View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

F E D E R A L. R E S E R V E B A N K

M IS C . 3B,2-130M-10-91

OF NEW YORK

O FF IC E C O R R E S P O N D E N C E
D a t e -- M a y
To.
Fr o m .

Mr. Roelse

13,- 354
1

SUBJECT:-

.AUftn.Spr.Qnl
At recent meetings of the Executive Committee of the
Federal Open Market Committee the following argument has been made
"Our estimates of future reserve positions are too
uncertain to place great reliance upon them and i is urgent,
t
therefore, that the System maintain a level of free reserves
which will provide a substantial cushion on the downside against
large
forecasting errors even i this means occasional/surpluses
f
of free reserves on the upside. This would m ean that sufficient
funds would be available to the commercial banka so that
they will seek loans actively. Bank security investment at
longer term has probably gone about as far as would be permitted
by prudent portfolio management so that the banks could be put
under increased pressure to seek additional loans rather than
having the funds siphoned off into intermediate and longer term
Treasury securities."
I

would like to have a discussion of this argument, perhap

participated in by Mr. Gaines who has been present at the meetings where
i has been presented.
t

AS :ES




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