of the National Archives
7A.
Telegram from Governor Harrison to the Federal Reserve Board, June 3* 1930
“This telegram is to confirm telephone conversations of Thursday,
yesterday, and today.
Our directors, while approving unanimously the
report of the Open Market Policy Conference of its meeting of May 21
and 22 after a thorough discussion voted on May 29 that in their opinion
it now seems desirable for the system to undertake the purchase of Gov
ernment securities in moderate amounts.
In reaching this conclusion
our directors had before them evidence that the current business depres
sion was continuing without any important indication of improvement. It
was their belief that the hope of greater business activity and increased
purchasing power for our surplus products depends at least to some ex
tent upon the financing of new undertakings both at home and abroad
through the bond market.
While the directors appreciate that it is im
possible to forecast accurately the extent of the effect of the proposed
purchases, nevertheless they feel that the money position is so deli
cately balanced that even a slight addition to the available reserve funds
might prove helpful both from the point of view of its direct influence
on the bond market and in the psychological benefit which might also
arise.
In any event it seems clear that small purchases of Government
securities at this time could do no harm and a test with the hope that
they might be of some benefit seems desirable.
Since the meeting of
our directors on Thursday we have discussed the question of purchases
of Government securities with the members of the Executive Committee e M
a Majority of the Governors of all reserve hanks are now in favor of pur
chasing not to exceed $25*000>000 a week of Government securities for jthe
next two weeks with the understanding that at the end of thaTTTme^Ee
situation would again be reviewed.
We should appreciate the action of
the Board upon this proposal of a majority of the Conference.M
Board action:
MIt was suggested that the Board reply to the recommendation of the
majority of the Open Market Policy Conference that the Board will ap
prove the purchase o f Government securities whenever and to the extent
that the earning assets of the Federal reserve banks fall below
$1.000.000f000.
It was finally voted to approve the purchase of not
to exceed $25.000*000 a week of Government securities for the next two
weeks with the understanding that at the end of that time the situation
would again be reviewed.'*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
s.
June 23* 1930
*—
Meeting of the Executive Committee of the Open Market
Policy Conference
Action recommended;
That in the opinion of the Executive Committee it was not desirable
at that time for the Federal Reserve System to undertake any further
purchases of Government securities for System account.
Note:- Occasion for this meeting was to review the result of purchases
of $50,000,000 of securities in the first two weeks of June, and to de
termine whether the Executive Committee desired to recommend any further
action to the Open Market Policy Conference*
Governor Harrison pointed out that the business situation appeared
to be growing worse rather than better, that exports were still falling
off, that commodity prices had continued to decline, and that there was
no definite indication of a turn for the better.
He stated that it was
the vie^ of the directors of the Few York Bank that the System should con
tinue to do everything possible to establish money conditions which would
provide an ample supply of funds for the bond market.
He also stated
that the recent purchase of Government securities had been followed by
some further easing of money rates,
" .... and by some improvement
in the bond market, though that market was not strong and was having
difficulty in meeting fully the demand for capital funds for business
use.
This purchase of securities had, however, been largely offset by
a decline in the bill holdings of the Reserve System, and it had become
clear that in order to keep some surplus supply of funds in the money
market and thus stimulate the bond market it would be necessary to con
tinue the purchase of Government securities further.
Governor Harrison
stated that the directors of the Hew York Reserve Bank voted at their
last meeting that in their opinion further purchases in the amount of
about $2 5,000,000 a week should be continued,M
"Governor Norris stated that the directors of his bank were opposed
to any further purchases of Government securities.
He indicated that in
his view the current business and price recession was to be ascribed
largely to over-production and excess productive capacity in a number of
lines of business rather than to financial causes, and it was his belief
that easier money and a better bond market would not help the situation
but on the contrary might lead to further increases in productive capacity
and further over-production.’1
Board action:
Note:- Governor Harrison stated in a meeting of the Executive Com
mittee with the Board that Mas he understands the procedure approved by
the Board there is no recommendation to be made by the Committee to the
Board, but that the Committee meets for the purpose of making recommendations
to the whole Conference, which recommendations would then be submitted to
the Board. The Committee is making, he stated, a report to the Board that
the Committee as a whole voted to make no recommendation as to an open
market operation now,M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
6
September 2 5 , 1930
—
Meeting of the Open Market Policy Conference
Action recommended?
"It is, therefore, recommended that the executive committee be authorized,
if necessary, to supplement "bill purchases by the purchase of government
securities in the event that the seasonal demand for Federal reserve credit,
gold exports, or other factors should teni unnecessarily to tighten present
money rates, and that in the event that any conditions should develop which
would require sales of government securities to execute this policy, the
executive committee should be authorized to make such sr.lea.
It is under
stood, however, that if the committee should have to buy or sell more than
$100,000,000 of government securities to maintain the status quo, new au
thority should be procured in accordance with the prescribed procedure.”
"Governors McDougal and Calkins voted in the negative and Governor
Talley asked to be recorded as not voting.
Governor McDougal explained
that he voted "no" on the ground that he thought some firming of rates
might be advisable at this time.
Governor Calkins explained that his
negative vote was based -upon the fact that authority to buy or sell up to
$100,000,000 rather than $50,000,000 might be construed as a further eas
ing policy rather than a policy to maintain the status quo inasmuch as
the committee now has authority to buy up to only $50 ,000,000,"
Reasons given for action;
"In view of the continued severe depression in business activity,
trade, and coarnociity prices in this country, as well as the rest of the world,
it is the sense of the conference that it should be the policy of the System,
so far as possible, to maintain the present easy money rate position in the
principal money centers, it being the opinion of the conference that under
present conditions no further easing of such money rates would be advis
able and that no firming of such rates would be desirable whether because
of seasonal requirements, gold exports, or other causes."
"Governor Harrison reviewed the status of foreign accounts with the
Federal reserve banks, and pointed out the changes which had taken place
since the last meeting of the conference.
He also discussed the general
position of the various central banks of issue abroad, calling attention
to the fact that the gold reserves of most of those banks have not only
increased in percentage but in actual amount during the past year. The
increase in the reserve percentage of most of these foreign institutions
is due not only to an increase in the actual gold supplies of the respec
tive banks but also to a very substantial decrease in note and deposit
liabilities, the decline ranging in most cases from 25$ to 50$ from a
year ego®
He pointed out that this, of course, reflected the depression
in business and trade which exists in those countries and throughout the
world.
This depression was further evidenced by the figures which were
presented to indicate the substantial decline in both the export and im-
Reproduced from the Unclassified / Declassified Holdings of the National Archives
port trade of most every one of the principal countries in Europe, South
America, and the Far Sast„H
Discussion;
••There ensued a general discussion of credit policies in which one of
the members of the Federal Reserve Board asked whether the conference
had considered the advisability of a very much more active open market
program involving substantially larger purchases of government securities
with a view to forcing upon the country a more active use of credit,
through the stimulus of such purchases of securities by the System* Gov
ernor Harrison explained that that had not been considered specifically
because of the fact that the majority of the conference felt so strongly
that there is no need for any further easing of the present easy money
rate position at the present time,*'
Board action;
In a letter dated October 2, the Board approved the Committeefs rec
ommendation, excerpts from which follow;
,f ... It is the understanding of the Board that the au
thority asked by the Conference to purchase or sell govern
ment securities is to protect the existing level of rates,
not to alter it,
•'I am writing to advise you that the Board is prepared
to approve the purchase or sale of Government securities
within the limits proposed in the i^ort7^for the purpose
of maintaining stability of rates under present conditions,
such authority is to run until an agreeable date next Jan
uary, unless a change in conditions before that tim<T should
make a review and reconsideration of open market policy ad
visable at an earlier date,H
Reproduced from the Unclassified I Declassified Holdings of the National Archives
9.
December 20, 1930
*—
Meeting of the Executive Committee of the Open
Market Policy Conference
Action recommended;
“Those present agreed that if any real need arose they would "be will
ing to leave it to the .judgment of the Federal. Reserve Bank of New York
whether some additional amount of government securities should be purchased
within the $100,000,006 authority with the understanding that the New
York Bank would keep in close communication with the members of the Com
mittee.
“With reference to the question as to whether any governments pur
chased at this time or other governments in the portfolio should be sold
after the turn of the year, while it seemed to be the sense of the com
mittee that this would prove undesirable or difficult in all the circumstances,
it was agreed that a meeting of the open market policy conference should
be held early in January to consider future policies at that time, Jan
uary 12 was suggested as a satisfactory date."
Reasons given for action:
“Governor Harrison then summarized the credit position, indicating
that, owing to some tenseness in the banking situation, the public state
of mind was now more sensitive than when the program of the Open Market
Policy Conference meeting on September 2*5 had been adopted, which provided
for a possible purchase of up to $100,000,000 Government securities if
necessary, as a supplement to bill purchases, to prevent any tightening
of the money market due to seasonal or other causes.
It was his view
that if there was any difficulty in securing an adequate a m o v zit of bankers
acceptances to take cnre of all seasonal needs for the next ten days, the
committee should be prepared promptly to buy governments rather than heve
any increase in nervousness arise from any indication of strain in the
money situation.
“This question was then discussed by the members of the committee.
In the course of discussion reference was made to the banking situation
at different important centers, the probable currency and window dressing
demands over the first of the year, and problems which had arisen in con
nection with some discrimination against certain names existing in the
market for bankers acceptances,*1
$ .Qa,r d - arfs t t o n i
Reproduced from the Unclassified I Declassified Holdings of the National Archives
10.
January 21, 1931
—
Meeting of the Open Market Policy Conference
Action recommended:
M .... It is the sense of the Conference that in view of these con
ditions it should be the policy of theSystem to continue an easy money
policy in the best interest of trade and commerce.
It is the belief of
the Conference, however, that the seasonal return flow of currency and
credit and other factors have tended during recent weeks to make for an
undue excess of funds in the principal money centers.
It is therefore
the opinion of the Conference that in these circumstances it would be
desirable to dispose of some of the System holdings of government securities as and when opportunity affords itself to do this without disturbance or any tightening of the money position.
It is understood that
there shall be a new meeting of the Conference as soon as or whenever
conditions in the opinion of the Conference or the Federal Reserve Board
justify a reconsideration of this policy.1'
Discussion:
“Governor Harrison then reviewed for the conference his discussions
with European bankers and others and the impressions he gathered on his
recent European trip.
In the course of extended discussion of these ,
matters Governor Harrison pointed out that the ?*orld owes the United
States on balance about $600,000,000 each year, and that payment has to be
made in gold, in imports from foreign countries to us, or by borrowing
from us.
These countries were unable to send us much more gold, their
exports to us were now limited and new financing curtailed.
Their only
alternative was to diminish their purchases of goods from us, which was
now being doen to our detriment.
“He indicated that the people he met abroad appeared to believe that
recovery from the present business depression depends largely on America,
partly for psychological reasons and partly because of the importance of
exports to us and borrowing from us*
"Generally speaking he felt that the economic situation of European
countries had grown distinctly worse since hie visit last spring, and has
probably grown somewhat worse in the weeks since his recent return from
Europe.
M ..... Governor Harrison referred to the reduction of the discount
rate of the Federal Reserve Bank of New York, effective December 2U, 1930.
He indicated that the banking situation was of primary importance in the
decision.
He had been urged from many quarters to make a reassuring
statement which might aid in quieting the banking situation.
Such a
statement was practically impossible because to be strong enough to do any
good it would run the risk of being contradicted by any small bank failure
which might thereafter occur.
The rate reduction, apart from other rea
sons, served as a method of stating to the public that money was freely
available.
The rate reduction was justified technically by the money
situation.
It would probably help the foreign situation as well as the
domestic situation.
Incidentally, it might make it easier for France to
reduce her rate.
The discount rate decision had been made very rapidly,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
11.
and. there had not "been an opportunity to discuss the matter with moat
of the reserve hanks.
In fact, the proposal had only arisen after the
meeting on December 20 of the executive committee of the Open Market
Policy Conference.
"Governor Harrison referred to the holdings of sterling bills purchased
during the period of greatest weakness of sterling last autumn.
He said
it had been the intention to sell these bills some time after the turn of
the year, when it was hoped that sterling would be strong enough to make
an orderly operation.
Recent weakness of sterling, however, has made
this program seem undesirable up to this time, and instead of the sale
of sterling the directors of the New York Bank had voted at their last
meeting to sell a part of the securities which had been added to the port
folio of the New York Bank during the recent banking emergency.
wGovernor McDougal commented on the recent discount rate change by
the Federal Reserve Bank of Chicago and indicated with regard to the
last three changes in their discount rate that in the case of the first
two of these changes it had been hoped that the reduction in the rate
would have some encouraging effect upon business, but that the latest
change had been made without any such belief, but was designed to correct
to some extent the large differential of 1
between the Chicago rate
and that of the New York Bank*
“Governor McDougal expressed the hope that there would be no further
reduction in the bill rate; that money was too cheap with Federal funds
ouoted at l/U of one per cent; and that it would be better for the market
to get the bills if it wanted them.
“Governor Calkins suggested that the position should be one in which
we kept our bill rate low, but tried to correct any over-sloppy condition
in the money market by the sale of government securities.
Several of
fchose present concurred in this view*
M .... Governor Harrison further reviewed the changes in the money
market since the last meeting of the Open Market Policy Conference, point
ing out that the seasonal expansion in the requirements for Federal reserve
credit up to the time of financial disturbances had been less than normal,
and bill purchases appeared to be sufficient to take care of seasonal
needs without additional purchases of government securities.
This ap
peared to be true, until the banking emergency when the New York Bank had
found it necessary to take over securities from two member banks and at
the end of the year when purchases were necessary in order to avoid too
great tightening df credit due to an unusual amount of “window dressing"•
Purchases made for the open market account had since been liquidated as
had also $20,000,000 of the emergency purchases made by the New York Bank.
Since the turn of the year the return flow of funds appeared to have
greatly aided the bond market.
There had been a considerable excess of
reserves of the New York City banks, though this had fluctuated a good
deal.
It was the general plan of the New York Bank to liquidate the bal-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
12«
ance of the temporary purchases of $H*5,000,000 of securities, as the sur
plus of reserves offered opportunity without interfering with the bond and
money market,
wIt was moved by Governor McDougal that it was the sense of the con
ference that the present was an opportune time to let government securi
ties go from the open market portfolio as pud when it could be done with
out undue disturbance, with the understanding that sales should not be
m3.de rapidly and should be made in orderly fashion.
Governor McDougal
explained this motion by saying that some time ago System open market
operations had followed a general principle which he believed to be sound,
and should be reverted to, that whenever the market is ready to take bills
and government securities the Reserve System should sell them, and con
versely, the System should acquire them when the market cannot take them
readily.
On this principle he would like to hold bill rates where they
were to push bills out of the System,
“Governor Harrison commented that if we sell governments we should
have the bill rate at a point nearer to the market so that we might be
ready to take in bills without such a big penalty to the seller.
He
would not favor any sales of governments unless the bill window were
opened to provide in this way any money the market required,11
*********
,1Governor Young stated that a sale of $50,000,000 or $60,000,000 of
governments might perhaps injure the bond market; that a commercial banker
who saw a reduction in government holdings of the Reserve System would be
inclined to sell bonds.
In any event it was important to decide the
general policy whether the conference favored firmer or easier money, or
the status quo.
The resolution shown above under “action recommended11 was unanimously
adopted, following which the discussion was resumed*
MGovernor Meyer stated that the banking situation was at present the
primary thing to consider, and that whatever policy was adopted should be
adopted with that in view.
He suggested that bill maturities would re
spond to changes in the money market, and would act as a buffer in taking
up surplus funds.
Any proposal for the liquidation of governments
should consider the present extraordinary reluctance of banks to show
bills payable.
The present banking situation was so delicate that it
could be easily disturbed,
“Governor Harrison pointed out that the resolutions of the conference
represented a compromise since some of those present were in favor of con
siderable sales of securities, while others were only in favor of such
moderate sales as might be necessary to take up some of the slack. Gov-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
13.
ernor Meyer suggested that any move which the Federal Reserve System made
in its automatic assets immediately put the acts of the System on the sky
line where they were subject to observation and criticism,
’’Governor Harrison indicated that he
the proposed moderate program of sales of
rates for bills were nearer to the market
the System would act as a safety valve in
drawn from the market*11
would not be content with even
governments unless the buying
rate, as bills coming back to
case too much funds were with
*****************
’’After Governor Harrison had left the meeting, Governor Meyer stated
that a reduction of bills and discounts of the System did not involve the
launching of any major policy, whereas the sale of governments is commonly
interpreted as a major move in Federal reserve policy.
The Reserve Sys
tem has been accused in a number of quarters of pursuing a deflationary
policy in the past year, and a sale of government securities at this time
is likely to draw fire*
In this situAtion it would appear most desirable
to avoid a move which appears to represent a major change in policy when
there is no necessity for doing it,
”Governor Young said that those present would certainly not favor any
program which they believed would affect bank confidence, or that was a
new and major change in policy.
Government bonds had first been bought
under an emergency, and their purchase had proved helpful, but there was
a limit to what the System could do in buying bonds.
Some sales would
put the System into a position to go back into the market and buy again
if it is necessary,
’’Governof McDougal pointed out that no one present was desirous of
dumpting securities in the market, but they favored a program that would
be worked out gradually,
..... *'
’’Governor Meyer stated that in this position the Board has an appar
ent responsibility to the country; that the world was now in the worst
economic condition that he had ever seen.
There had been the worst break
down in credit conditions which he had witnessed.
The present situation
in Germany end Australia in which a nation*s credit was at question being
cases in point.
Unemployment, unrest, and discontent w e r e severe. Un
der these circumstances everything which the Federal Reserve System does
which is or may be interpreted as a move in major policy is on the sky
line.
’’Governor Calkins stated that the proposal was not considered es a
major change in policy, that his idea was that a beginning of sales might
be made by letting February 16 maturities of Treasury bills run off. It
could not be considered a major change in policy because it provides spe
cifically for the Continuance of an easy money policy*.M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
13A
Board actions
On January 29 the Board voted to advise the Chairman of the Open
Market Policy Conference that approval had been given to the report as
submitted.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
1U.
April 29* 1931
**“* Minutes of the Open Market Policy Conference
Action recommended;
"VOTBD that pending another meeting of the conference, as B o o n as
that may be deemed necessary by the Federal Reserve Board or the members
of the conference, the executive committee of the conference should be
authorized, if and when it appears to them necessary or advisable, to_
purchase up to $100,000,000 of government securities
Reasons given for action;
"The question which was discussed by the conference was whether there
was any appropriate way in which the Federal Reserve System could take ac
tion in order that any further gold imports will have their normal and
natural effect upon the loans and investments of member banks.
"Governor Harrison pointed out that this was one of the reasons which
had prompted the Federal Reserve Bank of Hew York in recent weeks to re
duce itB bill rates, hoping that by that action it would be possible to
maintain or even increase the System!s bill portfolio in spite of the
fact that gold is still coming into the country,
He said that to have
done nothing with the bill rates would very likely have resulted in a
rapid diminution of the bill portfolio of the System as gold came in, not
only thereby nullifying gold imports but liquidating the System's earning
assets by a substitution of gold, of which we already have a plethora*
Governor Harrison then said that it was the purpose of the New York Bank,
if necessary, to reduce its bill rate as low as one per cent in the hope
of accomplishing its objectives of maintaining or even increasing the
bill portfolio in the face of gold imports; that it was likely that next
week or the following week he would recommend a reduction in the discount
rate.
The chief purpose of this program was, he stated, not only to
tend to reduce the amount of gold imports or to make those imports that
actually take place more effective, but also, by its effect upon the
short time money market, ultimately to make credit, of which there is now
plenty, especially in the big centers, more active and more widely dis
tributed.
It was felt that this policy sooner or later would necessarily,
because of its effect upon the short time money rates, encourage banks and
depositors in banks, in spite of their present liquidity, to employ their
money, which now is becoming relatively so unprofitable.
More specifically,
he said that he hoped that this policy might encourage the New York Clear
ing House banks further to reduce their interest rates on deposits,
"In this connection, it seemed to be the general sentiment of the
conference that one of the difficulties with the banking situation today
is the consequence of the competition of banks throughout the country for
increasing deposits at unjustifiably high rates of interest, and that any
action which might encourage a more general reduction in those rfetes could
not but be helpful to the banking situation as a whole.
Governor Harri
son then said that if the policy which the New York Bank has adopted is
to become completely effective it requires System cooperation both in the
Reproduced from the Unclassified / Declassified Holdings of the National Archives
15.
matter of rates and in the matter of open market purchases of government
securities for with bill rates as low as they are, in the event that the
System^ M i l portfolio runs off, even after rates may have been reduced
to one per cent, the only effective instrument which the System lias left
to aid in maintaining the total volume of its credit outstanding is the
purchase of government securities.
He, therefore, recommended that the
conference authorize the executive committee of the conference, if and
when it a.ppears to them necessary or advisable, to purchase up to
$100,000,000 of government securities.
In making this recommendation,
he pointed out that it was not the intention to purchase government securi
ties immediately but rather to attempt to carry out the policy, first,
through bill rates, second, through the reduction in discount rate, and,
then, if necessary, to resort to the purchase of government securities*H
Discussion;
Mgovernor Uorris was of the opinion that the proposed policy might
not accomplish any great amount of good* that the System was in a strong
position; that there was little or no danger of speculation; that he saw
no probability of any bad results from the policy; and that in those cir
cumstances he was ready to participate in the policy and to contribute by
recommending a reduction in the Philadelphia Bank rate to three per cent.
His chief misgiving about the adoption of the policy was the danger of a
slowness in the reversal of the policy when that might become necessary.
This was a danger to which all the members of the conference referred
and which Governor Meyer stated he did not believe would be existent in
the present circumstances, especially in view ,of the fact that the coun
try would look upon a reversal of the policy as an evidence that the
turn had come in the business depression,
•’Governor Young stated that they are even now following the Hew York
reductions in bill rates and in the past have followed in the reduction
in discount rates; that he believes it is important to have harmony in
the System; and that if New York reduces its discount rate to 1 l/2 per
cent, he will recommend the same rate in Boston.
He believes that it
is inadvisable to buy more government securities at the moment but that
even so he would, of course, be willing to buy government securities at
the present time from any member bank that needed accommodation in that
fashion.
He felt that while the program might be right or wrong, the
only thing to do, in view of all the circumstances discussed by the con
ference, is to go through with it,
'•Governor Fancher stated that the economic situation throughout the
world has seriously changed in the past year and is perhaps more serious
than ever; the gold flow is most important; and he said that he was will
ing to go along with any program designed to check it.
He also agreed
that the System can lend its efforts to make money so cheap as to put
it to work.
.....
••Governor Seay stated that he had no great degree of confidence that
the proposed policy will accomplish anything very definite or that busi
ness recovery is dependent upon any further ease in credit.
He inti
mated that it was possible that a further easing progfam might be con
Reproduced from the Unclassified I Declassified Holdings of the National Archives
,
16
strued as a move in the wrong direction and as a policy of desperation.
He did feel, however, that any move that would force hanks to reduce
rates which they pay on deposits is a-most important one, and that if
the proposed program fails in accomplishing that, the program itself
.......
would fail#
“Governor Black stated that, in his opinion, the present situation
is extreme and that it was important that we do something.
...
He
hopes and believes that the program recommended by Governor Harrison
will be effective, at least in part; that it would tend to make the gold
which we have more useful; and that it would tend to drive some short
time money to work, which is what the situation now needs. ....
“Governor McDougal stated that the gold problem, as discussed by
the conference, is an impressive one and should be corrected, if possible;
that that is the big question before us.
The banking situation is also
an outstanding problem; and that while he thinks money rates are now cheap
enough and does not see how cheaper rates will stimulate business, never
theless, it may serve to move gold elsewhere.
...
He was not in favor
of buying governments at the moment but that if lower discount rates were
established in the Eastern districts, Chicago would probably have to
follow*
“Governor Martin said that there
present situation, and that it would,
the results of the proposed policy.
on the whole, the majority of reasons
is no historical precedent for the
therefore, be difficult to predict
He saw some objections to it but,
were in favor of it.
....
“Governor Geery was somewhat at a loss to foresee the precise re
sults of the proposed policy but was willing to give it a fair trial at
this time and was willing to vote for it.
“Governor Talley stated that he still has confidence that gold will
finally express itself.
.....
In his judgment, there was some ques
tion whether it would be desirable to have the New York banks reduce
their interest rates further; that it was more desirable, in his mind,
for those banks to send money abroad into short commercial credits.
While somewhat apprehensive about attempting the policy, he saw little
ammunition left, and he was in favor of trying it*
“Deputy Governor Worthington said that while the Kansas City Bank
has felt for some time that money rates have been too low and that there
would be no revival in business until rates go up, nevertheless he sees
no objection to the program.... .
“Governor Calkins said that he agreed with the desirability of harmo
nious action in the System but questioned how harmonious it would be un
less a program is agreed to without reluctance*
He is somewhat skepti
cal of the proposed program because of the fact that the present situa
tion was so lacking in precedents that it is not possible to compare it
with the past.......
The big question, in his mind, is whether we
would be prepared to correct or reverse the policy if it proves to be
wrong, but that San Francisco will be prepared to follow and participate
in the program, even though not with the wholehearted acquiescence which
Reproduced from the Unclassified / Declassified Holdings of the National Archives
17.
he thinks so advisable*
“Governors Meyer and Harrison then said that they did not have any
fixed certainty of the outcome of the procedure but that it was one in
which we had little, if any, volition since it would he forced upon us
by the present gold movement sooner or later, in any event*”
Board action:
At a meeting of the Board on May 7 it was voted to approve the re
quest of the Open Market Policy Conference made April 29 that the Executive Committee be authorized to purchase up to $100,000,000 of Govern
ment securl ties•
Reproduced from the Unclassified / Declassified Holdings of the National Archives
18.
June 22, 1931
Meeting of the Executive Committee of the Open Market
Policy Conference
Action recommended;
"It was voted tobuy up to $50,000,000 of government securities with
the understanding that there would be further conference by telephone or
otherwise between members of the committee before any purchases were
made beyond that amount,
HGovernor Young asked to be recorded as voting in the negative, and
Governor Norris did not vote."
Reasons given for actions
"Governor Harrison outlined developments in recent weeks in the inter
national markets, and particularly in connection with the assistance re
quired by the Austrian Credit Anst.alt, and the further succeeding develoj>ments in Hungary and in Germany, and indicated that on Friday the Reichsbank had sold us over $100,000,000 in gold, and its total losses of gold
and foreign exchange had been approximately $250,000,000.
It had begun
a policy of credit rationing at home.
As a result largely of the gold
from Germany this country had gained $112,000,000 of gold since June 1,
and the total net gain since January 1 amounted to $298,000,000.
w ..... Since the April meeting incoming gold may be considered to
have been partly absorbed by currency withdrawals in connection with bank
difficulties.
If the influence of these currency withdrawals could be
eliminated Federal reserve earning assets would show a substantial reduc
tion.
In other words, the gold has been to a degree sterilized, and the
aim of the April meeting of maintaining earning assets and putting new
gold to work has not been fully achieved.
"Governor Young objected at this point that he did not agree with
the conclusions of the April conference with respect to the sterilization
of gold.
"Governor Harrison pointed out that the other aim of the April con
ference was to reduce short money rates and thus encourage the shifting
of funds to employment in longer use.
Partly as a consequence of the
action taken there had been large and widespread reductions of rates paid
by banks on deposits, and in short time money rates generally.
"He further sta.ted that the events of the past two weeks were in
some ways the most critical which the world has passed through since the
war, that there had been a threat of a general moratorium and a possible
breakdown of capitalism in Europe.
In the meantime developments in
South America had indicated the danger of a moratorium in certain coun
tries there.
In these circumstances it seemed desirable to take every
possible measure available to the Federal Reserve System for improving
Reproduced from the Unclassified I Declassified Holdings of the National Archives
19.
the situation.
He could see no risk in buying governments at this
time, but considerable advantage.
It was a particularly good time, be
cause the improvement of psychology and the lift in the commodity markets
and the security markets following the announcement of the administra
tion^ position as to reparations provided an impetus toward revival
which, with proper encouragement, might now bring the turning of the
tide*
HAs far as the bill holdings of the system were concerned Governor
Harrison stated that it would probably be somewhat easier to maintain
these holdings because of the fact that the Bank of JPmnce was allowing
all itfi'bills to mature*
Since these holdings constituted something
like 25 per cent of the total bills outstanding in the American market,
the release of these bills would provide a more ample supply, part of
which would presumably come to the reserve bank.
The Bank of France in
tended, however, to increase its balance at the reserve banks as its
bills matured, en action which would be a tightening factor in the money
market.
It might be desirable in the near future to make some reduction
in bill rates since technically bill rates were becoming out of line with
other short term money rates.
In fact the directors of the New York Bank
had already requested from the Federal Reserve Board a lower minimum buy
ing rate on bills, though there was no present intention of reducing the
actual buying rate#
“Governor Meyer reported ... that from $350*000,000 to $375*000,000
of currency was now hoarded throughout the country as a result of banking
disturbances since last autumn.
This represented an additional demand
for Federal reserve credit which tended to offset the effects of gold
imports under the normal working of the gold standard.H
Discussion?
“Governor Norris asked whether the real difficulty at present was not
the rates for money but lack of demand for credit from high grade borrowers
while lenders were timid and hesitant with respect to ?ny other type of
borrower.
“Governor Harrison suggested that the pressure of excess reserves
sooner or later tends to overcome timidity.
Under the traditional gold
standard the piling up of funds in any country sooner or later operates
toward an expansion of credit which in turn is an influence towards rais
ing the price level.
He hoped that the purchase of governments might
first avoid sterilizing gold, and might second be a stimulus operating
with other favorable recent events towards giving an additional lift to
ward business recovery.
’’Governor Norris raised the question whether the system would not be
criticized for taking a step to make money still easier when it was al
ready very easy.
...
Reproduced from the Unclassified / Declassified Holdings of the National Archives
to .
“Governor Meyer suggested that other critics would say that hy in
action we were preventing the normal influence of gold,
“Governor Black commented that the action taken at the April 29 meet
ing at Washington was affirmative, in favor of positive action which was
to continue until it accomplished its results.
... The President, by
his announcement, had taken a constructive step which should he hacked up
to the limit, and Governor Black believed that the purchase of govern
ments would give this impression and have this effect.
“Governor Meyer stated that the Federal Reserve Board would be sym
pathetic to the purchase of Government securities, would have some prefer
ence for a larger program of purchases than $50 ,000 ,000 , and that the
Board would regard this program as simply discounting in advance the eas
ing effect of the return of hoarded currency when the period of apprehen
sion was over,
“Governor Young discussed the question of gold sterilization and in
dicated that he believed that sterilization had been and was natural
and inevitable under the operation of the Federal Reserve System; that
the only way sterilization could be stopped was to have continuously an
excess of credit, but that any such excess never lasts but is rather quickly
absorbed through arreduction in Federal reserve credit.
It is, therefore,
impossible to prevent sterilization without adopting the Macauley policy
of buying an exceedingly large volume of government securities.
He
agreed that something should be done td support the action of the Presi
dent, but did not believe that the purchase of $50,000,000 of Government
securities would accomplish this purpose.*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
August 11, I93I —
Meeting of the Open Market Policy Conference
Action recommended:
MIt is the sense of the Conference that, subject to the approval of
the Federal Reserve Board, the Executive Committee be authorized to pur
chase for account of such Federal reserve banks as desire to participate,
up to $120,000,000 of Government securities if and when it becomes neces
sary or advisable to do so, or if necessary or advisable to sell up to a
similar amount.
It is the opinion of the Conference that economic con
ditions in this country and throughout the world are now such that it is
essential that the System be prepared promptly to take whatever further
proper steps are in its power to encourage or facilitate a recovery in
conditions as soon as it appears likely that such steps will be effective
in accomplishing this purpose.
’’All governors voted in favor of the resolution, as amended, except
Governor Young.*'
Reasons given for actions
MGovernor Harrison .. reviewed the recent developments abroad, and
particularly in those countries where credits had been granted by the Fed
eral reserve banks, discussing in detail the situation in Austria, Hungary,
and Germany.11
**********
"Between July 23 and August Sf 193^-t sterling exchange was purchased
to the amount of approximately £1 ,650,000 in support of that exchange.
Prior to August 8 1*900,000 of the above sum were invested in sterling
bills by the Bank of England, for our account.
On August 8 the £900,000
were transferred to apply on the Bank of England credit of $125,000,000
and the remaining &75'3»000, which were delivered to the Bank of England
on August 8, were invested in bills and applied directly to the credit.
"Governor Harrison reviewed the background of these credits and the
negotiations which had led up to them, as outlined in his letter of
July 9* 1931» to the Governors of all Federal reserve banks.
The con
tinued. lack of confidence and the state of fear and unrest which exist
all over the world and the continued decline in commodity prices had
brought about a condition approaching abnkruptcy in many foreign countries
and in certain sections of our own country, due to the inability of these
countries and sections to meet their fixed charges.
Under these condi
tions one of two things must happen; either commodity prices must go up,
or debt structures must be reorganized, involving defaults or postpone
ments in many cases.
While bank credits may serve to patch up various
situations temporarily, they cannot correct the basic difficulties. The
only possible additional step which now appears open to the Federal Re
serve System as a means for exerting some favorable influence upon the
situation is the purchase of Government securities.
The only question
is whether conditions are now such as to make such a step practicable or
reasonably effective.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
22
.
Governor Harrison stated his belief that economic, social, and po
litical conditions throughout the ^orld were so very serious, the pros
pects for the winter indicated such severe unemployment and distress,
and the threat of political and social upheavals in various parts of the
world was so great that the Federal Reserve System should certainly be
prepared to take any helpful steps within its power if and as soon as
conditions indicated reasonable prospects of their success,"
*************
“With regard to the immediate situation in New York, Governor Harri
son reported that the New York banks for two months past had been holding
currently excess reserves of from $60 ,000,000 to $20,000,000, but that in
the past few days, due to currency withdrawals and the action of the Bank
of France in allowing its Treasury Bills and bankers* bills to run off,
this excess had been wiped out and the banks had been obliged to borrow
at the reserve bank from $^0,000,000 to $80,000,000*
In view of this
sudden and unusual change and to avoid a disturbance to the money situa
tion, the New York reserve bank had made purchases on August 10 and 11,
for its own account, or $50,000,000 of Government securities, any part of
which it will be glad to give to any bank that wishes to participate.
This action was not taken with a view to creating excess reserves but to
supply enough, funds to take care of the unusual withdrawals.
The Bank
of France has now a $170,000,000 free balance with the reserve banks and
holds about $U0,000,000 more of bills maturing within the next few weeks.11
Discussion:
11....Governor Harrison did not advocate immediate purchases of se
curities because it did not appear that the attitude of the banks and in
vestors was such that funds thus made available would be put to work,
but he believed the system should be prepared to make substantial purchases
as soon as there was some prospect that the purchases might be effective.”
Considerable discussion followed about the inability of the majority
of the banks to participate in further purchases, due to lack of gold
cover.
Governor Harrison stated that the amount of free gold in the
system was about $J50 ,000,000 , which could be increased to a billion dol
lars by withdrawals from the agents, and pointed out that the question to
decide was not whether individual banks could, or could not, participate,
but to try to agree on a system policy which would be helpful.
HGovernor Meyer reviewed the various facts in the present situation
and stated that in his opinion the situation was one which called for
some action by the Federal Reserve System, and he hoped that the Conference
would give serious consideration to the matter of buying securities. Fur
thermore, it was his opinion that such additional action could be taken
without pny possibility of really weakening the System.**
Reproduced from the Unclassified I Declassified Holdings of the National Archives
23 .
Governor Calkins suggestion members of the Conference gave the
attitude of their respective boards of directors in regard to the pur
chase of securities.
After adjournment the Conference met with the Federal Reserve Board
and the following discussion ensued:
MIn discussing the reasons why the members of the Conference were not
in fa,vor of purchasing large amounts of Government securities immediately,
Governor Harrison pointed out that at present the effect of purchases would
probably be limited to the piling up of excess reserves in member banks
which would not be employed.
The natural outlet for such excess reserves
is in investments and if action were taken at the right time it might re
sult in pressure -upon the banks for the use of surplus funds in the pur
chase of bonds, mortgages, etc.
One difficulty at the present time is
that the most prime investments are selling on a very low yield basis,
while secondary bonds consist largely of railroad issues, of which a con
siderable proportion may in a short time become ineligible for investment
by savings banks, insurance companies, and trust funds, due to the provi
sions of various state laws.
In addition the bond market has been uncer
tain because of pressure on the market, due to forced liquidation of bond
portfolios of closed banks.
The conference felt, however, that the exist
ing situation was so critical that the System should be prepared to act
quickly if and when conditions are changed to a point which might make it
appear that an operation in Government securities would be effective- in
encouraging or facilitating business recovery.”
***********
’’Governor Meyer and other members of the Board expressed disappoint
ment at the action taken by the Committee in that it limited possible pur
chases to an ineffective amount.
They also indicated some disappoint
ment that the procedure followed by the meeting did not give the members
of the Board an adequate opportunity for discussion with the members of
the Conference before fin^l action was taken by the Conference.
"Governor Harrison stated that the present procedure was not satis
factory to him either but that it was precisely in accordance with the
procedure followed ever since the Open Market Committee had been changed
to the Open Market Policy Conference, including representatives of all
of the Federal reserve banks.”
************
”Governor Young stated that he would rather see the portfolios of
the Federal Reserve System composed of bills and discounts, and regretted
to see two important functions nullified by operations in Government se
curities.”
Reproduced from the Unclassified / Declassified Holdings of the National Archives
24.
*******
“Governor Meyer suggested as a matter or procedure that the members
of the Conference should come to the meeting without instructions by their
boards of directors, but prepared for a free discussion with the members
of the Board,
He suggested that there should be another meeting held at
an early date, to be attended by the Board, for a further discussion of
these questions.M
Reproduced from the Unclassified I Declassified Holdings of the National Archives
October 26, 1931
—
Meeting of the Executive Committee of the Open Mar
ket Policy Conference.
Action recommended;
“It was moved and carried that while for the moment there is no occa
sion for a reduction in System holdings of government securities, that by
reason of the views expressed by a number of governors favorable to a sale
of government securities, fend because of the possibility of changes in the
credit situation which might make sales desirable, the committee ask the
Federal Reserve Board to give the executive committee the same leeway with
respect to sales of government securities as it now possesses with respect
toTpurchases as recommended by the resolution of the Open Market Bolicy
Conference on August 11.“
Reasons given for action;
“Governor Harrison reviewed the considerations affecting open market
policy, indicating, first, that the free gold position of the System was
not a consideration at this time first because there is now, even after a
loss of over $700,000,000 of gold, over $800,000,000 free gold in the System,
practically as large as before the outward gold movement started and second
because a sale of government securities would not in fact really strengthen
the System*s gold position.
Its only effect would be to provide addi
tional collateral for Federal reserve notes, whereas there is an ample amount
of collateral either now on hand or in sight so that a shortage of collateral
would not be a limiting factor on the amount of gold which could be exported
or the amount of Federal reserve notes which could be issued.
At the
present time only $300,000,000 of Federal reserve notes out of $2,700,000,000
outstanding are not collateraled to 60$ of value by eligible paper.
“The most important question which the System faces at present is the
problem of bank failures and hoarding of currency.
Failures had been in
creasing at a rapid rate and are exercising a terrific pressure on the
credit situation.
Every action of the System should be considered in the
light of its possible effect on these failures and on the willingness of
banks to help out their correspondents in time of difficulty.
A decrease
in the Systemrs holdings of government securities might affect the situa
tion adversely, first, by its psychological influence as indicating a policy
of pressure, and second, as tending to increase the amount of member bank
discounts and so making them somewhat less willing to lend freely to help
banks actually in need***
Reproduced from the Unclassified I Declassified Holdings of the National Archives
26
November JO, 193^
.
Meeting of the Open Market Policy Conference
Action recommended and reasons given for actions
’’The Conference reviewed a preliminary memorandum submitted
by the Chairman,
They discussed business banking and credit
conditions both here and abroad and considered in particular the
effects upon the American banking and credit structure of the
recent huge withdrawals of gold and currency and possible fur
ther withdrawals of currency for holiday purposes or for hoard
ing,
They further considered the heavy maturities of bills in
the System portfolio before the end of the year,
While the Con
ference was of the opinion that there is no occasion for any im
mediate purchase of government securities, nevertheless, they
voted that in view of all circumstances and in order to be pre
pared if and when occasion arises, the Executive Committee be
authorized in its discretion to buy up to $200,000*000 of gov
ernment securities before the end of the year.
It was the
sense of the conference that the committee should also be au
thorized in their discretion to sell any securities so bought
after the turn of the year if conditions then permit.
The
conference felt that there should be another meeting of the con
ference early in January to consider the System’s general opera
tions and policies in the light of conditions as they then exist,
"Before final action on this resolution, Governor Harrison discussed
at some length the international situation calling attention particularly
to the change in conditions in various countries of the world since the
abandonment of the gold standard by England,
He emphasized the steps
which have been taken in recent weeks by various countries to increase
tariffs and to impose exchange restrictions which act as serious deterrents
to international tr$de,
He indicated that it was difficult to see how
many of these countries can determine upon their future monetary policy
until England finally decides upon a course of stabilization, but that it
is not likely in his opinion that England will attempt to stabilize its
currency until some definite action is taken about reparations and intertovernmental debts, and until they are in a position between to determine
their own trade balance and price levels which will be affected by the
tariff which the government has now enacted,"
Reproduced from the Unclassified I Declassified Holdings of the National Archives
January 11 and 12, 1932
—
Meeting of the Open Market Policy Conference
Action recommended;
11
The Executive Committee he authorized if and when desirable
to purchase for the System account not to exceed $200 fQQQ.PQQQ of government
securities« such purchases to be made only a^ter the approval of the Exe
cutive Committee at a meeting to be called for the purpose of considering
the occasion or need therefor.”
This resolution was passed with Governors Seay and McDougal, and Deputy
Governor Day voting in the negative.
Reasons given for actions
"The Conference has considered the preliminary memorand-um and discussed
at length the current business and banking situation*
It gave particular
attention to the increase in bank failures .and the pressure -upon the busi
ness and price structure of the country resulting from or coincident with
the huge deflation in bank credit during the past year, the contraction of
bank loans and investments during the last quarter of 193^ being at the
rate of about 20 per cent per annum.
The Conference believes that this
deflation cannot continue without most serious damage to the business and
financial structure of the country.
While the Conference is of the opinion
that the proposed Reconstruction Finance Corporation will be of material
help in checking the failure of sound banks and in thus tending to relax
further unnecessary pressure for liquidation, and that while the further
acquisition of bills by the Federal reserve banks may be encouraged by Fed
eral reserve bank rate adjustments, nevertheless because of the seriousness
of the general situation and the importance of relieving the drastic pres
sure on the credit structure now inspired largely by fear of further liqui
dation, the System should be prepared, if necessary, to supplement these
other steps by the purchase of government securities.H
%****** *all***%
"Governor Harrison pointed out that the deflation of bank credit in
the United States had amounted to more than $6,000,000,000 in two years in
addition to a decrease of $6,000,000,000 in brokers* loans by others thap.
banks.
In the past three months the deflation had become still more rapid
and was at the rate of 20 per cent per annum.
A continuation of this de
flation might be expected to leaa/still further serious price declines.
There had been some interruption of bank failures in November following
the inauguration of the National Credit Corporation but lately the number
of failures had again increased and currency withdrawals for hoarding ap
peared to have begun again to some extent.
"The gold situation, he indicated, was fairly quiet but likely to be
come active again if bank failures continued.
"The question now was what could be done to prevent a further deflation
and to bring about some improvement in conditions. * With developments al~
Reproduced from the Unclassified I Declassified Holdings of the National Archives
28.
ready begun or in prospect there seemed some possibility of getting an up
ward movement started by combined effort.
Recent important developments
included an improvement in the condition of the bond market, prospects for
a readjustment of wage rates for railroad employes, and prospects for the
passage of a bill providing for the fieconstruction Finance Corporation.'1
Discussion;
"Governor Harrison suggested that the following appeared to be the pro
gram for consideration to stop deflation and encourage some fcredit increase:
(1)
Passage of the Eeconstruction Finance Corpora
tion bill,
(2)
Organized support of the bond market predicated
upon railroad wage cuts.
(3)
Federal reserve and member bank cooperation with
the Treasury program.
(U)
Buying bills when possible.
(5)
Reduction in discount rates.
(6)
Buying of Governments, if necessary, facilitated
by an alleviation of the free gold position,"
**********
"Governor Harrison referred to the Treasury program and indicated that
the Treasury would require about one and a half billion dollars of new money
between now and June 30
that under present conditions it would be diffi
cult for the Treasury to borrow this amount without a serious effect on the
government security market and the general bond market.
He stated that
he believed a successful Treasury sale of these securities would require:
(1)
General strength in the bond market.
(2)
Direct discussions with the member banks a,s to
the importance of their cooperating.
(3)
Discount rate adjustments to enable banks to
borrow at a profit.
(U)
Probably some purchases of Government eecurities by the reserve banks.
"Any program to be successful must also include a definite policy by
the administration as to the total amount of borrowing to be undertaken
and also a definite policy as to balancing the budget after June 30* 1S32*
"Governor Harrison believed that through successful issues of govern
ment securities, purchased largely by the banks aided by Federal reserve
Reproduced from the Unclassified / Declassified Holdings of the National Archives
2f.
cooperation, it might be possible to stop the deflation of credit."
**********
M .....
In response to questions Mr, Mills stated:
(1)
That the administration proposed that the gov
ernment budget should be balanced after June
30 , next,
(2)
That the administration program called for sales
of approximately $1 ,500 *000,000 of additional
government securities before June JO, 1932»
(3)
That it seemed likely that new issues would take
the form of short term issues rather than bonds."
**********
"Governor Meyer stated that he believed in the present situation the
Reserve System should be prepared to use all of its powers if and when
necessary,
"Governor Black asked whether the members of the Federal Reserve Board
were in accord with the suggestion for lower discount rates, and Governor
Meyer replied that the matter had received no formal attention in meetings
of the Board but that the members of the Board with whom he had discussed
the matter were in favor of lower rates for the purpose of facilitating
the general program.
He also suggested that any lower rates which were
established should not, in fairness to the member banks cooperating with
the program, be withdrawn too quickly.
"Governor Black suggested that definite action should be taken with
regard to the $U2,000,000 of government securities purchased for System
Account at the year-end.
A motion to sell these $U2,000,000 of securities
was made by Governor McDougal but did not receive a second."
Reproduced from the Unclassified I Declassified Holdings of the National Archives
(ft/
30.
February 2k and 25, 1932
—
Meeting of the Open Market Policy Conference
Action recommended:
MIt is moved that it is the sense of the conference that, subject to
the approval of the Federal Reserve Board, the Executive Committee shall
he authorized to purchase up to $250*000*000 of government securities for
System account at the approximate rate of $25*000.000 per week.
It is
understood that purchases under this program shall he made after a meet
ing of the Executive Committee called for the purpose of considering such
purchases and that the program shall he subject to review by the Confer
ence at any time on call of the Conference or the Federal Reserve Board.11
This resolution was adopted with Governors Young and McDougal voting
in the negative.
Reasons given for action:
"Governor Harrison reviewed the action of the conference in January
authorizing the executive committee, if the occasion arose, to purchase up
to $200,000,000 of government securities.
He indicated that action had
not been taken under that authorization, partly because various elements
in the domestic program have developed more slowly than had been partici
pated, partly because of gold withdrawals to Europe, and partly because
of the limited amount of free gold held by the System.
These conditions
were all being modified in a favorable direction at the present time,
and the question might now be raised upon the merits whether it might be
well to proceed with the program as originally planned.
The important
reason for considering action at this time was the continued rapid defla
tion of bank credit which was a seriously depressing influence on the
whole business structure and the price level.
"Governor Meyer added that the question of buying government securi
ties also related itself to hoarding; that it seemed unnecessary for the
banking position to be subjected to severe strain because of the funds
withdrawn for hoarding, when the Reserve System under the new bill has the
necessary power by the purchase of government securities to relieve the
banks from some of their indebtedness to the reserve banks.
He said he
did not believe that buying governments alone would control the situation,
but the operations of various favorable factors, including the Reconstruc
tion Finance Corporation, would be aided by a gradual purchase of gov
ernment securities which would help the banks to reduce their bills pay
able, and so lighten the pressure on the credit situation."
**********
"Governor Harrison further pointed out that the country*s gold stock
had been reduced by about $100,000,000 in the first two months of the
year, with no offsetting gains to the market, and that further gold losses
at the rate of about $50,000,000 a month were to be anticipated.
The
purchase of government securities would have the effect of offsetting
this gold loss and preventing it from causing an increase in rediscounts*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Discussions
"Governor Meyer pointed out that the Reconstruction Finance Corporation was
making loans which it was hoped would have a favorable psychological effect?
that at the present time the public state of mind was a major factor; and
that no single sentimental factor was so important in the minds of the pub
lic as the purchase of government securities by the Federal Reserve System,,
Various factors in the situation look hopeful, and it seems a prudent time
to act.
“Governor Seay said that while he had opposed purchases at the last
previous conference he now believed the time had come to lay down a bar
rage all along the line, that there was now a better justification for pur
chases of governments than at any time in eighteen months.
“Governor McBougal said that he was not clear what good would come
from investing in government securities now, and that, with the doors open
as the new bill provides, the reserve banks are liable to be called upon
for additional amounts of funds which would have the same effects on the
System*s reserves as buying government securities*
He would be opposed
to purchases at least until after there was ppportunity to see what pres
sure arises from the new legislation.
On general principles he preferred
to see the banks borrowing to secure funds,
“Dr, Miller stated that he believed thete was never a safer time to
operate boldly than at present.
He indicated that he would approve pur
chases on an even larger scale than the amounts being discussed,
“There ensued a general discussion of the desirability or discount
rate changes in addition to security purchases, and the general opinion
was expressed that rate changes in the interior districts were not as
important as they had appeared to be in January, in view of the hope and
anticipation that a large part of the new issues of government securities
would probably be taken by eastern centers, with the result of drawing
money from the money market to other parts of the country.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
April 5 , 1932
—
Meeting of the Executive Committee of the Open Market
Policy Conference.
Action recommended;
tt
... It was moved and carried that purchases of government se
curities be continued at a rate of $25*090*000 a week as authorized by
the program adopted at the meeting of the Open Market Policy Conference
on February 2U.
•‘This motion was carried unanimously.
.....
While .. two of the
members of the committee were in general opposed to further purchases of
government securities it appeared that purchases made up to this time
had been followed by about as satisfactory results on the banking position
as could be anticipated, and there seemed to be no few factor in the sit
uation which would justify a discontinuance of the program adopted by
the full conference.H
Reasons given for action;
••Governor Harrison reviewed the current economic situation, the con
tinued decline in prices, the increase in the pressure of debts, the in
crease in bankruptcies, and the threat of radical action in Congress. He
reviewed in particular conversations with Senator Thomas with regard to a
proposed bill for a soldier*s bonus financed by the Federal reserve banks.
He reported also recent conversations with member banks indicating that
some change in lending policy was already taking place on the basis of
funds made available through government purchases and the return of cur
rency. 11
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3 i
April 12* 1932
—
Meeting of the Joint Conference of the Federal Reserve
Board and the Open Market Policy Conference.
Action recommended;
"That subject to approval of the Federal Reserve Board the Executive
Commi11ee be authorized to purchase up to $l
500 »000,000 of government se
curities in addition to the unexpired authority granted at the meeting
of the Open Market Policy Conference on February 2U, and that these pur
chases, at least in the initial weeks, should be at a rate as rapid as
may be practicable and if -possible should amount to 100 million in the
current statement week,”
"The Executive Committee voted
ments should start immediately, and
orders should be placed at once for
for delivery April 13, to bring the
total of $100,000,000.
that the program of purchasing govern
that in accordance with the resolution
$75*000,000 of government securities
purchases in that statement week to a
Reasons given for action:
11
Governor Meyer reviewed the open market program which had been pur
sued since February 2U, the return of currency from circulation, progress
in the arrest of bank failures, and the lending program of the Reconstruc
tion Corporation*
He reviewed also the changes in business and the
credit situation, indicating that the decline in credit volume and the de
cline in business §nd prices had not stopped.
He called attention,
merely as a matter of information, to the fact that a resolution had been
offered in the Senate asking the Federal Reserve Board to state its pro
gram for dealing with the situation and to indicate any legislation neces
sary.
Consideration of this resolution had been postponed.
He stated
that the Federal Reserve Board felt that the Reserve System could now
undertake to do more toward aiding in the recovery than it had yet done,
and that he believed the time had come when the System might be expected
to use its powers more fully in an effort to stop the credit decline.11
**********
"Governor Young questioned whether purchases of governments which
piled up reserves in the centers would result in the distribution of these
funds to other parts of the country.
He was skeptical of getting the
cooperation of the banks without which success appeared difficult, and
was apprehensive that a program of this sort would develop the animosity
of many bankers, and was apprehensive also that an extensive program of
purchases of government securities would impair the confidence of the
public in the reserve banks.
He cited the experience of 193^ as
*n~
dication of the futility of government purchases.
"Governor Meyer responded that the difficulty last summer was that
confidence was impaired by the German collapse and by the British depart
ure from the gold basis; so that any program adopted was negatived. He
believed that today the country was in a more favorable position to take
advantage of funds made available.
He believed that a strong program
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3^.
would inspire more confidence than distrust, and did not believe that
there would be serious opposition by banks*
"Governor Harrison stated that he believed that in the present situ
ation the banks were much more interested in avoiding possible losses
than in augmenting their current income, and that their attitude had
changed gradually since last year in the face of the shrinkage in values,
nGovernor Meyer stated that he believed a strong program would
quicken the currency return and might make it unnecessary to complete
the program.
He also indicated the great value in a unanimous program
in which the entire reserve system took part.
‘'Secretary Mills who had entered the meeting after it had begun
stated that he believed a great duty now rested on the Federal Reserve
System; that Congress and the Administration had done all they could in
developing remedial action, and yet deterioration was taking place
steadily.
For a great central banking system to stand by with a 70$
gold reserve without taking active steps in such a situation was almost
inconceivable and almost unforgivable.
The resources of the System
should be put to work on a scale commensurate with the existing emergency.11
**********
“Governor Harrison stated that he believed the only practical program
was a dramatic p-urcha.se of government securities.
He believed that the
member banks were ready to cooperate in such a program.
The uncertainty
as to the budget and bonus legislation had constituted obstacles to in
augurating such a program, but he believed that the outlook in these
directions was hopeful, and that it would fcot be possible or necessary
to wait until these two questions were completely solved,
11
Governor Calkins raised the question whether a policy of this sort
would be followed by large foreign withdrawals of funds, and Governor
Harrison replied that there might be some withdrawals but he did not be
lieve these would be sufficient to prove embarrassing.'1
Discussion:
nGovernor Harrison reported that the governors felt that the program
should be widely participated in, which would involve an early exercise
of section 3 of ‘
the Glass-Steagall bill.
The governors believed that a
general participation by the reserve banks would assist psychologically
in making the purchases effective.
“Governor Meyer suggested that whatever danger there was in the
program lay in the possible interpretation that it was inflationary.
From this point of view the danger might be lessened if the first large
purchases of bonds did not take place simultaneously with the first use
of Section 3 of the Glass-Steagall bill.
While the use of that provi
sion would be necessary before long the psychological effect might be
Reproduced from the Unclassified / Declassified Holdings of the National Archives
35
*
better if the two efents were separated by a reasonable period of time."
Board action;
"Governor Meyer reported that the Federal Reserve Board had approved
the resolution adopted by the conference*H
Reproduced from the Unclassified I Declassified Holdings of the National Archives
May 17, 1932
--
Meeting of the Joint Conference of the Federal Reserve
Board end the Open Market Policy Conference.
Action recommended:
“The following resolution was moved and carried. Governors McDotxgal
and Young voting in the negative:
“After discussion of credit, banking and business condi
tions end the effects of the System’s Open Market Operations
on those conditions in recent weeks, it was voted, subject
to the approval of the Federal Reserve Board, to authorize
the Executive Committee of the Open Market Policy Conference
to continue the purchase of Government securities for System
account a s may seem advisable from week to week but not to ex
ceed an aggregate of _$5QQtQQQ.tt.QQQ-.jrithout another meeting of
the Open Market Policy Conference*H
At a meeting of the Executive Committee following the joint conference
“it was voted that approximately $80, '>00,000 of government securities should
be purchased in the current statement week, if available, and it was agreed
that the amount of purchases in following weeks should be determined from
time to time by telephone.1*
Reasons given for action:
“Governor Meyer discussed briefly the apparent results of the program
of purchases agreed upon at the meeting of April 12 and indicated that the
effectiveness of the operation was impaired somewhat by disturbances which
had taken place, including passage by the House of the Goldsborough Bill,
which had occasioned an unfavorable reaction in Europe and some gold with
drawal s,“
I*******:***
“Governor Harrison said that while in the public mind the success of
the program had not been demonstrated because the downward movement in
prices and business had not been stopped, the results were important and
included a reduction of debt by the member banks at the reserve banks, and
a change in the bank attitude about loans and investments.
Generally speak
ing the bankers had received the program favorably and the decline in bank
credit appeared to have been checked.
The principal Hew York City banks had
begun buying bonds, although restrained by fear of adverse legislation.
Their excess of reserves had only been substantial for three or four weeks.
He believed purchases should be continued#
Board action:
The Board addressed a letter to Governor Harrison as follows:
“ .... The Federal Reserve Board has considered and
approve# the action taken by the Open Market Policy Con
ference at its meeting today in voting, subject to the ap
proval of the Federal Reserve Board, to authorize the
Executive Committee of the Conference ‘to continue the
Reproduced from the Unclassified / Declassified Holdings of the National Archives
37*
purchase of Government securities for System Account as
may seem advisable from week to week but not to exceed an
aggregate of $500,000,000 without another meeting of the
Open Market Policy Conference*|M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D/
38.
June 16, 1S32
—
Meeting of the Executive Committee of the Open Market
Policy Conference.
Action recommended:
"The following proposal was agreed to unanimously "by the members of
the committee, Governor Young pointing out that he was voting as a member
of the committee to administer the policy determined by the Open Market
Policy Conference rather than as a representative of M s own district
opinion?
H (1) That until further notice sufficient purchases
of government securities should be made to keep
excess reserves of member banks at a figure be
tween $250*000*000 and $300*000*000.
“(2) That the system should continue to show an in
crease from week to week in total holdings of
government securities in order to avoid the cre
ation of a feeling that the policy of the sys
tem had been changed, but that such increases
should be in amounts as small as might be, to
preserve these excess reserves, and take care
of special conditions arising from week to week*
"(3) That in the coming week it appeared that this
purpose might be accomplished by smaller pur
chases, but at the end of June the reserve
banks should be prepared to do whatever was
necessary to meet the situation."
Reasons given for actions
“The question was then raised as to the extent of future purchases
of government securities, ^irst, as to whether they should be continued,
and second, as to what should be the objective.
Governor Harrison
pointed out the difficulty of deciding on the objective each week by tele
phone, and suggested instead that it might be better to endeavor to main
tain the excess reserves of member banks at a figure somewhere between
$250,000,000 and $300 ,000,000 until there was some expansion of credit
which would make it desirable to reconsider the program.
With the gold
export movement reduced, it would probably be possible to maintain sub
stantial excess reserves with smaller purchases than in the past, though
there were likely to be considerable swings from week to week.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Letter from Qove^ o r Harrison to all governors
38A
July 5, 1932
CONFIDENTIAL
Dear Governor
:
In view of the changes in the System position resulting from gold
losses, recent bank disturbances, and mid-year events, it seems desirable
to review recent open market operations in their relation to the present
position of the System and the general banking situation*
Since February 2k the government security holdings of the System have
been increased by $1,060,000,000, including some purchases by the Federal
Reserve Bank of Chicago for its own account during last week.
The dis
position of the funds put into the market through these purchases may be
tabulated as follows;
Disposition of Funds Made Available by Security Purchases
(In millions of dollars)
Net loss of gold through exports and earmarking
Repayment of discounts of Federal reserve banks
Reduction in Federal reserve bill holdings
Increase in money in circulation
Increase in member bank reserve balances
Total
U30
1,077
The difference between these figures and the figures for government
purchases is made up by a number of miscellaneous items.
This table indicates that the funds made available by security pur
chases were largely absorbed by heavy losses of gold and by a reduction
in Federal reserve discounts and bills.
Only a relatively small remain
ing amount has been made available to form excess member bank reserves
^hich might support an increase in member bank credit.
During this period the excess gold reserves of the system have been
reduced from $1 ,392 ,000,000 to $9^+2 ,000 ,000 , that is a decline of
$U50,000,000 and the combined reserve ratio of the System has declined
from 6 S per cent to 57 per cent.
It is interesting to observe, however,
that only a very small part of this change In the Systemts gold position
and the reserve ratio is attributable to purchases of government securi
ties.
Most of it has been due to the repa.tri?tion of foreign central
bank dollar funds, which very probably would have occurred regardless of
the policy of the System.
The country*s gold stock has declined as shown
in the above table $^3 0 ,000,000 , or only $20 ,000,000 less than the decline
in the excess gold reserve of the Federal reserve banks.
Had there been
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3SB
no increase in the System government holdings this gold loss Would neces
sarily have been accompanied by considerable increase in federal reserve
bank discounts over and above the discounts held at the time security
purchases were commenced.
In other words member bank borrowings in the
Reserve banks instead of declining from $235,000,000 to $^70,000,000,
would most surely have been increased to well over $1^:000 ,000 ,000, in ad
dition to some increase in acceptances, and the drastic cred.it deflation
in process in February inevitably would have been accelerated as a con
sequence*
Thus we see that the open mrrket program was not only effective in
preventing the increase in discounts which would have followed such large
gold exports, but on the contrary was responsible for a substantial reduc
tion of discounts in spite of such gold losses.
Most of the increase in
reserve funds resulting from security purchases has been required to meet
demands for reserve credit -which had to be met in some form.
Whether
that reserve credit was provided by purchases of government securities,
by rediscounts, or by bill purchases, the effect upon the gold position
and the reserve ratio would be precisely the same.
The reserve ratio
is now less than 2$ under what it would have been had no securities been
bought, and that 2% difference is accounted for by the fact that our open
market operations have increased reserve credit about $125,000,000 in ex
cess of the actual demand, and member banks hold approximately this amount
of excess reserve deposits*
The required reserve against these excess
deposits accounts for the difference in the reserve ratio*
These excess
reserves are, of course, available to meet any demand for currency or
gold which may arise or to support an expansion of member bank credit
about ten times the amount of the excess.
**********
Apart from the effect of open market operations on the technical posi
tion of the System it is important briefly to smmarize some of the more
general results of the System’s purchases of securitiesi
(1)
The very large repatriation of foreign central benk
funds has been accomplished without any strain on
the position of member banks, and thus one impor
tant obstacle to a more normal credit position has
been removed*
(2)
The pressure for liquidation of bank credit which
usually results from the indebtedness of member
banks has been materially lightened by a reduction
in their total borrowings from more than $800,000,000 to less than $500 ,000 ,000 .
(3)
The decline in member b?nk deposits has been checked,
and the liquidation of bank credit which had been
proceeding at an alarming rate has been substantially
retarded.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
32C
The alternative to purchases of government securities would have been
a large increase in member bank indebtedness which would have exerted
still further pressure towards liquidation, the continuance of which at
the rate it was proceeding in February might well have been disastrous*
With the gold outflow apparently checked except for the export of
some $20 ,000,000 during the next three weeks, about which we shall write
you, the only factors which appear likely to influence the System*s re
serve position in the near future are' changes in the currency demand,
and changes in member bank reserve balances.
If there should be a fur
ther increase in the currency demand the form in which the Federal re
serve credit is supplied will make no difference in the effect on the Sys
tem^ reserve position.
Member bank reserves have recently fallen short of the 2R0 to 3^0
million of excess which it was proposed to maintain, as pointed out in
the minutes of the last meeting of the executive committee.
In the ab
sence of a return flow of the currency that has recently gone out, it
would require the purchase of about $125,000,000 more Government sec\irities to restore member bank reserves to that level.
Even such an amount
would reduce the reserve ratio of the System by only about 1 l/2 points,
from alittle over 57 Per cent to slightly under 56 per cent.
If excess
member bank reserve* should now be restored to that basis it seems likely
that they will for the first time have an opportunity to exert their full
force unless or to the extent that gold exports or currency hoarding
should revive.
In any event there is now more reason to expect that when
excess reserves are restored they can-be maintained until bank credit be
gins to expand— the real objective/the policy which the System inaugurated
in the spring.
While the recent experience shows that the purchases of government
securities do not adversely influence the position of the reserve banks
as a whole, they may affect the position of individual reserve banks, and
the present situation in which a number of the reserve banks have percen
tages of about 50 per cent whereas others have considerably higher per
centages, clearly requires reconsideration of the allotment of securities
as a necessary accompaniment of a further program of security purchases.
We have already received a number of comments on the letter and tables
mailed to all the reserve banks on June 2^, and shall write you further
when more are received.
Very truly yours,
George L. Harrison
Governor
Reproduced from the Unclassified / Declassified Holdings of the National Archives
39.
July lU, 1932
—
Meeting of the Open Market Policy Conference
Action recommended;
H ... The following motion was carried by a vote of 9 to 3* Gover
nors Young, Seay, and McDougal voting in the negative:
*That the Executive Committee be authorized to buy Gov
ernment securities to the extent necessary to maintain excess
reserves of member„MrfciLM^ai2££.9xlmifr^
lars, total purchases to be limited to the amount previously
authorized by the Open Market Policy Conference which is 207
million dollars*
For the guidance of the Executive Commit
tee it was the sense of the conference that except in unusual
or unforeseen circumstances purchases should not exceed 15
million dollars a week, but for the next four weeks should be
not less than 5 million dollars a week,>w
Reasons given for action:
“Governor Harrison referred to his letter of July 5 to members of
the conference which contained an analysis of the disposition of the
funds made available through open market operations.
Thus far these
funds have been used largely defensively, to meet gold exports and to
repay rediscounts, but there now appeared to be a much better oppor
tunity to achieve the objective of the program.
In view of the stop
page of the gold export movement it now appeared to be possible to
maintain surplus reserves at the cost of relatively small further pur
chases of governments, assuming bank failures and currency hoarding can
be kept in check.
Governor Harrison suggested a program consisting of
three points:
(1)
To prevent bank failures,
(2)
To continue to maintain excess reserves of
$200,000,000 to $250,000,000 until they are
used as a basis for additional credit,
(3)
To coordinate the action of the banking and
industrial committees in different districts
to promote the use of credit.
Discussion:
HWith reference to the system open market policy Governor Meyer indi
cated that while business had not undergone any revolutionary revival
everything had been achieved by the open market policy which there was a
right to expect in view of all the circumstances.
He suggested that in
determining future policy it was important to consider that the public ef
fect of any sudden discontinuance of the policy which had been pursued
would be unfortunate, and also that in future policy every effort should
be made to secure an effective united system policy.
He pointed out
Reproduced from the Unclassified / Declassified Holdings of the National Archives
IiQ.
that there existed a trend in Congress toward giving the System more
concentration, and that the open market program offered a test of the
capacity of the System to function effectively in its present form.
Board action:
ATyproval to the action of the Open Market Policy Conference was
given by the Federal Reserve Board in a letter dated July 20, 193?®
Reproduced from the Unclassified I Declassified Holdings of the National Archives
H i.
November 15, 1332
—
Meeting of the Open Market Policy Conference
Action recommended;
HGovernor Norris made the following motion which iw?f» carried -unani
mously;
'That it is the consensus of the Conference that no
change should be made at this time in the amount of
the system holdings of government securities, and
that there should be another meeting of the Open Mar
ket Policy Conference during the first week in Janu
ary to consider the system*s policy in the light of
conditions as they exist at that time, 10
Reasons given for action;
M .... Governor Harrison stated that the net influence of the vari
ous forces affecting the excess reserve position of member banks in the
next few weeks very probably would be in the direction of a reduction of
those excess reserves.
The gold inflow has lessened somewhat in the
past several weeks, the rate of return of currency from hoarding has
slackened and we are now facing the season when currency circulation
might be expected to expand for holiday purposes,
A different set of
facts will exist after the turn of the year.
“All of the members of the Conference were of the opinion that there
is no occasion to buy more securities at the present time."
Reproduced from the Unclassified I Declassified Holdings of the National Archives
%
U2.
January H, 1933
—
Meeting of the Open Market Policy Conference
Action recommended:
“The ... resolution was yv*.. passed by unanimous vote in the follow
ing form:
’•It is the sense of the Open Market Policy Conference that
there should be no change in the System's policy intended to
maintain a substantial amount of excess member bank reserves in
asmuch as the continuance of excess reserves in substantial amounts is desirable in present conditions.
In view of the re
turn flow of currency during January and Prospective gold move
ments the amount of excess reserves may rise considerably above
the present level which is deemed appropriate under present
conditions,
"BE IT RESOLVED, THEREFORE, That, pending another meet
ing of the Conference, the Executive Committee be given au
thority (a) to reduce the systemfs holdings of short term
Treasury bills in order to offset such amount of the return
flow of currency as may seem desirable, provided such ac
tion does not result in any substantial reduction in exist
ing excess reserves and (b) if necessary, to purchase Gov
ernment securities in sufficient amounts to prevent member
bank:excess reserves falling below the present general
level pending another meeting of the Conference.
"Governors Seay and McBougal desired to be recorded as voting with a
reservation.
They believed that the proposal represented a step in the
right direction but would prefer to see a larger reduction in the port
folio and did not favor the maintenance of as large excess reserves aft at
present.
Some reservation as to the value of the maintenance of the
present volume of excess reserves was expressed by several of the gov
ernors,
nIt was understood informally that the resolution should be inter
preted by the executive committee as follows;
(1)
Treasury bills up to $125*000,000 would be allowed
to run off in January to the extent that there is
a return flow of currency, but not to bring excess
reserves below $500,000 ,000 .
(2 ) When the resolution refers to the present level of
reserves it means approximately $500 ,000 ,000 .
(3 ) When the resolution refers to the return flow of
currency it means the return flow from the Decem
ber peak just before Christmas.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
»*3 -
(U)
There would he another meeting of the Conference
before any increase in the System holdings of
government securities above $1 ,851,000 ,000 ,M
Reasons given for action;
" ..... Governor Harrison outlined the various arguments both for and
against some reduction in the security holdings of Federal reserve banks.
He suggested the following arguments in favor of some reduction:
H(l) The System open market policy had not been one to
accumulate any definite amount of securities but rather to check
deflation through the reduction of bank debt and the creation of
substantial excess reserves, which had been accomplished. It had
been generally agreed that after a substantial effective pres
sure had been secured the System would reduce its security hold
ings as soon as possible without relieving that pressure. The
turn of the year appeared to offer the best chance to decrease
the amount of securities without reducing member bank reserves
and so not changing policy.
If this opportunity were not
used during January it might not be feasible to liquidate for
a year without decreasing bank reserves and thus giving the
appearance of a change in policy.
M(2) Any further substantial increase in excess reserves
might not in fact increase effective pressure and would thus
serve only to minimize control when necessary.
"(3) Though it was not the motive the fact that the Re~
serve banks have bought so large amounts of government securi
ties has in fact enabled the Treasury to borrow cheaply and
so in some measure has encouraged the continuance of an un
balanced budget.
♦♦Governor Harrison suggested the following arguments in favor of hold
ing the government portfolio intact,
M(l) There is danger that a reduction in security hold
ings might be construed as a reversal of policy which might
in turn increase the danger of the aoption of some radical
inflationary policy by Congress since the only effective ar
gument against such inflation is that an orderly policy of
reflation is now at work*
Any move so interpreted also
might be discouraging to business or to bankers holdings a
large volume of government securities, who might start to
liquidate.
M(2) A reduction in the total holdings might operate as
a, check to the bond market thus retarding business recovery
and further injuring bond portfolios of banks.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
" ( 3 ) One question was the effectiveness of varying
amounts of excess reserves.
There are indications that in
terest on deposits in principal centers might be eliminated.
It is difficult to trace the effects of such a move but if
limited to bank deposits it would probably distribute the
pressure for putting money to work more widely and would thus
justify a larger total of excess reserves,1*
Board action;
Approval of the Federal Reserve Board of the recommendation of the Con
ference was given in a letter dated January 6t 1933*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
January 6 # 1933.
Mr. Georg© L. Harrison*
Chairman, Open Market Policy Conference,
c/o Federal Reserve Bank of New York,
Hew York City, New York.
Dear Governor Harrison:
This letter will confirm the oral advice given you yester
day that the Federal Reserve Board has approved the resolution
adopted by the Open Market Policy Conference at its meeting on Janu
ary 5, 1933, and submitted by you to the Board in the following form:
*It is the sense of the Open Market Policy
Conference that there should he no change in the
system9s policy Intended to maintain a substantial
amount of excess member hank reserves inasmuch as
the continuance of vxcess reserves in substantial
amounts la desirable in present conditions, in
view of the return flow of cun%ncy during January
and prospective gold movements the amount of ex
cess reserves may rise considerably above the
present level which is deemed appropriate under
present conditions*
"BE If RESOLVED, THEREFORE, That, pending
another meeting of the Conference, the Executive
Cons<tee be given authority (a) to reduce the
system’s holdings of short team Treasury bills
in order to offset such amount of the return flow
of currency as may seem desirable, provided such
action does not result in any substantial reduction
in existing excess reserves and (b) if necessary
to purchase Government securities In sufficient
amounts to prevent member bank excess reserves fall
ing below the present general level**
There Is Inclosed, for your records, a copy of the stateX-V.V* I J
/-6,-z2
raent for the press which was approved at the meeting of the Federal
Reserve Board and the Open Market Policy Conference on January 5, 1933.
Very truly yours,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
It is the sense of the Open Market Policy Con
ference that there should be no change In the
syet m
*e
policy intended to maintain e substantial amount of excess
member bank reserves inasmch ee the continuance of excess
reserves in substantial ©mount« is desirable in present
condit1one ^mid Infrit in view of the return flow of currency
during Janiery and prospective gold moreBsente the eaount
of sxsess reserves
.-Wip-to rise considerably above the
present assert, eh i eh Is deemed a flW + e under present eondl*
■J----- -
tions.
Bi; IT kssqltoj* mvtJWtt, n m t / t u iawsutlTe
Committee be fiven authority (a) to reduce the system**
holdings of short ter® ireaeury b ills in order to offset
such amount of the return flow of currency
Im m a & f
does not
as may seep deetreble, provided such action
r s l a wt wswhs s baah
eposes reserves b*±o*
«nd (b) if necessary to purchase Ooveramn%
MwrttiMi i» •uffiel«ni cmoaiit* to
J&e^et. *' " ' " “ '*
A
Reproduced from the Unclassified I Declassified Holdings of the National Archives
I t 1$ the secse
of the Open Market Folicy Con
ference that thsre should be no chnnps In the aystws's
policy intended to m in t»i n « substantial ssiount of excess
jseisiber bank reserves in&B'TUch as the continuance of excess
reserves In substantial emounta la dealruble In present
conditions n M M
In view of tho return flow of currency
during Jftmcry ftnd prospective gold mortroonte the esiount
of excess rc*er*es iHHHr lewtwfte rise cone!durably above the
present nnswiit m l oh It deemed
uih^er present ooadl-
uon,‘
BE IT JUEMLTOD,
JPTOE, Thet^be
xeoutive
CoMlttee be riven authority {a} to reduce the eyotcso4«
^ f ^
„
holdings of short term treasury b ills in order to offset
euch «svo*rat of the return floe of currency iftsUafr.
as way seem desirable, provided such action
does not rftialH— i«u» 'fmfr1
M '»es■>mmmmmm >hsuiw,
«nd (b) i f necessary to purchase Oovera*
mnt securities in sufficient amounts to
member bat*, a* cans rese rves
A
psn;-lnf»»-ftne#>er
^ -. «
Reproduced from the Unclassified / Declassified Holdings of the National Archives
X-7321
F E D E R A L
R E S E R V E
BOARD
STATEME13T FOR THE PRESS.
For publication in Morning Papers,
Friday, January 6, 1933.
The Open Market Policy Conference of the Federal Reserve System,
with representatives from all of the twelve Federal reserve banks in
attendance, concluded its meetings with the Federal Reserve Board today.
The sessions of the Conference were devoted to a review of economic,
business, financial and banking conditions in each of the twelve Federal
reserve districts and to the economic and financial situation in the
country as a whole.
Particular reference was made in the discussions
to the workings and effects of the open market policy thus far pursued
by the Federal Reserve System during the course of the economic depression.
Consideration was also given to the attitude of the System in adjusting its
operations to conditions and needs as they may change and develop.
_
The first and immediate objective of the open market policy was to
contribute factors of safety and stability in meeting the forces of deflation.
The larger objectives of the System's open market policy, to assist and
accelerate the forces of economic recovery, are now assuming importance.
With this purpose in mind, the Conference has decided that there should
be no change in the System's policy intended to maintain a substantial amount
of excess member bank reserves, the continuance of which is deemed desirable
in present conditions.
Adjustments in the System's holdings in the open
market account will be in accordance with this policy.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
mmukL ws&mm board
m z m m t to r tm pssas*
For publication la aoralng papers,
Friday, Jaaaary 6, 1931*
tha Open Market Polioy Gonfereaee # f the Federal Hesorv* System,
with representatives froa a ll o f tho twelve Federal reserve hooks In
attendance, ooaoludod it s meetings with tho Federal Roserve Board today*
Tho ooooicms of the Conference were devotod to a review of acoaoale,
business, financial sad banking conditions la each o f tho twelve Federal
reserve d istricts and to the economic and financial situation la tho
country os * whole.
Particular reference mss made in tho discussions
to tho workings aad effects o f tho opaa msrket policy thus for imrsuod
by th# Federal Besarva System during tho coarse o f tho 4ooaaade depression* *
Consideration was also given to tho attitude of tho Systeta in adjusting Its
oporations to condition* aad needs as they may change sad develop.
the fir s t sad immediate objective o f tho opoa market policy was to
conttibate factors o f safoty aad sta b ility ia meeting the forte* o f deflation*
The larger objective* o f tho $jrsto»*s opoa aarket policy, to assist snd
accelerate the forces o f aooaoa±c recovery, are sow assuaing importance*
With this purpose ia iiiad, tha Ooaforeuao ha# docidod that there should
ho ao change ia the SjystsM*s policy intended to
a substantial amount
of oxaasa aeaber bank reserves, the continuance o f which is deeaed desirable
ia present ooaditioas*
Adjustments ia the System* s holdings ia the opea aarket
account w ill he in accordance with this policy*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
A. C. M*
The Open Market Policy Conference of the federal Reserve
System, with representatives from all of the twelve federal Beserve
'banks in attendance, concluded its meetings with the federal Beserve
Beard today*
The sessions of the Conference were devoted to a review
of economic, business, financial and hanking conditions in each of the
twelve federal Beserve districts and to the economic and financial sit
uation in the coantry as a whole*
Particular reference was made in the
discussions to the workings and effects of the open market policy thus
far pursued by the federal Beserve System during the course of the econaaic depression*
Consideration was also given to the attitude of the
System in adjusting its operations to conditions and needs as they may
, \ rv-way
wat
a*
the eeaseasus of sptniea* of the Coiifereas#.IfoafrHme open
tittup
goHey-ef 4he fedemsl Bess»»s
contribute^ fasters of s
■.
*
4e-rtnarte«ee**e8» tiie forces of
iu Wj&tfol
This —
* b n / a m r a itlt t l l E r w j » w ^
cy of
thregTillwit Wiw eweli
iiL ^ a ^ t i ^ i ^ i ^
the
JBtrleaa
—
1
fc'ra&lKory 4kocxsJT£he larger — a---- —
W a r ^ n rerTO’^ S I
1
^*— ~
V4—
objectives
of the Systems
market poligjuare now assuiaingVimportance*
W%
V
*
<*■*
assist and accelerate
the forces of econcmic recovery^
Reproduced from the Unclassified I Declassified Holdings of the National Archives
“1
With this purpose in mind and -in order to realise iw
cxwatry’^'tfeer’
ope»r* lanark©t .
operative
Fa&eral Reeerre % ‘steia, the Conference decid
%
eonfriaw.o-fche peliiu u n ffStB tainlug,
cQuntr^»B glffKSriTBrsTrong^casB. position
.
f
a.liheral margin7of surplus
d m
“
sy S M ' ,'
,oT
Reproduced from the Unclassified I Declassified Holdings of the National Archives
, .....„^v.
1 f f.. ^
3 3 3, c T
CHARTS FOR OPSST-MARKET COflFBRKVGB
January U. I933
X. Physical Volume of Industrial Production.*
t. Production— -Durable and Non-durable.
3* Building Contracts.
U. factory fcaployment and PayroXXs.*
5.
Wholesale Prices.*
6 . Reporting Member Banka.*
?• Reporting Member Banks.
8 . Reporting Member Banks— fotai Loans and Investments.
9* lew fork Funds of Out-of-Town Banks.
XO. VeXocity— AXX Reporting Member Banks.
XX. Velocity— Hew Tork City.
X2. VeXoclty— Outside Hew Tork City.
X3* TJ. 8 . Securities BeXd by Federal Reserve Banks.
X%. Discounts with Federal Reserve Banks.
X$. Discounts— by Districts.
X6 . Banks Suspended and Reopened.
17. Currency— AdJusted •
X8 . OoXd Stock and Reserve Bank Credit.
X9* OoXd Movements.
SO. Customers and Open-Market Rates.
2 X. Xxcess Reserves of Member Banks.
•Board Room Charts.
~
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority£()
/13S /*.*,?,
January 3, 1933
R«& S,
Cr. 3
CONFIDENTIAL
BUSINESS AND CREDIT CONDITIONS
Some of the factors in the business and credit situation to he considered
in deciding on an open-market program are discussed in the following paragraphs.
Business activity
Business activity, after increasing substantially between July and Septem
ber, has been relatively stable since that time, except for seasonal' movements.
Industrial production, as measured by the Board1s seasonally adjusted index, has
continued through December at about 66 per cent of the 1923-1925 average as com
pared with 58 per cent in July, and factory employment and payrolls have also
been maintained in recent months at a relatively higher level.
The value of
construction contracts which increased in the third quarter, contrary to sea
sonal tendency, declined considerably in the fourth quarter; residential build
ing continued to be an unusually small part of the total, while the proportion
of public works was unusually large.
Distribution of commodities by rail has
continued at a relatively higher level since September,
The value of commod
ities sold by department stores, however, showed considerably less than the
usual increases at the Christmas season and was smaller than a year ago, re
flecting in large part lower prices.
Wholesale commodity prices, after reaching a low level in June, increased
during July, August, and early September, but since that time have declined by
an amount slightly larger than the previous advance.
The summer advance in
wholesale prices was largely in farm products, foods, hides, and textiles; the
subsequent decline has also been in prices of these commodities, particularly
grains and livestock, and has reflected in part seasonal factors.
Digitized for cotton
FRASER and other
Prices of
textile raw materials, which showed a substantial increase,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
A
u
t h
o r i t y
^
s.
have declined considerably, but are still somewhat above the low levels of
early summer.
In general, the increase in industrial production this fall has been con
centrated in industries producing non-durable goods, such as textiles and shoes.
During recent months, however, there has been a marked increase in production
of bituminous coal, and in December output of automobiles increased substantially
in connection with the introduction of new models.
Activity at textile mills
continued at a relatively high rate in December, according to preliminary re
ports, and was at about the same level as in the corresponding months of the
two preceding years.
Output of steel,
however, was considerably smaller in
December than in the preceding month, or than a year ago,
Member bank credit
Volume of member bank credit, as indicated by weekly statements of report
ing member banks in leading cities, declined by $250 ,000,000 between the middle
of October and the middle of December.
This decline represented a further con
traction of loans, both on securities and other, with little change in the vol
ume of the banks1 investments.
At banks in New York City there was a slight
increase in loans and a larger increase in investments, while at banks outside
of New York City both loans and investments were reduced.
The decrease of $250,000,000 in loans and investments of these banks dur
ing the past two months followed upon an increase of nearly $800,000,000 between
July and October, so that the volume of credit in December was still $550,000,000
above its low level in mid-s-ummer.
Notwithstanding the decline in loans and investments, deposits of the re
porting banks continued to increase.
Time deposits increased by $155?000,000
between July and October and then declined by $50>000,000 to December 21; demand
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority^ )
deposits increased by $650,000,000 between July and October, and by an addi
tional $3^5,000,000 since that time.
This increase has been largely the result
of a transfer of funds from Government to private account, and an increase in
the volume of balances re-deposited by country banks with their city corres
pondents.
The following chart shows the volume of funds of out-of-town banks
MillionsrfDollars
NEW YORK FUNDS OF OUT-OF-TOWN BANKS
Millions of Dollars
*t000
in Hew York City.
4000
These funds ordinarily consist of street loans and balances
with correspondents.
At the present time street loans for out-of-town banks
are negligible and the total volume of $1 ,^70 r000,000 of out-of-town bank funds
in New York consists of balances held there by correspondent banks.
This
amount, which represents largely the re-deposit of surplus funds of interior
banks with their city correspondents, has increased by about $650 ,000,000 since
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority ^j)
U S S ^/i ^
b.
last February,
The increase in these balances since February has been about
tv/ice as large as the excess reserves of the banks in Hew York City.
Increases in the volume of deposits since the middle of 1932 have been
accompanied by further declines in the rate of turnover of deposits; the
growth in the means of payment has not been accompanied by an increase in
the volume of payments.
The rate of turnover of deposits, or their velocity,
was'S^j^times per year in 1929 , decreased t o ^ ^ b y the last quarter of 1930 >
and to \^6/by the last three months of 1932 .
Two charts are shown, giving the course of the principal items in the
reporting member bank statement, and the course of loans and investments at
banks in Hew York City, Chicago, and other cities.
volume and
Another chart shows the
distribution of the excess reserves of member banks.
*
|^
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority £0
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority^ #
(o
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Auth0I%Q l
EXCESS RESERVES OF MEMBER BANKS
M i ll io n s
or
(Wednesday Figures )
D o u a iq
M illio n s o f
600 =
Gold movements
Since the middle of June, this country's stock of monetary gold has in
creased by $596 *000,000,
which $10 5 ,000,000 was imported, $^+59»000,000 re
leased from earmark, and $3
minor items.
1
represented domestic production and other
This addition of $596*000,000 to the stock of gold represents a
recovery of more than one-half of the gold lost by this country during the
nine months preceding last June.
The table shows the countries to which the
gold was lost during the nine months and from which it was received in the
following six months.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority Q()
S.
CHANGES IN UNITED STATES GOLD STOCK
September l6, 1931 to December 28, 1932
(In thousands of dollars)
Sept. 16, 1931 June 16, 1932
to
to
June 15. 1932 Dec. 28. 1932
Net import (+) or export
Earmarking operations..........
Domestic production, etc.......
Sept. 16, 1931
to
Dec. 28, 1932
-1,107,507
- 777,105
- 353,51^
+
28,112
+595,73s
+105,528
+^59 ,1^1
t 31,069
“511.769
-671,577
+100,627
+ 59,181
-1 ,003,^23
- 165,288
-809,282
-1^7,503
- 103,188
- 9^,177
- 14,6^9
- 5,393
Gains from (+) or losses to (-):
France...................
Netherlands..............
Switzerland..............
Belgium..................
Siam...................
Germany..................
—
-
112,979
1 2 1 .33^
l^i-,649
12,860
+19^, l^-l
+ 17,725
+ 9,791
+ 23,157
•••
+ 7,^67
Japan....................
England........... ..... .
Canada................. ..
China................... .
India....................
Mexico...................
Czechoslovakia...........
+
+
+
+
+
-
205,753
^•5,^67
56 ,3^6
20,662
15,557
13 ,112
9,008
+ 10,681
+160,793
+ 30,105
+ 26 ,68b
+ 17,928
+ 9,372
+ 19,518
+ 216 , ^
+115,331
+ 86,1+91
+ ^ 7 ,3^8
+ 33. *+S5
+ 22 ,*+84
+ 10,510
Other countries..........
+
37,919
+ 37,2*40
+ 75.159
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority,
9.
Taking the period as a whole there was a loss of gold to France of
$809,000,000, to Netherlands of $1^+8,000,000, and to Switzerland of $103,000,000, while receipts were $216,000,000 from Japan, $115,000,000 from England,
$86,000,000 from Canada, $^7,000,000 from China, $33>OOOiOOO from India, and
$22,000,000 from Mexico.
Indications are that the gold inflow will continue
in the next few months 'both as a result of this country receiving a consider
able part of the new gold mined and of continued imports from Canada, Mexico,
and the.Far East,
The chart shows the total monetary gold stock of the United States from
1919 to date and brings out particularly the fact that losses of gold by this
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authori|y
10 .
country in I925 , 1927-1928, and 1931-1932 have in each case been followed by
a return flow of gold.
The losses were in all cases due to special circum
stances like the Dawes loan in 1925» the easy money and large volume of for
eign loans in 1927 , and the withdrawal of central bank balances in I93I-I932 .
The inflow of gold, on the other hand, has lasted over longer periods and has
reflected in general the favorable position of the United States in its bal
ance of international payments.
Gold position of the Federal reserve banks
As is indicated by the table below, the reserve ratio of the Federal re
serve banks on December 28 was 62.7 per cent, the ratio varying from *+9.3 per
cent in Minneapolis to 71*7 per cent in Boston,
On that date the system had
$ 1 ,330 ,000,000 of excess reserves, the largest amount, $^32 ,000,000, being
shown by the Chicago bank, and the smallest, $11,000,000, by the Dallas bank.
The table shows also the amount of United States securities pledged as col
lateral for Federal reserve notes by the different Federal reserve banks and
the extent to which they would be deficient in their gold position if the
authority to pledge Government securities were withdrawn.
a whole this deficiency would amount to $335»000,000.
For the system as
This deficiency could
be made up to the extent of $264,000,000 if some arrangement were devised by
which the banks would hold none of their own Federal reserve notes in vault.
But even in that case there would still be a deficiency of $70,000,000, indi
cating the great importance of having the provisions of the G-lass-Steagall
Act continued.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
I
Author^Q U lSS^2^
I
GOLD POSITION OF THE FEDERAL RESERVE BANKS
(Amounts in thousands of dollars)
District
Re
serve
ratio
Excess
reserves
Federal
reserve
notes
out
standing
Elig
ible
paper
Collateral
United
States
Gold
secur
ities
Defici
ency
in
gold
(1 )
Own
Federal
reserve
notes
(Per
cent)
Boston....... 71.7
107,5H
218,931
13,360
21,400
205,571 - 19,606
21,127
57.0
37S,981
666,651+ 57,389
9,000
609,265 - 1,669
87,9^
Philadelphia.
56.7
67,028
255,800
49,561
52,000
206,239 - 45,839
16,176
Cleveland....
59.2
90,881
301 ,5^6
26,111
85,000
275.^35 - 70,642
13,501
Richmond,....
62.2
37,502
110,490
17,192
18,000
93.29S - 15,500
7,602
Atlanta.....
55.6
27 ,6^3
115,861
25,590
32,000
90,271 - 24,822
IS,1^5
Chicago......
77.3
432,446
730,773
16,801
27,000
713.972 -
6,002
39,863
St. Louis....
53. s '
33,633
111,778
6,827
36,200
104,951 “ 30,362
8,535
Minneapolis., 49.3
13,4o 4
84,407
8,128
3^,900
76,279 - 30,883
3.^12
Kansas City..
58.3
32,497
99.767
11,136
29,000
88,631 - 20,239
3,636
Dallas......
50.1
11,474
44,096
5,065
16,000
39,031 - 12,199
5,069
San Francisco
63.9
97,536
259,614
15,144
68,000
244,470 ~ 57,5^5
3^,2^9
Total...
62.7
(l)
1,330,537 2,999,717 252,304 428,500 2,747,413 -335,308 26^,259
If no United States Government securities were pledged as collateral.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
I
A uthority
12
.
Currency movements
Return flow of currency from hoards was resinned in December, after a
period of two months in which there was little change in hoarded money.
The
chart shows the volume of money in circulation, after adjustment for seasonal
variations, for the period from 1922 to 1932 .
On the basis of available information, it may be roughly estimated that,
barring unforeseen contingencies, the return flow of currency from the
Christmas peak to the end of January will be about $200,000,000.
National bank notes
Issues of new national bank notes amounted to less than $1,000,000 dur
ing the week ending December 28.
The rate of new issues reached a peak late
Reproduced from the Unclassified / Declassified Holdings of the National Archives
A
u
DECLASSIFIED
t h o r i t y
^
13.
in August of $19,000,000 for the week ending August 31» and has "been declining
since then.
It averaged $12,000,000 per week in September, $8,000,000 per
week in October, $4,000,000 per week in November, and $2,000,000 per week in
December.
One large bank in New York City lias retired its notes.
Total new issues of national bank notes since passage of the Federal Home
Loan Bank Bill amount to $164,000,000.
These issues were distributed by Fed
eral reserve districts as follows:
NEW NATIONAL BANK NOTES ISSUED AGAINST BONDS:
DECEMBER 28, 1932 , INCLUSIVE
JULY 22 TO
(In thousands of dollars)
Boston.....................
New York...................
Philadelphia...............
Cleveland..................
Richmond...................
Atlanta....................
Chicago....................
St. Louis..................
Minneapolis................
Kansas City................
Dallas.....................
San Francisco..............
3,228
19,822
Total.................
163,533
National bank notes retired— including re
demptions against which new issues have
not yet been made (partly estimated)
July 22 to December 28 , 1932, inclusive..
8,962
8,357
5 ,205
8,304
24,481
4,793
6,313
16,021
5,280
52,765
17,062
Increase in national bank notes outstanding
July 22 to December 28, 1932, inclusive.. 146,471
National bank notes outstanding, December
28, 1932 ..............................
880,825
Position of the public debt
The table below shows the volume and composition of the public debt on
December 3 1 , 1930 , and November 30 , 1932 . During this period the total gross
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c la s s ifie d
Authority^ )
I Z 3 S /.,*
I
5^
I
14.
debt increased from $ 16 ,000,000 to $21 ,000 ,000 , all classes of obligations
showing an increase:
PUBLIC DEBT
(In millions of dollars)
Bonds
Notes
Cer
tifi
cates
Bills
Dec. 31, 1930...
12,113
2 ,3*12
1,192
Nov. 30, 1932...
14,257
3,539
Increase from
Dec. 31, 193O
to Nov. 30,
1932.........
2,144
1,197
Non-interestbearing
debt
Total
gross
debt
127
252
16,026
2 ,03S
6^-2
330
20 ,8O6
8^6
515
7S
^, 7S0
Outstanding on:
December financing resulted in an increase of $15,000,000 in the public debt.
The cost of Government borrowing on different kinds of paper in the last
two years is shown below; it indicates that financing in December, 1932, was
at the lowest cost on record.
High
Bonds
Notes
3
Certificates
3 3/^
Bills
3 l/ k
3 3/8$
l/b
(Month)
(Mar, 1931 )
(Dec, 1931 an(l
Sept, 1931)
(Feb, and Mar.
1932)
(Dec. 1931)
Low
32 l/S
/'
3/^
0,09
(Month)
(Sept. 1931 )
(Aug. 1932)
(Dec. 1932 )
(Dec. 1932)
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority £ ( )
January 3> 1-933
R.& S..
comaiiffiAL
"sTOTlS?
M M O R A m M FOR OPM-EABIIST POLICY CONFERENCE
In recent weeks business has been marking time.
siderably between July and September, it has rr
*
FEB 2 9 1944
After increasing* con?*
’ “
level somewhat above the low point, showing rei
'* "
' "“
„ _____
Commodity prices, however, have lost all of their mid-summer gain and are o n \
the lowest average level of the depression,
capital market.
There is little activity in the
]
Prices of bonds have shown a gradual downward movement,kez
while stock prices have fluctuated around a fairly constant level; prices of
both classes of securities are considerably above the mid— summer low point.
Credit conditions have improved, bank failures are not as numerous as
in the early part of the year, currency is being returned from hoarding, and
the country* s stock of monetary gold has regained somewhat more than half of
the losses from the high point of the autumn of 1931.
United States Govern
ment securities held by the reserve banks have been held at a constant level
of $1,850,000,000 since last August,
Additions to the stock of gold, however,
together with the return flow of currency from hoards and the issue of national
bank notes, have resulted in a growth of member bank reserve balances, which
at the present time are in excess of legal reserve requirements by more than
$ 500 ,000 ,000,
Notwithstanding the large volume of excess reserves, which has been main
tained for several months* the volume of member bank credit has been declining
since the middle of October,
The banks’ investments have remained at a fairly
constant level, while their loans, both on securities and commercial, have de
clined further#
Total loans and investments of reporting member banks in
leading cities on December 21 were about $250,000,000 lower than on October 19 ,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
£()
%
2
.
but still $ 550 ,000,000 higher than in mid-s-ummer, The increase since the sum
mer has been all at banks in New York City and all in investments, not in
loans,
The picture, therefore, is one of the economic machine of the countrybeing poised at a low level, slightly above the lowest depth reached last sum
mer, showing some power of resistance to forces both national and internation
al pulling it downward, but with the direction of the movement in the New Year
still beset with great uncertainties.
Reserve system*s operwnarket program
In these circumstances, the open-market policy of the Federal reserve
system to be determined at this meeting is of even greater importance than at
other times.
The system holds $1,850,000,000 of United States Government se
curities, discounts and acceptances are at a low level; reserves of member
banks are high and increasing as the post-holiday return flow of currency pro
ceeds; short-time money rates are at a record low level; gold reserves of the
reserve banks are ample, but the banks are pledging $^29,000,000 of United
States securities as collateral for Federal reserve notes, and if the authority
to pledge Governments as collateral were withdrawn, the banks would be $335 ,-
000,000 short in their gold position.
In determining upon a program of open-market policy the maturities of
United States securities held should be completely disregarded.
These matur
ities are an a.ccidental^matter and there is no reason why the amount that
comes due at any given date should i!»=SB$ceasa$y influence the system* s policy,
\J
There is no more reason for letting our portfolio go down as the result of
maturities than there was for buying securities in proportion to new issues.
The system must decide on a guiding principle for conducting its open-market j ^
operations in
the light of credit conditions and developments, and not on the
S
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority^
^
basis of a fortuitous circtunstance like the maturity composition of its port
folio.
Alternatives to be considered
Several alternative courses of action may be considered:
(l)
A program of extensive selling of securities.
between $ 500,000,000
Concretely, to sell
$1 ,000,000,000 of securities in the next three months.
Proponents of such a program claim that, if carried out, it would relieve
the system of the necessity of pledging Governments as collateral for Federal
reserve notes, because an increase in bills or discounts would create enough
collateral.
It would tend to raise short-time money rates and possibly improve
the earning power of member banks.
It would remove the artificial support of
the Treasury which our large holdings of securities represent.
Treasury fi
nance would be on a more normal and self-supporting basis.
On the other hand, such a course would be a policy of deflation in the
face of business stagnation and credit contraction.
With business at low lev
els and at best only showing a capacity to resist further declines, with prices
still drifting downward, and with bank credit continuing to contract, a deflationary policy by the Federal reserve banks couldjnot^be seriously contemplated
It
be a factor ^jajoaking conditions worse; would result
in greater difficulty in obtaining credit by trade and industry, and in a de
preciation of Government and other securities held by the banks and insurance
companies.
It would also tend to defeat itself by increasing the flow of gold
from abroad and by increasing the inducement for national banks to issue more
bank notes.
Such a policy would dissipate the good will which the system has
been able to preserve through these trying times.
l/
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
£Q
%
k.
\( 2 ) j A policy of moderate reduction of the portfolio, fixed in amount at
an arbitrary figure, such as $250 ,000,000 , to be accomplished at a weekly rate
to be determined.
Such a program could be left somewhat flexible by modifying
it in case the return flow of currency exceeded or fell below the ejected
amount.
In general, this plan would result, barring unforeseen circumstances,
in the maintenance of excess reserves of member banks near their present level.
A definite policy of selling securities in volume sufficient to off
set the return flow of currency and the inflow of gold.
Such a policy would
involve definite recognition of the fact that the central objective of the re
serve system's credit policy has been the volume of excess reserves of member
banks and the pressure that these reserves exercise in the direction of resump
tion of activity.
It could be decided that the system will maintain excess re
serves within a determined range, such as $250 ,000 ,000-$500 ,000 ,000 , or some
narrower range.
This would mean that securities would be sold 7/hen excess re
serves exceeded $ 500 ,000,000 and bought when they fell below $250 ,000 ,000 , or
some other determined level.
Such a plan would be logical and purposeful.
It
might, however, establish a precedent and furnish a formula which might cause
difficulty to the system at other times, when such a course would not be desir
able.
There was a plan in Congress/^proposed as an alternative to the price
v— ---stabilization bill, to instruct the Federal reserve system to keep the total
volume of member bank reserves at a given figure.
Such a legislative mandate
be destructive^of any rational federal reserve policy.
Adoption of**
-------— ------------------- -------------------------------------------------------------- --
pr+iwiflla, therefore, although sound *n theory, might be undesirable on the
ground of inexpediency.
If it 7/ere presented, however, as the intention of
the system, in view of large excess reserves, to offset for the present factors
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
6
Q__llS ^ 3^
4a
tending to increase reserves still further, it would not carry a definite
laplication of a formula.
This plan could b© modified
* decision to offset the return flow
of currency, bat not the inflow of gold.
The reasoning back of such a dis
tinction would be that gold Imports, because they reduce the reserve# of
banks in other countries, should be permitted to exert their fa ll influence
cm the reserves of banks in the United States*
The domestic demand for cur
rency, on the other hand, has been met without an increase in aeaber bank in
debtedness, partly because it was considered undesirable to permit m abnormal
development like the hoarding movement to put the- banks heavily into debt and
thus to exert a tightening Influence on credit conditions*
In these clrc-ja-
stances, it would be consistent at this stage to absorb the return flow of cur
rency through the sale of Halted States Government securities, particularly
since the member banks ar# borrowing little from the reserve banks and have a
large voluaw? of excess reserves*
Such a modification of this plan *ould still
have the effect of shifting the emphasis froa the volume of security holdings
by the reserve banks, which is not directly relevant to the credit situation,
to the voiu*^ of excess reserves of member banks, which Should be the central
point in credit policy.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority^/)
3 /
H S
I
I
5.
frendiftfl t-o inrrnnw* Tuaoenretr otill further,- il'i7CJuld mil-carry pcr^5iach'‘imin.lca^
XrieffSL--ojL
, (4) j A modification of this plan might be to undertake to sell securities
when\^c/ss reserves exceed $ 500 ,000,000 , but to make the sales equal to onehalf of such excess and not to exceed a fixed amount, say, $ 25 ,000,000 a week.
This plan would mean that when excess reserves were $550,000,000, $25,000,000
would be sold; if they were $ 575 ,000,000 , there would still be $ 25 ,000,000
sold; and if they were $520,000,000, there would be $10,000,000 sold,
A dis
advantage of this plan would be that it would look too ingenious, and that it
involves precision of action in a situation full of unknown factors.
(5 ) Another plan would be to have no sales at all, and to allow excess
reserves to increase to the full extent of the return flow of currency from
circulation and the inflow of gold from abroad.
Under this plan the excess
reserves would increase probably by $300 ,000,000 or more in the next two or
three months; short-time money rates would become still easier, and in general
the situation would represent an accentuation of the conditions which have pre
vailed since mid-summer.
This plan might result in the elimination of interest
on deposits in central reserve cities and in a further reduction in other cities;
this would tend to remove the pressure for activity exercised by excess reserves.
A disadvantage of this plan would be that it might give the impression that the
volume of Government securities held by the reserve system is frozen at $1 ,850 ,000,000.
If that figure becomes thoroughly imbedded in the minds of the public,
a departure from it would have an exaggerated effect on the public mind.
(6) A modification of this plan would be a policy of selling about $10,000,000 a week for three months.
This volume of sales would still allow excess
reserves to increase, since the return flow of currency and inflow of gold is
almost sure to be in larger volume, unless unforeseen developments occur.
Sales
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority
Q} / £ & & / „ .3 ^
6,
at the rate of $10 ,000,000 a week would simply he notice that the amount of
Federal reserve participation in the Government security market is not a fixed
and inflexible quantity, "but can and will be modified as occasion arises»
In considering these various alternatives and others that may be suggested,
they may be grouped in general under three broad classifications:
(a)
A policy of sales— extensive or moderate— (plans 1 and 2 ).
(b)
A policy of maintenance of excess reserves near present level
by buying or selling to offset other factors (plans 3 and 4).
(c)
A policy of no action or little action, permitting excess re
serves to increase further (plans 5 and 6).
\
When a program for the next few weeks is adopted, it would appear desirable
to make it definite enough to be capable of being understood by the public*
This does not necessarily mean that an official statement would have to be is
sued, as the information could be conveyed to the press in general terms and
informally.
It is important, however, that the public should understand at
this time what the Federal reserve authorities propose to do.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Jfovember 2, 1932*
■
Mr* Eugene H. Stephens,
Federal Reserve Ageaat,
Federal Reserve Bank o f Chicago,
Chicago, Illinois*
iW ls^ i/6 0 V »«0 a ;
Bear Mr* Stephens*
Please accept ay tfcark* *or year
October &\with reference to the Open Market Policy
of the Federal Reserve Systaa*
I shall be glad to
briiqg the letter to the attention of the other members
of the Board*
With best wishes, I am
Very truly yours.
p,.
notjKinitia]
V; .r/sr
Governor*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
A
FEDERAL RESERVE BANK OF CHICAGO
230
SOUTH
LASALLE
3
3
J
STREET
O F F IC E OF THE
October 31, 1932
CHAIRMAN OF THE BOARD AND
FEDERAL R ESE R V E AGENT
Hon. Eugene Meyer
Governor, Federal Reserve Board
Washington, D. C*
Dear Governors
I
f
f
f
f
We had a meeting of our full board last Friday and I had an
opportunity to present to them something of your views on the Open Market
Policy of the Federal Reserve System, and the desirability of its con
tinuance for the time being. One or two of the more important members of
the board had to leave the meeting and there was little opportunity for
discussion* However, it is generally understood that nothing will be done
about this matter until after the Conference in Washington the middle of
November.
As you know, our board has been practically ^nar-i-iTnmi<=t -in
reluctance to approve the""purchase and retention of so larpean amount nf
Government Donas in the System, althougii we Have gone along in taking our
share. While it seems apparent now that the extension of this Federal
Reserve credit last spring was justified by what has since happened, the
position of our board now seems to be that they feel the time has come for
consideration of some stabilization the other way on account of the large
excess reserves* I endeavored to state your point of view and said that
the creation of surplus reserves having only been recently accomplished
by reason of circumstances last spring which offset additional Federal
Reserve credit, some reasonable opportunity should be given for this to
get in operation. Further, that this involved the question of the proper
time and the proper method of calling in some of the outstanding credit,
which would be a matter for full discussion at the Washington Conference.
After that conference, the matter will doubtless be reopened with our
board and I am confident that they mil follow the recommendations of the
Conference. I hope, however, that some arguments can be brought to bear
and some information be furnished at that time which will tend to enlist
a little more hearty cooperation on the part of our board in whatever
policy the System may adopt. I have from time to time insisted to our
board that this whole operation is a ’’System11 policy, which we should follow
and they have done so, but somewhat against their ow^jexpressed views of
its wisdom.
Very
sral Reserve Agent
EMS HH
^
Reproduced from the Unclassified / Declassified Holdings of the National Archives
-C-i
July 20, 1932
Hr. Geo* X»« Harrison, Chairman,
Open Market Policy Conference*
c/o Federal Reserve Bank of Hew Xorkf
Sew Iork9 le i ?ork«
/
tkpHw
Bear Governor Harrisons
This w ill confirm the advice given you orally that the
Federal Reserve Board has approved the action taken by the
Open Market Policy Conference at its meeting on July H*
1932, in authorizing the Executive Committee of the Confer
en ce
*to buy Government securities to the extent necessary
to Maintain excess reserves of member banks at approximately
$200, 000, 000, total purchases to be United to the amount
previously authorised by the Open Market Policy Conference,
which is |2O7tOOOfOO0* and in expressing, for the guidance
of the Executive Committee, the sense of the Conference "that,
except in uoasual and unforeseen circumstances, purchases
should not exceed $15,000*000 a week, bat for the next four
weeks shcttld not be less than $5, 000,000 a week**
Very truly yours.
Chester Morrill#
Secretary
d
)
/7
Reproduced from the Unclassified / Declassified Holdings of the National Archives
■c
Moved that the Executive Committee be auth
orized to buy Government seouritiee to tho extent
neeeaaary to maintain excess reaerree of member banka
at approximately 200 million dollara, total purchaaea
to be limited to tha amount previoualy authorized by
tha Open Maxfcet Polioy Conference which la 207 million
dollars*
lor tba guidance of the Executive Committee
it waa the aenae of the conference that except In unwyaoi or unflmaseen oircuzoatancea purchases should not
exceed 15 million dollara a weak, but for the next four
waaka should be not leaa than 5 million dollara a week*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
/
Fe d e r a l R e s e r v e B a n k
of New Y
ork
Nirl
Us'Please note - initial
fietacn to S e c r e t * / *
July 12, 1932
CONFIDENTIAL
Dear Governor Meyer:
Referring to our telephone conversation this
morning, I am enclosing a copy of a letter which I re
ceived today from Governor McDougal relative to future
open market operations and to redistribution of existing
holdings of governments.
This letter was in reply to one
which I sent to all governors under date of July 5, a copy
of which I forwarded to you at the same time.
Faithfully yours.
George L. Harrison,
Governor•
Hon. Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D.C.
*«'
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
£j)
^
FEDEBAL RESEKVE BANK OF CHICAGO
July 9, 1952.
Office of the Governor
CONFIDENTIAL
Mr. George L. Harrison, Governor
Federal Reserve Bank of New York
New York, N.Y.
Dear Governor Harrison:
We have given very careful consideration t6 your letter of
the 5th instant regarding the proposed policy of increasing purchases
of U.S. Government securities to the extent of about $125,000,000
for the purpose of restoring member bank reserves to the point where
they would show from #250,000,000 to #300,000,000 excess. We have
also considered your suggestion to the effect that reconsideration of
the allotment of securities is a necessary accompaniment of a further
program of security purchases, owing to the fact that a number of re
serve banks have reserves of about 5C$, while others have considerably
higher percentages.
We are of the opinion that no additional purchases should be
made by the System merely for the pu^po^e of increasing the amount of
member bank excess reserves. While purchases by the System for the
purpose of offsetting gold exports were probably justified, we believe
that the additional purchases made were much too large and have re
sulted in creating abnormally low rates for short-term U.S. Government
securities* Treasuiy bills are being sold by the Government at a
yield of less than 1/2 of 1%; one-year certificates with a coupon of
1-1/2$, selling at a premium, yield only about 1$ and Treasury notes
maturing in 1934 and 1935 yield from 1.90$ to 2.60$. This clearly
\S
indicates that we went too far in the purchase of Government securities
as these rates are abnormally low and have been artificially created
by pouring a large excess of funds into the market which it does not
need. A minimum rate of 2$ for short-term Government securities
,
maturing~wlthin a year would be a VmoFS"natural i^atelunder present
y
conditions.
~
"—
v,
With regard to your suggestion that reconsideration should be
given to the allotment of System purchases of securities among the
participating Federal reserve banks, this question has been covered in
our answer to Mr. Burgess* letter which was forwarded on the 7th instant.
It was pointed out in our letter that while our gold had increased about
#250,000,000 since June 1, 1931, our circulation had increased about
#500,000,000 and that ?/hen return movement of this circulation begins
a corresponding reverse movement will be shown in our gold settlement
fund.
I note from the last published statement of July 6 that the
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Qj)
Governor Harrison - #2
^
July 9, 1932.
circulation of your bank amounted to about $613,000,000 and your member
bank reserve account is about #858,000,000, whereas the circulation of
this bank is over $727,000,000 and our member bank reserves are only
$258,000,000. This shows the abnormally large amount of circulation
that we have outstanding as compared with your bank. It amounts to over
25$ of the entire circulation of all the Federal reserve banks.
We are, therefore, of the opinion that special consideration
should be given to such of the reserve banks as have an abnormally high
circulation and that allowance for this should be made in any plan for
redistribution of the holdings of the System Open Market account and
that the participation of banks having an excess amount of circulation
should be reduced.
You have called our attention in your letter to the fact that
while from the period February 25 to June 29 this year the System as
a whole increased its purchases of U.S. Government securities by
$1,060,000,000, the net amount of increase in Federal reserve credit
was only $612,000,000, the difference being a reduction in discounts,
bills bought and other Federal reserve credit.
You will find enclosed tables #1 and #2 showing to what extent
each Federal reserve bank contributed to this additional amount of
credit. Table No. 1 shows the increase or decrease in the total volume
of Federal reserve credit in each Federal reserve bank separately, and
it will be noted that two of the banks, Dallas and San Francisco, actually
had less total earning assets on June 29, 1932, than they had on Febru
ary 24, 1932, before the additional purchases of $1,060,000,000 of
Governments were made. On February 24, 1932, in accordance with the
usual percentages in effect at that time, it was natural to expect
that the total investments of each bank would be increased by the amount
of their participation in the additional purchases in the System account.
However, it appears that New York with 54.4$ of the System*s increase in
total investments and Chicago with 22.6$ increase in its total invest
ments, or a total between them of 77.4$ of the increase in the System*s
investments, as compared with 27$ for New York and 12-3/4$ for Chicago,
or a total of 39-3/4$ bet?/een them, being the percentages which have
been used in alioting System purchases, have furnished a much larger
amount of the additional amount of credit furnished than the System’s
percentages of allotment would indicate* Table #2 is intended to show
the result of a redistribution of the purchases involved in accordance
with the original percentages but based on these percentages of the
actual amount of additional credit extended by the System as a whole.
The reserve position of a number of reserve banks may make it
impossible to consider a redistribution of the securities by this
method but if such is the case it would indicate that the System has
already gone too far in the purchase of Government securities and that
the ability of certain of the Federal reserve banks to take over the
share of nonparticipating Federal reserve banks is due largely to the
increased amount of their circulation.
While the passage of the Glass-Steagall Act permitted Federal
reserve banks to pledge Government securities to secure Federal reserve
>
Reproduced from the Unclassified I Declassified Holdings of the National Archives
declassified
Authority
I23S/.,.*, ^
Governor Harrison - #3.
July 9, 1932*
note issue was necessary for the purpose of meeting export demands
for gold, we feel that the further pledge of such securities to
create additional member bank reserves is dangerous and if indulged
in much farther may raise the question as to the.in&egri ty of our
Federal Reserve note issue.
~ ..
^
For the reasons stated above, it is our opinion that the
System should not increase its purchases of U.S. Government securities
and that this bank should not increase the amount of its participation
in these purchases.
Very truly yours,
(signed) J. B. McDougal,
Governor.
J
Fed eral R eaerre Bank o f Chicago
Cosqperison Showing In c r e a s e o r D torra M o f each F ed eral Reaerre 3*rvk*s H oldin gs o f U. S. S e o u r lt i* a , D iscou n t*, H ill* Hou^ht and Othar F ederal R eaerre C re d it
•a a t e lo a e o f buaineas February 24 and June 29, 1932*
Tabla Ho. 1
F eb . 24.1932
June 29,1932
In cre a se
or
Deorease
D ecrease
June 29, 1932
Peb.. 24, 1932
% In o re a i
or
Decrease
Chicago
B oats*
V* 8 . S i w r l t i a i
M se o w st*
V i l l a Bcwght
O tbsr P . S . C r e d it
T o ta l
55 ,90 8
39 ,59 9
8 ,0 0 9
1 .0 05
ib b , r i
106,729
27,698
4 ,5 5 2
0
13§,T W
{ 50,761
- 11,901
- 4 ,2 57
1,085
+ SSTBl’f
+ 5 ,3
'
+180,065
- 37,465
421
2.400
4T59.TW
+ 2 2 .6
'_
+ 34,529
9,641
4 ,804
560
* _ t t tW 4
+ 3.1
52,413
10,305
632
29
8 5 .STS"
+ 24,757
4,331
3,157
393
♦ 16.876
i 2 .7
5 4 ,71e
20,303
891
0
f t ,9 l6
f 35,458
- 19,068
6,299
0
T ota l
107,315
71,549
20,679
2.400
801.1145
287,380
34,084
20,258
0
541’, 7Z?
T ota l
27,886
21,603
5,809
580
55,878
62,416
11,902
1,005
0
w ;» r
T otal
27,t>5t>
14,636
3,789
422
4 6 ,^ 3
T ota l
19,258
36,5t>l
7,190
0
85ITOS
T otal
2 7 ,J t3
15,146
4.50C
0
4 7 ,o li
29,59t>
11,633
93C
0
45.156
47,741
13^ ,PO^
I t , 95:
800
1 0 b ,642
80,260
8,849
0
IBB.TFl
U. 1 . S e c u r it ie s
D iscou n ts
B i l l s Bought
Other P . R. C red it
S t . L ouis
lo w Tori:
0 . 8. S e w r ltle e
D iM t W U
M U * BMCfet
O ther F . SL. C ro d it
Trfcal
273,618
108,980
36,746
6,558
14 5 . T&2
694,545
108,676
11 ,58 9
4 .2 9 2
110116?
+420,927
- 60,304
- 25,157
2,066
f 333,406
D. S. S e c u r it ie s
D isoou n ts
B i1la Bought
Other F. R. C red it
♦54,8
M in neapolis
M la fts lp h la
iM W ltia a
rti
Bo<*ht
P . R. C re d it
T o ta l
58 ,46 3
122,808
6,5ti7
1.911
189,745
131,998
f 73,535
6 7,542
- 55,266
3 ,4 lt
3,151
1 .6 23
288
a w .C T r ” ' t T 4,I iSB
U* S. S e o u r ltie a
Dlsoounta
B llla Bought
Other F. R. C red it
f 2 .4
Kansaa C ity
C le re la a d
V . 8 . S e o o r lt l e s
D lsoow nts
B ills B o^ h t
Other p . R . C re d it
T o ta l
68,572
121,217
7,494
0
19V ,zsS
174,660
43 ,67 0
6 ,2 32
0
22 4 , « T “
D. S. S e o u r ltie a
D iscou n ts
B i l l s Bought
Other F. R. C red it
+105,988
- 77,647
1,262
0
♦ 2T7TT8
f 4 .5
“
f 1 .6
_
D allaa
KiohBoad
U. 8* S e c u r it ie s
O lte e n U
B i l l s Bought
Other P . R. C re d it
T o ta l
14,080
34,631
7,172
525
^8,464
4 7 ,13 3
25,891
3,282
0
W ,S W "
+ 33,053
- 8,740
3,890
525
£1.9*898
U. S. S e o u r ltie a
D iscount*
Bi 11 a Bought
Other F. P. C redit
♦ 3.1
t
-
2,233
3,516
3,570
0
4.852
- 0 .8
San P ranolaoo
A tla n ta
V. 8 . 8 M « r l t i M
D lse o v n ts
B i l l s Bought
O ther P. E. C re d it
Total
12,630
47,905
7,875
600
69,01*
52,844
27,804
2,063
0
is .T s r
+ 40,208
- 20,101
5,792
bOO
♦ 1T 7H 6
II. S. S e o u rltie a
D isoounts
BI11 a Bought
Other F. R. Credit
+ 2.2
Tot* I
f 58,901
- 57,546
- 8 ,103
800
"
T .M I
- l.t
A ll Hank* Coaiblnad
D. S. S e c u r it ie s
D isoounts
Bi l l s Bought
Other F. E. C red it
740,666 1,800,871
fl,0 « 0 ,4 1 fr
836,24.' 4t>9,828
3bb,416
153,*82 *3,519
«9,8fi3
14,**1 P .944
n ‘T*7
T ou:
l.W C T T —
1
" T ^ le S M
f M ,H
d e c l a s s if ie d
V* 8 .
ttm o
B ills
Other
In cre a se
or
D eorease
X Inc
Federal Reserve Bank of Chicago
TABLE NO. 2
COMPARISON SHOWING INCREASE OR DECREASE OF EACH FEDERAL RESERVE BANK'S
EARNING ASSETS AS OF FEBRUARY 24 AND JUNE 29, 1952, ALSO INDICATING THE
CHANGES IN EACH RANK'S HOLDINGS IN THE EVENT THE "PRESENT ALLOTMENT
RATIOS" WERE USED IN PLACE OF THE ACTUAL DISTRIBUTION.
Actual
Percentage
of
Increase or
Decrease
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Present
Allotment
Ratios
Each F.R.Bank's
share of total
increase in earning
assets, basis
present allotment
ratios
Actual increase
or decrease of
each F. R. Bank's
share of total
increase in
earning assets
+54.8?
•f 2.4*
4 4.5*
+ 3.1*
4 2.2*
+22 .(5*
+ 3.1*
+ 2.7*
*• 1 . 6*
- 0 . 8*
- 1 . 2*
7-1/4*
27
*
1-l/tfo
10-1/2%
5
*
4-3/4*
12-5/4*
4-1/4*
3
*
5-1/2*
3-3/4*
8- 1/ 2*
(Thousands Omitted)
£ 53,518.
$ 44,689.
355,400.
166,428.
14,850.
47,771.
27,179.
64,722.
30,820.
19,898.
15,715.
29,279.
159,779.
78,591.
19,504.
26,197.
16,876.
18,492.
10, 101.
35,902.
-4,852.
25,115.
52,394.
-7,548.
100*
100*
t616,400.
4 5.5*
$616,400.
Increase or decrease
in each F.R.Bank's
earning assets in the
event "Present allot
ment Ratios” were
used
+ 11,171.
-166,972.
* 32,941.
+ 57,545.
f 10,922.
+ 15,564.
- 61,188.
+ 6,695.
4 1,616.
f 25,801.
i 27,967.
4 59,942.
(In Billion* of dollar*; partly Mtlaatod)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
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Reproduced from the Unclassified / Declassified Holdings of the National Archives
/
F e d e ra l R ese rve B a n k
of New Y
ork
for
OovT Meyer
Mr, Hamlin.
Nr. James
Ifeoee
WSfc. ttllter.
Ufa.
Hr,
CONFIDENTIAL
July 5,
Dear Governor Meyers
I am enclosing a copy of the letter which
I have today mailed to all Federal reserve banks
concerning the open market Operations of the system,
This is the letter which/was read to your secretary
over the telephone ttyfs morning.
Faithfuily yours,
George L. Harrison,
Governor.
Hon. Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £.()
IZ3S&3.3
FEDLf-'-
"&
all governors.
■"f
a* » •
GCM rnm ruL
Doar O o w a o r Ihrtltti
In n « v of ths changes im ths Sywtsii position rssnlting from gold 1 o m m »
iM ttt bank diaturbanoaa, sad st*»yssr srsnts, It c m
dssirabls to ravlsw rscsnt
opan asxfcst optntlou lm thsir rslstioii to ths f w w a t position of ths SymUm
and ths g i u n l banking situation*
Sines February
8
4tho g d v m a n t ssourlty holding* of tho Syst«a hsx*
b M & l&em i« a by 11,000,000,000, including sons purchase. by tbs Fsdsral B o s o m
fumir of Chicago for Its s n account during last vmIu
His disposition of tbs funds
put into tha market thx«Mb tbsss purchases aay be tabulated ss follows:
Msnosltlon of funds Mads Avsilsfrls by Sscurltygnrqhssss
(In ailllons of dollars)
Mot loss of gold through exports sod earmarking
Bspsynsmt of discounts of Fsdsrsl ressrrs banks
Boduotlon lm M s v s l reserve bill bolding
Increase lm mosey im circulation
Tnorssns im wssbsr
isssrys balancss
Total
430
S4©
49
57
ise
1,077
lbs difference bstsssa tbsss figurss snd tbs figures for government purehasss is asds up by a wmbsr of miscellaneous items.
this tabls indicates thst ths funds mads srailable by ssonrity purchaaw
lsrgsly absorbed by heavy lossss of gold snd by a reduction im FSderal reeerre
dlsoounts sad bills*
Only s relatively small regaining msafunt hss been made stall*
abls to f o m sxcsss maaber bank rmsarvss which might support an increese im mesfcer
bank arsdit*
During this psrlod ths excess gold reserves of ths System hava bssn
reduced from #1,39B,000,000 to #942,000,000, thst Is s dselins of #450*000,000,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority Cb
iZSolp^.3
Goraraor m
is
7/ 5/32
aad tho ooabinod m t n t ratio of tho Systsa has doolinod froa de par coot to
5T for cont • It lo iitMfftixs to oboorvo, towvir, that only t Ttry m i l port
o f this chaago la tho Syatsa*o gold position aad tho roaorwo ratio lo attributablo
to purohaaoo of goTorasant socuritlos.
Moot of It has bon duo to tho ropatri-
atios of foroign ooatral bank dollar funds, which fory probably would haro oo~
currod ragardloas of tho policy of tho Syatoa* Tho couatry^s gold stock has
docllnod as shown 1b tho ahovo tablo #490,000,000, or only #10,000,000 loss than
tho dooliao in tho ossoaa gold rooorro of tho Fodoral rooorto banks. Had thoro
boon no laoroaao la tho Systoa goroxaaoat holdings this gold loss would xtecossarlly
haro boon aoooapanlod by conaldorablo incroaoo In Fodoral rooorro bank
discount* oror and aboro tho discounts hold at tho tlas soourity purcbasos woro
fircmoiifoil
in othor words aoahor
borrowings Ia tho Booorvo
instoad
of doollniag froa #855,000,000 to #470,000,000, would aost suroly bars boon Incroaood to wall oror #1,000,000,000, in addition to ocas laoroaao In aoooptanooa,
and tho drastic erodit delation la proooss in fobroary inoritably would haro
boon aoooloratod aa a oonooquonoo.
Thua wo aoo that tho opoa aarkat progrsas was not only offootlro in pro▼anting tho lmoroaoo ia dlsoouata which weald haro followod oiaoh largo gold oxporto, but oa tho contrary was roopoaoihlo for a substantial roduotloa of discounts
la oplto of saoh gold loaooa* Host of tho laoroaoo la rooorto faads resulting
fro* soeurlty purchaoos haa boon roquirod to aoot doaands for roaarvo orodlt whioh
had to bo ast la ooao foxa.
Whothcr that rooorro orodlt was prorl4od by purchaoos
of gorornaoat ooourltioo, by rodloeouato, or by h ill purchaoos, tho offoct upoa
tho gold position and tho rooorro ratio would ho prociooly tho ooao. fho rooorro
ratio ia now laaa thaa «Jt uador what It would haro hooa had ao ooouritios boon
bought, and that S* dlfforoaoo la aocountod for by tho fact that our opoa aarkot oporatloaa haro lacroaood rooorro erodit about #125,000,000 In oxcoss of
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority CO
I
GoYtraor
m
7fsf&z
1a
tha metual 4aaaadv and m m bar baitka hoi* ap p roxi*»taly this amount of axooss r a -
aarva dapoaita.
Tha raquirad raaarta a«aia at thaaa t z c t n dapoaita account* for
tha d lffsra a e a la tha raaarta ra tio *
Thaaa sxeaaa raaartaa ara# of eouraa,
a ra lla b la to aaat aa? 6taaaft for surraucy or gold which aay arlaa or to support
aa •xpanaioa o f wsalai r haak orad lt about taa tla ia tha aacmat o f tha axaaaa.
A t fo llo w ia g ta b le glra a thaaa figu raa ia datall*
(Za m ilio a a o f D ollar*)
f> I# C ra d lt:
fob * IS
laaa 19
742.
855
15»
28
1*801
470
64
31
IT* 8* aaourltlaa hild
Dlaoauata
Bills bought
Otter F. B* aradlt
T*tal f * 1* m i l t
i s i m i 4 .mmMM *m.
1,794
2,346
♦ 1,060
365
•
69
14
♦
612
a* craii**
Bartnttine ia 0* s* g*!# steak
Mat iaaraaaa la eurraaay alroulatioa
total iaaraaaa la I— anA.
Sxaasa af iaaraaaa la f * B. aradlt otar lnqraaaad daaaud
Xasraaaa la m m Inkp Hy** sad ©tfcaap daposlts la
S«
4ffQ
57
487
134
Apart froa tha affaat of opaa aarkat oparatloaa oa tha toeimloal poal~
tioa of tha gyataa It la iapartaat briafly to r a a a r i u aoa* of tha worm ganaral
raaulta of tha ^rat«ft purahaaaa of aaeurltlaa:
(1)
Tha tary larga repatriation of foraign aaatral bank funda
haa baas aoeonpllahad without aay •train oa tha poaltloa
o f aaabar haaka, aad thua oaa iaportaat ohataala to a
aora aoraal aradlt poaltloa haa baan raaoTad.
{2)
Tha praaaura for liquidatioa of bank oradlt ^ « h usually
raaulta froa tha laAafetadoaasa of aanbar baika haa hoaa.
Materially
by a raduatioa la thalr total
borrovlaga froa aora thsa #800,000,000 to lasa
#900,000,000.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
*
Cb I
Govaraer Mirt;
f/S/38
The decline ia aenber toggle dapoaita lias baen checked,
aad th* liquidation of bank oredlt Aich bad b M B
proceeding at aa elarxaing rata has been substantially
ratardad.
ffca alteraative to purehaaee of pv«i9attt sacuritiee would have been
a large increase Is aawfcer beak indebtedneae which would hava exerted etill
further preaeure towards liquidation, the continuance of which at the rata tt
waa proceeding ia February sight wall have been disastrous.
*ith tha gold outflow apparently checked except for tha export of msm
#20,000,000 daring tha next three weeka, about ifeich wa shall write you, tha
oaly faetora which appear likely to influence tha Systa»*s reserve position ia
the near future ara changes la tha eurrwuey danaad, aad change* ia naabsr
reeerve balances.
If thara A«qId ba a farther iacraasa ia tha currency denand
tha for* ia wfeieh tha fa&sral raaanra credit ia supplied will aake no difference
ia tha affaot oa tha 3yats»*s raaanra positioa*
Metiber bank reserves have recently fallea short of tha 250 to 300
aillloa of excess which It was proposed to aalataia, as poiatad oat ia tha ainataa of tha laat meeting of tha executive oossiittee.
Ia tha abaence of a retura
flow of tha curreaey that haa raoaatly gona out, it would require tha purohaae
of about #125,000,000 sora Government securities to raatora awwber bank reserves
to that latal.
Sven such aa aaouat would reduce tha raaarva ratio of tha Systsn
by oaly about 1 1/8 points, fraa a little over 5? par oant to slightly under $6
par cent*
If excess smber baak raaanraa should now ba raatorad to that basis
it aeons likaly that thay will for the flrat time have aa opportuaity to exert
thoir full foroa ualeae or to tha extent that gold exports or currency hoarding
should revive*
la aay eveat thara ia now acre raasoa to expect that when excess
reserves are raatorad thay oaa ba Maintained until bank credit begiaa to expand -
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
C.DIZ3S&3-3
Oovarnor Marti
7/ft/sa
tha i* a l o b je c tiv e o f t&e p o lle r ahleb the Syataai laa«g»rated ia the aparin*.
fh ile tli« reeeat asparieaee «& m » H u t the parehaaee of g s m a n f t
Mosrittea do m
ot • d ftr »«ly tafla a o ee tha p o a ltlo a *>f the reeerra banka a* a
w hole, they *ay affiaat the p o sitio n of ia d lv id a a l reaerve banka, and the preeant
a ita a tio ii la whieh « aurter of the Baaianre banka have pmntegw of aboat 50 par
cent whereas othera have coneiderahly higher pereentagee, ©learly reqalrea^ra*
qonalderetlop of the ellotaaat of aocarltlea aa a aeeoeaary aeooapanlaant of a
farther progran of aaearlty parehaaea.
Wa have already received a ma&er of eaa-
neats on tha lattar and tables aallad to all the Beaerva banka on Jtiae 24, aad
ahall write you farther ahaa aore ara received.
▼ary lnl| yoara,
Oaorga 2* Harrleoa,
OoTazttor«
Mr* *illla» XoC* Martla,
Oonramor, fadaral BaaerY* Beak of St. Ionia*
St. Loala, Mo*
j
Femoral Kv><-r*■
i f V'w v r ‘
.
MILLIONS OF DOLLARS
+400
+350
300
>
i
I
|
§ M*
.•? ®|
r\ n |
+250
+200
----- C/3!
05> *3
(A W
^ O
+150
lu
100
+50
6
13
20
27
MARCH
3
10
17
APRIL
24
8
15
MAY
22
29
12
19
JUNE
26
3
10
17
JULY
Res-rves of Prin^ip^il New York City Banks and of All Member 3anks in the juiUu otat.r
24
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Reports I ' e p u * •!
Reproduced from the Unclassified I Declassified Holdings of the National Archives
-s
i
3
/ / J1,y, ■’■■S-sf
(y *** f i ***»*"
July 1, 1953.
Mr* XI* Handolph Burgess,
Deputy Governor,
Federal Heserve Bank of New York,
New York City, Now York.
Dear Mr.Burges s:
Receipt is aclaiowledf^d of your letter of June 25,
— ^ i ± I addressed t0 Governor t'&yer, with which you inclosed
copies of a letter and tabulations* which have been cent to
the Governors of all Federal reserve banka, regarding the
allotment of government securities.
Your letter is being brought to the attention of the
members of the Federal Reserve Board.
Very truly yours,
Chester Ilorrill,
Secretary.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
¥
3 3 3 z £ rl
/I
Fe d e r a l R e s e r v e B a n k
For C
of New Y
ork
„
atios
G
c
v*
r
,
e
y
e
r
I.'r. Hamlin
{^r. James .
fcr. Uu-cee
June 25, 1932.
Ivir. filler— Mr. Pole,
Mr.
/
IsSr.
$&r>4o4
Dear Governor Meyer:
J
piease note •initial and
Return te-Secretarn 0Hic«
I am enclosing herewith for your information
J^^v-SL-r-
copy of a letter and tables which we have just sent to
the governors of all Federal reserve banks dealing with
the question of the allotment of securities*
It is ray
hope that this information might pave the way for dis
cussions which would lead to gome readjustments in hold
ings as between Reserve banks.
Veiy truly yours,
W. Randolph Burgess
Deputy Governor
Honorable Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C#
Y^B.H
encl.
JUM 27 «32 ,
FEiEKAL
Reproduced from the Unclassified / Declassified Holdings of the National Archives
(Similar letter sent to governors of all Federal reserve banks)
M m * 24* 1032*
Sear Governor Martini
Xa accordance with & suggestion aade at the last aeeting of the exacutive coaaittee of the Open Market Folicy Conference 1
m
enclosing herewith two
tables showing the aaouiits of overages or shortages la the holdings of govesnaeni
securities of the different reserve banks on different bases of allotments, which
sight conceivably bo usod«
the first table is related solely to the holdings la
the %flt«a special i&vestasnt account* but the second cover# the total holdings
if government securities and so includes those seeaxtties which the different
banks hold for their own account in addition to qrstea account*
tho tables appear to indicate that there is no single basis which is
entirely satisfactory*
the
Hie basis which is now being used, which is related to
fp reqpireaents of tha different reserve banks, m s adopted at a tiae
when the banks war# hairing aoae difficulty in earning their dividends*
fiiig
difficulty does not arise at the preset tiaa^ t&ongh it seeas not m ilitely to
arise froa tine to time in tbe ftttore. In recent tenths the reserve percentages
Of the banks h a w beoose increasing^ important aad a nuaber of the banks have
found it neoessaxy to decline to take additional allotaents of goveraaent sedul
ities because of a narrow margin of available reserves*
We appear to be sp*
proaohing a tine whan it as? be aeceseaiy either to adopt a ratio of distribu
tion which gives consideration to reserve percentages* or to sake certain arbiW
raiy adjustments in that direction*
We should appreciate your consents «|»on th is question*
Veiy truly yours,
» . U U a «eC. Bartia*
O o w n o r , federal I m m t m Bank,
St. #
Louis.
**eC
*a
PlW
BeJfcJ3^p H
re<M
wf*iT
a^i»4
„
W* Bandolph Bttrgess
S*cr«taxy» Qpm *arta*
W l M y C«nf*rmo»
STATEIUKT SHOWING VARIOUS PLANS OF REDISTRIBUTION OF GOVERNMENT SECURITIES IN SYSXDI ACCOUNT
FIGURES AS OF JUNE 1 5 . 19*2_____________________________________
(OOO Chritttd)
PLAN 2
PLAN 1
Present Plan - Baaed on Earning
Requirements of Each Bank
Amount oi
Participation
in
Svstom Account
Boston
#
95,978
Nev York
575,120
Philadelphia
125,628
Cleveland
165,8*3
Preeent Holdings
OVER or SHORT
Of Pro Rata Share
Current
Allotment
Ratios
P ro v id e s f o r Adjustment of
P a r t ic ip a t io n s t o Average
R a tio o f A ll Banks - 5 7 .9 *
Reeerve
Ratios
7 1 /2 *
5 0 .2 *
118,294
-0 -
32 1 /2 *
80,687
5 6 .6 *
5,151
-C -
10 1 /4 *
-0 -
6 7 .9 *
*
164,360
-0 -
7 3 /4*
7,724
27
10 1 /2 *
6,123
-c -
Preeont Holdings
OVER or
SHORT
Of Pro Rata Share
# 33,535
I 14,318
I
Ratios of Combined Capital
and Surplus to
System Total
-o -
-0 -
7 1 /4 *
Present Holdings
OVER or SHORT
Of Pro Rata Share
PLAN 3
Provides for Adjustment of Eaoh
Bank's Participation So That I t s
Holdings W ill Bo On Tho Same Ratio
That I t a Combined Capital aad Sur______ plus i s to the System Total
#
#
"0 "
5*. 2%
16,595
-C -
10
*
13,730
I 18,121
-0 30,309
- 0-
PLAN 4
Provides for Adjustment of Saoh
bank's Participation So That Ito
Excess Cash Reserves W ill Bo On
Tho 8oao Ratio That I t s Capital
and Surplus i s to tho System Total
Ratios of
Present Holdings
Excess Caoh
OVER or
SHORT
Reserves to
Of Pro Rata Share
System Total
10 1/ 2*
#
-0 "
I 28,5*2
21
*
110,450
■o«
7
*
30,165
-0 -
7 1 /4 *
26,323
-C“
Richmond
47,132
5
*
-0 -
28,934
5 5.6 *
3,649
-C -
*
*
e^M
13,721
2 3 /4 *
11,764
-c-
Atlanta
49,743
4 3 /4 *
-C -
22,521
5 1 .8 *
10,050
“C-
3 3 /4 *
-O -
7,307
2 1 /4 *
14,573
-0 -
Chicago
185,390
12 3/4*
8,580
76.2*
-0 -
13 1 /2 *
-Q~
19,990
208,123
56,98C
4 1 /4 *
-C -
7,677
5 7 .3 *
1,050
-0 -
3 l /2 *
2
Minneapolis
43,538
3
-c -
2,101
5 1.0 *
8,185
-0 “
2 1 /4 *
nsas City
49,723
5 1 /2 *
-&■
33,950
5 3.9 *
6.27C
3
19,596
3 3 /4 *
~ c-
27,454
5 6.8 *
896
106.642
8 l/2 <
-c -
22.672
Louis
wallas
Sar. Franosco
TOTALS
♦1,521,333
100
*
*
#178,207
#176,207
25.972
5 7.9 *
#196,112
162,577
*
35
*
«0M
- 0-
3
*
4,714
■*0*#
9,308
-C -
1 1 /2 * .
6,566
-0 -
4,083
-c -
2 1 /2 *
3,780
-0*
1 3/4*
10,889
-c-
-
2 3 /4*
-c*
7
*
148
100
*
#111,699
#196,112
“ 0~
22,2*1
-0~
#111,689
100
*
#236,715
#236,715
Reproduced from the Unclassified I Declassified Holdings of the National Archives
TABU NO. 1
sTA'mcarr showing various plans of redistribution of to ta l holdings of govewmsnt securities
_________________________________
FIGURES AS OF JUNE 15, 1932__________________________________ ■
(OOO Omitted)
PLAN 2
PLAN 1
Amount of
Total Hold
ings of
Government
Socuritiee
Boston
*
96,*29
Current
Allotment
Ratios
7 1 /4 *
Present Holdings
.OVER or SHORT
Of Pro Rata Share
$
-0 -
I
-0 -
1 33,535
7 1 /2 *
$
-0 -
# 29,975
10 1/ 2*
$
- 0-
$ 28,592
-0 -
32 1 /2 *
150,365
-0 -
21
*
110,450
-0 -
1,894
56, 6£
5,151
-0 -
10 1 /4 *
-0 -
44,128
f
*
30,165
-0 -
-c -
11,523
5 4.2 *
16,595
10
*
-c -
3,076
7 1 /4 *
26,323
- 0-
7 3 /4 *
■Qw
165,863
10 1 /2 *
Cleveland
6 7 .9 *
118,294
129,034
Philadelphia
27
* 25,752
Present Holdings
OVER
or SHORT
Of Pro Rata Share
5 0 .2 *
243,262
699,417
Reserve
Ratios
PLAN 4
Provides for Adjustment of Each
Bank's Total Holdings So That I t s
Excess Cash Reserve* W ill Be On
The Sams Ratio That I t s Capital
and Surplus I s To The System Total
Ratios of
Sxcess Cash
Present Holdings
Reserves to
OVER
er SHORT
System Total
Of Pro Rata Shaw
-o -
*
New York
Provides for Adjustment of
Total Holdings to Average
Ratio of All Banks - 57.9*
Present Plan - Based on Earning
Requirements of Each Bank
PLAN 3
Provides fo r Adjustment of Each
Bank'* Total Holdings So That I t s
Holdings W ill Be On the Same Ratio
That I t s Combined Capital and Swpplus i s to the System Total
Ratios of Com**
Present Holdings
bined Capital
OVER or
SHORT
and Surplus to
System Total
Of Pro Rata Share
Richmond
47,132
5
*
►o-
37,338
5 5,6 *
3,649
- 0-
*
*
-c -
20,444
2 3 /4 *
11,764
«■()«
Atlanta
50,052
4 3/4*
-c*-
30,194
5 1 ,8 *
10,050
-0-
3 3 /4
*
-c-
13,300
2 1 /4
14,573
-0 -
208,123
206,988
12 3 /4 *
►e-
57,480
4 1 /4
'sa p o lis
50,647
3
Kanses City
Dallas
C 'go
St. Louis
San Francisco
Totals
13 l /2 *
-c -
21,080
35
*
—Qm
-0 -
3 1 /2 *
-c -
1,649
3
*
4,714
8,185
-0 -
2 1 /4 *
12,636
-C -
1 1 /2 *
6,566
“0 -
5 3 .9 *
6,270
-0 -
3
*
-0 -
872
2 1 /2 *
3,780
~0“
33,756
5 6 ,0 *
896
-0 -
2 3 /4*
-0 -
16,862
1 3 /4 *
10,889
-CH
36.956
5 1 .1 *
25.972
. 11_1i.il
j> l /? £
luai
$243,282
5 7.9 *
♦196,112
8,409
7 6,2 *
-0 -
-c -
14,319
5 7 ,3 *
1,050
*
-c -
35
51. c*
49,810
5 1 /2 *
-c -
43,106
29,596
3 3 /4 *
-c -
106 642
8 1 /2 *
-0 “
*1 ,689,390
100
*
#243,282
162,577
#196,112
7
*
100
*
$163,001
$163,001
100
*
$236,715
$236,715
Reproduced from the Unclassified / Declassified Holdings of the National Archives
TABU NO. 2
Itr. Ooorg® L* Starrioott* Chairman,
Open Mortoet Polioy Oonforenoa,
o/o Fodoral R«Mrr» Bank of Haw York*
B m York City, Haw Yaek*
D
o
o
rGovernor Harrisons
This will confirm the advioo given
you orally
that
tho fadaral Baaarva Board haa oonaidarad and approves tha
action takan by tha Opm tfartett Polioy Ooafaranoa at ita aaa*~
lag today in voting, oubjaat to tha approval of tha Federal
Baaarva Board* to onthoriio tha Bxaoutivo Oou&ittaa of tha
Ooskfara&oa "to continue tha purohaoa of Oofariumtit eecurition
for 3yat«m Account aa nay ooon adrloable fra* woak to woak
but not to axoaad an aggregata of #800,000*000 without another
Boating of tha Open Market Polioy Conference."
Share la attaohad hereto, for your information ani
files§ a oopy of tha atatewMit whioh wan iaauad to tha praaa
fallowing tha joint seating of tha Board and Oonforenoe,
Vary truly youraf
(Signed)
Chester Morrill
Chaster itorrill,
Saorotary*
B0£/3Pict
K COPY
After discussion of credit, banking and business conditions and
the effects of the System’s Open Market operations on those conditions
in recent weeks, it was voted, subject to the approval of the Federal
Reserve Board to authorize the Executive Committee of the Open Market
Policy Conference to continue the purchase of Government securities
for System account as aay seem advisable from week to week but not
to exceed an aggregate of $500,000,000 without another meeting of
the Open Market Policy Conference.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
FEDERAL RESERVE BOARD STAT-'luENT FOR THE PRESS
May 17, 1932
For immediate release
The Governors of the Federal Reserve Banks met
today with the Federal Reserve Board and it was decided to
continue open market operations by the purchase of govern
ment securities, the extent and amount to be determined
from time to time as conditions justify.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
CONFIDENTIAL
—c
RECONSTRUCTION FINANCE CORPORATION
Statement of Condition as of the Close of Business, May 14, 1932
ASSETS
tied
Cash-General Account, Symbol 93-300
Cash*»Bxpense Aooount, Symbol 93-301
Petty Cash Funds
Aliooated to Secretary of Agrioulture
Loans-Prooeeds Disbursed (Less Repayments)
Banks & Trust Companies (l) (2)
Credit Unions
Building & Loan Associations
Insurance Companies
Joint Stock Land Banks
Livestock Credit Corporations
Mortgage Loan Companies
Agricultural Credit Corporations
Railroads (Including Receivers) (5)
Total
Loans-Prooeeds Not Yet Disbursed (4)
Banks & Trust Companies (l)
Credit Unions
Building & Loan Associations
Insurance Companies
Joint Stock Land Baziks
Livestock Credit Corporations
Mortgage Loan Companies
Agricultural Credit Corporations
Railroads (including Receivers) (3)
Total
Aocrued Interest Receivable
Furniture & Fixtures
Total
1275,408,616.37
48,363o52
l,700o00
75^000,OOOoOO
*272,513,190o20
3380437©00
23,295,230o09
14,959,951.34
724,877oll
2,795,016o31
12,084,71So91
21, 200o00
74,030,672o00
400«763o291o46
82,646,640o26
ll,563o00
8,005,086o84
2,746p405o00
2400122o89
883,195o00
2,085,677e22
lp152o05
22,516,453o00
119,136,295o25
2,563p053o06
97,367o27
fS fS HVo" VoV <vx
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
£{)
CONFIDENTIAL
RECONSTRUCTION FINANCE CORPORATION
Statement of Condition as of the Close of Business, May 14, 1932
ASSETS
'tied
Cash-General Account, Symbol 93-300
Cash*»Expense Aooount, Symbol 93-301
Petty Cash Funds
Allocated to Secretary of Agriculture
Loans-Prooeeds Disbursed (Less Repayments)
Banks & Trust Companies (l) (2)
Credit Unions
Building & Loan Associations
Insurance Companies
Joint Stock Land Banks
Livestock Credit Corporations
Mortgage Loan Companies
Agricultural Credit Corporations
Railroads (Including Receivers) (3)
Total
•Proceeds Not Yet Disbursed (4)
Banks & Trust Companies (1)
Credit Unions
Building & Loan Associations
Insurance Companies
Joint Stock Land Banks
Livestook Credit Corporations
Mortgage Loan Companies
Agricultural Credit Corporations
Railroads (Including Reoeivers) (3)
Total
Accrued Interest Receivable
Furniture 4 Fixtures
Total
1275,408,616.37
48,363o52
1,700.00
75,000,000o00
#272,513,190o20
338*437c00
23,295,230.09
14,959,951.84
724,877oil
2,795,016o31
12,084,716.91
21,200o00
74,030,672.00
400,763n291o46
82,646,640.25
ll,563o00
8,005,086o84
2,746,405o00
2400122o89
883,195o00
2,085,677022
1,152.05
22,516,453.00
119,136,295o25
2,563,053.06
97,367o27
$573^An o *©« an
LIABILITIES A CAPITAL
Proceeds of Loans Not Yet Disbursed (4)
Cash Receipts not allooated pending advioes
Cash Collateral
Unearned Discount
Reimbursable Expense
Interest Refunds ^yable
Interest Accrued on "First Series" Notes
Interest Earned
Less-Interest on "First Series1* Notes
#431,505.00
Expense-Washington
284,322.87
Expense-Loan Agenoies
439,178o50
Expense-Cutodian Banks
250213.26
Six Months 3j# "First Series" Notes
Capital Stock
Total
(1)
(2)
(3)
(4)
#119,136,295o25
1,962,268o51
lln415054
13,430.16
371o93
22.01
431,505.00
#2,643,597.95
l,180,219o42
1,463,378o53
250,000,000oC0
500,000D000o00
♦873,018",~686o33
Loans to Banks & Trust Companies include #11,414,650o00 to aid in Reorganization or
Liquidation of closed banks*
Includes #7,168,602.91 to twenty-seven Banks & Trust Companies which closed after
the loans were made. Total Loans amounted to #7,462,670.53 and repayments
aggregate #294,067o62.
Of Loans Authorized to Railroads #11,570,187050 is reimbursable from the Railroad
Credit Corporation, when, as and if funds are available.
Conditional Agreements outstanding-Not included in above statement!
Banks & Trust Companies
#975,000^00
Reorganization or Liquidation:
Receivers-State ¥anks
2,000,000.00
Other**State Banks
2,000,000.00
Total
T C 9 7 C o OC£QO
LOANS AUTHORIZED DURING THE PERIOD FEBRUARY 2fl 1932 to MAT 14. 1932, inclusive
GLASS OF LOANS
dka* & Tr. Companies (1)
Reorgtn0 or Liquidtn:
Receivers^Nat6! Banks
Rece iversustate Banku
Others-Nat°l Banks
Others*State Banks
Total^HcSo k Tro Co0 (2)
Credit Unions
Building to Loan Assn0
Insurance Companies
Joint Stock Land Banks
Livestock Credit Corp0
liortgage Loan Companies
Agricultural Credit Corpo
Railroads (Inclo Receivers)
Total
WITHDRAWALS
NUMBER
AND
AMOUNT
INSTI
CANCELLATIONS
TUTIONS AUTHORIZED*
LOANS
2299 #363,413,874.56 #1B698P850.00
2574
159
1
2
3
2739
3.
246
45
3
U
27
3
35
3115
99204,650.00
159:
7608000o00
U
l80000000o00
2
450.000.00
3
3740828,524o56 1 9698,850©00
2464
350,000.00
1
31042O8523o4O
246
1809129OOOoOO l0OOO,OOOc,OO
44
9650000.00
3
110422c99
3 07000835o00
9'
1493579000o00
27
229352o05
3
.\00a500a252o00
26
2823 *545.056,487.01 $2 „710 „272 f,99
PROCEEDS
NOT YET
DISBURSED
$760165P959.53
5 7040000o00
760,000*00
JLAtJu8Cs72
5.500*00
8i-,646,340.25
!A0563o00
8,005,086*84
2,746,405.00
240,122.89
883,3 <>5.00
2* 0 8 5 , 2 2
l0152o05
22«516o453o00
*119 ,136o295e>25
CONFIDENTIAL
D ISBURS3D
#285,549,065.03
#17,773,278.27
PROCEEDS DIS
BURSED LESS
REPAYMENTS
#267,775,786.76
3 500D650c00
124r000o00
3 D376,650o00
988D8xl.28
444.500.00
290,483,034.31
338,437.00
% £36©56
15,165,595.00
724,877.11
29806,217o02
12,271,322*78
21,200o00
W.983n799oP0
*423.209 n918o77
24,137069
48*428*15
17^9690844oll
964,681o59
396*071^85
27205130190o20
338,437o00
230295,230o09
14C959,951084
^24,877oll
2 9795fi01603i
120O8497x 6o91
219200o00
74ft030r,672o00
*400 0763 0291->46
PROCEEDS
REPAYMENTS
120,206o47
2050643©16
110200o70
186,605.87
3 q953«127g00
*22 «446 a627 031
MAY 14 „ 1932
Sks. & T?o Companies (1)
Rsoretno or Llouldtns
Rece irers-Na ttf1 Banks
Others^ t&te Bask*
Total°Bk»o & Tro C0o (2))
Building & Loan Aaaa0
Insurance Compan 1m
Livestock Credit Corp0
Mortgage Loan Companies
Railroads
Total
NUMBm
INSTITUTIONS
BORROWING FOR
FIRST TIMS
LOANS
20
26
AMOUNT
CANCELLATIONS
AUTHORIZED
#1569,950.00
4
4
239D500.00
36
2
24
2
1,8090450o00
225D000o00
4750000o00
670OOOeOO
2
1
1
1
REPAYMENTS
#4009000o0C
#693 230 02
400c000o00
iv,5uuo00
1 a002o19
7110732o21
5 0663o5l
500.00
.
loQO
35
28
Inl86n585o00
*3A763fl035.00
i400o000o00
#717o896072
♦This Corporation agreed to take over
all or any part of February 15 th, March 15th,
and April 15th issues of Intermediate Credit
Bank Debentures which remained unsold on
February 15th, March 15th and April I5th0
The Issues aggregated #680025c000o00o All
were sold in the open market0 These agree*
ments are not included in the above figure#
(1) Excluding loans far reorganization
or liquldat ion.
(2) Including loans for reorganization
or liquidation^
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Qj)
^
r
3 3 J.-C-1
f
4/85/32
3 2—
Mr. Miller then referred to the fact that of the 193,000,000 of
Government securities which were purchased for System account during the week
ending April 20, $24,945,000 were Fourth Liberty Loan Bonds maturing in 1938,
and he stated that in his opinion the proportion of long time Government
securities now held in the System account is too large, and that consideration
should be given to the advisability of exchanging some of these for Government
securities of shorter maturities.
During the discussion which followed other
members of the Board concurred in Mr. Miller’s
opinion, and the Governor was requested to take
the matter up with the Chairman of the Open
Market Policy Conference*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
declassified
Authority £Q
/ £ £ £ / ,>
/ / /
/
f iJt
>-1
■J «
April 16, 1932.
/
Mr. J".
MoDou@alt A c tin g Chaiman,
Open l&rfcet Policy Conference,
o/o ?aderal Jteserve Bisik of Chicago,
Chicago, Illinois*
(
Dear lie. MaDou&aX:
I have brou$xt to tho attention of the Board your letter
of April 12, 1932, in which you stated that "the Governors of tho
Federal Reserve Banks, sitting today as an Open r&rket Canralttee,
have necessarily given consideration to Senate Dill Ko* 4115, and
to the suggestions In reference thereto suS2tted^y the federal
Beserve Board**, and requested that 1 caciainicate the conclusion
reached to the Banking and Currency Ooemlttee of the Senate*
ihe nesting o
ths Open Ils rfe e t Ooszcaittee, as you know,
was called by the Federal Reserve Board not for the purpose of
considering Senate Hill Ho. 4115 or the coBns&ts and recocmenda11oiis
which tho
oard submitted to the Senate Gosslttee on Banking and
Currency, but for the purpose of considering the open market policy
of the systeeu
It secsos to the Board that the question whether any
Federal reserve bank should submit its views regarding s. 4115 to the
Senate Cocsalttee on Banking and Currency Is one for determination by
its board of directors.
In the drcuxastances, the Board does not feel
that it should earsply with the request contained in your letter.
Very truly yours,
Governor*
DECLASSIFIED
< 3
12, 1932
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W W V 1P 9
9 b is w ill confirm t t » advlea g lT s* to jom o r a lly tb a t
the Federal Baaerva Boar* approTaa the a o tio c o f tb s Conference*
Very txuly |wr»|
iig m Meyer,
ufffiriiflp
DECLASSIFIED
Authority
Th© Conference voted that, subject to the approval of
the Federal Reserve Board, the executive committee be authorized
to purchase up to #500,000,000 of Government securities in addition
to the uneacpired authority granted at the meeting of the Open Market
Policy Conference on February 24, and that these purchases, at least
in the initial weeks, should be at a rate as rapid as may be
practicable and if possible should amount to #100,000,000 in the
current statement week*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority^ )
n js ieA^
3 3 3, C -/
FREE GOLD 07 EACH FEDERAL RESERVE BANK,
APRIL 9, 1532
(In thousands of dollars)
Boston
Hew York
Philadelphia
19.U90
166, 91H
21,530
Cleveland
21,130
Richmond
10,388
Atlanta
8. 02U
Chicago
3^,965
St* LouiB
10,991+
Minneapolis
3,968
Kansas City
10,079
Dallas
San Francis oo
5,315
20,139
332.936
DIVISIOH 07 BANK OPSEUIIOHS,
iPBII. IX, 1932
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority
Q)
For CIRCULATION
Gov. Meyer
Y
Mr. Hamlin..
/ Mr* James . .
..
Mr. Magee
8^sLiW|jS.|
Fe d e r a l R e s e r v e B a n k
^ Mr. Miller
Mr. Pole___
o f N ew Y o rk
Mr.
Mr.
nd
s Office
Please note
Return to
April 8, 1932*
dear Governor Meyer;
As I told you over the telephone yesterday, our directors
at their meeting yesterday discussed at some length the present
banking and credit situation, especially as it has been affected
by recent purchases of government securities under authority
granted by action of the open market policy conference and approved
by the Federal Reserve Board on February 2 4 , 1932.
They were of the opinion that while these purchases have
been beneficial, nevertheless, in their judgment, the situation
is now such as to warrant a broader and more rapid program on the
part of the System.
They understood that a meeting of the open
market policy conference has been called for next week and that
the wisdom of adopting such a program will no doubt be considered
at that time.
Nevertheless, in view of the urgency of the situa
tion and the importance of pursuing an open market program promptly
and vigorously, they voted that, subject to the approval of the
Federal Reserve Board, the Federal Reserve Bank of New York should
this statement week purchase for its own account $50 million in
government securities in addition to the #25 million being pur
chased for System account.
This action was taken with the hope
that a program of substantially greater purchases than now author
ized for System account would be approved by the open market policy
............................. ...............................——
vmmm—
Reproduced from the Unclassified / Declassified Holdings of the National Archives
xA L . R E S E R V E B A N K O F N E W Y © ^
____ f
'
_______
HOH • EllgeilG
£
6
T
4 / 8 / 3
2
conference next week, but with the realization that even if such
a program should not he approved, this #50 million additional
purchases would not exceed the total amount now authorized under
existing resolutions of the conference which limit purchases for
System account to $25 million a week,
I am sending this letter in order to confirm my oral
report of the action taken by our directors.
Governor•
Hon. Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D.C*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
^ L E G R A M
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E SE RV ICE )
189bfa
RECEIVED AT W ASHINGTON, D. C.
NewYork 431p Apr 5
»
»-. ruie.
»i
I'M
Mr.
Mr.
Governor Meyer
Please note - initial and
Washington
Return to Secretary’s Office
Confirming telephone conversation executive committee of
open market policy conference to-day^voted to continue
purchase of Government securities at rate of $25,000,000
a week as authorized by last meeting of open market policy
conference.) As explained to you over the telephone it was also
voted that it would be desirable to hold a meeting of the
open market policy conference in Washington on tuesday April
12. All Federal Keserve Banks have been notified of these
actions of executive committee.
K
*». n <tovimNii*vr n n t w i w n m
Harrison
435pm
A P R # - 1932
110M
333
() f { Po-bMonk 9 , 1938.
Mr* Qeorii L. Harriaon, ChajLrmn,
Open liaxfcet Policy Conference,
^federal Heaerr* Bank of He* York,
Kew York, H. T.
Daar Governor Harrieon;
Market Policy Conference at ita meeting an February 24, 1932,
in voting that, "subject to «ia approval of the M o r a l neearve
Board, the Executive Oomlttoe shall bo authorized to purchase
up to #250,000,000 of Government securities for System account
at the apprariaate rat* of #25,000,000 par w M k % it being
underatood "that purchases under thia program ahali be made
after a meeting of the Executive Ooanlttee called for the j w »
poeo of considering such purchases and tbat the program shall
bo subject to review by the aonferance at any time on call of
the Ocnference or t&o Federal Reeerve Board**
✓
Shi* letter ia to confirm, aa a matte* of record,
Governor Mayors oral advice to the Conference of the Federal
Hoaerv* Board*a approval of it* action.
It is undarvtood that,
at a meeting of the Executive Ooaaittee following the mating
of the Open Market Policy Conference on February 24, it mm
decided to proceed will* the purchases of Ooremnent sacuritlea
f]
Reproduced from the Unclassified I Declassified Holdings of the National Archives
as authorized by the Conference and approved by the Hoard,
upon the enactinent into law of the so-called Oiass-Steagall
bill.
Very truly yours,
Chester Korrill,
Secretary.
SRG/CM/acw
Reproduced from the Unclassified I Declassified Holdings of the National Archives
It Is moved that it is the sense of the conference
that, subject to the approval of the Federal Reserve Board,
the Executive Committee shall be authorized to purchase
up to #250,000,000 of Government securities for System
account at the approximate rate of #25,000,000 per week*
It is understood that purchases under this program shall
be made after a meeting of the Executive Counittee called
for the purpose of considering such purchases and that
the program shall be subject to review by the Conference
at any time on call of the Conference or the Federal
Reserve Board#
<
“ i>
^
January If f ltS2
fir* Goorgo tm Barriaon, Chalraaa,
Opoa Mmriteot Pol toy Conf«ranco,
o/o Federal Bosorro Bank,
fm York* low York»
D oar
Governor Barrlion t
Tho Fedoral Hoaarro Board hat coaaidorod tha roao-
V
lutlon adopted
by
tho Opoa
H ir le o t
Policy Conforenoo or
Jaam~
a*y 12, 1932, a oopy of whloh was handad to me by Dootor
Burgoo**
S o o ra ta ry
of tho Conforonoo*
Tho Board approroo tho authorisation granted in tho
resolution to tho %ooutivo Coaaittoe of tho Conforoneo to
purohaoojfor Syoton aeoouat, if and whoa doalr&blo, not to
oacoood $200»000»000 of Govemaiaat aotmritlos, such purohaaoa
at a sooting to bo oallod for tho purpoao of oon»idorln£ tha
oooaalon or aood thorofor*
It will bo undaratood, of ecmrao, that any aotion
to bo tako& by tho Krooutlvo Coamitta© of tho Coafaronoo tixtdor
tho toraw of tho ro»olatioa will bo atibjoot to tho approval of
tho fodoral Boaarro Board.
1-jhZL
Juuu
3
3' 3.
F IL E COPY
*
2 *
In v l«w o f tho fn « t th a t no t l a i X la lt « * •
plaood
la
on
tho a u th o rity grftntod
to
th o ErooutiTa OfloodL
tho ra ao lu tio n p i i i t i by tho Conforonoo* tho
oorroa tho
rig h t to
r t r lw
B oar*
ro~
and rooo& aldor lt a approval hov**
in oxprooood* I f aad ofeoa olrouaotaneoo
Voty t m ly
your*,
(Signed) Eugene Meyer
8Q(fOOO Uoyor*
Ooirornor
HgtfleidfgroftKeNational Archives
3
33
D«mwtimr 1# 1981
Mr# Gaorga L« Harriaon, Chairman,
Marioat Policy Conforanoa,
Fadaral H t s t m Bank,
Haw York, law York.
^
fF***
r
D««r Cknramor Harriaon i
Tha Fadaral itetarra Board law oon*idarad tha p m m *
*andatlona aubadttad %
tha Opan Market Folioy Confaratica
following t%» Baating with tha Board yaatarday, and you
ara advtaad that tha Board approraa tha granting of author
ity to tha Kracutiva Cowitta© of tha Confaranoa, In thair
diaoretion, to buy up to $200,000,OCX) of Oovormant aattnri*
tiaa bafora tha and of tha yaar*.
Tha 'Board alao ty w w m * tha granting of authority to
tha SxacutiTa Cowaittaa of tha Confaranoa, in thair diaora
tion, to aall any aaauritiaa ao bought, aftar tha turn of
tha yaar If oauditIona than perait.
It it undaratood that
thla authority ia to run until January 50 or such a*rli*r
data a# anothar *a*tliig of tha Opan wiarkat Policy Confaranoa
any fe# acafTfaii#d*
T tty traly y o w i#
^
Bugaoa Mayar,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
The Oonference reviewed a prel Ininary muosmdun
submitted by the Ohairwan#
fUiey discussed buaInass, bauldx;.
and credit conditions both here and abroad, and considered in
particular the effects upon the Amprices. barncin:;; sauI credit
structure of the recent hu^o withdrawals of cold and curroncy
and possible furtiioi' withdrawals oi* currency .for holiday x>urpoaes or for hoarding*
Hhoy further considered tho hau/y »;iu-
turities of b ills in tho iJystera ijortfoiio before the end of
the year#
while tho conference was of the opinion that there
is no occasion for any i imliute purchase of Govorxwnt
socurifciea, nevertheless they voted timt in view of a ll
circumstances and In order to be prepared i f and when occa
sion ariaes, tho executive comiittee be authorized in its
discretion to buy up to ^200,000,000 of dovormient securities
before the end of the year#
I t was the Denise of the Con
ference that the conniittoe should nlso be authorized in their
discretion to s e ll any securities bo bought after Die turn
of the year i f conditions then pomit*
55ie Oonference fe lt
that there should be another noetin^ of the ;3onferonco early
in January to consider the iJysteci’ s tfononal operations and
policies in the ii^ht of oonditioiiS ass they then exist.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
FoAn. No. 131
,
✓ A
,
4 "%
Office Correspondence
Tn
B0AR
D
FEDERAL RESERVE
rw hw>b * t, wo.
Mg. M IU W ________________________ Subject;--------------------------------
^
^
^
2— 8495
A t t t a a a a t i a c « f t t a Ogmm M
t* U a « S a g k m I i U m
w
r iifM
M
F a l i e y O a a f r a — a am J a e u r t U
tta
i
• H t a t l » m m * « f t t a n»M f»T— » U a t , a a ftja a * * a t t a
a p p iw t a l o f t t a M t n l R M N W B o a r d , t t a B w a t it l* a M N n
t a a o t t o r ia a d t o rm rrttiT T j t m m w t off n A f a d a a a l l» a » r w
aa I w lw to
» p t o * 1* 0, 000,000 o f ( I d i r M i r t
■ a m r r ttla a . I f a » d w ta a i t > i i m i — a a a a a r y a x a d n a a M a t o f o
a o . o r i f M W M B f n iM M d * to
ap to a at a i l a r mmm&.
« I » t s t k i o » i a l M < f t t a r w f m w i t t a t ■■■— ! » a a fe d i t i o a a 1» t h i a a o M * * y a a d th n w u h w r t t t a w r U m
a a a aaak
tM
I t l a w M r t t i l t t a * t t a S y a tM t a f n y m < |W > U t t o t o t e
m t m r t e t t a r f t q w i t m u » t » it o i m w to U M m f i «
f M lU t a t o I N W M 9 t a ( M l t t M i M M M M I t «P »M M U W j
t i n t a n * a to p a a i l l t a a f f M t i v a i a — M p l l a fc la g t o l a p «urp*«a.*
I* t«a la tta a r o f ttjrt a
fim m .
to t t a C t a i n a a o f t t a O fa a B a x t e t F o l i a r # m »
« t a B o a rd a t e t o d t t i t t t w
l i
a aa a a a o xp roaaod i a t t a aaaaad f a n p q k
a a a a w l a i t t th o p o * it i o a i f
t t a (k m tu r-
o f t t a a ta a a r o a o la t io a , tk a t i t w
p x a p a ro d to (It* fa r o x m k la o o a a ld a r a t io n to ugr a » M a r i a t p r o p o a a l «
‘ la a ltfil to b p r a
|N ( i m
a a t t a r a t a t t a a s i a t i a g t M M l t a a d f t a a a a i a l a x ic a a q r a a d
t o a o a a la r a t o t a a t a a a a w a n w y , * t t a t t t a I w r l m u t a t t a a a m
" a p p r o p r ia ta
a a d ■nXUt a f c j a a t ia a a t a d a to a a iiU a « t t a a f c a n a t o r a a d a a o p a « f o p a a a a r t o t o p a r a t l o a a o f t t a I M m l B a a w a a S y a ta a t a t t a | M M t a x t x a o r d ia a r r a a d * H M M l
a t o t o o f t a a ia a a a ," a a d t t a t i t , t t n t h a , *& w m a g a a a r a l W
N n l to tta ooa-
t«M pljL t*d pttXWlMia* o f O a a a iM a a t a a a u r it ia a t » r S jra to a a o e o n a t , a a d i a a s d a r t t a t
i t aay
ta p ra p a r a d to M
inn it a « i.
t fla v o r
i t t a a a a t t a » ia a d t t a
■ a tta r o f « » m « M
m tta
aarraat m U t r t t a mt m m
Otnmxmar a f
t fa M « r t t a U
t t a ta a * * , a a * U a *
ttM
p o li a y o f
aa t t a
t a M f t a a t a a d f a r t t a * o o a a id a ia d , t o a a t i a
i t o t a t a l * w it h la a p a a t t o t t a p a r t t a aa o f a a i « w p « a M o a a t o f 11* 0 , 000,000 o f
f l a i a i a a i i t a a a o r it la a a a f i n d
t a t t a Baonaaw a d a t i o a o f t t a O a a fa ia a a a .*
S a t t o ll f a r t h e r a t a t a d t t a t - t t a B o a rd la T a r tl a a t t a r t s l a g t t a
Ovmomr to
T ta
a a a m ia a
^
Reproduced from the Unclassified / Declassified Holdings of the National Archives
^
:f>C'
Hore
- 2-
*lte approval with regard to sales of open market securities acquired for System
account,
la the event that oonditiona should take such a turn as to make sales
of securities from System account advisable, in the Judgment of the Executive
Committee of the Conference, the Board would wish to consider the matter.”
following receipt of Governor Calkins* telegrams of October 20 and 2 1
suggesting that the Board authorise the sale of securities from the Open Market
Account, the Board, at the meeting on October 22, discussed the matter, and It
was developed as the feeling of the members present that, if recommended by the
Executive Committee of the Open Market Policy Conference at Its meeting on
October 8 6 , they would be inclined to approve the sale of securities or to allow
maturities to run off to the extent of #12 0 ,000 ,000 , and it was the understanding
that Governor Meyer would communicate the feeling of the Board in the matter to
the Executive Conmittee at the time of its meeting.
At the meeting of the Executive Committee of the Conference, it was
voted:
"That while for the moment there is no occasion for a
reduction in System holdings of government securities, that by
reason of the views expressed by a number of governors favorable
to a sale of government securities, and because of the possibility
of.changes in the credit situation which might make sales desirable,
the committee ask the Federal Deserve Board to give the executive
committee the same leeway with respect to sales of government
securities as it now possesses with respect to purohases as
recommended by the resolution of the Open Market Policy Conference
on August 11.**
Informal discussions at meetings of the Board, following receipt of the
mlattoe of the meeting of the Executive Committee of the Conference, indicated
that the members of the Board were |not^disposed to grant the authority requested,
but no fomal action has been taken up to the present time*
SBC/a&a/acw
Reproduced from the Unclassified / Declassified Holdings of the National Archives
F o r m 148
TELjtQjRAM
FEDERAL
RESERVE
BOAfc
LEASED WIRE SERVICE
W A S H IN G T O N
/■
Curtiss- Boston
Case - New York
Austin - Philadelphia
DeCamp- Cleveland
Hoxton- Richmond
Newton - Atlanta
November 17, 1931.
Stevens - Chicago
Wood - St Louis
Mitchell - Minneapolis
McClure - Kansas City
Walsh - Dallas
Newton - San Francisco
TRANS NO. 1^-lQ
For your information the following telegram is "being s6nt
today to all Governors QUOTE Board suggests that Conference of Governors and
Open Market Policy Conference be held in Washington begining November 30.
Conference of Federal Reserve Agents not being called because there seems to
be a general feeling that in present■circumstances it would be preferable not
to have both Chairman and Governor leave their posts at same time. Please
wire whether proposed date agreeable UNQUOTE.
MEYER
- M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
Fer CIRCULATiOKi
Federal R eserve Bank
o f
N e w Yo r k
Please note-initial
October SO, 1951.
G6r4»d
Dear Governor Meyer:
I think you may be interested in the enclosed
copy of Governor Seay’s letter of October 28, and my
reply of the 29th,
truly yours,
George i>. Harrison
Governor
Hon, Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
andreturn to
GOVL.JNOR.
COPY
FEDERAL RESERVE BANK
OF RICHMOND
October 28, 1931*
Dear Dr. Burgess:
We thank you for your letter of the 27th sending us a copy of
the minutes of the meeting of the Executive Committee of the Open Market
Policy Conference, held at your bank on October 26, and a preliminary memo
randum on credit conditions submitted to the Executive Committee at its
meeting.
We have tentatively considered the conclusions of the Executive
Committee, and are frank to say that, while these conclusions are reasona
ble and we know are intended to meet the situation as far as it can be met
in an equitable manner, the whole plan of operation of the Open Market Poli
cy Committee, or Conference, leaves much to be desired and in my opinion
calls for further consideration. »e hardly think that any Federal Reserve
Bank would be willing to abrogate its independence of action and as a con
sequence be placed in a position, according to the language of the report
(first paragraph, page 5 } of having to "offer participation in these bills
and securities to the other banks with the understanding that those whose
reserve position is such as to enable them to take bills and securities
should cooperate to the fullest extent possible."
In my judgment, if the Open Market Policy Conference is to be pre
served a more binding plan, automatically operative, will have to be devised.
Very truly yours,
GJS-CCP
(Signed)
GEO. J. SEAY,
Governor.
Dr. I. Randolph Burgess, Deputy Governor,
Federal Reserve Bank of New York,
New York City.
from the Unclassified I Declassified Holdings of the National Archives
October 29, 1931.
Dear Governor Seay:
Ur* Burgees hue shown me this morning your letter of October SB, sfcich
crossed in the mil wy letter of y&sterday on the same subject.
Of course, the difficulty lies ia preserving freedom of action for the
h»yrir» who would take o w bills and securitise, as well as for the banks tk> might
have them to sell, and neither one naturally wishes to abrogate completely it* own
right of decision in any case. In response to our earlier telegram we Imve com
munications free a number erf Reserve banks that they did not desire a plan shich
would appear to abrogate the authority of their directors.
Moreover, it is dif
ficult to make any plan completely automatic, and whenever judgment is necessary
someone must exercise that judgsmnt. The committee has been reluctant to assume
too great responsibility, and desires to leave to the directors aaft management of
the several Reserve backs the mftTiiaam of choice consistent with the maintenance of
a System policy*
¥b» difficulty you raise, of oourae, is inherent in our opan market organ
isation «hich, in the nature of the case, has to be a little informal. Frmctleally
speaking we do not anticipate any difficulty#
In this bank we are, of course,
prepared, so l^g as we are able to do 00, to corns to "Use aid of other lies^rve banks
whenever that appears to be necessary.
But apart from the willingness of other
banks to do likewise the Federal reserve Hoard, of course, has the power
under
the
&*t to arrange rediscounting between Federal reserve banks so tbat in the final
analysis each bank ie sure of protection.
In the meantime it is our belief that
the plan suggested, while it may appear a little indefinite, is best adapted to
preserving the rl&ts of the several Reserve banks, while at the seme time assuring
protection to all and a coordinated System policy.
¥ery iruly yours,
Gsoxge L. Harrison,
Governor.
Mr* George J. *euy,
Governor, Federal Beserve Bank,
Kichmoad, Virginia.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3 3 3.-C-1
Fe d e r a l R e s e r v e B a n k
o f
N e w Yo r k
October 29, 1931.
Dear Governor Meyer;
At the meeting of the executive committee of the Open Market
Policy Conference on Monday, October 26, at this bank, the following
motion was passed;
"It was moved and carried that while for the mo
ment there is no occasion for a reduction in ^rstem
holdings of government securities, that by reason of
the views expressed by a number of governors favprable
to a sale of government securities, and because of the
possibility of changes in the credit situation which
might make sales desirable, the committee ask the Fed
eral Reserve Board to give the executive committee the
same leeway with respect to sales of government secur
ities as it now possesses with respect to purchases £S
recommended by the resolution of the Open Market Policy
Conference on August 11•”
The reasons for this motion are, I believe, evident in the
minutes of the meeting which have already been transmitted to you,
and I believe that you were yourself present at the meeting at the time
the motion was passed*
I should be glad if the Board would give consideration to this
Veiy truly yours,
Reproduced from the Unclassified / Declassified Holdings of the National Archives
At the meeting of the Board this morning, during the discussion of the
advisability of approving sales of securities from the open market account*
it was developed as the feeling of the members present, that if recoimnended
by the Executive Committee of the Open Market Policy Conference, they would
be inclined to approve t,hft sal# nf Rftcnritlaii, nr ».n »T}gw fflftturltlftg ta-jsrm
off, to the extent of $1 2 0 ,000 ,000 , and you stated that you would communicate
tfcer'feeling'df the Board in the matter to the Executive Committee of the
Conference at its meeting on Monday,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
F o r m N o . 131
Office Correspondence
FEDERAL RESERVE
BOARD
Date— uetober
3
Subject:
To__ — Governor lisyer
3 3 . -C
From
/#- «?
CSV
At the mooting of the Board this aoming following discussion of 1b©
subject of the attached teloacagao te rn Qmwrmxe Oalklna^ it was iOa© feeling
of the Board that a meeting of the Open Market Policy Conference riaould be
hold at as early a data as possible* You stated that you would tate up the
natter of a full conference mooting at the ttao of the mooting of its
executive ooe&ittee in New York on Monday*
/x
m
.
i°/»<)/%> v
,0h h \
— r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
•^ZLEGRAM
*•?
FEDERAL RESERVE SYSTEM
■' -C " /
(L E A SE D W IR E SE RVICE)
6gb
RECEIVED AT W ASHINGTON, D. C.
SanFrancisco Oct 20
Gov Meyer,
Washh
32r p,m
'
Oct
21
r
Referring your wire todav\ answering mine of yesterday I considsr
prompt attention to this matter essential and am advised that
executive committee of Ompc will meet next Monday which in view
of the tight situation which is imminent if not here does not
satisfy me. I received following wire from Governor Harrison
dated yesterday'Q UO TE In view of the reduction in amount of
free gold and in reserve ratio which is affecting the several
Reserve Banks somewhat unequally it may be desirable to- take
. if
steps which will protect the position of all banks and avoid too
great fluctuation in these figures. In view of hesitancy on the f \
pai'T"O'Fulsome or The others oanks d o participate in repurchases
of governments and or bills unless absolutely essential, it
occurs to us that it would be advisable promptly to set up
some procedure whereby some one central source or committee
will have figures available daily for each federal reserve bank
and some more,or less definite authority to make adjustments
from day to day as occasion arises.
With that in mind would
it be agreeable to you to prefer this task to the executive
committee of the open market policy conference in order that
they may perhaps appoint a subeommittee to watch the situation
and handle it from day to day. We see no other practicable way
of satisfactorily making adjustments which may be needed, unquote,
-end send following reply dated today quote: we would fre disposed
U. 3. GOVERNMENT
PRINTING OPTICS: 1928
2— 11901
I
M
Reproduced from the Unclassified / Declassified Holdings of the National Archives
TELEGRAM
FEDERAL RESERVE SYSTEM
(L E A SE D W IR E SE RVICE)
RECEIVED AT W ASHINGTON, D. C.
a meeting in Newyork on monday next to discuss setup of adequate
machinery to handle applications from individual reserve banks.
In the meantime in view of general reluctance of many of the
reserve banks to increase their holdings of government securities
it is suggested that any reserve bank desiring to improve its
reserve percentage advise us promptly of the amount of bills which
they would like to have us offer for participation rit by other
federal reserve banks the general sentiment being that adjustments
reserve percentage should be made through a resale of bills
rather than through a resale of governments.
I am sending
similar telegram to all governors pending meeting of executive
committee on monday next unquote.
2—11001
0* 8. OOVKBXlfENT
FRIXTIN6 (R IO I: 19M
Galkins,
925am
r~
—
'
'
~
—
Reproduced from the Unclassified I Declassified Holdings of the National Archives
F o r m 148 A
FEDERAL
r e s e r v e
bo ar d
LEASED WIRE SERVICE
W A S H IN G T O N
The telegram given below is hereby confirmed.
2— 9454a
October 20, 1931*
Calkins - San Francisco
Your tela>fprain(f possible sales from system open market account will be
brou^ii to attention of erocutive conaaittoe of Open Market Policy Con
ference f as contemplated in last sentence of Board’s letter An&ist 18th.
You will be advised later#
AJUL
Reproduced from the Unclassified / Declassified Holdings of the National Archives
’ZLEGRAM
FEDERAL RESERVE SYSTEM
(L E A S E D W IR E SE RV ICE )
RECEIVED A T W ASHINGTON, D. C.
19g m
Sanfrancisco oot 19
427p
oct 20
Governor Meyer
Washn
In view o f recent trend in s itu a tio n o f fe d e r a l Reserve Banks "A" as
to fr e e gold "B" as to res e rve percentages "C" as to r e s t r ic t e d
market fo r governments which w i l l be fu rth e r narrowed by advancing
ra te s board might g iv e con sid eration to re v e r s a l o f i t s a c tio n taken
August eigh teenth on recommendation o f open market p o lic y conference
when the Board said quote Board is not a u th orizin g governor to
e x e rc is e i t s approval with regard to s a les o f open market s e c u r itie s
c
a^uifced fo r system account unquote
May I have your views by w ire
or w i l l you telephone me between tw elve and one your time Tuesday ?
Galkins
915a
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Form No. 131
Office Correspondence
To
...... Mr* James____________________
c-/
FEDERAL RESERVE
BOARD
Subject:
From ___Mr.-lfe Cl el 1a n d ____________
tio
2—8495
At the meeting of the Executive Committee on August 20th, -Mr*
ailler referred, informally to the advice contained in a letter ad
dressed to the Board under date of August 13thrby Governor Harrison
of the Federal Reserve Bank of Hew ^ork, that while the need for the
purchase of 150,000,000 of Government securities authorized by the
New York Directors and made on August 10th and 11th occurred too
rapidly to secure its execution under System authorization, he has
written to all Federal Reserve banks offering them participation to
be carried in their independent accounts rather than in the System1s
special investment account*
He stated that entirely apart from the fact that such a distri
bution of purchases made try the New York Bank is outside the provisions
of the open market procedure set up with the approval of the Board, it
seemed clearly also to be contrary to the intent of the Federal Reserve
Act in that it was tantamount to a rediscount operation by the Federal
Reserve Bank of New York without any participation by or authorization
of the Federal Reserve Board* He stated that it was a step in the di
rection of pooling the res.*™** r>-P -hhe Federal Reserve System for the
disposal of the New ^ork Bank without any System policy covering such
a move. He suggested that serious consideration of this angle of the
matter be given by the Board.
Mr. Miller also expressed the opinion that the same question arose
in connection with the participation of the other Federal Reserve banks
in the foreign credits arranged, through the New York Bank. He said that
he thought the matter of participation 'by all banks was one to which the
Federal Reserve Board should give consideration in each case^as some of
the Federal Reserve banks have serious problems of their own to deal with
in'the face of which they may find it necessary on occasions to transfer
their participations in the foreign investments to the other banks.
In connection with the easasm matter first referred to above, the
following is quoted from the weekly letter addressed to the Board by
the Federal Reserve Bank of New York:
"During the week we offered to the other Reserve Banks
participation in the $50,000,000 of governments acquired by
us last week, but up to the present time none of them has
expressed a desire to participate. Most of the banks indi
cated as their reason that they did not wish to weaken their
reserve position.n
FOR IK F O R IM fta OF
and Return to. .
Reproduced from the Unclassified I Declassified Holdings of the National Archives
■C - l
August 18, 1931,
Daar Governor Harrisanr
’Si© 7 M M
Baaarfa Boa*d_haa oonaidarad tha Ha®ort aad B®o»*
%35', C
.—•
raendatiaa of tha Qp*a iiwfcat Policy Canfaranoa held An^iat 11, 19©3*
1 am daalrad to adviaa you that tha Board la In aooord with tha
poaition oC the O m im m m m aa^roaaad in tine following atataoant*
"It la Hi* opinion of tha Oonferoaoa that acanaaio
©ondltiona in Hiia country and tfcrou^fcoit tha world are
now aruofc. that it i* aaaantial that tha 3yat«a ha proparad
promptly to tataa whatever fuartiier proper atapa oro in ito
pova? to aaoauuea®a «? faailitata a recovery In oanditiana
aa soon aa it appaara likaly that maak stapa will ho affaotita
in aoooapllaMng thla purpoaa**
In oonaaqueaoa, tha Board la prepared to giro favorable oonaideratlon to any open market proposal Or protean wSiich la desi^od to liappova
saattor* In the aadatlng aoononio and finanalal aoeiaaBey awl to aoealarata
hualnaaa reoovoiy.
Hi® Board regards thaaa aa appropriate and valid ob~
jootlvoa In datamlnliig tho aharaotar and aoopa of open naxtoat operations
of the Fedoral Baaarva Syata® In tha pxaaant eoctraoxdinary and dapeanaad
atata of bualnaaa*
Tha Board9 Utarofocra, gltaa a general approval to the oontaeplatad
purohaaa of Qwwm am t aaouritiea far Syatam aooount, and In ordar that it
r»y Ini prepared to aot praaptly on tha currant application osf this polloy
of purahaaa, it haa autharlssad tha Ootesn&flo? of the Board, until eueh t$ m
m the natter of opan aaxtoat policy shall ha reviewed and further oonaidered,
to aot in ita bahalf with seapeot to th© purohaaa of an aggregate anoont of
Reproduced from the Unclassified / Declassified Holdings of the National Archives
m 3***
#129,000,000
Q m m sm m t soeurltiao m fixad in ttuc m o m m m M im , aef
Tk© Board U ^^authorizing the Ocwtoboet to vbmcoIm
tha
its opprtma with.
System aocouat.
to aal*s of opes* E*u$s»t aemxriiiae acquired for
In tho ©rent tbflt oonUttaui afcouM tak© m b a turn as
to mate aaloa of aoourities f s n 8 y»ta© account adhriaablo, iai tho jud^asnt
of the ExoouttTs Ooncritteo of tho GofctfsMmo©, tho Boaard would wiah to ooo*
aidor the »»tter# "
Hury tzuXy youzB,
SOjfflBW H 03T8GP,
OoYorocpp.
Ufa
L»
Q h alraan , Open Ifeu& st P o iic y O a f t o m ,
H««f Y o rk , X , T .
*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
FE D E R A L RESERVE B O A R D
W A S H IN G T O N
OFFICE OF GOVERNOR
Dear Governor Harrison:
The Federal Reserve Board lias considered the Report and
Recommendation of the Open Market Policy Conference held August
.11, 1931*
I am desired to advise you that the Board is in accord
with the position of the Conference as expressed in the following
statement:
"It is the opinion of the Conference that economic
conditions in this country and throughout the world are
now such that it is essential that the System he prepared
promptly to take whatever further proper steps are in its
power to encourage or facilitate a recovery in conditions
as soon as it appears likely that such steps will be effect
ive in accomplishing this purpose* *
In consequence, the Board is prepared to give favorable
consideration to any open market proposal or program which is
' *
— *3ting economic and financial
‘
business recovery.
these
The Board regards
objectives in determining the character and
the Federal Reserve System in
_____
__
ness*
TheBoard, therefore, gives a general approval to the conten^lated purchase of Government securities for System account, and
in order that it may be prepared to act promptly on the current
application of this policy of purchase, it has authorized the Governor
of the Boaxdj
of open market policy
until suck time as the matter
be reviewed and farther considered,
r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
fa 4,iJ'ts*amount ot #120,000,000 A
oa<geiee^j
i^a appgtfJ. with respect
&6
A
^uxoha^esjjfixed In the Recommendation of the Conference*
/t f It+ y t'w
r
The Board
is not authorizing the Governor to exercise its approval with regard
to sales of open market securities acquired for System account.
In
the event that conditions should take such a turn as to make sales
of securities from, System account advisable, in the judgment of the
Executive Committee of the Conference, the Board would wish to consider the matter*
Mr* George L* HarriBon,
Chairman, Open Maiket Policy Conference,
c/o Federal Beserve Bank,
New York, N. Y*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Subject?
Open Market policy Conference
Report and Recommendation
August 11, 1931.
The Board has considered the Be-oort and Recommendation of
A
the Open aarket Policy Conference held August 11, 1931.
I
am desired to advise you that the Board is in accord
with the position of the Conference as expressed in the following
statement:
the Exfjcpartieipet*,
,sp. or if i
11
It is the opinion of the Conference that economic
conditions in this country and throughout the world are
now such that it is essential that the System "be prepared
promptly to take whatever further proper steps are in
its power to encourage or facilitate a recovery in con
ditions as soon as it appears likely that such steps will
he effective in accomplishing this purpose."
In consequence, the Board is prepared to give favorable con
sideration to any open market proposal or program which is designed,
to improve matters in the existing economic and financial exigency
and to stimulate business recovery.
The Board regards these as
legitimate objectives in determining the character and scope of open
market operations by the Federal Reserve System in the present de
pressed. state of
e o o at.
The Board, therefore, gives a general approval to the contenrolated purchase of Government securities for System account, and
Reproduced from the Unclassified I Declassified Holdings of the National Archives
-
2
-
in order that it may "be prepared to set promptly on the current appli
cation of this policy of purchase, it has authorized the Governor of
0
the Board, for and on its behalf, to exercise its approval with respect,
to the amount of $120,000,000 of purchases fixed in the Recommendation
of the Conference* aSSL^ontil such time as the matter of open market
policy should he reviewed and further considered)
The Board is not
authorizing the Governor to exercise its approval with regard to sales
of open market securities acquired for System account*
iairM-im griTon !■«.
.
fopwwr.
In the event that conditions should take such a turn as to
make sales of securities from System account advisable, in the judgment
of the Executive Committee, the Board would wi
cons.lrierii
rri in nnnfrrrnrr "*rf"tVr.Tftrrm^iirn
A. C. M.
A ugust 13, 1931.1
A ttf"marker#
w 1it^„_lt.
Reproduced from the Unclassified
I Declassified Holdings of the National Archives
'rELEGRAM
FEDERAL RESERVE SYSTEM
(L E A SE D W IR E SE RV ICE )
RECEIVED AT W ASHINGTON, D. C.
I05bs
NefcYork 155p Aug 13
Board
Washn
following will confirm resolution of the open Market policy
conference August 11 transmitted orally to the Board by Governor
Harrison quote It is the sense of the ’conference that subject
to the approval of the federal Reserve Board the executive
committee be authorized to purchase for account of such Federal
Reserve Banks as desire to participate up to f120,000,000 of
Government securities if and when it becomes necessary or advisable
to do so or if necessary or advisable to sell up to a similar
amount it is the opinion of the conference that economic conditions
in this country and throughout the world are now such that it is
essential that the system be prepared promptly to take whatever
-further proper steps(^hat)are in its power to encourage or facilitate
a recovery in conditions as soon as it appears likely th^t such
Digitized
FRASER
u. ft. M for
T B im
m vuxTma «*nc>: m a
r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
•'•P L E G R A M
FEDERAL RESERVE SYSTEM
(L E A SE D W IR E SERVICE)
sheet 2-105bs
r e c e i v e d a t W ASHINGTON, d . c .
steps will be effective in accomplishing this purpose End quote
Burgess
101PM
ir. a. M Tw ram *KDm>re m im i:
2—11601
Asgftlt 13* 1901*
George L . H a rrU o n , E sq .,
Q ororaor, Fodoral Boaerwe Baak,
tor Tort, S. T.
%
ta u r Governor B u r r i m :
flfcoa tha return of My* Millsr sad ay*alf to Ifashlngtott on
Tuesday, Augast 11, I r i p d r M to the Federal R m m
Boar* the
authorisation granted on Monday by the Executive Cowait te« to tho
offloors of the Fodoral Reserve Bank of Hew Yortt to purchase up
to $50,000f000 of Haitod Statoa Governacnt bonds with a rlsw to
offsetting tho zotirsnoat of an approximately ofaal
mmmt
of
Treasury bill bolding* which « « n naturlng tli« week is tbs
account of tbs Baak of France, resulting in withdrawing
mrrmicy
fTOH thO MKBSy nailcet#
X bad p re v io u sly in d icated to you t b * t tb s a ttitu d e o f the
Federal Bssorvo Board a t t h is U s e was sy *p a th e tic and fav o rab le
to the purchase o f United S tato s Govarnaent s e c u r it ie s and on
th is a c c o s t 1 know uhen I heard the n a tte r d iscu ssed a t the
a s o tin g o f y e a r Executive CoaadtOeo tb a t tho F e d «ra l Reserve Board
y
was sym pathetic to the purchase su lh o rlze d by yowr Basic t e n t ir e ly
/
a p a rt f r a i tho p e c u lia r olrounstancas which prompted your Sxecutlve
Ccnnlttee to aetlw ith ottt d e la y .
O to q p i
L«
Hu t I b o b ,
* » q .
- t~
Thtft* p a r i h i N i by t h « VMaral IN w en e Bwnlr o f K#w Tortt
/■
« * • a p jn w # d by the 7 «4 «m l n u m
B©«r4.
V «ry t x t l f ycmift*
i\ i ^ e"e
^ W e
0 ftvMHlftdP
Reproduced from the Unclassified / Declassified Holdings of the National Archives
F o s m Mo. 131.
yn,
|
Office Correspondence
FEDERAL RESERVE
—
i
Date ^
V
*7
V
_ /
Sub"
Froa?c^ M l> M cC lellan d -------------------------------------------------------------
2—8485
tro
At the meeting this poraing there was ordered circulated
letter toted .toast 13th frroa the OoYemor o f the federal Seserre S an k oF "
S w F T o ik / w ItS re^rd to tlae purchase “by that feaak, Tinder authority fto m
its executive eoonlttee, of $50,000*000 of Gkn/prnent securities*
OoYeraor Meyer
Mr* Baulin
Mr. M iller r
Mr* James
Mr# Magee w t
,
Mr* Pole
Please circulate promptly and return to this office*
--------------------------------:------------------- -----------------------------------------------------------------------—
11
■ ■ ii .wib,ajl i i i
Reproduced from the Unclassified I Declassified Holdings of the National Archives
RECEIVED
cJ!G 1 <*
Federal R eserve Bank
o f
QrTFiCE OF
ao^sso^
Y fr - c - /
N e w Yo r k
August 15, 1951.
C) *
Dear Governor Meyers
fl
On Monday of this week the directors of this bank at their executive
committee meeting, at ndxich both you and Mr* Miller were present, voted to
purchase 150,000,000 ©f government securities for the account of this bank to
meet an unusual.situation ffeich had developed in the money market, which seemed
to require prompt action*
Two events operating together served to bring about
a sudden change in money conditions from those which prevailed during June and
July,
The Bank of France, as you know, has been allowing to mature bills
held for their account here and has been letting the proceeds accumulate in
the Reserve Banks as free balances. This operation takes funds directly out
of the money market.
Through this means foreign bank balances in the Federal
Reserve Bank had been increased to #152,000,000 by August 5, and this amount
of funds thus removed from the market.
But on Monday last this amount was
suddenly increased by an additional #48,000,000 by reason of a maturity of
Treasuiy bills held by the Bank of France.
Simultaneously the closing of three small New lork City banks, to
gether with a group of four banks just across the river in New Jersey, resulted
in some uneasiness in the banking situation and heavy withdrawals of currency
from us amounting in the first ten days of August to about #75,000,000 net.
This Situation, however, has since quieted down and about #25,000,000 of this
excess has been returned to this bank.
As a result of these two events the New York City banks not only lost
all of the surplus reserves which they had been carrying for two months past but
were forced to borrow more than #50,000,000, as well as to sell us considerable
amounts of bankers bills.
Bealars in bankers acceptances,, mn-rAmm-rT resorted.
to_repurchase agreements to an amount of about #60,000,000.
was in © H e r
meet this situation and to prevent its injuriously affecting the money market
position and causing undue or sudden hardening in money conditions, that our
directors felt it desirable to act quickly* in this purchase of securities. This
letter is merely to confirm the discussion which you heard at the meeting of our
directors*
In accordance with this vote #50,000,000 of securities were purchased
^ o n Monday and Tuesday of this week, consisting largely of Treasuiy bills and
pot h e r short term issues.
Hhile the need for this purchase occurred too rapidly
^ to secure its execution under system authorization, we are writing to all Feder
«£ Reserve Banks offering them participations to be carried in their independent
accounts rather than in the system special investment account.
Very truly yours,
r/* r /s /
Honorable Eugene Meyer,
Governor, Federal Reserve Board,
Washington,
D. C.
jt.
George L* Harrison,
Governor.
,
& /* %
/s /
f
Reproduced from the Unclassified I Declassified Holdings of the National Archives
3 3 3- -*C
m y 11, 1*81
8o*r Gororaor Birrifaat
Governor iH jror hmm rmmlrmd amd i s b ^ ln giiig to
tho otton tiott o f i
o th o r naafeofo of th» Board t o o t
lo t t o r of m y Tth^Qbm ia w it t ia g o copy of tho
—
tokoa by th o dpoa Iferlw t P o lio y Co&foroaoo « t i t s
a to tln g o » Wodnoodtey, A p r il 29th* o lo o * oopy o f ©
MMKrttndiai it a o y t m W lt t t d bv th o d n ira ftn o f tt*o
Conforonoo*
It !• aotoi thot tho foiNftl stantoo of tho
aooUng w i l l bo o w d lo b lo w ith in o fow datyo*
Vmwj wwiSUky yWXFMf
£• M# H o & o lla iid ,
A «* is t e n t Soorotary
M r* Ooorgo Inv B o rrlo o a* O o ro m o r,
3F*AeMfcl
B***—
^ ^ i r ^ i w i F w
1
^p.
Huik.
T*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
T"*
c
€
Fe d e r a l R e s e r v e B a n k
o f
N e w Yo r k
May 7, 1931
CONFIDENTIAL
Dear Governor Meyer;
For your convenience In reference and in
order to confirm what I dictated to your secretary on the
telephone
this morning, I am enclosing a copy of the
vote of the open market policy conference taken at its
meeting in Washington on Wednesday, April 29, which was
read to the Federal Reserve Board at our joint meeting on
April 50.
I am also enclosing for your information a copy
of a memorandum presented by the chairman of the open market
policy conference, which is referred to in the above vote of
the conference#
I am sending these documents to you now pending
the completion and distributk>n of the formal minutes of the
conference, which should be available in a day or two.
> RECEIVED
Honorable Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
MAY - 3 1931
ommior
Enos.
1 ,1 h
i
Reproduced from the Unclassified / Declassified Holdings of the National Archives
A
y
y
u
DECLASSIFIED
t h o r i t y
I
I
C
1
CONFIDENTIAL
ACTION TAKEN BY OPTO MAEKET POLICY CONFERENCE AT ITS
MEETING IN WASHINGTON DN WEDNESDAY AFTERNOON, APRIL 29, 1931.
After consideration of the memorandum presented by the chairman,
and following a long discussion of the present business, banking, and
credit situatibns, both national and international, it was
VOTED
that pending another meeting of the conference, as soon
as that may be deemed necessary by the Federal Reserve Board or the members
of the conference, the executive committee of the conference should be
authorized, if and when it appears to them necessary or advisable, to pur
chase up to $100,000,000 of government securities.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Sfey 7* 195*
Hr. George !>• Harrieon* Governor*
Federal Beserve Bank,
Hew tork* B w York*
Dear Governor Harrisont
At I advised you over the telephone, the Federal Beserve
Board at its isoeting this aomlag cos*aidered the report of
action taken by the Open Market Policy Conference, on April
29* 1&51* reading as fellows*
"After consideration of the mmmr&nt&m presented
by the Chalraan* and following a long dlaeuaeion
of the present business* backing and credit sit*
uatlon* both national and international * it m
voted that pending another mooting of the Confer
ence, a« soon ae that say be deemed necessary by
tho Federal Bsserve Board or the mea&ere of the
Conference* the jixeeutive SosB»ittee of the Confer**
enoe should be authorised* if and whan it appears
to the® necessary or advisable, to purchase up to
§100*000*000 of Govenusent securities*.
The Board has voted to approve the request that the 2xeou~
tive Cowalttee of the Open Uarket Policy Conference be authorised*
if and when it appears to them necessary or advisable* to purchase
up to 1100*000*000 of Ooverxttsat seouritiea.
Very truly yours*
Eugene lleyer,
Governor
Reproduced from the Unclassified / Declassified Holdings of the National Archives
d e c la s s if ie d
Vote taken by Open Market Policy Conference on Wednesday
afternoon, April 29, 1931:
"After con si deration of the memorandum presented by the
Chairman* and following a long discussion of the present business*
banking and credit situation, both national and international, it
m s voted that pending another meeting of the Conference, as soon as
that may be deemed necessary by the Federal Reserve Board or the
members of the Conference, the Executive Committee of the Conference
should be authori£ed, if and when it appears to them necessary or
advisable, to purchase up to #100,000,000 of Government securities".
Reproduced from the Unclassified / Declass fed Holdings of the National Archives
F o rm N o . 131
/ *>
|
Umce Correspondence
T o ______ _ Sflr t r a o r Magrrn_____________
3 2 Z . ' £ ’~j.
FEDERAL RESERVE
BM
"D
Date.
Subject:.
From_____Mr* lloClotlmiui____________________ _____
IB * t o l O f <Ut*d
***> [ froa tho Chair**» o f
tho Fodorol Ropotfio Bftitk o f Motaend, & M e t
glvon thot tho
Saafltjp f a r the proooRt* w ill a o t portiotpftto 1b further jxireikftoee
a*6o fcy th « Opm Morfcet Boiler Coaf e r i os fo r % « t « i
During m telephone eoerwrsBtSott with Mr* Hoxfcon th is aomln*;,
1 aade iaguiry ft* to the rea»<** fo r tiki# aotion ft»d he ototed t!*fc k i«
Dirootero tattmtaouoly f e lt thftt the b i l l imte o f tho 3yote* Is too, low
thftt, under present condition*, tho aftxtcot ohowld ho allowed to
take «ny M ilo vhloh » n o ffe n d *
Reproduced from the Unclassified / Declassified Holdings of the National Archives
CS2EI
s
3- o
rlrl
...... . * ■ »»*■*<*■*-** * -
3 3
February 6, 1931.
Bear Mr. loxtont
At the meeting of the Board this morning,there being no objection, it was noted with )
approval from your tele gram of Fsftri&n: Sfok Jthat
the Board of Directors of your hank, at its meeting
on that date, made no change in your existing
schedule of rates of discount and purchase#
It has also been noted that for the present,
the Federal Beserve Bank of Hicimond will not
Participate ia further purchases of acceptances
made by the Open Market Policy Conference for Systen
account*
Yery truly yours,
I* M. McClelland,
Assistant Secretary*
Mr* V* W* Hoxtoii, Chairman,
Pfederal Reserve Bank,
Richmond, Virginia.
cc: Mr. Smead,
Mr. Soldenweiser,
/
f-
3 - < ’ (
/. i *
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3
TELEGRAM
federal beserve sisraa.
(Leased wire Service)
^
Received at ISasMngton, D. C.
39rJaot
Richmond 1220p Eeb 5 1931
Meyer
Washington
Mar soon minimum rate on bankers acceptances last reported to
the Board is not chafeged but this bank for present will not
participate in further purchases of bills by open market committee
Hoxton
I22 0p
noted with annl
At Board Meeting.
'F *
---------- ;— ;----------------■
--------- ;------------------------------------------ ---------- - — j — ..
Reproduced from the Unclassified / Declassified Holdings of the National Archives
J
Fe d e r a l R e s e r v e B a n k
- ’ V-.-.A
o f
N e w Yo r k
February 2, 1951.
Sirs:
Receipt is acknowledged of your letter dated
J ^ u a c y ^ 2 9 > 1 9 ^ j addressed to Governor Harrison advising
that the Federal Reserve Board has voted to approve the
report submitted by the Open Market Policy Conference on
January 21, with the amendment referred to therein.
Very truly yours,
W* Randolph Burgess
Deputy Governor
Federal Reserve Board,
Washington, D* C.
^
i
*3
t- C —
*
/
,
Reproduced from the Unclassified / Declassified Holdings of the National Archives
F o rm N o . 131
Office Correspond
Governor Meyer ^
FEDERAL RESERVE
BOARD
>*3
r
Date.___ January 50, 1931
Subject:
Hand
J jla- i*'2
If the attached draft of a letter to the Chairman /of the Open
Market Policy Conference, prepared in accordance with action taken
at the meeting yesterday, is satisfactory to you, it will be submitted
for approval at the next meeting of the Board*
b y Jti..
yfi -j
/
Hr# Gaorgs L* Hftxv£«oft« Ch*ir**n, '
O w m Market olloy Confsranos,
*/o Fedarsl Sesorra Saak*
law Tort, law York*
Sear ®wv#imar Harrisons
Si* Fedsr&l Sasarra Board has considered tho report atah*itted
tha ©f>aa larttst ftOUp C<MSf»reao# an January t M # raiding ms
follow sI
*fha Conference has oonsidsrad tha *>reli»lna*y
aubadttad by th« Chairman and has swiavad
buelnaea and credit condition* aa they now ®pf>aar«
It la tha sea** of tha Confer®!*©# that In view of
thas* conditions It should ba tha policy of tha Sya~
tsai to continue ass easy nosey policy in tha bast in
terest# of trad# and ooM»«ftt#«
It is tha baltaf of
tha Conference, hmmtmt* that tha aaaaonal return flow
of
*«d credit sad othar ffcatora have tandad dur
ing recent weeks to wmk* for an undue exoass of funds
is the principal money cantors*
It is9 therafore, tha
opinion stf ths Conference that in these clrenaattanoaa
it would ba desirable to dispoee of sons of tha Systoat*a
holdings of Governaant securities as and whan opportunity
/UiQ.^ ^ U t ^ o
>/ > /^ /
afford* itself to do «o without disturbsno* or aagr
<— ^
undue tightening of the money position*
*1% 1* understood th*t there shall bo another
meeting of the Conference a* *00® a* or whenever
oondition* in tho
opinion
of tho Conference or the
Federal Eesenr* Board justify a r»oon»id*ration of
this policy#*
iShile the report was submitted subject to verbal or alnor correction,
it is understood froa you that the only change to be s*4e therein is
the elimination of the *ord mvrndurnm uadersoorod above»
In conaiderin?; this report, the Federal Reserve Board has also
taken into consideration the discussion whioh followed its presenta
tion at the joint lassting of the Open Haricot Policy Conference and the
Beard on January 21st sad* in the light of that discussion, has voted
to approve the report with the aseodeeat a W e referred to*
By Order of the Federal Beserve Board*
fery truly your*,
E* M* HsCleUand,
Assistant Secretary
d e c l a s s if ie d
Authority^ )
HSS/r f i ^
35 3 -C-/
GONflDfflSm.
Januaiy 21, 1931.
,
~ ;• ? ■i /
flie Conference has considered the preliminary memoranda*^ submitted 0 flft P<2!
” T~~
~ ~ '"f
j- z / - 3 /
by the Chairman and has reviewed business and credit conditions as they now
appear*
It is the sense of the Conference that in view of these conditions
it should be the policy of the System to continue an easy money policy in^
the best interests of trade and commerce.
It is the belief of the Conference,
however, that the seasonal return flow of money and credit and other factors
have tended during recent weeks to make for an undue excess of funds in the
principal money centers.
It is, therefore, the opinion of the Conference
that in these circumstances it would be desirable to dispose of some of the
System*s holdings of Government securities as and when opportunity affords
itself to do so without disturbance or any^undue) tightening of the money
position.
It is understood that there shall be another meeting of the Con
ference as soon as or whenever conditions in the opinion of the Conference
or the federal Reserve Board Justify a reconsideration of this policy.
CSubject to verbal or minor
correction when minutes are
finally prepared)
AT EXECUTIVE COMMITTEE
MEETING
JAN
29 1931
d e c l a s s if ie d
Authority Q
U l£ s ^ 3 ^
January 3Lt 1931.
tfe* Q Q a f e r M s # list <rnsidered 1&« p « l i a i m t y m o m r m & m
by the I H i l -md b m t m l m m & . husin&s#. and credit eon&itisiaa m
eubaitted
they now
ags$«ar»
I I is the sens# of Hi# Chnferer.c* that la Yiem of those conditions
It
In s
ib o ^ .4
the policy o f the
%
» te i
best interests of trade and cocrteros.
to ©oatiau© a » e&s^
m osm y
-poliisy In the
Tt It Hie b o lie f of the
and
howrrer, that the seasonal return flaw o f roney/credit
othor factors
have tended during & § rocent «t«isa to crike for as, undue ectcees o f fund*
ia the priactiraO
principal, M
w aityf ca
cantor*.
n to rs .
It Is. therefore, the opinion of the
C onference tK a S ^ it w ould fee de a lra fcle to &%wpQm ®t some o f th e System 1*
E ld in g * of
securities m and when opportunity affords ito e lf
to lib eo without dUturbnnee or any undue ti^htonin* of the r»ney posit i n .
Xt^ is uoderetood that there sh *ll he another piling of the
Conference as soon at a* wheaeter eoadttioa* ia the gy iiw rtn rt optai&a
of the fesfer^ane# or the fedem l H«a#r*e Board ju stify a r«€m*$ds®iiiioa of
this policy.
f v v / 's /
C j a u i& s
'
C^4jA4
o
It a W
?
U u A tft/h ? a ^ -
Reproduced from the Unclassified / Declassified Holdings of the National Archives
3
J?
F E D E R A L RESERVE B O A R D
WASHINGTON
OFFICE OF GOVERNOR
January 15, 1931.
MEMORANDUM FOR THE BOARD:
hGovernor Harrison rang me up and told me that at the
meeting of the Board of the Federal Reserve Bank of New York
held today it was decided to gradually dispose of almost all,
if not all, of the $40,000,000 of "bonds bought in December from
one of the member banks, as the market could absorb them.
He reported that money was very easy in the open market
_
@FedFRASER