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‘i - R w r

k t o 3 C3 c a s - u d t r n m

v r a ssa m j i i c a

lClJD /UM., JXft-T 15, 15-63

( £ 4 c^ool&jlctJL erdir of tia foUovic^ cstij ejjt lurt V* eccjtertaly
ecrrsot, V.* ell ef tis najc* joints t n
------- -.
4
1« gscret&ry tdllca c*5£&d tlm cs^tixvg by dtsarlfcin^ tki proposed
isare&se in the dl&3cunt r&to vhicb la
* or* «j£X*c&ah, t4
rxcistfiry policy# Et tiwa
thst i£a teCAz^-cf-pajfccste eltu&tlasi
v&a c\u*reatiy drreio^lng to tbe point to %&sn It fcsixkred ca * "roa*
ca tb3 dcllzapt AscordLcs to Cspoitssat of CCEsatrce &sfiaitlcca, |ce»
llz&mjr/ te£* a&ov a ceecod ^asrtcr deficit la t e n^l^t^astood of
fa
45 M illon st cssaal rutca. (Xa p?t|
thle resalt* ffcea t&e
ccnTmr®l£sa of the Xtallftar cca-coavtrUbla borrcvisg to & ecarortlfele
t&£l*« Al«d, t&ss* ere otbsr premiers of dafl&ltlaa of the d&flalt
tbat D^td to h r*rolT*d*)
Aa locreeoe la tbe diocsust r*te end a eacm&at fewdlcr riie
in tho fre^rjery felll w t e eculd
reejt $500 ■Alllcsa lm chartHom
capital cutflcvs. S^iSj iojstiiW witb tbe ctkar *rtl«u vhich t&e
Freaidaot vill snasenes lstsr this vsck, vould produce tctal b&lBaeocf-psyscnta taring* of ease |2 fcilllcn*

& • Gierstezy ate&ed hit te lU f t h l thi r itt la ehsrt-tora
ret*# eoald I t effected vltli bo dgB ft^eat Ixjgaat on lo o ^ c jsi interest
rctea or credit avel U tility #
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S* Chalraea laller itataft
rilila i the dleoooet
rata* fit M l ***** tfie effect ef tbs laeseeee i l p l not be eooflaed to
thi to M tx x aateIf M eoald resell 1b a rtee 1 lantern y it iijf'—*
b
la

^erleed Ihjirtrrrl ef Goess$reo flguree ebcw thsl tbi lacreaee
la the leel for cssrtere bee beea lo w tfesa ptlteintry eettimVia

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Cbe f m i t e l thee etfkeA
Iburtta
be i g m l 1 t H
r.1
Seoret«*y 8 U I m tbe% tbe y e aeet eet&ea eoeld be tebea edtbool efftpctlag
p
lrmjr t f r
^nya
rcdeef end levUev II eee
yollflgr le
w w eai * l U e la Ine§ t e m retae* M
o m Untie elatai» •&>••
o Wa
Mmmnm
be i2cel la ***** H n s t l e y be eedt M l
yretlet wltb e n t d r t r theltbe ttfw l ef toe eetlea wfll be loifleei
is laMrwWBTfete^ fcittw^jNieril jin«n>e eoaU aeke a o ^er tfftrt
to eebleve % * * f ^ t r fbe fv e d t el eelsed bov ttcU v m II be dene^ eoi
*f
Cbelnea Until eleled the! tbe Prfr**1 teeewe r**H etaoestvele ea
yayehaeleg latereedlete and laag^teni eeeua
rltlee to tbe a d a a exteal
|oatfUi| acid tbet tte Creeeosx rtedd eeaeeatnAe lie flaiaelas la tbe
c t e r M c a i H M t lecrttiiy jlllea egreed thel tbla eeeld be deoe>

CfcrJ.ns23 E U l e r jctntcd cat that thi rito Iti'tha dlacourit reta
w o l d call fcrth ritstf.ntial cjpotHlea fxca luxy K^sb&rt cf Consrsea
uA thst way a l w t o a Id tba dcc^etl« ccoo&Ty vhlsfe nl&ht o-:c\ir# vhstter
it actually tv ault-fcd fro* F-sr.sUjy policy cr act, v n l d f i fclsa'-d ca tba
c
trd t b Fjijnd
Eoard*

3* 55io F ratld ^t a&dd vhat tt* altar&*tlir*a v*r* to & rli9 Ia U j
discount rat** Chalrc^a. £ jlla r et&tad ths.tiS* b&la&c*~of«p&y&%2ts
probl^a vould bo r^ro effectively h&adlad#*& lec* cost to tha dcsasstla
ceccccgr# thrcucfc rxdtilstcr&l &3£ctlatlo£a elaad at gottlsg Surops&a
caaikiri<5« to hold « largo portion of thslr reitrvsa la dollars* Ika
Frasldsst then noted tbs* d ifflcu ltlai la &ettl&$ Ikiropeca countries*
asra&saart ca th is, la particuZat vltfc reapact to tbe frsnch* C »

CalUd Stetea h&a &o lcnra^t escapt froa actions vfclch veuld ban the
U&Ltsd Stats• M vail as £oro?*«
f * Stoe president atbad a&cut tba tiding of fcba propocod toereace
c
la the discount ret*. Chains K&rtla atated that be vastad to acaounca
the loer»&»a tkftt aftsruoco Qfesdey, July 1$)# Seven Fadaral f&carvt
Ssn£a hava already proposed e a l&crt&sa* &» plaaaod to lim Boston
s
lesd Off Vlth the a2JiC4XW4£S3t*

Tbt Pwaid-int, hcvs7*r, stated hit prafferoace for tiding tbs
dl*cc*sot rate Increase and hi# ova Gtatcawxt oo balaaca of payseota at
do t e toeathar c » poafcslle. It vaa than
j
tbst the Fid&ral £tcarve
acsxsiacaaast vould t« cede Ttsseday aftcmocn, and that the rr»iltoxt,«
atateasst vculd be relapsed Tturaday at the lateat* aial l r y ^ fcjy
The f*re*lSast rtattd that ca Imroaae In Istarart rat&s vould
tba pGX««o& of hi# t&x procrca evsa e&re urecat* Za this ccezjectico
ha aot»d that public support of tha tax pre*rsa by Cb&lrssa Kartla vould
be especially u^fol.

mJm

5* SoAgert director 0ordoe j»lntad c a tba icporU-aca of taking aa
st
a^proprlata aniiourKamazst to a c s p z y tba dlacouzrt rata lacraaaa# Css
cosei
rtatsenst abould fftraat tha fact that tha tacraaj* vaa al&ad aolaly at
shast^tm rataa# tad that tha ofe^aetlvea of Bcottary policy at thla
ttom d d aot tacluda a rlaa la lflGg^tam rata*. Chalzmsa K&rtla said
i,
It haa orrar baaa fadsral Baaarta policy to wi^i thla kind of emcxsse**
ffeat^ «2sd thay vould d * do to thla tlaa* Bi did atata# howrar, that
o%
thslr aaeooacaeaea* vouli olta tha halaaae^-psyaeata al^atloa aa tha
aola np^aoa for tha dlaoooat rata lacraaaa*
tba ludgat Dtrwtor alao atatad thct a rlaa la tha dlaoouat
rata aoooagealad hy aa tacraaaa ia loeg«t*ra rata# of aa llttla aa 1/8
pairaat oould ralaa btids»t axpaaditoras, oa a fall yaar baala, %y a#
aa |1 Villict>

3
6.
k r 03reassa ea£33 vnsxiisx cr tot It vcMld b» posaibla to
f.
ixwarporato in tbt Pr*3idast'# talaaot^of-g^yeaati ccss^i A cert
explicit fttsteasst of tbs <&j«ctlTas of Bonttary poIicy# vlth particular
to tbt desirability of avoldic^ icy tightening of eralit la
th$ loos-term ssrfett* It v&s cscftrally tgrcsd that *cc» itatosact to
thia tffeat ou£$tt to t* included*
“
%4 Ch&lreaa Ealler pointed out th« oactsaity of ecmentrating
stttrcjtion on total reserve* rafcfcar tbaa fr»i rcservss In t^» proposed
operatic®. Bocauat of th» ralaticcshlp bstweaa frti r®«rv9»| tb»
discount rata, ead ths Treasury bill rst*# it ia axtwsaly is^ortsat to 0-^6 • - ^
gfl^o r j w that undas ccootntr&tioa oq frea rcserves tes^st^leed to a
rtatriotiv* polio/ vitJi r#t£*o% to1total raearvcs.

8. The President 3gain stressed the great impk>rtaa<r% 0€ BMelding
the domestic economy from the impact of the discount j*ate incJ^ase in
the light of the continuing heavy unemployment and modest pace of economic
expansion -- and the importance of maintaining expansion until our economic
goals have been reached.

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