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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) t}/n / ~ c^7 '7?*'/