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Meeting on April 15, 1938.

MEMBERS PRESENT: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Szymczak
McKee
Davis
|
Draper

Reduction in Reserve Requirements of Member Banks.
It was voted unanimously at this meeting, for
the purpose of reducing reserve requirements of
member banks, to adopt, effective at the opening
of business on April 16, 1938, a revised supplement to Regulation D, Reserves of Member Banks,
requiring that each member bank maintain on deposit
with the Federal reserve bank of its district reserve balances equal to 12 percent of its net
demand deposits if the bank be not located in a
reserve or central reserve city, 17 l/2 percent of
its net demand deposits if the bank be located in
a reserve city, and 22 3/4 percent of its net demand deposits if the bank be located in a central
reserve city, plus 5 percent of its time deposits.
It was estimated that as a result of this reduction in reserve
requirements excess reserves of member banks would increase by about
$750,000,000. This action had been agreed upon by the members of the
Board as a part of the program announced by the President of the United
States on April 14, 1958, for the encouragement of business recovery.
Although there had been excess reserves in amounts considered ample to
meet all probable needs of agriculture, commerce and business, the volume
of business activity had declined with such rapidity as to produce
injurious, deflationary effects upon commodity prices, the capital market,
and industry generally. In these circumstances and in view of the other
steps proposed to be taken in the Government's program for encouraging
business recovery, the Board decided that a reduction in reserve require-




-2ments of member banks might be helpful, as a part of a concerted effort
by the Government to carry out the purposes of this program, by assuring
the continued availability of ample funds for meeting business requirements and thereby preventing injurious credit contraction.




Meeting on April 15, 1938.

MEMBERS PRESENT: Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Eccles, Chairman
Ransom, Vice Chairman
Szymczak
McKee
Davis
Draper

Reduction in Reserve Requirements_of Member Banks.
Prior to this meeting all of the members of the Board had agreed
informally to take action, as a part of the program announced by the President of the United States on April 14, 1938, for encouragement of business
recovery, to reduce reserve requirements of member banks by approximately
$750,000,000.
In order to carry out this agreement, i[I]t was
voted unanimously at this meeting to adopt a revised supplement to Regulation D, Reserves of
Member Banks, requiring that effective as of the
opening of business on April 16, 1938, each member
shall to maintain reserve balances on deposit
with the Federal reserve bank of its district
equal to 5 per cent of its time deposits, plus 12
per cent of its net demand deposits if the bankis[be]
not located in a reserve or central reserve city,
17 1/2 per cent of its net demand deposits if the
bankis[be]located in a reserve city, and 22 3/4 per
cent of its net demand deposits if the bankis[be]
located in a central reserve city. It was estimated
that the reserve percentages thus prescribed would
effect a reduction of approximately |750,000,000 in
the required reserves of member banks.
In taking this action it was recognized by the Board that while
there were ample excess reserves to meet any probable needs of agriculture,
commerce and business, there was no immediate danger of an injurious

credit expansion. On the contrary, the volume of business activity had

declined with [great] rapidity to a point where an injurious, deflation


tion

[conditions] was [were] developing in industry, in the capital mar

-2prices. In view of these circumstances, the Board decided that a reduction
in reserve requirements might be effective, as a part of a concerted
effort by the Government to encourage business recovery, in counteracting
the deflationary trend and in thus preventing injurious credit contraction.