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FED ER A L R ESER VE BANK

M IS C . 3B*2— 130M— 2-51

O F N EW Y O R K

O FFIC E C O R R E S P O N D E N C E
Copy

to M r Koalae
i.

ntTF 8o$tojBbor 26> 1952*

To,
.

Messrs* freiber and Bouse

su b je c t

_______________________________________________________

At the seating of th* Federal Open Market Committee
yesterday, therm mm mmm discussion as to »
fhether meaber bank
borrowings do m t have a decreasing influence, as * measure of
restraint* after they have passed soae figure, such as $1 billion
or H I billion* M i seoias to bo on the theory that the bank*
then toad to I>eco»e maoi to borrowing, and rather like It after
to It* 1 do m % think this theory
should be accepted without question*
-y^ j

(

1* There is the a&ftor tl»t Mr# Sidney aeentioaed at
the meeting, naaely, that the aggregate figures teed to conceal
th® foot that different bank# may bo borrowing froa tlsae to tise,
vith s o b o new borrowers costing in as old borrowers pay out* The
recent aarroy aa&o by the Board* dated September 12th, shoved
that oaly about 1Q£ of all senior banks borrowed in ^ o s l i al*
though 2/3rd* of the central reserve city bank* borrowed. and
1/2 of the reserve city basks* to spread oat the restraining
influence of aeaber bank borrowing, a higher aggregate figure
than ve recently have had alght bo necessary*

I

2* fhere la also the fact that ssaa&or bank borrowing
brings the borrowing bank under soae degree of control by the
Federal Reserve Ban*,s. The banks do not like to be in the
position of having us able to toll them that they must reduce
or eliminate their borrowing from us, vhieh forces them to stake
other adjustments in their portfolios* X think it will be quite
a while before this feeling vill subside, if it ever does, do*
spite the profitability of borrowing at
n*ta«

JJ/MR

(AFF)




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Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102