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Follow-sg? oa Federal Reaerve "criala"

Ob the basis of a friendly but searching two-hour talk
with Chalraaa Jtertia os Monday, May 29# Tobin and I~cbacittdSd
that (X) your announced policy oa interest rates is la Jeopardy? I
(2) this la agt because tf aa iaaiaeat tmmreal dTpolicy t r t c
o fa
Federal finmi, whieh would have raised the luu< of lanediate
Kbits Boum aetioaj (3) rather, it Is a loss of conviction aad
heart la qoftrtaC
pwwsot policy; and {k) the aitustioa calls
for aa early seating with Martin oa your return.

1he aonetsry aituation, as w feared, Is very shaky.
Martin argues that he can’ stea the tide of rising
interest rates.

2. He la not yet abandoning tlw afttaapt. Se assured os
that (•) ha will eoatiaue to try, I.e., he will con­
tinue to bap i f e a d a f s aoA long-tera toads, and
(b) at the Aaa 6 aaatfng of Ids opea-Market Coeadttee, there «U1 be m rwtm
tsal of this basic policy,
l*a«, the red will aot return to “
billa only."

Bat, he is vary peaeiaistic, has bo hope «f lowering
Interest rates, and, indeed, doubts that the Fed ean
or should atep up its purchases enough to prevent
rates fna rising.


fa prevent the wirtmiag of aa l^ortant prop mader
tho Ateialstrctlcn's recovery prograa requires — as
aoea aa eonrealee&y feasible after your return fraa
Sorape — the cooreaiag of tte Tacmetsry policy group"
la your office to urge oa Martin the iaportanea of
vigorous action and to sttffaa his bat* against the
banking cnawnnity (both inside sad oatadda the Fed),
which is pressing h±a to abaatoa your policy of holdlag ioaa iatarest rates uatil the recovery la consider­
ably further along.

Valter V. Seller

cc: wWH Black Book
Messrs. Tobin
Memos for President
(follow-up on p/27 memo)
v.y?—^ ■

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