The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
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—
—
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IW III, II
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/O ^O j
Form P. R. 567
END
SHEET
K IN D OF M A T E R IA L OR HUMBER
333*~©-2
name o r s u b j e c t
Open Market Policy Conference
Meetings
Open Market Operations
DATES
Jan — Jill 1933
(In c lu s iv e )
PART NUMBER
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
3 ^ 3
October 11, 1955*
Mr* W* Randolph Burgees, Secretary,
federal Opm Market Ocwaittoe,
M a s a i Heaerre Bask o f He* York*
Hew York, New Toxic*
Dear Mr* Bu rgaaes
Receipt la acknowledged of your la tter of October
4, 1993* addressed to Governor Black, Inclosing coplea of
tha revised ndmtee of tha meeting of tha executive caaraittee of the Open Market Poltey Conference on Jftme 29, 1933,
and of tha Fedaxal Opan Marloet Comittee on J o ly 20, 1933*
fery truly youra,
Secretary
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E ^ J o Z o j
1 -//•
[/ l/V/U
I'll
'^
Fe d e r a l R e s e r v e B a
n k
!
'
^33
I Cv;‘of
Ne w Yo r k
L ~ ^
i
CONFIDENTIAL
3
^
3 3 . — "C.
October 4, 1955,
Dear Governor Blacks
I am enclosing revised minutes of the executive
___= ~ r ip v Z A
- t: ■
committee meeting of June Zdfaxia of the Open Market Committee
meeting of July 20, to be substituted for the preliminary
drafts which you have previously received.
Very truly yours,
U j-ji * .
A.
W. Randolph Burgess
Secretary, Federal
Open Market Committee
Honorable Eugene R. Black,
Governor, Federal Reserve Board,
Washington, D. C.
WBB.H
encl.
/Q /
' ! /
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
A AO
/
2
3
3
. —
JUL271933
Mr* W* Randolph Burgees, Secretary,
Ifcderal Open Market Coamittee,
Federal Beaarva Bask of Han York,
Nan York, Haa York*
Dear Mr# Burgess:
Refereno© is nade to your latter of June 30, 1933,
addreaaed to Governor Blaek, with which you ineloaed a oopy
of a tentative draft of tha «lautea of tha meeting of tha
executive e omittae of tha Open Market Policy Conference, held
ia Haa York on June 29, 1933*
Governor Blaek haa requested ae to advise you that
he has no suggestions to sake aa to Qhaugaa ia tha draft*
Vary truly yours,
2
-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
BSOEiVISD
JUL1 1933
F e d e ra l R e s e rv e B a n k
O F F lo t O F T H E
o f
N
e w
Y
f e d e r a l
o r k
r
e
O O V’ F .W
s
vs,-. r-.n.>
3 -3 3„
June 30, 1953.
Dear Governor Blacks
aiclosed herewith is a tentative draft of the
|
^ 7
-^S
minutes jof the meeting of the Executive Committee of the
............ —
Open Market Policy Conference held in Hew York yesterday,
together with copies of the Report of Operations and the
Preliminaiy Memorandum on Credit Conditions*
I
should be glad to receive at your early conven
ience any suggestions you nay have for changes in these
minutes#
Very truly yours,
fta Q
t
W. Randolph Burgess
Secretary, Open Market
Policy Conference
Honorable £• R. Black,
Governor, Federal Reserve Board,
Washington, D. C.
w h b /h
end#
/L2 *-
7/ ^ /
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
fT.d. /n$<oj
/une (89# 1935*
3
..........................................................
3
3
. —
£
' t a K U M k l i f t UttCtUNCOlt K R THE EXtettlTO COiMITTEE'
m m s (g a r m t o e t b c l i c t c ^ m M s a ^ m s : g a . ■;
Sine© open market purchases were resumed in the statement week beginning
May 17, t h e p n ^ f f >iased $159,000,000 of govftrMmaTit aftoirritifta.
These
purchases have not resulted in any increase in the total amount of Federal reserve
credit outstanding, but, on the contrary, there has been a small decline due to
further reductions in member bank borrowing and the virtual elimination of tbe
Systems bill holdings through maturities as shown in the following table*
(In millions of dollars)
June 28
Bills . . -----Other securities - - - - - - - - Total bills and securities - - -------
2,250
i #S76
215*
8*
3*
♦ 139
- 115
- 70
?
2,202
-
48
% u n e 27
While the total volume of Federal reserve credit has not increased
there has, nevertheless, been an increase in the excess reserves held by member
bafojss#
The following table shows the excess reserves of the principal Mew York
City banks and all merabor banks*
(In millions of dollars)
Hew Ytorfc City
May 17
111 Member
Banka
i
-MM—
WWH—»
84
311
"
24
166
376
»
31
111
335
June 7
89
358
14
125
410
21
49
349
fe8
70 estimated
475 ©sfc!»A®d
*
•
-
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
jT.fi,
j
s
2
The general tendency toward an increase in excess reserves has been
due principally to a return of currency from hoarding at the rate of about
$25,000,000 a week, despite additional requirements for currency due to increased
business activity and higher prices#
The diminished excess reserves in IFew York and increased excess reserves
in other centers is due to a transfer of funds out of New York following the enact
ment of the Glass Bill providing for the termination of interest on demand de
posits*
After the passage of that Act New York City banks lost $420,000,000 of
demand deposits, of which about $215,000,000 consisted of deposits of out-of-town
banks*
There has been some evidence of cessation of these withdrawals in the
past few days, though it remains to be seen whether they will be resumed again.
A considerable amount of the funds withdrawn by out-of-town banks, and other de
posits as well, was employed by depositors in the purchase of government securi
ties, bankers bills, or other securities*
Although the excess reserves in New York City have been considerably
reduced recently there has been no evidence of greater firmness in money largely
because of continued large excess reserves elsewhere and a tendency for deposi
tors to eiEploy their money*
While the demands upon the money market may be expected to increase
somewhat over June 30 and the Fourth of July holiday, a return flow of currency
is to be expected after that time, together with a reduction of Treasury balances
in the Reserve banks.
deposits may take place.
It remains to be seen, however, what further shifting o f
T
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
i
W
O^OGOj-
—
TENTATIVE ORAFT - SUBJECT TO CHANGE
C C K F ID M IA L
MINUTES OF MEETING OF EXECUTIVE COMMITTEE OF THE
OPEN MARKET POLICY CONFER M C E ,
___________IN NEW IDRK - JUNE 29, 1935__________
The meeting was called to order at 11:10 a# m#, there being present
Governor Harrison, chairman, Governors Young and Fancher, and
Deputy Governors Hutt, McKay, and Burgess (secretary) and
Dr. J* H. Williams (of the New York bank)
The preliminary memorandum and the report of operations were distributed,
and after discussion accepted*
Governor Harrison reviewed recent open market operations carried On under
action of the Open Market Policy Conference at its meeting on .April 22, as modified
later#
Governor Black entered the meeting at this point.
In a discussion of future policy Governor Harrison indicated that with
the return flow of currency after the July 4 holiday it seemed possible that ex
cess reserves might increase to the neighborhood of $500,000,000#
A situation
would thus be created which would provide some justification from a technical point
of view for tapering off purchases of government securities#
On the other hand
the psychological effect of the continuance or discontinuance of purchases needed
careful consideration, particularly as they might be related to movements
foreign exchanges or any stops which might dr
tion of the dollar*
in the
m ight not be taken toward stabiliza
The increase in prices and in business activity required
some continued support until it became more firmly established.
If the impetus
which has arisen from the instability of the dollar in foreign exchange should be
removed, it might be desirable to increase purchases of government securities, in
accordance with the suggestion made by Governor Black at the meeting on May 23.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority r .o
./o ^ o i
2
There ensued a discussion of the desirable policy to be pursued in the
current week, and at the conclusion of this discussion it was moved and carried
that purchases of egpproximately $20,000,000 be made in the current week.
It was
agreed that these purchases should be made for delivery on Thursday and $!riday,
June 29 and 30, in order to provide the market with funds to avoid any stringency
over the end of the half year.
It was also agreed that it would be unwise to reach
any definite decision beyond the current week because of the great uncertainties as
to the position of the dollar and other influences affecting business activity.
Governor Harrison then reviewed briefly his discussions in London and
the present situation with respect to plans for monetary stabilization.
There was also a discussion of the policy to be pursued in keeping open
licensed member banks, Governor Black stating that it was the Administration^
policy to make the utmost effort to keep open all licensed member banks*
The meeting adjourned at 12s 15 p. m.
W. R. Burgess,
Secretary.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
lO ^ O f
-
OOKFIDgrriiL
BEPGRT OF OPEN MARKET (PUPATIONS TO MEETING OF EXECUTIVE COMMITTEE
OF (FEN MARKET POLICY C O NF E RM C E HELD IN
__________ IEP3RAL RESiRVE BANK OF NEW YORK, JONE 29, 1955
At the time of the last meeting of the Executive Committee of
the Open Market Policy Conference held in Washington on May 23, 1955,
the total holdings of United states Government securities in the System
Special Investment Account were - - - - ------ -- - —
$1,629,399,500*
Under authority of resolutions adopted at the meeting of the
Open Market Policy Conference on April 22, 1953, later amended hy tele
graphic vote, approved by the Federal Reserve Board on May 12, and by
agreement of the Executive Committee, purchases of short-term United
States Government securities were made far the System Account, since the
May 23 meeting, as follows:
Week
W
tt
it
tt
M ay
ended »
It June
w
it
»
tt
w
tf
24
51
7
14
21
28
Total Purchases
$ 25,000,000
28,000,000
22,000,000
20,550,000
22,500,000
20,900,000
$138,750,000
These purchases increased the amount of total holdings in the System
Account t o -------------------- ----------------------- $1,768,149,500.
2 -
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
2
Other transactions effected in th© System Account since
the May 23 meeting consisted of
(1)
Redemptions of $127,600,000 aggregate
amount of Treasury bills matured
May 24 to June 28 inclusive, which
were replaced by purchases in the
market of a like amount of short
term issues of government securi
ties*
(2)
Exchange at maturity, by exchange sub
scription, of $83,925,000 - 1 1/2$
certificates of indebtodnoss
matured June 15, 1933, for a liko
amount of 3/4$ certificates of in
debtedness due March 15, 1934*
(3)
Exchange in the market of $27,000,000
aggregate amount of short-term
issues of government securities
for a like amount of other short
term issues of government securi
ties*
(4)
Sale to foreign correspondent of
$16,550,000 Treasury bills duo
August 30 (to carqpleto order for
$35,000,000 Treasury bills matur
ing not later than August 30) which
was replaced by purchase in the market
of a like amount of short-torm issues
of government securities.
Tho following is a statement of the issues of united states
Government securities held in the System Account on May 23, 1933,and on
June 28, 1933:
Reproduced from the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d ”
Authority E .0 .
5
May 33, 1955
24,
31,
t» June
it
«
»t
tl
7,
«
tt
tt
w
w
tt
21,
tt
tt
ft
tt
«
tt
28,
»
tt
m
»
tt
July
5,
tt
tt
tt
tl
tt
w
18,
w
tt
tt
tt
tt
tt
19,
tt
tt
tt
tf
tt
tt
26,
tt
tt
tt
tt
tt
Aug.
9,
tt
tt
tt
tt
»t
tt
16,
tt
tt
tt
«
tt
tt
23,
w
tt
n
tt
n
n
30,
tt Sept.
it
tt
t»
it
6,
tt
«
tt
tt
m
tt
20,
w
tt
tt
»
n
tt
27,
tt June
15,
1 1/2fo Cert. of Ind.
tt
w
tt
w
Aug. 15,
4
$
«
ft
it
t»
Sept. 15,
1 1/4$
tt
m
w Dec.
3/4$ tt
15,
w
w
tt
tt
♦t
15,
4 1/4$
tt
tt
tt
3/4$
Mar. 15,
tt May
3
$ ■Ereas« Notes
2,
w
n
tt
2 1/6$
1,
Aug.
tt
tt June
3
fo tt
15,
tt
tt
»t
2 7/8$
Apr. 15,
tt
tt Aig.
3 1/4$ »t
1,
tt
tt
tt
2 3/4$
Dec. 15,
«
tt
Apr. 15,
3
fo m
»
tt
»
3 1/4$
Sept. 15,
tt
tt
2 5/8$ m
1,
Feb.
n
«
tt
S 7/8$
June 15,
3 1/2$ First L/L Bds. of 1932/47
»t
tr
4 1/4$ »
" 1932/47
4 1/4$ Fourth » n
" 1933/38
U. S. Treas* Bills
w
tf
«
w
due May
tt
it
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1934
1934
1934
1935
1936
1936
1936
1937
1937
1938
1938
$
41,000,000
17,500,000
33,150,000
11,350,000
24,250,000
4,738,000
31,000,000
2,650,000
42,900,000
7,500,000
7,500,000
0
0
0
0
0
83,925,000
51,655,000
200,533,000
83,454,000
75,770,000
0
101,587,000
137,527,000
91,277,000
75,337,500
25,892,000
61,743,000
25,225,000
36,750,000
19,570,000
0
25,025,000
29,000,000
281,591,000
#1,629,399,500
June, 28, 1955
$
0
0
0
0
0
10,213,000
31,400,000
2,925,000
43,100,000
7,500,000
7,600,000
12,500,000
28,950,000
18,500,000
20,830,000
19,270,000
0
62,405,000
187,433,000
87,254,000
101,020,000
114,225,000
106,287,000
142,477,000
95,577,000
113,987,500
31,892,000
72,943,000
33,025,000
55,650,000
23,070,000
2,500,000
25,025,000
29,000,000
281,591,000
#1,768,149,500
Attached Exhibit "A" shows the holdings of government securities
in the System Account, by maturities, at the close of each month during
1932-33*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
4
Participations and Outrifjit Holdings of
United States Government Securities
The Federal Reserve Bank of Dallas repurchased the $5,000,000
of its participation in government securities in the System Account
which had been taken over temporarily into the Federal Reserve Bank of
Now York’s participation on .April 28, 1933, as follows:
M ay 35
June 16
$8,500,000
2,500,000
$5,000,000
Tho following is a statement showing the amount of each Federal
Reserve Bank’s participation in the purchases made for System Account
since May 23, and in the total holdings in the Account on June 28, 1933,
and each Federal Reserve Bank’s holding ratio, i* e*, tho ratio percentage
that each Federal Roservo Bank’s holdings in tho Account bear to the total
holdings in tho Account; also, tho amount of each Federal Roservo Bank’s
outright holdings of United States Government securities at tho close of
businoss Juno 21, 1933*
Participation in
New Purchases
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Totals
Participation in
Total Holdings
Holding
Ratios
$ 16,194,500
25,655,000
5,717,500
5,891,000
8,208,500
5,958,000
48,106,000
7,166,500
1,932,000
5,247,000
0
8,674,000
$
108,599,500
629,165,000
139,506,000
182,431,000
56,357,500
54,583,000
241,821,500
72,498,000
49,156,000
61,495,500
38,939,500
133,597,000
6
35
8
10
3
3
13
4
2
3
2
7
$138*750,000
$1,768,149,500
100
1/4*
1/3*
*
l/4£
1/4*
*
3/4*
*
3/4*
1/8*
1/4*
1/2*
*
Outright
Holdings
$
705,450
120,296,550
3, 352,100
0
0
353,200
62,736,000
500,000
7,147,150
171,600
10,000,000
0
$205,262,050
"gam
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
5
System Purchases of Bankers Acceptances
The amount of bankers acceptances purchased by the System,
since the M a y 23 xaaQ&lsg, has been negligible and no purchases or
allotments woro made by the Federal Besatrye Bank of N * w TOrk#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
EXHIBIT "A"
MATURITI1S OF HOLDINGS IN SYSTEM ACCOUNT
_______ END OF BACH ..MONTH - 1952-33
(In Millions of Dollars)"
1952
Within
Six
Months
Per
cent
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
#165
191
299
585
716
744
755
622
606
651
765
779
29
52
44
57
51
48
45
58
37
40
47
48
644
577
709
570
545
641
41
56
44
55
52
56
Within
Per
One
Year cent
$
555 65
575 . 64
475 69
778 76
1,058 75
1,106 71
1,098 67
1,029 65
998 61
1,051 64
1,046 64
1,021 62
Within
Two
Years
.$
Per
cent
5-5
Years Per
Inc, cent
«•
555
575
475
779
1,115
1,175
1*167
1,194
1,170
1,229
1,227
1»205
65
64
69
76
79
75
71
75
71
75
75
75
64
152
110
134
75
77
101
1,107
1,090
1,090
958
962
1,099
71
67
67
59
57
62
116
205
205
555
584
323
Per
cent
4
8
6
8
4
4
6
§212
212
212
259
290
522
556
556
556
556
556
•556
37
36
31
24
21
21
21
21
21
21
21
21
7
12
12
20
25
19
536
336
356
556
556
336
22
21
21
21
20
19
-
-
•*
-
•
Call
able
Bonds
Totals
$
5^7
58?
687
1,018
1,405
1,559
1,635
1,640
1,640
1,640
1,640
1,640
1955
Jan.
Feb.
Mar*
Ipr.
May
Jimd
905
856
856
725
825
861
58
55
55
45
49
49
. .. , ■
1,559
1,629
1,629
1,629
1*682
1,768
»
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E r O ^ jO ^ O f
*
i
\ fc
rA'.'V' /
vy
w
x
i m
Sir* v/» Bandolph Burgess, Secretary,
Open Market Policy Conference,
c/o federal Bp serve Bank of Hen York,
New York, Hew York*
Bear Mr* Burgess:
Receipt is acknowledged of your letter of
June 28, 1953, inclosing copies of the revised fflin-
ai J« - C - i~
utes of the meeting of the Open Market Policy Confer
ence oa April 22, and of the rneeting of the Executive
Committee of the Conference on May 23, 1933*
It is noted that while the last paragraph
of the minutes of the meeting on April 22 has been changed
somewhat, the last portion of the suggestion contained la
the Board* s letter o f May 18 was not adopted*
Very truly yours,
Chester Morrllli
Secretary
V
s
'
.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o . i o S o f -
F e d e ra l R e s e rv e B a n k
of
JUN 29 1933
Ne w Yo rk
June 28, 1955.
Dear Governor Black:
Sh
We are sending you herewith revised minutes\of / <
the Open Market Policy Conference meeting held on April
22, 1955,/ and of the executive committee meeting held on
May 25, 1955. | Hill you please substitute these for the
preliminary drafts previously sent you.
Veiy truly yours,
1W. Randolph Burgess,
Secretary, Open Market
Policy Conference.
Honorable Eugene R. Black,
Governor, Federal Reserve Board,
Washington, D. G.
Enc.
1
3 / 33
i
y
>*
3 3 3*
-X
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
fO ^ O f
June 3, 1953
Dr. f. Bandolph Burgess,
Federal Keserve Bank,
l e w York, I, T .
---~
j
;
Dear Doctor Burgessj
I thank you for your letter of June 19 Inclosing preliminary
draft of the minutes of tbe Executive Coraaittee of the Open Maifcet
Policy Conference held in Washington on May 23. In response to your
request for suggestions, the following are submitted*
On pages 1 and 2, where reference is made to the federal Re
serve Board *s approval of the resolution adopted at the meeting of
the Open Market Policy Conference on April 22ad, substitute the
following language for that now used:
Page Is ^Governor Harrison referred to the fact that the
Pederal Heserve Board *s approval of purchases of United States
Governaent securities by the Executive Comndttee of the Open Market
Policy Conference up to an aggregate of $1,000,000f000 m s broader
in scope than the resolution adopted at the last meeting of the
Conference, on April 22, ***».
Page 2i *It m s pointed out that this action, if approved
by the Conference, would enlarge the powers of the Comaittee to
conform to the broader action of the Federal Heserve Board in ap
proving purchases of United States Government obligations without
the limitation as to Treasury requirements*.
i
On p£^e 2, substitute the following at the end of the last
cagplata paragraph, beginning immediately after the statement made by
Governor Toungi
r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/O ^O j
- 2 -
•’Governor Black advised tlie laembers of tha Committee that
he m s inclined to belienre that a larger amount of securities possibly $100,000,000 or $200,000,000 - should be purchased, when
there was more evidence of a real need therefor* He inquired
whether, if the present improvement in business activities and
prices should fall off seriously, the Conunittec would then be in
favor of heavy purchases of securities. Members of the Corralttee
expressed the view that they would be in favor of such purchases
under such circumstances. Governor Black then stated that in
consideration of the views expressed at this meeting, as to the
possible advantages of prompt action, he was agreeable to the
proposal to
$25,000,000 of securities this state ruent week,
irith the understanding that, if need for more vigorous action
develops, such action will be taken promptly.”
With ny w a n regards, I am
Sincerely yours,
Governor*
EMM/vmt
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/O ^ O f
F e d e ra l R e s e rv e B a n k
t
of
Ne w Yo r k
CONFIDENTIAL
June 1, 1933,
Dear Governor Black:
I
am enclosing herewith preliminary draft\ of the
minutes of the meeting of the executive committee of the
Open Market Policy Conference held in Washington on May 25,
together with tha secretary1s report and the preliminary
memorandum which were presented to that meeting.
I
shall be glad to have at your early convenience
any suggestions you may have for changes in these minutes#
Very truly youijs,
if, Randolph Burgess,
Secretary, Open Market
Policy Conference.
Honorable Eugene R. Black,
Governor, Federal Reserve Board,
Washington, D. C*
fine.
2L«
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/
TENTATIVE DRAFT - SUBJECT TO CHANGE
CQUFIDENTIAL
MBTOT1S OF MEETING OF EXECUTIVE COMMITTEE OF THE
O P W MAEKET POLICY CONFSRINCE - MAY 23, 1953
A meeting of the Executive Committee of the Open Market Policy Conference
was called in Washington at Governor Black’s office on Tuesday, May 23, at 11 a«m.
There were present:
Governor Harri son, Chairman,
Governors Young, Norris, Fancher
and McKay, and
Governor Black*
Governor Harrison called attention to the fact that because of Governor
Black’s appointment to the Federal Reserve Board, there was a vacancy on the
Executive Committee of the Open Market Policy Conference and that with the approval
of the other members of the Committee he had invited Governor Fancher to serve in
Governor Black’s place ponding another meeting of the Opon Market Policy Conference,
Governor Harrison then presented to tho Committee the secretary’s report,
of operations and a preliminary memorandum on credit conditions which was read and
discussed in some detail.
Governor Harrison referred to the fact that the Federal
Beserve Board’s approval of the resolution adopted at the last meeting of the Open
Market Policy Conference on April 22 was broader in scope than the resolution it
self, and stated that Governor Black had Requested him to take up with all of the
members of the Conference in some appropriate fashion the question whether or not
tho authority given to the Executive Committee by the resolution passed at the
last meeting of the Conference might not be extended.
After discussion it was
voted unanimously to be the sense of the Executive Conroitteo that the authority
given to the Executive Commit tee at the last meeting of tho Conference, which
limits the right to purchase government securities, either in the market or direct
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E . f r f r t G O j .
2
from the Treasury, Mto meet Treasury requirements,” should be amended so as to
Remove that restriction in order that purchases of securities may be made promptly
if in the judgment of the Committee such purchases are considered desirable,
whether or not to meet Treasury requirements.
It was pointed out that this action,
if approved by the Conference, would enlarge the powers of the Committee to conform
to tho broader action of the Federal Reserve Board in approving the resolution of
the Conference without limitation as to Treasury requirements#
Governor Black expressed himself as being in agreement with this action
by the Executive Committee#
The Committee then discussed the general situation in the light of the
preliminary memorandum with a view to ascertaining whether or not it would be
advisable to initiate some purchases of government securities at this time#
After discussion it was unanimously voted that the Committee should purchase $25
million of government securities this statement week provided a majority of the
Open Market Policy Conference approved of the proposed extension of authority to
the Executive Committee#
Governor Young explained that his vote v/as predicated
on the assumption that the Treasury would approve this action#
Governor .Black
asked whether, if the present improvement in business activity and prices should
1
fall off seriously, the Committee would then be in favor of heavy purchases of
\
i
securities.
Members of the Committee expressed tho view that they would be in
favor of such purchases in such circumstances.
j
Governor Black said that he was
in favor of the proposal to buy $25 million securities this statement week, and
j
$
I
would be in sympathy with large purchases in the event that there is any notice-
\
able falling off in business improvement #
Governor Black advised the Committee, prior to the final action on the
resolution to purchase government securities, about proposed legislation to
eliminate the so-called gold clause from new issues of government securities#
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority [T , & f & G O f
3
He showed the Committee a memorandum, prepared by the Treasury on this subject and
stated that the Treasury and Administration were in favor of the bill.
point Secretary Woodin joined the meeting.
At this
Governor Harrison advised the
secretary that the Committee had voted to purchase $£5 million of securities this
statement week, but that one of the members of the Committee wanted to be in
formed of the views of tho Treasury with respect to such a program.
Secretary
Y/oodin stated that he and the Treasury would have no opposition to open market
operations, bui? he felt, as did a majority of the Committee, that there is no
necessity for Treasury approval of the proposal*
At the request of Governor Black each member of the Executive Committee
than expressed his opinions regarding: (1) the proposed open market operations;
(2)
the problem of keeping open licensed member banks;
membership requirements in tho Federal Reserve System.
and (3) liberalization of
During tho course of
this discussion it appeared to be the unanimous opinion that one of the most im
portant problems now before the system is to devise a procedure or program for
keeping open all member banks which have been licensed to open.
To accomplish
this, either the Federal reserve banks should have some legal protection against
losses on account of liberal 10(b) loans made for the purpose of keeping member
banks open, or else tho Reconstruction Finance Corporation Act should be amended
so as to make it possible for the R* F. C. to advance sufficient funds to keep
open any member bank that had been licensed to open.
If this were done, and
membership requirements in the Federal Reserve System were liberalized, and prompt
action taken upon the applications of sound state banks for membership, it was
felt that it would be possible adequately to take care of all sound banks either
through liberal 10(b) loans by the Federal reserve banks, or by loans through the
R. F. C.
Governor Black reported steps which were being taken designed to handle
these problems, but stated that there might be difficulty in obtaining the
requisite amendments to the law*
sa r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority ^ A / 0 9 0 1
4
During the course of tho discussion it was pointed out that various
governmental agencies had substantially different yardsticks for appraising loan
values and that it would be helpful were a more uniform basis of appraising values
arrived at.
There was also some feeling that the office of the Comptroller of
the Currency was becoming more strict rather than more liberal in the reopening
of closed banks and that the present regulations of the Federal Reserve Board re
garding the admission of state banks to membership in the system are probably
more strict than present circumstances require.
G-eorge L. Harrison,
Chairman.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
CQNFED3NTIAL
REPORT OF OPEN MARK3F OPERATIONS TO MSETING- OF 3X2COTIV3 COLMTTTSS
OF THE OP3T MARKET POLICY C0NF5RMC5 H5LD IN WASHINGTON MAY 25, 1955
There has bee
change in the amount of total holdings of United
States Government securities in the System Special Investment Account since the
last meeting of the Open Market Policy Conference held in Washing^on on April 19,
1953, the total remaining at
629,599,500•
Transactions effected in the System Account since the report to the
April 19 meeting consisted of:
(1)
Redemptions of $112,500,000 aggregate amount of
maturing Treasury bills and $50,000,000
2$ certificates of indebtedness matured
May 2, 1933, i;hich were replaced by purchase
in the market of $162,500,000 aggregate
amount of short-term issues of government
securities.
(2)
Exchange at maturity, by exchange subscription, of
$25,537,500 - 2$ certificates of indebtedness
matured May 2, 1935, for a like amount of
2 7/8% Treasury notes due April 15, 1936,
(3)
Exchanges in the market, of $38,559,500 aggregate
amount of short-term issues of government
securities for a like amount of other short
term issues of government securities.
The following is a statement of the issues of United States Government
securities held in the System Account on April 12, 1953 and on May 20, 1935,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
May 20, 1955
April 12, 1955
U# S,#. Treas, Bills
17,
1933
3 6 ,5 0 0 ,0 0 0
May
tt
tt
w
tt
w
24,
1933
4 1 ,0 0 0 ,0 0 0
4 1 ,0 0 0 ,0 0 0
tt
tt
tt
tt
31,
1935
1 7 ,5 0 0 ,0 0 0
1 7 ,5 0 0 ,0 0 0
tt
»
tt
June
1933 '
3 5 ,1 5 0 ,0 0 0
5 3 ,1 5 0 ,0 0 0
w
21,
1935
1 1 ,0 0 0 ,0 0 0
1 1 ,3 5 0 ,0 0 0
28,
1933
2 3 ,5 5 0 ,0 0 0
2 4 ,2 5 0 ,0 0 0
5,
1933
0
»
12,
1933
*
tt
0
tt
n',
«
1 6 ,1 0 0 ,0 0 0
♦
«
n
■
1933
2 9 ,0 0 0 ,0 0 0
tt
«
\tt
«
10,
$
tt
tt
tt
\
0
0
1933
26,
n
w
1933
3 1 ,1 0 0 ,0 0 0
19,
«
tt
tt
due Apr.#
tt
»
«
7,
0
»■ tt,'
tt
tt
tt
»
t?
tt
tt
tt
tt
tt
»>
tt
tt
tt
July
tt
H
tt
tt
»
tt
tr
tt
w
tt
tt
19,
1935
0
2 ,6 5 0 ,0 0 0
tt
»
tt
tt
tt
tt
26,
1933
0
4 2 ,9 0 0 ,0 0 0
9,
16,
1933
0
7 ,5 0 0 ,0 0 0
1933
0
7 ,5 0 0 ,0 0 0
tt
n
tt
tt
»
Aug.
tt
tt
tt
tt
tt
tt
2
io Cert. of Ind.
tt
tt
tt
«
w
n
«
tt
tt
1 1/4J6
tt
tt
tt
tt
3/4$
ti
tt
tt
tt
tt
tt
tt
tt
1 1/2%
4
fo
3
2
3
2
3
3
2
3
4
4
4 ,7 3 8 ,0 0 0
3 1 ,0 0 0 ,0 0 0
0
1933
7 9 ,3 9 7 ,0 0 0
15,
1935
1 1 6 ,4 2 5 ,0 0 0
15,
1933
4 3 ,1 5 5 ,0 0 0
5 1 ,6 5 5 ,0 0 0
2,
8 3 ,9 2 5 ,0 0 0
15,
1935
2 0 0 ,5 5 5 ,0 0 0
2 0 0 ,5 3 3 ,0 0 0
15,
1953
7 8 ,1 0 4 ,0 0 0
8 3 ,4 5 4 ,0 0 0
15,
1933
6 8 ,6 7 0 ,0 0 0
7 5 ,7 7 0 ,0 0 0
May
2 , 1934
tt Aug#
tt
»
1, 1934
1 / 8 fo
w
tt
tt June
1 5 , 1935
$
tt Apr#
ti
1 5 , 1936
7/85
6 tt
w
tt
♦t
Aug#
I /456
1, 1936
tt
tt
w Dec, 1 5 , 1 9 3 6
3/4$
#
tt
Apr# 1 5 , 1 9 3 7
^
tt Sept, 15, 1 9 3 7
tt
tt
1/4J6
tt
t»
tt
Feb.
5/8$
1, 1938
1/2$ First L/L Bds of 1932/47
tt
tt
tt
» 1932/47
l/49b
tt
1933/38
w
1 / 4 # Fourth n
9 7 ,0 2 5 ,0 0 0
1 0 1 ,5 8 7 ,0 0 0
1 5 7 ,5 2 7 ,0 0 0
1 3 7 ,5 2 7 ,0 0 0
9 0 ,4 7 7 ,0 0 0
9 1 ,2 7 7 ,0 0 0
4 1/456
3
■ fo
2
May
June
Aug#
Sept #
Dec#
3 1 ,0 0 0 ,0 0 0
Treas • Notes
tt
tt
Tot als
0
75, 357, 500
1 2 ,0 5 0 ,0 0 0
2 5 ,8 9 2 ,0 0 0
2 7 ,5 8 0 ,0 0 0
6 1 ,7 4 3 ,0 0 0
2 4 ,1 5 0 ,0 0 0
25,225,000
32,750,000
16,440, 5t)0
25,025,000
29,000,000
281,591,000
25,025,000
29,000,000
281,5 9 1 , 000
|1,629,399,500
#1,629,399,500
3 6 ,7 5 0 ,0 0 0
1 9 ,5 7 0 ,0 0 0
On April 28, owing to the low reserve ratio of the Federal Reserve Bank
of Dallas, $5,000,000 of its participation in government securities in the System
Account was taken over temporarily into the participation in the System Account of
the Federal Reserve Bank of New York#
The following is a statement showing the amount of each Federal Reserve
Bai&^s participation in government securities held in the System Account at the
close of business May 20, 1935, and each Federal Reserve Bank’s holding ratio,
i*e#, the ratio percentage that each Federal Reserve Bank’s total holdings in the
tfg f"
Reproduced from the Unclassified I Declassified Holdings of the National Archives
" W
DECLASSIFIED
Authority
3
Account bear to the total holdings in the Account;
also, the amount of each
Federal Reserve Bank’s outright holdings of United States Government securities
at the close of business May 17, 1933:
Amount of
Participation
Boston
New York
Philadelphia
Cleveland
Ri chmond
Atlanta
Chi cago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Tot als
$
Holding
Ratios
92,405,000
608,510,000
133,788,500
176,540,000
48,149,000
48,625,000
193,715,500
65,331,500
47,224,000
56,248,500
33,939,500
124,923,000
5
37
8
10
3
3
11
4
|1,629,399,500
100
5
3/4$
1/4$
1/4#
3/4$
$
fo
Z/4$
fo
fo
3 1/2$
2
fo
7 3/4$
$
Outright
Holdings
|
706, 050
120,296, 500
3,352, 100
0
0
24, 400
62,836, 000
500, 000
7,043, 650
171, 600
10,000, 000
0
$204,930, 300
System Purchases of Bankers Acceptances
The amount of bankers acceptances purchased by the System, since the
April 19 meeting, has been negligible and no purchases or allotments were made
by the Federal Reserve Bank of New York,
Attached are exhibits showing:
"A” - Classification of Issues held in the System Account
as of May 20, 1933, and the percentage of each issue
held in the Account as compared with the amount of
the respective issue outstanding.MBn - Maturities of Government Securities held in System
Account as of May 20, 1933.
"C” - Approval received from Federal Reserve Board under
date of May 12, 1933, authorizing the executive
committee of the Conference to proceed with its
proposed purchases of United States Government
Securities up to an aggregate of $1,000,000,000*
- £ j» '
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
2&HIBXT "A"
Classification oi _ss
Held in tho System Accoun. as
iay 20, 1933
and tho Percentage of Each Issuo Hold in tho Account as
Comparod yith the Amount of the Respective Issue Out stranding_____
(ooo'1omitted)
Amount of
Respective
Issues
Outstanding
Amount of Issues
Held in System Account
By Classification
TREASURY BILLS
u. S. Treasury Bills due May
tr
tr
tt
tt
tt
»t
tt
tt
«
tt
tt
ft
tt
t»
tt
tt
tt
tt
t»
tt
tt
tt
«
tt
tt
n
tt
n
tt
tt
tt
tt
»t
tt
tt
tt
tt
tt
tt
tf
t»
tt
tt
tt
n
tt
tt
tt
tt
rt
24,
31,
June 7,
tt
21,
«
28,
July 5,
tt
12,
n
19,
tt
26,
Aug. 9,
»t
16,
tt
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
TOTALS
C M I FT CATES OF INDEBTEDNESS
1 1 / 2 $ Cert . of Ind* due June 1 5 ,
ti
tt Aug. 1 5 ,
tt
4
$
«
»
w
w
Sept . 1 5 ,
1 1/4$
«
»
w
w Dec. 1 5 ,
3/4$
«
tt
w
n
»
15,
4 1/4$
1933
1933
1933
1933
1933
TOTALS
TREASURY NOTES
3
$ Treas. Notes due
tt
«
»t
2 1/8$
«
tt
tt
3
$
tt
»
w
2 7/8$
w
»t
tt
3 1/4$
tt
M
»
2 3/4$
tt
tt
tt
3
$
tf
tt
tr
3 1/4$
tt
w
w
2 5/8$
May
2,
Aug, 1,
June 15,
Apr. 15,
Aug. 1,
Dec. 15,
Apr. 15,
Sept,,15,
Feb. 1,
TOTALS
LIBERTY LOAN BONDS
3 1/2$ 1st L/t Bds. of 1932-47
4 1/4$ M
w
*
* 1932-47
4 1/4$ *
*
”” " 1933-38
TOTALS
1934
1934
1935
1936
1936
1936
1937
1937
1938
Percentage
of Issues
Held to Amount
Outstanding
$ 41,000
17,500
33,150
11,350
24,250
4,738
31,000
2,650
42,900
7,500
7,500
$ 60,074
100,613
75,216
100,569
100,158
100,096
75,733
75,188
80,295
75,067
75,442
68
17
44
11
24
4
41
3
53
10
10
1/4$
1/2$
$
1/4$
1/4$
3/4$
$
1/2$
1/2$
$
$
$223,538
$918,451
24 1/4$
$ 83,925
51,655
200,533
83,454
75,770
$ 373,856
469,089
451,447
254,364
473,328
22 1/2$
11
$
44 1/2$
32 3/4$
16
$
$495,337
$2,022,084
24 1/2$
$101,587
137,527
91,277
75,337
25,892
61,743
25,225
36,750
19,570
$
41
39
22
13
7
17
5
4
7
$574f908
$3,924,466
244,2*34
345,292
416,603
572,419
365,138
360,553
508,329
834,401
277,517
25,025
29,000
281,591
$ 1,392,227
535,983
6,268,095
3 3 5 ,6 1 6
$ 8 ,1 9 6 ,3 0 5
1/2$
3/4$
$
1/4$
$
1/4$
$
1/2$
$
14 3/4$
1 3/4$
5 1/2$
4
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Exhibit »»BMr
MATURITIES OF GOVERNMENT SECURITIES
HELD IN S M
ACCOUNT AS OF MAY 20, 1955
SHORT -TEEM ISSUES
Treasury Bills, Certificates and Notes
MATURING WITHIN 1 YEAR
Within 5 months
3 to 6
"
6 « 9
*»
9 « 12
«
$359,118,000
200,533,000
159,224,000
101,587,000
TOTAL MATURITIES WITHIN 1 Y E A R ----------------------------- 0
MATURING 1 TO 1 1/2 YEARS
- -
--------------------
r
820.462.000
137.527.000
----------
MATURING 1 1/2 TO 2 1/2 YEHARS-----------------------------------
91,277,000
MATURING 2 1/2 TO 5 Y E A R S ---------------------------------------
75,337,500
MATURING 3 TO 5 Y E A R S -------------------------------------------
169.180.000
$1,293,783,500
LIBERTY LOAN BONDS
First 5 1/2f0 Liberty Loan Bonds
”
4 1/4$
w
«
«
(Due June 15, 1947
Callable on or after Dec. 15, 1955)
§ 25,025,000
29,000,000
§
Fourth 4 1/4$ Liberty Loan Bonds
(Due Oct. 15, 1958
Callable on or after Apr. 15, 1954)
54,025,000
281,591,000
GRAND TOTAL
§1,629,399,500
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E ^ / O ^ O j
Exhibit "C"
C O P Y
F E D E R A L
OF
T S L 3 G E A H
R E S E R V E
B O A R D
WASHINGTON
May 12, 1933.
Harrison - N e w York
Tho Federal Reserve Board has given careful consideration to
the resolutions adopted at the meeting on April 22, 1933, of the Open
Market Policy Conference, and has requested me to advise you that it
authorizes the executive committee of the Conference to proceed with its
proposed purchases of United States Government securities up to an
aggregate of $1,000,000,000.
In granting this authority the Board will
expect to be kept informed currently by the executive committee of its
program of purchases and as to any developments in the situation which
may affect the application of the program#
The Board will have the
whole matter of open market policy under constant review, and will ad
vise the committee of changes to be made in the program in order more
fully to adjust it to the requirements of the national situation#
(Signed)
CHESTER MORRILL
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
■V-
itoy
bb,
H 38
During tlie pest month there has been a considerable further increase
' -------------------- -- “ ?'**■*
r
business activity, a strong r i m is comaodity and security prices, and a further
i^ T
0r m m i
in the banking situation.
Indications of the extent of the rise in
business activity and in prices are given in the following table:
Per cent
1933
Biiugtrial production — -----------If* B* Board usonthly index)
Merchandise and miscellaneous carloadings
(f. B* Bank t»f If. Y. weekly index)
l&olesale prices of 285 ccawodities - *-■ (?• B* .Board weekly index)
iSholesale prices of ,15 basic couaaDdities(Moody*s dally index)
J*rlees of 9 0 stodcs - — (Standard Statistics Co* daily index)
-W o i& prices
TJ. 3* Government bonds — ------- * (F. B* Bank of H. T* average)
A m bonds (Moody*s average) ------- A
*
»
' *
--------Baa "
"
»
--- - - B
" (F. B. Bank of N. Y* average) -
60
Lst^ept
Low
(Mar.)
66
.. .
(April)
♦ 10
46.1 (Mar.)
54.1 (May 13)
+ ir
59.6 (Mar.)
63.2 (May 12)
6
78.7 (Feb.)
116.0 (May 18)
+ 47
43.9 (Feb.)
68.7 (May 20)
+ 56
98.8 (Mar.)
102*6 (May 20)
+ 4
97.8
72.2
53.3
31.1
103.3
80.7
67.0
41.8
+ 6
12
+ 26
♦ 34
(Apr;)
(Apr.)
(Apr.)
(Apr.)
(May
"
*
*
19)
" •
»
"
4*
Steel mill aerations have considerably more than doubled since the bank
holiday and have risen well above a year previous for the first time since 1929*
Hectric power production also has recently reached a level above that of e year
previous for the first time in about three years*
The railroad movement of merchan
dise is now closer to the level of the year previous than at any time since the
beginning of the depression#
Bet ail trade also has ir^roved considerably*
The
relatively faiwable caparisons with a year ago are due partly to tho downward
course of business t^year ago, but, in general, business activity appears to have
about regained the level of last autumn*
The principal industries which have not yet
shown a material increase in activity are those dependent upon the investment of now
c%ital, sttfii as the building and industrial equipment industries.
if?
rise in ccnaodity prices thus far haa b « n largely ** **•
tlee-such as grain, cotton, rubber, and basic jnetals.
COTCodi
in index of 15 such cccsooditi
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E c . i o S o f
2
is now nearly 50 per cent above the low point of the year, whereas the broad indexes
of wholesale cormodity prices have risen only about 6 per cent*
gasic cocnodity
prices have reached the highest level since the early autumn of 1931, while wholesale
connodity prices in general remain close to the lowest levels reached up to the end
of 1932*
As a result, the gap between basic coEEJQclity prices and the general level
of wholesale comodity prices has been naterially reduced.
During the past few
days a noderate reaction in connodity prices has occurred*
The Position of Member Banks*
The renewed publication of data on the loans and investments and deposits
of selected member banks in principal cities throughout the country shows that be
sides the substantial recovery in deposits and a renewed increase in loans and
investments in New York City, deposits in other cities have increased moderately,
and there has been some increase in loans and investments, reversing the tendency
of several previous months*
These changes arc summarized in the following table;
(Millions of dollars)
Hew York City
Mar. 8
Loans
On securities - -------All other - - - - - - - - - - -------1,453
Total - ------ -- - -■ -------- 3,121
Mar* 8*
May 17
1,735
1,617
3,352
2,091
3,098
5,189
1,989
3,080
5,069
1,105
2,378
1,117
3,495
2,241
1,886
4,127
2,556
1,874
4,430
--------
6,412
6,847
9,316
9,499
---------------
749
5,230
5,558
692
6,250
4,794
3,496
8,290
5,123
3,579
8,702
Investments
U. S. securities---- ----- Other securities - - - - - - - -------T o t a l -- ----- ----- -- -
Total loans and investments -
May 17
Other Reporting
Pities
Deposits
Time - - - - - - - -- - ---Total - - - - - - - - - -
%apublished dat a
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
!n$O f
S
The increase in deposits reflects to a considerable extent the return
flow of currency since the bank holidays, although a part has been the result of
additional loans and investments*
Funds received through the return of currency
have been used largely to retire indebtedness at Federal Reserve Banks, but until
a month ago there was also a fairly rapid increase in the reserve balances of member
banks#
Since the April meeting of the Open Market Policy Conference, however, the
growth of member bank reserves has been checked, although currency has continued tc
flow back to the banks#
The reasons for this are indicated in tho following table:
(Millions of dollars}
ipril 19 to May 17
Gain (+)
ot
Loss (-)
Gain or loss of reserve funds through Reduction in currency outstanding —
---- ---------------- +
Reduction in "Treasury currency adjusted” -- -- - Increase in foreign balances in F. R. banks - —
Net gain - - - - - - - -—
- - - - ------- ---------- +•
Reduction
Reduction
Reduction
Net
in F. R. discounts - - - - - - - - —
in F. R. bills bought - - - - - - - - - in other F* R. credit - - - - - - - - - loss through reduction in F# R# credit- -
Change in member bank r e s e r v e s -- - - - - - —
-
216
13
11
192
- 84
- 131
- 32
- 257
-45
As this ta£le shears, the deduct itm in Federal Reserve credit has proceeded some
what more rapidly during the past month than the gain of funds to member banks
from other sources#
As a result, member bank balances showed a net decline of
$45,000,000 during the past four weeks.
In addition there has been a fairly steady increase in reserve require
ments, accompanying the expansion in member bank deposits#
For all membei* banks
the increase in reserve requirements during the past month has been in the neigh
borhood of $75,000,000.
Consequently, excess reserves of all mgnber banks, which
a month ago were above $400,000,000, have since declined to around $300,000,000.
In New York City, excess reserves, which a month ago were around $200,000,000, were
nearly wiped out at the beginning of May, and after a renewed flow of funds to Now
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
4
York remain below §100,000,000.
prospects for Issuing Weeks*
During the two weeks ending Ma y 31 most of the remaining dollar ac
ceptances held by the System, about $65,000,000 will mature.
The payment of these
bills at maturity will tend to reduce member bank reserves, and may result in in
creased offerings of bills to bill dealers, whose portfolios are now rather large *
This might result in a temporary tightening of the money market.
In the week ending May 24 there should be a further return flow of cur
rency to offset the effect of the decline in the System’s bill holdings, and in
addition there will probably be Treasury expenditures of the free gold which has
resulted from making all forms of money legal tender.
During the last week of May,
however, there is usually some increase in the demand for currency for the monthend and the Decoration Day holiday, which may add to the effect of maturities from
Federal Reserve bill holdings in reducing member bank reserves.
foreign Exchange
A factor of some importance in the rise in prices during the past few
weeks has been the decline in the dollar relative to the principal foreign curren
cies.
This appears to have been effective in stimulating prices more because it
has seemed to indicate a decline in the value of the currency unit of this country
than because of any increase in the actual experts of commodities from this country.
In the case of wheat, which is among the commodities that have shown the largest
price increases during recent weeks, exports have declined in volume, and in the
case of cotton the increase in exports has not been large.
The decline in the dollar relative to foreign currencies appears to have
been the result chiefly of movements of capital, rather than of ordinary settlements
of balances due between this and Other countries.
The balancc of payments position
of this country, exclusive of capital movements, remains favorable, and would
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DECLASSIFIED
Authority
5
ordinarily tend to maintain tho dollar in a strong position.
During the past ten
days the depreciation in the dollar against the principal foreign currencies has
diminished somewhat*
For the time being at least,
therefore, this factor as a
stimulus to prices is no longer effective.
The Government Security Market
As the table on the first page of this report shows, there has been a
moderate recovery in the market for United States Government bonds following the
decline in February and early Mar£h, and the same is true of Treasury notes.
In
the case of Treasury certificates and bills, yields declined rapidly after the
abrupt rise during the banking crisis, and have remained at low levels in recent
weeks•
The moderate strength of Government obligations recently, in the face of
expected large additional issues of Government securities, appears to have been
due at least in part to purchases by dealers in anticipation of large operations
in Government securities by tho Reserve Banks.
As the result of those purchases,
dealers* portfolios are now at unusually high levels.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
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Authority
3 3 $ r < Z
Mr*
Randolph Burgsas, issiotary,
Opsa Marks* Policy Co&f«r»&as,
e/o M o r a l Rsssrrs Bank o f K n T«vl»
Row York, H»v Tojfc#
Star Mr* Burgsssi
Bosoipt is asksonlodosd of your lstto r of
Juxmi as , 1933, iaslosing ooplas o f tbs rsTlsod ada*
«ta * of tbs sM tlag o f tbs Gpsa Market Policy Confaro f tbs Sxsoutft*
COBBittOS Of tbS COSltSfOai* oa ifsy 23, 1933.
It Is astsA tbst abila tbs last paragraph
of tbs Kiautss of tbs raaatiag on April
baa boss changed
soasvbat, tbs last portion of tbs sisgtsstlon contained la
tbs Board9s Xsttsr o f May 18 vaa aot adopted*
Vsry truly yours,
(Signed) thesis? Men' i
Cheater M orrill
secretary
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Authority
m m
m m & L
HESIHVE BASK
OF HEW lOHK
Jtm© 28, 1933*
Dear Govoraor fil&ok:
Wo aro oonding you horowith roviood mlnntoojog y
tho Qpon Market Policy ©oaforonoo nesting hold on April
■'3 3 ?. - C - x
22 9 1933 9 and of tho oxoeutiTO oam it t oo mooting hold on.
Ifey 239 1933*
Will yon ploaoo onbotituto thooo for tho
preliminary drafto proYiously sont yon*
Tosy truly yoisrs,
(Signed)
V* Bandolph Bargoso
W. Randolph Burgoao,
Soorotary9 Qpoa Market
Policy Coaforonoo#
Honorable Eugene B. Black,
Governor, Federal Rasorre Board,
Washington D. C.
Eno*
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DECLASSIFIED
Authority
V
F e d e ra l R e s e rv e B a n k
of
Ne w Yo r k
June 5, 1933.
Mr. Chester Morrill,
Secretary, Federal Reserve Board,
Washington, D. C.
Dear Mr. Morrill:
I think I have never acknowledged the receipt
of the Board1s letter of May 18 suggesting a number of
changes in the tentative draft of the Minutes of the Open
Market Policy Conference held on April
/
2 2 /
1933.
I have
noted the contents of this letter and shall endeavor to
revise the minutes of the meeting in such fashion as to
cover the points raised in your letter.
Very truly yours,
W. Randolph Burgess,
Deputy Governor.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
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Authority
f^ G O j
MAY 181933
Mr* W* R. Burgess, Secretary,
Open
Policy Conference,
c/o Federal .Reserve Bank of New York,
New York, New York.
Dear Mr* Burgessj
Becelpt la acknowledged of your letter of jtey 8, 1933,
transmitting a copy of a tentative draft of tha minutes of tha
m e t i n g of the open Masfeet Policy Conference la Waahlngton on
April BB§ 1933*
The Board dealres to suggest the following
substitute for the next to the laat paragraph on page 3:
"At I I 1 50 a, a* the Open Maxfcet Policy
Conference met with the federal Beserve Board*
Coplea of the three resolutions adopted by the
Conference were presented to the Board, and
Governor Harrison outlined sons of the reasona
which prompted the adoption of the resolutions
In the font sutoaltted* / In reaponae to an Inquiry
by Governor Meyer, Governor Harrison stated that
the resolutions did not require lanedlate action by
the Board.”
atnoe then, aa you probably know, the Board advised
Governor Harrleon, aa Chalxiaan of the Open Market Policy Confer*
ence, In a letter dated m y 2, 1933, that the Board waa In agree
ment with the proposal that the executive coaralttee of the Confer
ence work out a new system of allotment of Government aeeurltlee
In the System account, and In a telegram dated May IS, 1933, that
the Board authorised the executive co&nlttee of the Conference to
proceed with Its proposed purchases of Government securities up to
an aggregate of #1,000,000,000*
Action on the resolution adopted
Y
the Unclassified I Declassified Holdings of the National Archives
d e c l a s s if ie d
Authority
-2by the Conference with regard to the shifting of maturities
of securities hold in the System account has been deferred,
although, as you know, the natter has been dlsoussed informally.
Vory truly yours,
Chester Morrill,
secretary.
-«**»•* w i u H l i
Mr.
Pteas# irtttfeU0» copy
if you appr<ws ansi return
to Secretary's Office,
DECLASSIFIED
Reproduced from the Unclassified I Declassified Holdings of the National Archives
Authority
/O ^O j
r/ y
■?*$
Memorandum for Governor Blacks
k
I enclose, for what interest it may have for
you, correspondence with the Secretary of the Open
Market Policy Conference relating to the recent
report of the last conference, on which comments
were invited.
George J. Seay,
Governor.
May 16, 1955.
\
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DECLASSIFIED
Authority
Misc 129
FEDER>
- R
J E R V E B A N K O F RIC iMC
JD
May 8, 1935*
Dear Dr* Burgess:
I am in receipt of your letter of the 0th, accompanied by a tentative
draft of the minutes of the Open Market Poliey Conference, which I have read
with care, as you suggest.
Subsequent events have made i t plain that our action at that conference may be fraught with very grave consequences, although we fu lly realized
i t at the time. " The text of the minutes reflects the discussion of the sug
gestion then made that i t might be necessary to cooperate with the Treasury bypurchasing government securities in the market, in order to support such securi
ties and make public issues possible upon better terms*
I stated then, and I
state now, that the terms of the resolution reflect bqt opinion, which is that,
i f circumstances require us to purchase any large amount of government securi
tie s , we should buy them directly from the Treasury, and thus force the Treasu
ry, in e ffect, to make us it s direct instrumentality of expansion, or in flation ,
which of course is the purpose of the Act, and thus make the Treasury responsi
ble for what might follow.
I stated then, and I state now,
required to purchase up to three b illion
is easily conceivable that the entire
might be wiped out lay market decline
sition in which member banks a ll ove:
tion of their investments.
Of course1
this might not occur in theory,
turing and in theory would be c
take other securities in
sibly market the securitie
the Federal Reserve Banks are
government securities, i t
of Federal Reserve Banks
securycies and leave us in the potry have been placed by depreciay were very short-time securities
cause such securities would be mapar; but in fact we would have to
as Mr* Glass stated, we could not pos-
I s t i l l think t® ± thisnform of in flation , by "negotiation" with the
Federal Reserve Banks for t^^ptichase of government securities, is the least
harmful of any proposed in the b ill, because i t is more subject to scien tific
control and would be credit inflation pure and simple.
Mr* Glass thinks that
the issue of Treasury currency to the extent of three b illion s 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.
I 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 i t was the sense of the conference that a system of allotment of existing hold
ings should be worked out; but, at the same time, I stated that i t was essential,
in ny opinion, for the Federal Reserve Banks to be operated as a system i f 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 la st paragraph
of the minutes some allusion to the necessity of operating the Federal Reserve
Banks as a system, under the control of the Federal Reserve Board, and requiring
the approval of the Board as much as in the purchase of one b illion dollars of new
securities, as specified in the la st paragraph of the minutes.
*J
(V/
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jQ ^ Q j
We of course could not purchase any such volume of government securi
ties as specified in the inflation bill without the waiver of reserve require
ments, and without coordination of all the banks under the supervising authority
of the Board.
lours very truly,
GJS-CCP
(Signed) GEORGE J. SEAY,
Governor.
Dr. W. R. Burgess, Secretary,
Open Market Policy Conference,
Federal Reserve Bank of New York,
New York City.
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Authority
Misc
(O ^ O j
29
FEDER,
R
'iERVE BANK OF RH
m*
ID
May 16, 1
Dear Doctor Burge®®!
I have your letter of the 15 th replying to- mine of the
relative to the policy of purchasing a huge amount of government se
curities*
/
I do not think there 1® any point to the suggestion or argu
ment of preserving the jMegendence of the Federal Reserve Banks, or
System, when it comm to buying three billions of securities, or even
one billion, in addition to what we already have. 1 as quit© post*
tive that the conference, or the majority of th« conference, if not
confronted with the inflation bill and if it did not have to choose
between methods of inflation would vote against the- purchase of such an
extraordinary amount* I do not call that preserving the independence
of the Federal Reserve Bystesu
—fy
It is not wgr recollection that tnl conference favored buying
in tb.e aarket, but rather that it was tj^w;h\ and expressed that, in
the carrying out of the policy of the 'niQ]tMXi bill,, we might also
have to buy in the market*
And, %p£jj*k ifc^V broughi out in the dis
cussion that buying in the imrket^ms iVjhas heretofore been done had
the effect of piling up excess yS^Wcejp chiefly in the money centers,
although the excess, of cours^-^rew&vsd to eso?se extent into the
country generally, whereas
from the treasury and having
the amounts bought by each fbd^ralSAaolrve Bank checked out of the sev
eral bank* by the freasgfer
us© would bring about a more gener
al distribution of crcdfff* x y
V
/
Of course w^tojgp^kaow fros\ the beginning to what extent
’ purchases by the %etesNuyp^b| but if government securities are Issued,
to cover all of the purposes which Congress has in aind, the prices of
government securities will, of course, suffer, and we as .holders of such
securities will be likely to suffer by decline, especially if we tone up
the atorket, a» you say, in advance by taking securities off the aarket*
He are very fir® here in desiring to have a policy determined
in this case by the Federal Reserve Board for the &yste*«
Very truly yours,
CtfS-CCP
(Signed) GEORGE J, S1AI,
Governor*
Dr. K Randolph Burgess, Secretary,
Open Market Policy Coaferenee,
Federal Reserve Bank of Sew Xork,
Mew lrork City.
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DECLASSIFIED
Authority IT ,# , l o ^ o f
Fe d e r a l R e s e r v e B a n k
of
Ne w Yo r k
May 8, 1933
Dear Governor Meyer:
V-
I am sending you herewith a tentative draf \ of
the minutes of the meeting of the Open Market Policy
Conference held on April 22.
These are subject to cor
rection and the final draft will be forwarded later.
Veiy truly yours,
Secretary, Open Market
Policy Conference
Honorable Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
WRB.H
encl.
MAYS 1933
OFFICE OF THTi, GOVERNOR
FEDERAL RI',. TJaVE BOARD
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E~,0. l o ^ o j
53
It i« the i o b m of the eonferoaee that while, m
t
$e&siml pipta#i|>lii# the aiw m $ * natttritj^of :.6Mnran»itt securi
ties held la the ayatea aeeotmt ehould he fceft aa wtowrt a*
a e r e r th e le e e , In
in
timt ef
la e e tin g
the a # e d
of
th e p r e a e a t e a e rg ^ n e y , and e a p e o i a l l y
fu ll
ftoopeumtloa with
Txmwax# ia
Its fiaoal prohlseaf the *3e»«\rttiri ©orasittee ahould he
& u th o r iz 4 d fro m % i m t o t i n e
a c c o u n t aa
«©aditi©a* ia the
T r e a a u r y app®eur to m fce
u n d e rs t
th e
ood that ia
the
to
a h ift » a ta r itie e
m r f c e t o r r e q > iir e * e B t8
that ajIriaahXe*
r & p la o in * ■ a t u r l t i e e
o f w . 1 t te e w i l l
ia th e eye tarn
we
ita
fm r tk tm o v *
ia
the
of the
# it it
e y a te a a c c o u n t,
di t e r a t i o n ia the
of e x i s t i n g o o n d itio n a aad t h i a r e s o l u t i o n i a s e le c t in g
re p la o e m e n t# .
(Uhajiinoae)
^iiiftutrnvsj mmmmm
lig f c t
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ ~ 0 .
Rssolutlon
It Is ths BOAS* ©f ths 0O3rfSl*fttS t&at ths
•xsoutirs a w i t t + s fes instruct*d to work out a eystwi
of allotasnt of sxiatin* holdings *s well i« as* pareh&sss of OtarsriMsat *#*urltU« with a riow to arriYln*
St a aors squitabls relationship of rss«rra psrsantagss
of ths s s w r a l Fsdsr^l vsssrtw bosks*
APR2 C 1<B9
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
It ia tbo m m m
E g ./o Z o )
of th« tpen Market Policy
Conf«r«iifl» that, § u & > # t to th* approval of th« F«<2bral
& M * r m Board, th« «x«eutlT« ooiaaltt*e be aut ho ri M d to
arr*ag* with th* $•£*»***? of the Tr*e«ury from tin# to
tia» to purohft** up to #1,000,000,000 of Q m i W M i t
»«curitU« t# M*#t Tr»a*ury r*qulr«o»nt«.
(Itoanlaoug, wit& Bijraty OovoraeHP McK&y not ▼otia«)
wm
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Exoerpt from the Minutes of the Meeting of
the Federal Reserve Board with the Governors
of the Federal Reserve Banks, April 22* 1933
3 3 3
,—
^
•~*2fc
Governor Harrison stated that a meeting of the Open Market Policy
Conference was held this morning at which the follcnring resolution m s
adopted, Deputy Governor MoKay not voting t
* * * * * *
Governor Harrison stated that the resolution nas 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 bs made in the open market whenever conditions made such action
desirablef that it was the feeling of the conference that the resolution was
necessary to prepare the System to pake arrangements with the Secretary of
the Treasury along the lines proposed in the Thomas Billj and that, even if
that bill is not enacted into law, it is felt that the ocomittee 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 Conferences
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 Gcremment
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
to anticipate a major liquidation of the System account, it was felt tli&t
consideration might be given to the advisability of acquiring longer
maturities, at the appropriate time, for the purposes (1) of avoiding the
R e p ro d u c e d fro m th e U n c la s s ifie d / D e c la s s ifie d H o ld in g s o f th e N a tio n a l A rc h iv e s
DECLASSIFIED
Authority
E g. io 9o !
EX001“pt m Z
wide ■$pww& b « $ m m the yieldi on abort and long t o m naturitioa* mmi (2)
Of toning x%> tho aarket for short maturities which would enable the Trwaaury
Department to market an laaue of iooiiri'U## without the a**1stance of
ife* Federal reserve banka, whore «uoh assistance might otherwise bo neoeseary
tkpraraor liarrieon added that it H I .sot oonsidered that the *itnfctio»
required immediate aotion 'by the Federal Reserve Board on those resolutions*
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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 tho ac si stance of
the Federal reserve banks, where such assistance might otherwise l-c necessary.
Cover nor Ilarrison 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
.
'
.w
DECLASSIFIED
Authority
It 11:50 a*m* the Open Market Policy Conference
met with the Federal Beserve Board, Copies of
the three resolutions adopted b y the Conference
were presented to the Board, and Governor Harrison
outlined some of the reasons which prompted the
adoption of the resolutions in the farm submitted.
In response to an inquiry by Governor Meyer,
Governor Harrison stated that the resolutions did
not require immediate action by the Board.
This is as quoted in the Board’s letter to
Dr. Burgess under date of May 18*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/Q ^Oj
CONFIDENTIAL
TENTATIVE DRAFT OF MINUTES OF MEETING
OF THE OPEN MARKET POLICY CONFERENCE
SATURDAY, APRIL 28, 1933,
WASHINGTON, D. C.
The meeting was called to order at 11 a. n u , there being present
the following:
Governor Harrison, chairman, and
GovernorsYoung, Norris,'Fancher, Seay, Black, Martin,
Geery, Hamilton, McKinney, and Calkins, and
Deputy Governor McKay.
Following completion of the deliberations of the governors con
ference, a meeting of the open market policy conference was convened to
consider what, if any, action should be taken by the conference with a view
to giving the executive committee power to function if necessary in the
emergency pending another meeting of the conference.
The report of the secretary of the operations in the system account
since the last meeting, which had been previously distributed, was received
and ordered to be placed on file.
The conference then considered the pre
liminary memorandum which had also been distributed during the course of the
governors conference.
There was a general discussion of the memorandum and
a review of banking and business conditions which had been considered during
the course of the governors conference.
Particular reference was made to the
fhomas Amendment to the Farm Bill giving the President among other powers the
right to direct the Secretary of the Treasury to arrange with the Federal re
serve banks for the purchase of government obligations up to three billion
dollars.
As drafted, this provision of the law is not obligatory so far as
the Federal reserve banks are concerned.
But the conference was generally in
O'-
agreement that during the period of the emergency it would be necessary for
the Federal reserve banks, so far as possible and consistent with their own
position and requirements, to cooperate with the Treasury with a view to
facilitating any necessary issues of government securities or to support the
Reproduced from the Unclassified / Declassified Holdings of the National Archives
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Authority IT , 0 .
2
market for government securities in order to make such public issues possible.
The majority of the conference however did not feel thet at the present time
it would be advisable for the Federal reserve banks to purchase government
securities solely for the purpose of increasing member bank reserves.
After
further discussion and in order that the executive committee might be prepared,
if deemed advisable at the time, to purchase government securities with a view
to making it possible for the Treasury to meet its requirements, it was
y l ‘~U
f~ VOTED
to be the sense of the conference that
subject to ar-proval of the Federal Reserve Board the
executive committee be authorized to arrange with the
Secretary of the Treasury from time to time to pur
chase up to one billion dollars uf government securi
ties to meet Treasury requirements.
Deputy Governor McKay of the Federal Reserve Bank of Chicago asked to
b© recorded as not voting*
All the other governors voted in the affirmative.
During the debate on this resolution it was pointed out that this
authority, if approved by the Federal Reserve Board, would permit the executive
conmittee to purchase government securities in the market as a means of facili-*
tating public issues of government securities rather than to force the Treasury
to seek accommodation directly from the Federal reserve banks.
It was understood
that a purchase in such circumstances would be with a view to meeting Treasury
requirements as specified in the resolution.
The conference then considered the question of the average maturity
of the securities held in the system account, it being pointed out that in
present circumstances a larger proportion of longer time government securities
might not be inappropriate, especially if the exchange of short term securities
for longer maturities would facilitate the marketing of government issues when
necessary.
It was emphasized that it might be possible by shifting various
issues in the system account from shorter to longer maturities to promote a
better relationship of rates in the government security market and also tone up
the market so as to facilitate public issues where otherwise direct recourse to
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the Federal reserve banks might be sought.
After discussion it was
unanimously
VOTED to be the sense of the conference that
while as a general principle the average maturity of
governments held in the system account should be kept
as short as possible, nevertheless in the present emer*
gency and especially in view of the need of full coopera
tion 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 if condi
tions 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.
In view of the fact that the present emergency might make it necessary
or advisable for the Federal reserve banks to acquire further amounts of govern
ment securities, it was the belief
of the conference that there should be the
dullest cooperation on the part of the several Federal reserve banks in reallo
cating existing and passible future holdings of government securities as between
reserve banks.
Accordingly, it was unanimously
executive
system of
purchases
at a more
VOTED to be the sense of the conference that the
committee should be instructed to work out a
allotment of existing holdings as well as new
of government securities with a view to arriving
equitable relationship of reserve percentages.
It was pointed out that the reallocstion of securities between reserve.
banks might be necessary not only to permit of further purchases of securities
by the system but also to enable any Federal reserve bank freely to accommodate
its member banks on 10 B loans in cases wh^-re large amounts of such loans might
be required to keep open licensed member banks in its district.
f
After the adoption of these resolutions, the Federal Reserve Board
joined the conference and each of the resolutions was read to the Board, it
j being pointed out that the first resolution authorizing the executive committee
| to purchase up to one billion dollars of government securities would require the
I approval of the Federal Reserve Board.
At 12:30 the meeting adjourned#.
George L. Harrison,
Chairman*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/0 9 0 j
J
CONFIDENTIAL
3 3
3 .
REPORT OF OPEN MARKET OPERATIONS TO MEETING OF OPEN MARKET POLICY CONFERfNCf
_________ HELD IN WASHINGTON ON APRIL 19, 1935__________
— -------------------f
/ ! cj / 5 5
A t the last meeting of the Open Market Policy Conference held in
Washingtoa on January 4, 1933, the following resolution was passed by unanimous
vote;
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
inasmuch as the continuance of excess reserves in substantial
amounts is desirable in present conditions. In view of the
return flow of currency during January and prospective gold
movements the amount of excess reserves may rise considerably
above the present level which is deemed appropriate under pres
ent conditions.
BE IT RESOLVED, THEREFORE, That, pending another
meeting of the Conference, the Executive Committee be
given authority (a) to reduce the System’s holdings of
short-term Treasury bills in order to offset such
amount of the return flow of currency as may seem de
sirable, 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 re**
serves falling below the present genrral level.
It was understood informally that the resolution should be interpreted
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 re
serves it means approximately $500,000,000.
(3) When the resolution refers to the return flow of cur
rency it means the return flow from the December peak just before Christmas.
(4) There would be another meeting of the Conference
before any increase in the System holdings of government secur
ities above $1,851,000,000.
In line with this policy, a part of the System*s holdings of maturing
Treasury bills was redeemed without replacement during the month of January,
i
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Eo.lQ^Oj
indicated below:
January 11
n
11
«
18
n
18
ft
25
Total
$35,600,000 from holdings in
♦»
w
n
2,756,000
n
»
»
n
30,208,000
t
t
♦
t
»
t
4,000,000
w
15,000,000
System
F.R.B.
System
F.R.B.
System
Account
Chicago Investment Account
Account
New York Investment Account
Account
$87,564,000
These redemptions reduced the amount of total holdings in the system from
$1,850,900,000 to $1,763,311,000, of which amount $1,558,799,500 was held in the
Open Market Investment Account and the balance of $204,511,500 in the Investment
Accounts of Federal Reserve Banks.
Within the course of the following ten days member bank excess reserves
declined to a point below $500,000,000 and in line with the resolution passed on
January 4, purchases of short-term issues of Government securities were made in
the market for System Account as follows:
Week Ended February 8
w
"
"
15
"
"
"
22
$520,600,000
25,000,000
25,000,000
Total
#70,600,000
These purchases increased the amount of total holdings in the System Account from
$1,558,799,500 to $1,629,399,500, which figure has been maintained since February 22,
1933.
Other transactions effected in the System Account since the report to
the January 4 meeting consisted of:
(1)
Redemptions of $288,300,000 aggregate amount of maturing
Treasury 3 ills and $5,234,500 - 3 3/4$ Certificates of
Indebtedness matured February 1, 1933, (representing
the unallocated porti'on of exchange subscription),
which were replaced by purchase in the market of
$293,534,500 aggregate amount of short-term issues
consisting for the greater part of Treasury Bills.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E .O . jO O O j
5
(2)
Exchange at maturity, by exchange subscription, of
$ 8,540,500 - 3 3/4$ C/l due 2/ 1/33 for $8,540,500 - 2 5/8$ T/N due
1/38
81,025,000 - 3 3/4$ "
" 3/15/33 " 25,855,000 - 4
$ C/l " ^15/33
___________
55,170,000 - 4 1/4$ "
"12/15/ 33
$89,565,500
$89,565,500
(3)
Exchanges in the market, at advantageous rates, of $83,640,500
aggregate amount of short-term issues of Government securities
for a like amount of other short-term issues of Government
securities*
(4)
Sales to a New York City bank, in lieu of purchase from them of
a large block of bankers acceptances, of $50,000,000 - 3 3/4$
Treasury Certificates of Indebtedness due March 15, 1933, which
were replaced by purchases in the market of a like amount of
other issues of short-term Government securities.
(5)
Sale to a foreign correspondent of $40,000,000 aggregate amount
of Treasury Bills which was replaced temporarily by purchase
in the market of a like amount of Treasury Certificates and
later exchanged for Treasury Bills when the latter were avail
able in the market.
The following is a statement of the issues of United States Government securities
held in the System Account on December 28, 1932 and on April 12, 1933:
Dec. 28, 1932
U. S. Treas. Bills due Jan.
11»
18,
ti
ft
ft
tt
tf
tt
25,
tf
t»
ft
tt
tt
Feb.
8,
tt
ft
tt
tt
tt
«
15,
tf
ft
tt
tf
tt
tt
23,
f? tt
♦t
tt
tf Mar.
1,
n
t»
tf
tf
n
ft
29,
tt
ti
tt
tf
tt
Apr. 19,
tt
tt
tt
tf
«
tt
26,
tt
t»
tt May
tf
»f
10#
tf
tt
tt
tt
tt
n
17,
tt
tt
tt
tf
tt
tt
24,
tt
tt
tt
tf
tf
»t
31,
tt
tt
tt
♦t
tt
7,
June
tt
tt
tt
«
tt
tt
21,
tf
tt
tf
M
tt
tt
28,
tf
»
tt
tf
V
July 12,
3 3/4$ Cert, Of Ind • tt Feb.
1,
ti Mar.
tl tt
3 3/4$ tt
15,
tt
tt
tt May
2
$ it
21
tt
tt June
n
1 1/2$ w
151
tt
t» «
4
$ f«
Aug. 151
tt
tt
n
1 1/4$
Sept. 15,
tt
ft
tt
tt
tt
tt
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
1953
1933
1933
1933
1933
1935
1953
$
55,600,000
46,208,000
69,550,000
43,200,000
38,600,000
49,950,000
35,000,000
34f350,000
0
0
0
0
0
0
0
0
0
0
13,775,000
151,025,000
123,257,500
118,725,000
0
175,983,000
Apr. 12, 1953
$
o
0
0
0
0
0
0
0
29,000,000
31,100,000
16,100,000
36,500,000
41,000,000
17,500,000
55,150,000
11,000 ,000
25,550,000
51,000*000
0
0
79,397,000
116,425,000
43,155|000
200,533,000
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o .jO
^O f
4
3/4# Cert . of Ind. due Dec.
15,
m
«
ii
n
it
15,
4 1/4#
i
t
May
3
Treas.
Notes
2,
1o
it
it
it Aug.
2 i/a f o
1,
♦t
it June
tt
3
15,
fo
it Aug.
«
3 1/4fo n
If
i
?
♦
i
i
t Dec.
2 z/yfo
15,
»
w Apr.
3
15,
# tt
i
t
« Sept. 15,
3 1/4# ii
ii
it Feb.
2 5/8fo ii
1,
3 1/2# 1st L/L Bds. of 1932- 47
« 1932-■47
ii
it
4 1/4fo «
i
t 1933-38
i
t
t
t
4 1/4fo 4th
1933
1933
1934
1934
1935
1936
1936
1937
1937
1938
TOTALS
$
Dec. 28? 1932
66,454,000
0
78,225,000
104,952,000
79,277,000
0
19,880,000
0
0
0
25,025,000
29 ,000,000
281,591,000
|1,639,607,500
Apr. 12, 1953
# 78,104,000
68,670,000
97,025,000
137,527,000
90,477,000
12,050 ,000
27,380,000
24,150,000
32,750,000
16,440,500
25,025,000
29,000,000’
281,591,000
$1,629,399,500
On January 20, 1953, a sale was made of $2,500,000 United States Govern
ment securities from the Federal Reserve Bank of New York’s participation to the
Federal Reserve Bank of Dallas* participation in the System Account.
This sale to
the Federal Reserve Bank of Dallas represented part of its shortage in the hold
ings in the System Account which it was able to take over owing to its improved re
serve position at that time.
The following is a statement showing the amount of each Federal Reserve
Bank's participation in Government securities held in the System Account at the
close of business Wednesday, April 12, 1933, and each Federal Reserve BankTs hold
ing ratio, i. e., the ratio percentage that each Federal Reserve Bank's total
holdings in the Account boar to the total holdings in the Account; also, the amount
of each Federal Reserve Bank's outright holdings of Government securities:
Amount of
Partic ipation
Boston
New York
Philadelphia
Cleveland
Richmond
Atlanta
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
TOTALS
$
92,405,000
603,510,000
133,788,500
176,540,000
48,149,000
48,625,000
193,715,500
65,331,500
47,224,000
56,248,500
38,939,500
124,923,000
#1,629,399,500
Holding
Ratios
5.6711#
37.0388#
8.2109#
10.8347#
2.9550#
2.9842#
11.8887#
4.0096#
2.8983#
3.4521#
2.3898#
7.6668#
100
#
Outright
Holdings
$
707,000
120,296,550
3,352,100
0
0
18,000
62,836,000
500 ,000
7,034,350
171,600
10,000,000
0
$204,915,600
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Statement showing adjustments in earning asset holdings of Federal
Reserve Banks made during March and April, owing to the low reserve ratios of the
Federal Reserve Banks which relinquished either temporarily or outright part of
their holdings.
All of the Government securities and the bills discounted re
ferred to in this statement have been taken back by the banks which temporarily
relinquished them*
F .R .B.
tt tt w
tt tt tt
t» tt tt
tt tt tt
tt tt tt
rt tt n
tt tt tt
tt tt tt
Boston purchased temporarily from
ft
«
Chi cago
”
it
tt
Cleveland ”
rediscounted for
Bost on
tt
tt
Cleveland
tt
tt
Chicago
tt
tt
S t . Louis
San Fran, purchased outright from
tt
ti
tt
Ri chmond
F .R .B. New Tork §25,000,000 Gov’t sec.
n 145,000,000
tt
tt
tt
tt tt tt
tt
tt
tt
tt tt tt
ti
40,000,000
tt tt tt
tt
t»
20 ,000,000 bills disc.
tt
tt tt tt
tt
tf
tt
25,000,000
tt
ft
tt
tt tt tt
tt 150,000,000
n
tf
tt
tt ?t tt
tt
15,000,000
it
n
tt »t tt
1 0 ,000,000 bankers’ bills
tt t» ti
tt
tt
tt
ft
1 0 ,000,000
Total amount given off by tt tt tt
tt
tr $440,000,000
F*R#B* Boston purchased temporarily from F.R.B# Phila.
" " "
«
"
outright
" " »» "
"
Total amount given off by n ” "
$ 10,000,000 Gov’t s e c .
5,000,000 bankers’ bills
$ 15,000,000
”
F,R.B. New York purchased outright from F#R.B. San Fran.f 10,000,000 bankers’ bills
n it w Chicago
»
»
» »» » "
"
»
10,000,000
"
"
Total amount given off by” ” "
TOTAL ADJUSTMENTS FOR S I E T M
"
”
$ 20,000,000
$475,000,000
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
j0 ^ 0 j
SYSTEM PURCHASES OF BANKERS ACCEPTANCES
Statement showing amount of bankers acceptances purchased by Federal
Reserve Banks in their respective markets and the amount each Federal Reserve Bank
received by allotment from the Federal Reserve Bank of New York during period
December 28, 1932 to April 12, 1933, exclusive of any adjustments made between
Federal Reserve Banks owing to low reserve ratios.
_____________________ (000 Omitted)_____________________
Purchased
By Allotment
Own Market
From New York
Totals
Bost on
New York
| 15,413
103,454
| 49,711
| 65,124
0
103,454
812
16,666
17,478
90
8,019
8,109
331
11,021
11,352
Atlanta
1,640
18,056
19,676
Chicago
42,229
56,781
99,010
S t « Louis
0
19,145
19,145
Minneapolis
0
17,600
17,600
Kansas City
0
9,218
9,218
16
2,833
2,849
3,524
45,447
48,971
$167,509
$254,477
$421,986
Philadelphia
Cleveland
Richmond
Dallas
San Francisco
TOTALS
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
■
Classification of Issues neld in the System Account on April 12, 1933
and the Percentage of Each Issue Held in the Account as
Compared With the Amount of the Bespective Issue Outstanding
(OOO Omitted)
Amount of
Respective
Issues
Cutstanding
Amount of Issues
Held in System Account
by Classification
Percentage
of Issues
Hal5. to Aiuount
putotanding
TREASURY BILLS
U . S . Treasury Bills due April
tt
tt
n tt
w
n
tt
tt May
tt tt
tt
tt
tt n
tt
tt
t»
tt
tt
tt
tt
tt tt
«
it
tt
»
tf tt
t» tt
i»
tt
tt
June
»»
»
ft n
it
tt
t» tt
it
tt
tt
tt
tt July
ti tt
tt
w
19,
26,
10,
17,
24,
31,
7,
21,
28,
12,
$ 2 9 ,0 0 0
3 1 ,1 0 0
1 6 ,1 0 0
3 6 ,3 0 0
4 1 ,0 0 0
1 7 ,5 0 0
3 3 ,1 5 0
1 1 ,0 0 0
2 3 ,5 5 0
3 1 ,0 0 0
1933
1933
1933
1933
1933
1933
1933
1933
1933
1933
TOTALS
$
7 5 ,0 3 2
8 0 ,0 2 0
7 5 ,2 2 8
7 5 ,2 0 2
6 0 ,0 7 4
1 0 0 ,6 1 3
7 5 ,2 1 6
1 0 0 ,5 6 9
1 0 0 ,1 5 8
7 5 ,7 3 3
38 3 /4 $
38 3 /4 $
2 1 1 /2 %
48 1 /4 #
6 8 1 /4 %
1 7 1 /2 %
44
%
11
%
2 3 1 /2 %
41
%
$
269,700
$
817,84:5
33
1
$
79,397
116,425
43,155
200,533
78,104
68,670
$
239,197
373,856
469,089
451,447
254,364
473,328
33
31
9
44
30
14
1/4$
1/4$
1/4$
1/2$
3/4$
1/2$
$
586,284
$ 2,261,281
26
1o
$
97,025
137,527
90,477
12,050
27,380
24,150
32,750
16,440
$
244,234
345,292
416,603
365,138
360,533
508,329
834,401
277,517
39
39
21
3
7
4
4
«
437,799
$ 3,352,047
13
*
25,025
29,000
281,591
$ 1,392,227
535,983
6,268.095
1 3/4$
5 1/2$
4 1/2$
$
335,616
$ 8,196,305
4
$1,629,399
$14,627,478
°
CERTIFICATES OF HTDEBTMKESS
2
% Cert. of Ind • due May
2 , 1933
tt
tt
w
1 1/2% tt
June 15, 1933
4
%
1 1/4%
3/4%
4 1/4%
tt
tt
tt
tt
tt
tt
tt
tt
tt
»
It
tt
ti
n
tt
tt
Aug. 15,
Sept,.15,
Dec. 15,
tt
15,
1933
1933
1933
1933
TOTALS
TREASURY NOTES
3
- $ Treas. Notes due M a y ’ 2, 1934
tt
"
" Aug* 1, 1934
w
$ »
" June 15, 1935
it
1/4$ "
M Aug. 1, 1936
tt
3/4$ "
" Dec. 15, 1936
n
$ "
n Apr. 15, 1937
«
1/4$ "
»* Sept .15, 1937
tt
5/8$ »
M Feb. 1, 1938
2 1 /8$
3
3
2
3
3
2
TOTALS
3/4$
3/4$
3/4$
1/4$
1/2$
3/4$
$
6
$
$
LIBERTY LOAN BONDS
3 1/2$ 1st L / L Bds. of 1932-47
w
4 1/4$ "
"
" 1932-47
tt
4 1/4$ 4th "
" 1933-38
TOTALS
GRAND TOTALS
11 1/4$
Total of all issues of Treasury Bills, Certificates, ITotes and Bonds outstanding
#20,708,733.
Percentage of issues held in System Account 7 3/4$.
$
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
8
MATURITIES OF G O V S M E N T SECURITIES
HELD 3N S T S T m ACCOUNT CUT APRIL 12, 1955
SHORT-TERM ISSUES
Treasury Bills, Certificates and Notes
MATURING V/ITHDT 1 YEAR
Within 3 montlis
3 to 6
”
6 " 9
”
9 "22
"
$465,522,000
243,688,000
146,774,000
0
•---$
TOTAL MATURITIES WITHIN 1 YEAR -
855,984,000
MATURING- 1 TO 2 Y E A R S --------------
234,552,000
MATURING 2 TO 3 Y E A R S --------------
90,477,000
MATURING 3 TO 4 Y E A R S --------------
63,580,000
MATURING 4 TO 5 Y E A R S --------------TOTAL --------------
$1,293,783,500
LIBERTY LOAN BONDS
First 3 1/2$ Liberty Loan Bonds
"
4 1/4$
"
"
"
(Due June 15, 1947
Callable on or after Dec, 15, 1933)
f 25,025,000
29,000,000
____________
Fourth 4 1/4$ Liberty Loan Bonds
(Due Oct. 15, 1938
Callable on or after Oct* 15, 1933)*
$
54,025,000
281,591,000
(HAND TOTAL --------
$1,629,399,500
*As no call was issued on April 15, 1933, callable date has been changed to
April 15, 1934*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
A u th o r ity E o j Q ^ O f
STATEMENT SHOWING EARNINGS OF ALL FEDERAL RESERVE BANKS
FOR THS FERST THREE MONTHS OF 1953
Gross
Earnings
Boston
|
653,502
Current Expenses
and
Net Deductions From
or
Net Additions to
Net Earnings
$
702,651
Available for
Depreciation
Allowances,
Reserves,
Surplus and
Franchise Tax
§
49,149 (a)
New York
4,465,494
2,625,903
1,839,591
Philadelphia
1,327,820
813,180
414,640
Cleveland
1,259,161
990,758
268,403
Richmond
441,458
480,322
38,864 (a)
Atlanta
471,284
390,125
81,159
Chi cago
1,596,852
1,328,713
268,139
S t • Louis
379,494
488,606
Minneapolis
371,748
334,982
36,766
Kansas City
445,154
496,670
51,516 (a)
Dallas
282,850
366,972
84,122 (a)
1,059.618
871,573
188,245
§12,654,435
§9,890,255
§2,764,180
San Francisco
TOTALS
(a) deficit
109,112 (a)
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E & M £ < 2 1
£
3
3
.
April 18, 1933
m u a m B x v m m u B L J B *. Tm
policy
m m
im m
ammmm. jp rx l 19 y 1953
The extent to which the banking system has recovered since the banks were
reopened is reflected
in
the following summary:
(In millions of dollars)
*
Money in circulationF* B * discounts far member banks- » - m
--------Member baaak reserves- - Total reserves of F. B* B a n k s ------- m
Excess gold reserves of F. B. Banks - «■»
Combined reserve ratio of F. B. Banks •
6,611
400
mjtS
m
7,538
6,147
408
2,006
3,529
1,315
1,414
2,513
1,776
3,460
2,809
440
1,47*
45.6#
65*4#
M
60.«j6
\
-
As this table shows, the improvement of banking conditions folloilng t&e
reopening of the beaks has been almost as rapid as the preceding deterioration*
due largely to the heavy return flow of currency fco the banks.
A large part of
member bank indebtedness has been repaid, and member bank reserves, after a sub
stantial shrinkage, have again increased moderately.
The position of Federal
Reserve Banks has been strengthened correspondingly*
The number of member banks licensed for full reopening is more than 80
per cent of tha total number of member banks, and the proportion of member bank
deposits released is more than 90 per cent*
This still leaves, however, approxi
mately §2,700,000,000 of deposits in member banks that have not been licensed, and
in addition a substantial volume of deposits is still tied up in unlicensed nonmember banks*
The total volume of deposits still unavailable, therefore, is
probably in the neigiborhood of $3,500,000,000*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ 7 O ^ O ^ O j .
2
Although efforts were made to continue business operations as far as
possible during the suspension of bank operations, the general level of business
declined at that time to a new low level for recent years, ’ The industries most
seriously affected were those which were already operating at the lowest levels,
such as the automobile, building, and steel industries.
Subsequently there has
been a fairly rapid recovery, but the movement thus fax does not appear to have
extended beyond a resumption of the level of activities prevailing early in Feb
ruary.
Steel mill activity, which had declined from 20 per cent of capacity in
the week of February 16 to 14 per cent in the week of March 23, increased again
to 19 1/2 per cent in the week of April 15*
Sales of automobiles showed a renew
al of the spring expansion after the bank holidays, and automobile production was
resumed.
The railroad movement of merchandise also showed a resumption of the
usual seasonal increase.
Retail trade, at least in some localities, showed
marked improvement after the reopening of the banks.
Commodity prices rose sharply when the commodity exchanges were reopen
ed on March 16, but in most cases the rise was short-lived.
Recently, however,
there has been renewed strength in a number of important commodities, especially
in grain prices which have reflected poor crop prospects.
Wheat prices rose
about 16 cents a bushel, or about one-third, from the low point of March to April
15;
corn rose about 12 cents a bushel, or more than 50 per cent in the same
period.
Other commodities which have shown moderate strength recently include
cotton, sugar, silk, rubber, copper, lead, silver, and scrap steel.
Broad in
dexes of commodity prices, which include a large number and variety of quotations,
however, remain only slightly above the lowest levels of the year.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
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Authority T .O * lQ * ? O j
3
Bond prices, which reflected the influence of liquidation of bank assets
during February and early March, have thus far shown no sustained recovery.
In
the security markets, as in the commodity markets, there was a rise when trading
was resumed, but the higher prices were not long sustained.
The pressure of
liquidation from closed banks has continued, and corporation bond averages on the
whole remain about 8 points below the January levels, and close to the lowest
levels of the year.
In the absence of the usual weekly data on member banks in principal
cities, the information on recent tendencies in member bank credit is limited.
In the principal New York City banks there was an increase of approximately
$550,000,000 in deposits between March 8 and April 12, following a decline of about
$1,500,000,000 in the preceding five weeks.
The greater part of the recent in
crease represents a renewed increase in the balances of out-of-town correspondents,
which were heavily reduced prior to the bank holiday.
The loans and investments
of the New York banks, which declined about $800,000,000 between February 1 and
March 8 , have shown no material change subsequently.
With a large part of their indebtedness at the Reserve Banks paid off,
member banks have again been accumulating excess reserves in moderate amount dur
ing recent weeks.
For all member banks the excess is probably now around
$300,000,000, although the actual volume of reserves remains about $400,000,000
less than in January.
More than half of the excess reserves are again concentrat
ed in New York, due to tendency of banks in other localities to place their surplus
funds on deposit in the large New York banks, but the actual ownership of the
funds probably is fairly widely distributed.
The return flow of currency to the
banks continues to add to the amount of excess reserves, but has diminished con
siderably since the first of April*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
April
6, 1933
ir« If* Randolph Burgees,
Secretary, Open Market Policy Conference,
c/o Federal Reserve Bank of New fork*
Hew Xork, New fork#
Dear Mr# Burgessi
Governor Meyer has received your letter of
April 4# 1933# and is bringing to the attention of
the other aeabars of the Board the final ttinutea* \
inolosed therewith* of the Meeting of the Open Msrket Policy Conference, held on January 4 and 5, 1933#
It is noted that these alnutes incorporate
all of the changes in the tentative draft which were
suggested by the Beard*
Very truly yours,
Chester Morrill*
Secretary
ain/fsf
:
?
a
^^
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DECLASSIFIED
Authority
F o rm N o . 131
Office Corresponue ~ce
FEDERAL RESERVE
E
0A
R
D
Date April 6 f 1933
To_____ F ile s __________________________ Subject:_________________________ -
^
F ro m __ Mr. McClelland___________________________________________________________ ______
a ro
2— 8495
All of the changes suggested by the Board in the tentative draft of
.. —
these minutes were incorporated in the final minutes*
... .
/
/ --v
The only other changes from the tentative draft were (l) unimportant
changes in verbage of Governor McDougal* s statement at bottom of page 6$
(2) an addition which does not appear to change the sense of Governor
McDougal* 3 statement at the bottom of page 7$ and (3) the addition of a
statement by Governor Yoong at the bottom of page 8.
f 4
.
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DECLASSIFIED
Authority E o . i o ^ o f
3
2
3
F e d e ra l R e s e rv e B a n k
of
Ne w Yo r k
April 4, 1933.
Dear Governor Meyer:
j
_3 3
l j
x
Enclosed are the final minute s\ of the
U
A J
6 |K.t
meeting of the Open Market Policy Conference held
on January 4 and 5, 1933, in which are incorporated
the changes which have been suggested.
Will you
therefore please substitute these in your files for
the tentative draft previously sent you.
Very truly yours,
W. Randolph Burgess
Secretary, Open Market
Policy Conference.
Hon. Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C.
Encl.
*.,1
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DECLASSIFIED
Authority
2 —
\v r >
F e d e ra l R e s e rv e B a n k
of
'i
Ne w Yo r k
. I,
i ■ \i
\ %-
/ #
January 31, 1955,
Dear Mr. Morrill:
Thank you for your letter of January 50 with the
suggestions for changes in the minutes of the meeting of
the Open Market Policy Conference held on January 4 and 5,
1933, which will be reviewed with great care.
Veiy truly yours,
Randolph Burgess
Secretary, Open Market
Policy Conference
Mr. Chester Morrill,
Secretary, Federal Reserve Board,
Washington, D. C.
WKB.H
3 - 3 ,- C - w
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
S 3
3 -—
January 30 , 1S83*
Hr* W* Randolph Burgess, Secretary,
Open Market Policy Conference,
c/o Federal Reserve Bank o f New York,
New York City, Hew York*
Dear Mr* Burgess:
Receipt is acknowledged of your letter of January 9, 1933,
transmitting a ten tat ive draft of the minutes of the meeting of the
Open Market Policy Conference held on January 4 and 5, 1933*
In reap ana e to your request for suggestions aa to changes
which might be made in the tentative minutes, the following are sub
mitted:
On pages 1 and 8, in naming the members of the Board's
staff in atte$4 anee at the meeting, the name of i£r«
Carpenter is Incorrectly recorded as Mr* Carter*
Following the statement on pa 00 1 that Dr* Gold ear e is er
reviewed the recent developments in the credit situation add
"and presented a memorandum on the subject prepared in the
Board's Division of Research and Statistics* During Dor*
Goldenweiser*s statement the Chairman of the Board joined the
meeting* ”
Change the following sentence to read "’The Secretary of
the Conference then read the preliminary memorandum on credit
conditions previously distributed,” and transfer it to follow,
rather than precede, Governor lleyer’s opening statement.
Change Governor Meyer's opening statement to read "Governor
Meyer stated that probably at no time since the war has the
relation between the open market policy of the Federal Reserve
System and the general ecanonic situation been so important and
that *or this reason it is particularly necessary that the
decision of tfre Open l&rtet Policy Conference be of such a
character as to be capable of express ion in definite terms
which will be understandable to the public and justify confidence
i
"
2 -
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
{0 ^ 0 j .
-2 -
wln tho soundness end stability of the system’a policy* II©
referred to the agitation, especially in Congress, for the
adoption of inflationary measures and pointed out that under
conditions like these the system must of necessity give due
consideration to such factors in reaching a determination as
to future policy* He also stated that during his recent
visits to seven of the Federal reserve hanks, when he dis
cussed the open market policy with the directors of those
banks, he found what appeared to be general approval, and he
expressed the opinion that the policies of the system, in the
light of conditions which have existed during the last two
years, have been remarkably free from public criticism*”
On page 3, in line 4 of paragraph (1) change "the only
effective argument" to "the most effective argument*"
In outlining the arguments for and against some reduc
tion in the portfolio of governments, you will recall that
Governor Harrison suggested that, if a reduction should be
made in the system account, the amount of securities disposed
of should not exceed the amount of the return flow of currency,
and that the system should not attempt to offset gold imports,
for the reason that if such imports are sterilized, under
present conditions, the position of the United states in con
nection with any attempt of foreign nations to return to the
gold standard would be considerably weakened* You may wish to
add soi,
to thing to this effect after paragraph (3) on page 3*
On page 3 , in Governor Meyer’s statement immediately
following paragraph (3) the verb "was* should be changed to
’'is * in the two places it is used*
At the top of page 4 change the first paragraph to read
*Governor Noiris raised the question of the probable renewal
of the provisions of sections 2 and 3 of the Glass-Steagall
Bill, and in general discussion it was suggested that there
would probably be little difficulty in the renewal of the
provisions referred to, and that in any event the situation
of the banks with respect to collateral for Federal reserve
notes could not be relieved by the sale of any reasonable
amount of Government securities***
At about the middle of page 4 change Governor Black’s
statement to read "Governor Black said that while he sa% no
economic reasons for not lilting maturities run off, ho was
greatly impressed by the dangers of unsound inflationary
proposals and believed that they could only be combated by
the continuance of the present policy of the federal Reserve
System.”
On -pftfge 7 eliminate, the clause *pfcwss|in^ another meeting
of i}he voftfeH^ce” Bit the end/0f’''’1^o/Ws^Xu1iion^^t^4 by
tve COfcfejunfce* ?hi<f clause H a ^eputit^on of that
tearing
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o J o ^ o f
at tho bo g in n in g o f
on
th*
r o e o lu t lo n .
8 | fo llo w in g
o n tr» *© o o f tb # e o a b o r* o f t b *
o i i w l i u i t o QO*e>«iQ^ m f + v * 9 f i r * t o io to a io n t and a * y
r»»olnti«i fcdoptwi fcy ti* Oojiforono* iwu» proaontod to tb*
Bomrd $b * im a n iiK K L B ly upprotod by i t * *
I n t b * n *a rt p o r*« T *i> b m U M m t * t b # * .# n t# n o * * i t w m
impQTta&t, bo*«tirf t&*t a oaroful *iplanfttAon of tb* option
ahoold b * Bftd# to B M b f 7 b a »k * *ad o t b o r a * and «ru b # titu t«
tb# following! ^Oovttnoap M*y*r tb*a a t m t M tbat it la tb*
opinio® of tb* y*4*r*i 8**«rtn B o n d tbat tbe C k ) t f « o w of
tb* y*<l*r*l r***rr* bank* o*mfontribut* a gi*at &•*! to tb*
aaoo*a» of tb* ay*t#» op*n
p&lioy by oxplaAnln^ to
£i*eibojf banka In a poaiiiy*
wbw**?*r m
^tporfciaity i*
affor£*<i# tb* £tq*p$*** aoagbt to bo aoooepliabid by tb*
polloy**
T**n*f*r O©T*yn0i- M*?*#** atat*ia*nt* r***rding r*<iuotto*
la tb* rat* o$ 10(b) loan* and tb* iinportano* o f building up
t b * wmn p a w * ? o f tb* T*d*f*l H # w m &yat** to t b * and © f t b *
mii»it#at imi p*o#o4in« aajatmsaa&t*
T o r y t r u l y y « ro r*#
(Signed) Chester ^ ’ ,f.
CbsrttV Morrill,
3**y*tary.
For APPROVAL
tytCySfa
«**«•**
M r. H a m i ln . lC -
Ur
James
Mt.Magwwr-
-----J'
W r M ille r . - »
J
copy
*
and return
Please initial file
ii you approve
to S ecretary’s Otfice*.
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o . / o ^ o j
333
-
F e d e ra l R e s e rv e B a n k
of
Ne w Y o r k
January 9, 1933,
Dear Governor Meyer:
Enclosed is a tentative draft of the minute s\of the
meeting of the Open Market Policy Conference on January 4 and
5,
I should be glad to receive at your early convenience any
changBs which you have to suggest.
Very truly yours,
'¥<. Randolph Burgess,
Secretary, Open Market
Policy Conference.
Honorable Eugene Meyer,
Governor, Federal Reserve Board,
Washington, D. C,
line •
,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
y
TENTATIVE DRAFT - SUBJECT TO CORRECTION
3
3 3 :
CONFIDENTIAL
MINUT3S OF MEETING OF THE
0 P M MARKET POLICY CONFERS'TCS
W3IK3SDAY, JANUARY 4, 1933,
WASHINGTON, D. C.
The meeting was called to order at 10:20 a# m*, there being present
the folloT/ing:
Governor Harrison, chairman, and
Governars Young, Norris, Fancher, Seay, Blade, McDougal,
Martin, Geery, Hamilton, McKinney, and Calkins,
and Deputy Governor Burgess, secretary*.
The secretaryfs report of operations was received, and placed on file#
The preliminary memorandum on credit conditions was distributed*
Governor Harrison pointed out that the present organization of the con
ference called for rotation in the membership of the executive committee, and it
was moved and carried that the present executive committee be continued for another
year*
Governor Young reported that the committee on banking legislation had
been in session the previous day and had reached a general agreement.
He indicated
that the preliminary report of the committee would be mailed to the governors in a
few days•
At 10:35 the members of the Federal Reserve Board entered the meeting,
there being present:
Governor Meyer, Messrs. Hamlin, James, Miller, Magee, and
from the Board Staff Messrs* Floyd Harrison, Morrill,
Goldenweiser, Wyatt, Smead, McClelland, and Carteg-» S t n J L j *
Dr* Goldenweiser reviewed the recent developments in the credit situation^
The Secretary p res eat
the preliminary memorandum on credit conditions ^
0
Mot/*.
'
Governor Meyer stated that Federal reserve policy at this time was attend-^.
ed with public and political implications especially in view of the inflationary
drive being made in Congress*
He believed that the policy up to this point had
. been well support ed and the system had been successful in operating in a way to in
spire confidence*..
_
i
r f
J
ii< A .
,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E c > . ! o $ o j
2
Secretary Mills on request reviewed the budgetary situation of the gov
ernment.
He also reviewed the proposals for inflation whi ch ¥/ere being made to
the Congress and suggested that any slackening in Federal reserve open market
policy might provide an excuse for an unsound inflation bill*
Secretary Mills
pointed out, however, that the Treasury itself was not directly or indirectly in
terested in the decision the open market policy conference might reach.
The
Treasury should pay the market price for its money and should not expect, for
example, to take advantage of any abnormal situation for a large refunding opera
tion.
Policy should be deteimined independently of the Treasury position.
As a basis for discussion by the Conference, Governor Harrison then out
lined the various arguments both for and against some reduction in the security
holdings of Federal reserve banks.
He surested the following arguments in favor
of som§ reduction.
(1) 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
pressure had been secured the System would reduce its security
holdings as soon as possible without relieving that pressure.
The turn of the year appeared to offer the best chance to de
crease 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 ap
pearance of a change in policy.
(2) Any further substantial increase in excess reserves
migftt 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 Beserve
banks have bought so large amounts of government securities has
in fact enabled the Treasury to borrow cheaply and so in some
measure has encouraged the continuance of an unbalanced budget.
Governor Harrison suggested the Ibllowing arguments in favor of holding
the fiiwemmont portfolio intact
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o * l O ^ O j
y
(1) There is danger that a redi^zxion in security holdings
might be construed as a reversal of/£olicy which might in turn
increase the danger of the adoption of some radical inflationary
policy by Congress since the only effective argument against such
inflation is that an orderly policy of reflation is now at woik,
Any move so interpreted also miggit be discouraging to business
or to bankers holding a large volume of government securities,
who migjit start to liquidate.
I
I
(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,
(3) One question was the effectiveness of varying amounts
of excess reserves.
There are indications that interest 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.
/s
Governor Meyer suggested that what was most required v& s assurance as to
r
the continuance of the pressure of excess reserves,
Mr, Miller suggested that the precise amount of excess reserves main
tained was an incidental detail, but that the important question was one of policy
and direction of movement, and that there mi^it be harm in stopping excess reserves
from accumulating.
There ensued a general discussion during "which the question was raised
whether country banks could and would make use of excess reserves if driven back
from the centers.
Governor Martin pointed out that fear of bank failures was
preventing banks fran using their excess reserves and if that situation were cor
rected the excess reserves would be put to use*
Governor Calkins emphasized the same difficulty, particularly in relation
to agricultural banks.
Governor Meyer pointed out that one effect of the policy had been to
relieve greatly the finances of cities and states, so that they could secure money
in the market for relief and other necessary activities.
This was helpful in
keeping the social organization going.
(
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Governcr Norris raised the question of the*probable renewal of the^
Glass Steagall bill, and in general discussion it was suggested that there would
probably be little difficulty in the renewal, of tha£~btHafc-, and that in any event
the situation of the banks with respect to collateral for Federal reserve notes
could not be relieved by the sale of any reasonable amount of government securities.
There ensued some further discussion of the use of excess reserves and
the probable effects of a discontinuance of interest on deposits in New Yoik
should that occur.
There was some difference of opinion as to the extent to which
an excess of reserves would be put to use by banks if it were distributed more
widely throughout the country, some expressing the belief that the funds would be
put to use in investments or somewhat freer lending, and others expressing the
opposite opinion.
The meeting adjourned at 1:10 p, m.
The meeting reconvened at 2:25 p. m,, there being present the following:
Governor Harrison, chairman, and
Governors Young, Norris, Fancher, Seay, Black, McDougal,
Martin, Geery, Hamilton, McKinney, and Calkins,
and Deputy Governor Burgess, secretary.
After some further general discussion each of the governors stated his
views which may be summarized briefly as follows:
Governor Black said that while he saw no economic reasons for not letting
maturities run off he was greatly impressed by the dangers of unsound inflationary
proposals and believed they could only be combated by a continuation of a Federal
reserve policy of controlled inflation.
Governor Geery favored letting January maturities run off after making a
statement that the policy of maintaining excess reserves would be continued.
Future policy could be governed by the effects of this operation.
Governor Seay believed that the dangers of a further accumulation of
reserves were greater t&an those of disposing of seme securities.
He believed a
statement that there was no change in policy would be adequate to deal with politi
cal problems T$uch have a way of not materializing.
He would let not less than
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
lO ^ O j
Authority
5
$200 ,000*000 of securities go.
Governor Young emphasized the opportunity in January for letting govern
ments go without interfering with excess reserves.
He would let January maturi
ties run off and perhaps those of February and would try to speed up the renewal of
the Glass SteagaLl bill.
Governor Calkins stated that he was not impressed by the political
argument and particularly with the System’s power to deal with inflationists.
He
was not a supporter of the theory that excess reserves were effective in expanding
credit.
He would, however, let a smaller emount cf governments than the January
maturities run off and not decide yet about February.
Governor Martin thought the elimination of interest on deposits would
result in hoarding gnd other difficulties.
He believed the banking situation must
be straightened out before excess reserves would have their full effect.
He
would favor letting some securities run off with the executive committee keeping in
close touch with the results.
Governor Hamilton believed the System should not base its action on the
political situation.
He would favor letting January maturities run off and having
another meeting to decide on February maturities.
He considered it important to
explain the action to the public.
Governor Fancher thought an elimination of interest charges due to in
creasing reserves would be undesirable.
He believed some of the maturities in
January should not be replaced, relating any changes to the return flow of currency.
Governor Norris suggested that further increases in excess reserves would
adversely affect bank earnings and incur the .risk of disturbance which might arise
from eliminating interest on deposits.
As to political effects one danger was the
encouragement to an unbalanced budget.
The other related to inflationary propos
als.
policy.
He believed this latter difficulty could be met by a careful statement of
He would favor letting January maturities run off to the extent of the
currency return but would only favor doing this if an explanation were made.
If
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6
no e:xplanation were made he would favor maintaining the portfdLio.
Governor McDougal believed that further increase in excess reserves would
be unhealthful and that reductions in the portfolio might make open market money
rates firmer and strengthen the position of the Beserve Systan.
J
at least January maturities run off;
He favored letting
perhaps February also*
Governor McKinney did not favor giving too much consideration to the
political aspects*
He would permit the greater proportion of January maturities
to run off.
Governor Harrison said he had felt all along that some securities should
be allowed to run off in January but he attached considerable weight to the dangers
of the inflationary movement all over the country*
He feared misinterpretation of
sales by the banks,the market and by Congress, but believed that this difficulty
might be largely avoided if the policy were clearly understood to be one of con
tinuing to maintain substantial excess reserves in present conditions.
This might
involve purchases as well as sales of securities.
The conference then proceeded to draft a resolution, starting with a
motion by Governor Calkins that the executive committee be authorized to dispose of
$100,OCX),000 to S&25,000,000 of securities in January to offset currency returns.
Before adjournment a preliminary draft of the resolution was voted upon favorably,
Governors McDougal, Seay, and Black, voting in the negative.
It was decided to
hold a further meeting in the morning, and since Governor Black was unable to stay
until morning he desired to record his dissent from any proposal for reducing the
System portfolio, as follows:
MI am in accord with the economic reasons given by
the Conference for the proposed reduction in governments.
I, however, have an intense feeling that the present situation
as to proposed inflationary measures creates a new condition
that is most serious and should be persuasive of action re
sulting in maintaining our present holdings; and I therefore
vote rno* on the present motion.”
After further discussion of the draft resolution the meeting adjourned
at 6:05 p . m .
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DECLASSIFIED
Authority
January 5, 1933.
The meeting was called to order at 10:06 a. m . , there being present the
following:
Governor Harrison, chairman, and
Governors Young, Norris, Fancher, Seay, McDougal,
Martin, Geery, Hamilton, McKinney, and Calkins,
and Deputy Governor Burgess, secretary.
The discussion of the draft resolution was continued, and after further
At
modifications ,Awas passed by unanimous vote in the following fora:
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
inasmuch as the continuance of excess reserves in substantial
amounts is desirable in present conditions.
In view of the
return 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 con
ditions,
BE IT RESOLVED, THEREFORE, That, pending another meet
ing of the Conference, the Executive Coumittee be given
authority (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 action
does not result in any substantial reduction in existing ex
cess reserves and (b) if necessary, to purchase Government
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 McDougal 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 portfolio and did not
favor the maintenance of as large excess reserves as at present.
Some reservation
as to the value of the maintenance of the present volume of excess reserves was
expressed by several of the governors.
It was understood informally that the resolution should be interpreted
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*
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(2^ When the resolution refers to the present level of re
serves it means approximately $500,000,000*
(3) When the resolution refers to the retuafti flow of
currency it means the return flow from the December peak just
before Christmas*
(4) There would be another meeting of the Conference
before any increase in the System holdings of government securi
ties above $1,851,000,000*
a;m;
At 11 :0Q/ o ’clock the members of the Federal Reserve Board entered the
meeting, there being present, in addition to the governors of the Federal reserve
banks, the following:
Governor Meyer, Messrs. Miller, Hamlin, James, Magee,
Moirill, Harrison, Wyatt, McClelland, and Sart-erv— •
Ctefrearner M eygp -gto*^
that ~£he Federal Reserve Board
,__
„
considered the
action— of the conference and approved it unanimously*
Governor Meyer expressed satisfaction with the form of resolution in that
it provided a more scientific basis for action than the usual resolution v&ieh
siiqply indicated a definite amount of securities to be bought or sold*
The resolu
tion gives assurance to banks and business men as to the continuation of easy money
and should help make the policy more effective*
It was important, however, that
a careful eaqplanation of the action should be made to member banks and others*
Governor Meyer said that the Board had approved reductions in the rate
on 10-B loans in the case of two reserve banks and would be glad to act upon other
applications*
Governor Meyer suggested the importance of building up the man power of
the Reserve System by bringing in able young men.
There ensued some discussion
of the aid which an adequate pension plan would give to this proposal, and it was
indicated that the Board was studying the recanmendations of the governors upon
that point-*
Govetrnar Harrison reported the interpretations of the resolution upon
which the -conference was agreed*’
I
J
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority r . d . / a Z o /
9
There ensued a general discussion of what if any statement might be
given to the press, and Dr, Miller and Mr, Hamlin, and Governors Harrison and
Norris were constituted a committee to draft a statement, and they withdrew to
prepare a statement.
At 12:52 p. m t, the coumittee returned and the following statement was
read and adopted without dissent:
The Open Market Policy Conference of the Federal Beserve System, with
representatives from all of the twelve Federal reserve banks in attendance, coneluded its meetings with the Federal Beserve Board today.
The sessions of the
Conference were devotod 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 Beserve System during the course of the economic depression.
Consideration was also given to the attitude of the System in adjusting its oper
ations to conditions and needs as they nay change and develop♦
The first and imaediate objective of the open market policy was to con
tribute factors of safety and stability in meeting the forces of deflation.
The
larger objectives of the System^ 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 Systems policy intended to maintain a substantial amount of
excess manber bank reserves, the continuance of which is deemed desirable in
present conditions.
Adjustments in the System*s holdings in the open market ac
count will be in accordance with this policy.
At 1:00 p. m,, the meeting adjourned.
¥, Eandolph Burgess,
Secretary*
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E o , i Q 9 o j
CONFIDENTIAL
R3POKT OF O P M MAP HEP OPERATIONS TO 1MZFI7-C- OF 0PUT MARKET POLICY OONFEOTCE
_________________ HELD IN WASHING-TCET ON JANUARY 4, 1955____________________
At the last meeting of the Open Market Policy Conference held in
Washington on November 15, 1932, a motion was carried, that it was the consensus
of the Conference that no change should be made at that time in the amount of the
System holdings of government securities and that there should be another meeting
of the Open Market Policy Conference during the first week in January to consider
the System's policy in the li^it of conditions as they exist at that time*
Pursuant to this action there has been
change in the amount of holdings of
government securities in the System Account, the total remaining up to the close
of business Wednesday, December 28, 1932, at $1,639,607,500*
Transactions effected in the System Account since the report to the
November 15 meeting consisted of
(1) Redenptions of $224,114,000 aggregate amount of
maturing Treasury bills and $19,900,000 - 5 1/4% Treasury
notes matured December 15, 1952, (representing the un
allocated portion of exchange subscription) which were
replaced by purchases in the market of $244,014,000 aggre
gate amount of short-term issues consisting principally of
Treasury bills.
(2) Exchange at maturity, by exchange subscription,
of $55,454,000 - 5 1/4$ Treasury notes matured December 15,
1932, for $40,554,000 new one year 3/4% Treasury certificates
and $14,880,000 new four year 2 5/4% Treasury notes.
(3) Exchanges in the market at advantageous rates of
$92,200,000 aggregate amount of short-term issues of govern
ment securities for a like amount of other short-term issues.
The following is a statement showing the issues of United States Govern
ment securities
held in the System Account on November 2, 1932, and on Decanber
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority £ ^9 , I f ' Q O l
Nov.
u
S. Treasury Bills due Nov.
st
tt
tt
t;
tt
tt
!T
tt
ft
tt
TT
TT
TT
IT
n
tt
TT
Xt
ft
tt
-
tt
tt
tt
tt
tt
tt
v
:?
it
tt
W
IT
tt
:?
TT
T7
tt
TT
TT
ft
TT
tt
it
3
3
3
2
1
1
1/4# Treasury Notes
3/4# Cert, of Ind.
tt
n
3/4# tt
7°
1/2#
1/4#
3/4#
tt
tt
tt
tt
tt
t?
tt
tt
tt
tt
tt
»»
3
/° Treasury Notes
tt
tt
2 1 / 8 5b
tt
»t
3
tt
tt
2 3 /4 %
3 1/2# 1st L/L Bds of
tt
tt
tt
tt
4
1/4?,
4 l/4 f„ 4th ”
" ’’
9,
16,
tt
ft
23,
It
tt
30,
ft
Dec. 28,
ft
Jan. 11,
tt
ft
18,
tt
1? 25,
w Feb. 8,
ft
tt
15,
tt
tt
23,
ft
Mar. 1,
:t
tt
29,
tr
Dec. 15,
:?
Feb. 1,
tt
Mar . 15,
tt
Ma y
2,
tt
June 15,
tt
Sept .15,
tt
Dec. 15,
t?
May
2,
tt
Aug. 1,
tf
June 15,
ft
Dec. 15,
1932-47
1932-47
1933-38
St
tt
1932
1932
1932
1932
1932
1933
1933
1933
1933
1933
1933
1933
1933
1932
1933
1933
1933
1933
1933
1933
1934
1934
1935
1936
Totals
9
1932
33,500,000
59,500,000
38,677,000
45,587,000
61,100,000
54,100,000
42,208,000
27,000,000
0
0
0
0
0
101,197,000
13,775,000
174,025,000
123,987,500
113,575,000
163,483,000
0
75,225,000
102,452,000
74,600,000
0
25,025,000
29,000,000
281,591,000
$1,639,607,500
Dec. 28, 1932
0
0
0
0
0
0
55,600 000
46,208 000
69,550 000
4-3,200 000
38,600 000
49,950 000
35,000 000
34,350 000
0
15,775 000
151,025 000
123,237 500
118,725 COO
175,983 000
66,454 000
78,225 000
104,952, 000
79,2 77 000
19,880 000
25,025 000
29,000 000
281,591 000
$1,639,607, 500
The following is a stat ement showing the amount of each Federal reserv
bank’s participation in Government securities held in the System Account at the
close of business Wednesday, December 28, 1932, and each Federal reserve bank’s
holding ratio, i. e., the ratio percentage that each Federal reserve bank's total
holdings in the Account bear to the total holdings in the Account; also the amount
of each Federal reserve bank’s outright holdings of Government securities;
Bost on
New York
Philadelphia
Cleveland
Ri chmond
At lant a
Chicago
St. Louis
Minneapolis
Kansas City
Dallas
San Francisco
Tot als
Amount of
Part ic ip ation
Holding
Ratios
$
5.8538#
37.0487#
8.2897#
10.8735#
2.8746#
2.8397#
12 .1489#
4.0043#
2.8719#
3.4875#
2.1786#
7.5288#
95,978,500
607,453,000
135,919,000
178,282 ,000
47,152,500
46,560,000
199,195,000
65,655,500
47,087,000
57,180,500
35,721,000
123,443,500
$1,639,607,500
100
#
Outright
Holdings
$
689,000
124,296,550
3j550,100
0
0
oo,o o Q
65,015,000
500,000
7,106,000
71,600
10,000,000
0
$209,086,600
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority E . Q . j O ^ O j
Classification of Issues Held in the System Account on December 28, 1932,
and the Percentage of Each Issue Held in the Account as Compared
______ With the Amount of the Respective Issue Outstanding_________
(000 Omitted)
Percentage
Amount of Issues
Amount of
of Issues
Held in System Account
Respective Issues Held to Amount
by Classification
Outstanding
Outstanding
TREASURY BILLS
| 55,600
46,208
69,550
45,200
38,600
49,950
35,000
34,350
$ 75,954
75,110
80,295
75,056
75,480
60,000
100,000
100,039
73
61
86
57
51
83
35
34
1/4%
1/2%
1/2%
1/2%
%
1/4%
%
1/4%
$372,458
#641,934
58
%
$ 13,775
151,025
123,238
118,725
175,983
66,454
# .144, 372
660,716
239,197
373,856
451,447
254,365
9
22
51
31
39
1/2%
3/4%
1/2%
3/4%
%
Tot als
$649,200
#2,123,953
30 1/2%
3
Treasury Notes due May
2, 1934
TT
it
ft
2 1/8%
Aug. 1, 1934
Tl
?!
t?
3
June 15, 1935
%
tt
II
tt
2 3/4%
Dec. 15, 1936
$ 78,225
104,952
79,277
19,880
§
244,235
345,29 3
416,603
360,534
32
%
30 1/2%
19
%
5 1/2%
Tot als
$282,334
$1,366,665
20 3/4%
25,025
29,000
281,591
§ 1,392,228
535,983
6,268,100
1 3/4%
5 1/2%
4 1/2%
tf
<*> 335,616
$ 8,196,311
4
$1.,639 ,608
$12,328,863
u.. S. Treasur'J ■Bills due Tan. 11, 1933
tf
TT
ft 18, 1933
1T
TT
Tf
TT
TI
TT
tt
tt 25, 1933
Tl
It
Tt
Tl
tf
tt
Feb. 8, 1933
tf
ft
TT
tl
TT
tt
15, 1933
tt
tt
II
Tl
TT
It
23, 1933
tt
tt
TT
tf
TT
Mar. 1, 1933
TI
TT
TT
tt
Tt
tt
29, 1933
Tot als
CERTIFICATES OF indebtedness
3
3
2
1
1
1,
3/4% Cert. of Ind. due Feb.
TT
tt
TT
Mar. 15,
3/4% Tt
TT
IT
t?
May
2,
% ft
T?
T!
ft
tl
1/2%
June 15 ,
TT
ft
tt
Sept . 15 ,
1/4% ft
tt
Tt
ft
tt
3/4%
Dec. 15,
1933
1933
1933
1933
i.933
1933
TREASURY NOTES
LIBERTY LOAN BONDS
3 1/2% 1st L/L Bds of 1932-47
4 1/4% "
If " 1932-47
4 1/4% 4th
55
1933-38
Totals
GRAND TOTALS
<*>
13 1/4%
Total of all issues of Treasury Bills, Certificates, Notes and Bonds outstand
ing $19,303,154.
Percentage of issues held in System Account 8 1/2%.
%
mr
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
jO ^ O f
4
MATURITIES OF GOVEPNMM1 SSCUhiriEp HELD IN SYSTEM ACODUMT ON DECEMBER 28, 1932
SHORT-TERM 15SUBS
Treasury Bills, Certificates and Notes
MATtBING WITHIN 1 YEAR
Within 3 months
3 to 6 months
6 to 9 months
9 to 12 months
$537,258,000
241,962,500
175,983,000
66,454,000
TOTAL MAT IB TP123 WITHIN 1 M R ---------------------- $1,021,657,500
MAT IKING 1 TO 2 YEARS----------------------------.------
183,177,000
MATURING 2 TO 3 YEARS-------------------- ------- ------
79,277,000
MATURING 3 TO 4 YEARS-----------------------------------
19,880,000
TOTAL
---------
$1,303,991,500
LIBERTY LOAN BONDS
First 3 1/2$ Liberty Loan Bonds
t? 4 1/4#
"
”
r?
$ 25,025,000
29,000,000
(Due June 15, 1947
Callable on or after June 15, 1933)
$
54,025,000
Fourth 4 1/4# Liberty Loan. Bonds
(Due Oct. 15, 1938
Callable on or after Oct. 15, 1933)
281,591,000
GRAN D
TOTAL
$1,639 ,607 ,500
Changes in participations in government securities in the System Account
since November 2, 1932.
Sales of $5,000,000 (aggregate amount)
from the Federal Reserve Bank of New YorkTs
participation to the Federal Reserve Bank
of Dallas1 participation as follows:
November 12, 1932
December 6, 1932
$2,500,000
2,500,000
$5,000,000
This sale to the Federal Reserve Bank of Dallas was due to the improved
reserve position of the latter bank and represented part of its shortage in the
holdings in System Account•
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
j
5
System Purchases of Bankers Acceptances
The amount of bankers acceptances purchased by the System since November
2, 1932, has been negligible, and no allotments were made by the Federal Heserve
Bank of New York*
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
J
S 3
.—
a
January 3 * 1933
R.& S.
Or. 3
COmffiEUTIAL
BUSINESS AND CREDIT CONDITIONS
Some of the factors in the business and credit situation to be considered
in deciding on an opeiwnarket 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 Board* s 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,
H?holesale 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 b^en in prices of these commodities, particularly
grains and livestock, and haa reflected in part seasonal factors.
Prices of
cotton and other textile raw materials, which showed a substantial increase,
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority F , o , / o $ o i
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 citiesTSdeclined bv $ 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 banks* 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-summer.
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 / Declassified Holdings of the National Archives
DECLASSIFIED
!0 9 0 j
Authority
3.
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
in New York City.
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
last February,
!o ^ o )
The increase in these balances since February has been about
twice as large as the excess reserves of the banks in New 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 ^5 times per year in 1929 > decreased to 26 by the last quarter of 1930 *
and to l6 by the last three months of 1932 .
r '
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 New York City, Chicago, and other cities.
vol'ume and
Another chart shows the
distribution of the excess reserves of member banks.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
Authority
iQ^nl
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
7.
EXCESS RESERVES OF MEMBER BANKS
^Wednesday F ig u r e s )
M illio n s o f D o l l a r s
Millions
: .
600
of Dollars
6oo
,
G-old movements
Since the middle of June, this country's stock of monetary gold has in
of which $105 ,000,000 was imported, $^59,000,000 re
creased by
leased from earmark, and $3 1 ,000,000 represented domestic production and other
minor items.
recovery of
This addition of $59^*000,000 to the stock of gold represents a
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
{O ^ O j
CHANGES IN UNITED STATES GOLD STOCK
September l6 , 1931 to December 28, 1932
(In thousands of dollars)
Sept. 16, 1931 June lb, 1932
to
to
June 15, 1932 Dec. 28, 1932
Sept. l6, 1931
to
Dec. 28, 1932
-1,107,507
- 777,105
35S,51^
2 8 ,1 1 2
+
+ 595,733
+ 105,528
+ 459 ,i4i
+ 31,0 69
-511,769
-671,577
+ 100 ,627
+ 5 9 ,18 1
France....................
Netherlands.......... .
Switzerland............ .
Belgium..... ..............
Siam..... .................
Germany...................
- 1 .003,423
- 165,888
- 1 12 ,9 7 9
- 1 2 1 ,33^
14,649
+194,i4i
+ 17,725
+ 9,791
+ 2 3 ,1 5 7
• ••
+ 7,467
- 809,282
-147,503
- 103,188
- 9^,177
- 14,649
- 5,393
Japan.....................
England...................
205,753
15,557
13,H2
9,008
+ 10,681
+ 160,798
+ 30 ,10 5
+ 26,686
+ 17 ,9 2 8
+ 9,372
+ 1 9 ,5 1 8
+ 216,434
China......................
India.. ................
Mexico......... ..........
Czechoslovakia........... .
+
+
+
+
+
-
+115,331
+ 86,491
+ 47,348
+ 33,485
+ 22,484
+ 10 ,5 10
Other countries.... .......
+
37,919
+ 37,24o
+ 75,159
Net import (+) or export (-)....
Earmarking operations..........
Domestic production, etc.......
Gains from (+) or losses to (~):
12,860
45,^67
56,386
20,662
Reproduced from the Unclassified / Declassified Holdings of the National Archives
DECLASSIFIED
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 $103r000,~
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»000,000 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
date and brings out particularly the fact that losses of gold by this
MONETARY GOLD STOCK OF THE UNITED STATES
Millions of
Dollars
Millions of Dollars
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority ^ ,0 . ( O Q O j
10 .
country in 19 2 5 . 1927 - 19 2 8 > and 19 3 1-19 3 2 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 19 2 5 » the easy money and large vol-ume of for
eign loans in 1 9 2 7 , and the withdrawal of central bank balances in 19 31 - 19 3 2 *
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 P©** 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, $^3 2 ,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 Glass-Steagall
Act continued.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority IT, 0 ./ & £ & / ■
11.
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
Own
Federal
reserve
notes
(1 )
(Per
cent)
Boston......
71.7
107,511
218,931
13,360
21,400
57.0
378,921
666,654
57,3*9
9,000
205,571 - 19,606
21,127
609,265 -
1,669
87,944
Philadelphia.
56. T
67,028
255,800
49,561
52,000
206,239 - 45,839
16,176
Cleveland....
59.2
90,881
301,546
26,111
85,000
275,435 - 70,642
13,501
Richmond....
62.2
37,502
110,490
17,192
18,000
93,298 - 15,500
7,602
Atlanta......
55-6
27,643
115,861
25,590
32,000
90,271 - 24,822
18,145
Chicago.....
77.3
1+32,446
730 , 773
16,801
27,000
713,972 -
6,002
39,263
St. Louis....
5S.3
33.633
111,772
6,827
36,200
104,951 - 30,362
3,535
Minneapolis..
^9.3
i3 ,'+o1i
84,407
8,128
34,900
76,279 - 30,883
3,4-12
Kansas City.•
58.3
32.^97
99.767
11,13 6
29,000
88,631 - 20,239
8,636
50.1
1 1 , 1471+
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 - 57,545
34,249
Total.,.
62.7
(1)
1.330.537 2,999,717 252,304 428,500 2,747,413 -335,308 264,259
If no United States Government securities were pledged as collateral.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
/O O O )
12.
Currency movements
Return flow of currency from hoards was resumed 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 19 3 2 .
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 I Declassified Holdings of the National Archives
D E C L A S S IF IE D
A u t h o r it y
13.
in August of $19,000,000 for the week ending August 3I 1 &nd has been declining
since then.
It averaged $12,000,000 per week in September, $8,000,000 per
7/eek in October, $4,000,000 per week in November,, and $2,000,000 per week in
December.
One large bank in New York Citybas 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
8,962
8,357
5,205
8,304
24,481
4,793
6,313
16,021
5,280
52,765
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..
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 31, 1930j and November 30 , 1932.
During this period the total gross
Reproduced from the Unclassified / Declassified Holdings of the National Archives
D E C L A S S IF IE D
A u t h o r it y
^
l4.
debt increased from $ 16,000,000 to $21,000,000, all classes of obligations
showing an increase:
PUBLIC DEBIT
(In millions of dollars)
Bonds
Notes
Cer
tifi
cates
Bills
Non-interestbearing
debt
Total
gross
debt
Dec. 31, 1930...
12,113
2,3^2
1,192
127
252
16,026
Nov. 30 , 1932...
1^,257
3 ,5 3 9
2 ,03S
642
330
20,806
Increase from
Dec. 31, 1930
to Nov. 30 ,
1932.........
2 ,lift
846
515
72
4,780
Outstanding 011:
1,197
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 3 /8 $
3 iA
Certificates
3 3/4
Bills
3 l/H
(Month)
(Mar. 1931)
(Dec, 1931 and
Sept. 1931)
(Feb, and Mar.
1932)
(Dec. 1931)
Low
3
/!
2 l/S
3/*+
0 .0 9
(Month)
(Sept. 1931)
(Aug. 1932)
(Deo. 1932)
(D ec.
1932 )
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 it y
Z . - Z * 2OTFIDMTU&
De combor 31, 1932.
PB2LIMINABY MMGRfflOTM fOB. THj3 0 P M MARKET POLICY CONFERENCE,
JANUARY 4, 1933.
When the decision was made last February to begin open market purchases
of securities the -nriTnnry aim of thfi policy as revealed in the discussions was
to check the unprecedented liquidation of bank credit vtiich was exerting a
seriously depressing influence on business and on prices.
It was hoped that
purchases of Government securities would enable member banks to pay off indebt-*
edness and accumulate some excess reserves, with the consequence that the
pressure to liquidate might be lessened and a moderate expansion of bank credit
might occur, which would exert seme influence in the direction of a recovery in
business and in commodity and bond prices.
In the first half of the year fluids made available by open market
operations were largely absorbed by gold exports and currency hoarding, bat in
the second half of the year both these movements were reversed and, with the
discontinuance of open market purchases, currency ret urns and gold imports were
largely responsible for building up excess reserves and so became the active
factors operating towards the objectives which had been set for open market
operations.
Changes in Credit and Business
There have been substantial results towards achieving the objectives
outlined above.
(1)
These results may be summarized as follows:
Member bank borrowings
Whan the open market policy was under
discussion doubts ware expressed as to the possibility of reaching the member
banks outside of principal canters, whose borrowings accounted for a major part
of reserve bank discounts.
Since February 24 when purchases of government secur
ities were begun discounts have been reduced from $835,000,000 to $265,000,000.
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 it y
an;
Report
>
BILLIONS OF DOLLARS
23
MILLIONS OF DOLLARS
1000
800
600
400
200
J A S O N D J F M A M J J A S O N D
1931
1932
Excess Reserves and Indebtedness cf All Liorabcr Banks, Compared with Loans and
Investments of Weekly Reporting Banks
7,/i3 >
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 it y [T ,# , / O ^ O j
2
(2)
Bank credit..
Loans and investments or the reporting banks stopped
declining in July and since that time have increased by $500,000,000.
The in
crease was wholly in government securities though other forms of credit have shown
greater stability.
The increase also was concentrated in New York,, but in other
parts of the country the decline in credit has been checked,
(3)
Bond
market.
The bond market made a recovery of about 25% and
then lost approximately half the gain*
The reaction was followed by a number of
weeks of relative stability, and there is now some evidence of renewed strength.
In recent weeks buying of long term government securities by banks, insurance com
panies and investors has resulted in new high prices since the autumn of 1931, and
this buying movement appears to be spreading into other parts of the bond market.
The prospects for an improved bond market are better than, for some weeks past.
(4)
Commodity prices,
Coinmodity prices rose about 5 per cent and sub
sequently lost all of this gain, reflecting in part the pressure of depreciated
currencies upon world prices, and especially the weakness of sterling.
While de
preciation of currencies has tended to increase or stabilise domestic paper prices
it has depressed world gold prices by reducing the buying power of countries with
depreciated currencies, and decreasing their production costs so they can sell at
lower gold prices,
(5)
Business.
The volume of business as measured by production indexes
rose about 14 per cent but has lost part of this gain.
The present situation may be summarized by saying that a good start was
made toward recovery, thaijbhis movement has been interrupted, and is now hesitant
and uncertain.
The improvement in sentiment is perhaps even more marked than the
improvement in the statistics;
in recent weeks.
but in this respect also some ground has been lost
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 it y
3
Precedents in Earlier Depressions
1/Vhether or not these developments in business and in prices are to be
viewed as disappointing depends very largely upon expectations*
A comparison of
recent developments with those of previous periods of depression shows that recent
events have followed much the usual pattern of business recovery from depression
which is usually highly irregular and uncertain in the early stages.
The accompanying series of charts indicates the sequence of events in
the more important depressions of the past fifty years.
The amount of excess
reserves that accumulated in New York banks in each of these periods, and the
lapse of time before a sustained recovery in prices and in business activity got
under way are summarized in the succeeding table.
Excess reserves - N. Y. City Banks
Amount _
($ million)
Period
Per cent of
Requirements
1884— *85
1893-*94
1896-’97
1908
1921-522
26 to 64
34 to 67
39 to 100
37 to 74
33 to 55
25 to 38
30 to 58
11 to 18
(Practically none; borrowings equal to
1 1/2 times reserve requirements retired)
1932 (since July ) 100 to 300
14 to 40
Lapse of time until sustained rise in bond prices began
1884-*85
1893-T94
1896-»97
1908
1921-*22
-
about 6 months
practically none
none
practically none
v/ithin 3 months of substantial reduction in
bank indebtedness.
Lapse of time until sustained rise in business activity began
1884-,85
1893-t94
1896-’97
1908l92l-*22
-
nearly a year and a half
about 10 months
about 10 months
about 6 months
about 6 months after substantial reduction
in bank indebtedness
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 it y E d . )
0
^
0
f
F ederal R eserr#
o f Hew York
R eports Department
PERCENT
+75
PERCENT
+ 75
PER CENT
+50
PERCENT
+20
STOCK PRICES
^BUSINESS ACTIVITY-
- 10
-20 --PER CENT
140
120
fac+r 7 » 199X>
13X1.1
--
100
80
WHOLESALE PRICES
|_
60 1910-1 4*100
1884
1885
1886
1883
-20
PERCENT
80
—
— WHOLESALE
i
| PRICES
_19tO-1914 “ 100
1893
PERCENT
+50|RESERVE POSITION
PER CENT
+25
I
1894
1895
1896
1897
1932
1933
PER CENT
+50
OF N.Y .C ITY B A N K S
O H (PE FORE BOR R OW IN G'
!
FROM F.R.BANK) v ^T
-50l
"RESERVE POSITION
O F N.Y. C I T Y B A N K S
BILLIONS OF $
1.6I
\^\/5TOCK PRICES401PER CENT
+10
BUSINESS
WHOLESALE PRICES'
1910-1914.100
1907“
_______ [ _______ _
1908
‘ 1909
1930
Sequ ence o f B ra n ts In P e r io d s o f D e p re s sio n
1931
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 it y
jQ ^ O j
4
Lapse of time until sustained rise in comnodity prices began
1884-f85
1893-*94
1896-197
1908
-
1921-r22
-
over two years
limited rise after at least 1 1 / 2 years
about one year
gradual rise within 3 months; more rapid after
1 year
about a year after substantial reduction in
bank indebtedness
Present and Prospective Reserve Position.
Excess reserves of member banks have generally been maintained since the
November meeting of the conference at something above §500,000,000.
Christmas
currency demands proved smaller than were ejected, and gold receipts which in
cluded the $95,550,000 debt payment of the British Government were larger than had
been expected.
Hence the member banks come to the end of the year with between
$500,000,000 and $600,000,000 of excess reserves.
after the turn of the year.
This figure will be increased
It remains to be seen how large the return flow of
currency will be for we do not know whether the small Christmas takings of currency
were due wholly to the depressed conditions or reflected some return of money from
hoarding.
The gold flow is definitely toward this country.
From these tv/o
causes a gain to reserves may be anticipated in the next six weeks of anywhere from
$200,000,000 to §400,000,000, in the absence of any unusual circumstances.
In determining the effectiveness of any given amount of excess reserves
in constituting pressure for the employment of funds several considerations appear
important.
Location. Excess reserves are now largely concentrated in New York
and Chicago as shown on the attached chart.
In both these cities, however,
the
increase in excess reserves has been paralleled by an increase in amounts "due to
banks" so that the excess funds really represent largely funds of out-of-town
banks and the pressure to put these funds to work rests not alone on the New York
and Chicago banks but on the banks generally throughout the country.
The excess
ci ir
fiepcriu _
\
NEW YORK CITY
CHICAGO
JL
OTHER WEEKLY REPORTING BANKS
of Weekly Reporting Banks in New York City, Chicago, and Other Centers
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 it y
of reserves is thus widespread in its influence.
(2)
Time*
The experience of the past summarized in a previous chart
indicates that the effectiveness of excess reserves depends in part on the length
of time they are hold.
In previous periods of depression it has frequently taken
six months to a year for very large amounts of excess reserves to find reflection
in business.
(3)
Assurance of Continuance.
The use of reserves depends in part on
the confidence the banks feel in their.-continuance.
In the pre-war days it was
believed that excess reserves would continue until they were used;
mechanism for absorbing them.
there was no
In recent months there has been uncertainty as to
the effects on excess reserves of Federal reserve policy or possible demands, upon
the banks.
Foreign Influence.
During the year influences from abroad have been inport ant and at times
dominating.
Early in the year gold vdthdrawals were disturbing.
When the gold
movement turned,strengthening our position but weakening the European position,
depreciating exchanges became a depressing influence on world prices as noted above
The debt uncertainties were a disturbing influence second only to the political
campaign.
Debts, Prices, and Recovery.
While the financial and business situation shows now a considerable im
provement from the position of mid-summer the improvement is not sufficient and
the direction of movement is not sufficiently well established to assure a solu
tion to the major economic problem which confronts this country and other countries
as well.
That problem is whether the economic structure
to conform
to something like the present
whether
must be readjusted
price level and volume of business or
we may expect in a reasonable period of time sufficient advance from
• r
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
6
the present price level and sufficient resumption of business activity so that a
general readjustment of debts will not be necessary.
The condition of panic which prevailed last spring has been checked but
the critical problem of prices and debts remains.
It is clear that a continuance
.5
of the present price level and the present volume of business activity would in/ s ' __
—
—
—
------- —
-------------------------- ■
s ~
volve a vast readjustment of the entire debt structure, including readjustment of
.—
v,
'>
a number of banking situations.
The question arises whether the grinding process
of deflati on ofc-r.
ocent .mo&ths must continue or whether it would be preferable to
\V
move decisively either for a more rapid deflation or for some measure of inflation.
The improvement which took place fron mid-summer into the autumn gave some reason
to hope that recovery might go far enough and rapidly enou^i to relieve greatly
the weight of debts.
not.
The question now is whether that recovery can be resumed or
The question is complicated by widespread public and political interest
both in this caintry and abroad so that every decision in the field becomes in some
sense apolitical question.
Reproduced from the Unclassified I Declassified Holdings of the National Archives
DECLASSIFIED
Authority
3 32
December 28, 1932.
Mr* George L* Harrison, Chaiman,
Open Market Policy Conference,
e/o Federal Heserve Bank of New York,
New York, New York*
Dear Governor Harrison:
This letter will confirm Governor Meyer* s
recent telephone conversation with you in which he ad
vised that, in accordance with the understanding at the
meeting of the Open Market Policy Conference on November
15, 1932, that another meeting of the Conference should
be held during the first week in January, the Federal
Reserve Board has approved Wednesday, January 4, 1932,
as the date for the meeting*
Very truly yours,
•■ic"ed) Chester
Chester Morrill,
Secretary*
/^>
11
/}
@FedFRASER