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Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E.C. U35(d MINUTES OF MEETINGS OF OPEN MARKET INVESTMENT COMMITTEE HELD IN WASHINGTON, D* C., DURING WEEK OF GOVERNORS* ____________ CONFERENCE. COMMENCING MAY 9. 1927_________ __ ^ ^ i • 7 The Open Market Investment Committee held a meeting in Washington* D* C,f at the o f f i c e o f the Federal Reserve Board, Monday, May 9, 1927, at 9 o ’ clo ck . Present: Governor Strongf Chairman Governors Harding, N orris, McDougal and Fancher Mr, Harrison, Acting Secretary The secreta ry read the prelim inary draft o f the memorandum o f matters to be considered by the Open Market Investment Committee p rio r to the preparation and submission o f a report and recommendations. A fte r discussing the prelim inary memorandum i t was the opinion o f the committee that cop ies o f i t with suggested amendments should be submitted by the chairman o f the committee to the Federal Reserve Board fo r it s con sideration in order t o fa m ilia riz e the Board with the fa cto rs which would be in the minds o f the committee la t e r in preparing i t s re p o rt. The Open Market Investment Committee adjourned at 10 o*clock* * * * * * * * The Open Market Investment Committee reconvened on Monday, May 9, 1927,. at 12:30 o 'c lo c k . Present: Governor Strong, Chairman Governors Harding, N orris, McDougal and Fancher Mr. Harrison, Acting Secretary The committee considered a red ra ft o f the prelim inary memorandum con tain in g the amendments agreed to at the e a r lie r meeting. With these amendments, the chairman was requested to transm it seven copies o f the memorandum to Governor C rissin ger fo r the members o f the Board, with the advice o f the committee that the committee would be glad to meet with the Board to discuss the memorandum at any time su ita b le to i t s convenience* These co p ie s o f the report were , Reproduced from the Unclassified / Declassified Holdings of the National Archives DECLASSIFIED Authority E.6.1235& I 2 transm itted to Governor C rissin ger at 1:15 o'O lock , when the Open Market Invest ment Committee adjourned. * * * * * * * The Open Market Investment Committee met with the Federal Reserve Board on Monday, May 9, 1927, at 4:10 o ’ clock* P resen t: Governor C rissin ger Messrs. P la tt, M ille r, James, Hamlin, Cunningham o f the Federal Reserve Board Governors Strong, Harding, N orris, McDougal and Fancher Dr* Goldenweiser Mr, H arrison, Acting Secretary There was a long discu ssion by' various members o f the committee and the Federal Reserve Board o f the prelim inary memorandum p rev iou sly d istrib u ted among the members o f the committee and the Federal Reserve Board# Governor Strong explained that th is prelim inary memorandum did not embody any recommends* tio n s but m erely raised points fo r d iscu ssion with the Reserve Foard which would enable the committee la t e r t o f i l e a report with d e fin it e recommendations. In connection with the con side rat ion o f the memorandum and problems before the cors* m ittee, Dr. Goldenweiser gave h is statement o f the present business situ a tion with p a rticu la r referen ce to the p rice l e v e l . The meeting adjourned at 5:45 o ’ clock , with the understanding that the Open Market Investment Committee would submit it s fin a l report to the Federal Reserve Board la t e r on in the week* * * * * * * * The Open Market Investment Committee reconvened on Wednesday afternoon, May 11, 1927, at 12: 30 o ’ clo c k . Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E .6 . [BSIo 3 Present: Governor Strong, Chairman Governors Harding, N orris, McDougal and Foncher Mr. Harrison, Acting Secretary The committee considered a draft o f report prepared by the committee at lunch on Tuesday, May 10, as m odified by the chairman on Wednesday morning b efore the meeting. Upon con sideration , it was VOTED t o approve the rep ort as amended, and the secreta ry was request* ed to have it retyped, with the understanding that the prelim inary memorandum as f i n a l l y revised should be mimeographed to be su b stitu ted fo r the f i r s t draft d istrib u ted among the committee and the members o f the Federal Reserve Board on May 9„ The prelim inary memorandum as revised May 11 is attached hereto* The report o f the committee as f i n a ll y approved by the committee and the Governors* Conference is as fo llo w s; "The Open Market Committee, a ft e r considering the attached memorandum, and a fte r discu ssion with the Federal Reserve Board, sub mits the follow in g recommendations o f p o lic y fo r the period ending August 1 next: " ( l ) That no fu rth er sales o f System s e c u r it ie s be made in order to o f f s e t a rriv a ls o f gold from abr6ad now known o r anticipated* ” (2 ) That it sh a ll be the p o lic y o f the committee between now and August 1 next, g ra d u ally to acquire, i f p ossib le to do so without undue e f f e c t upon the money market, s u ffic ie n t a d d ition a l short-tim e government o b lig a tio n s to bring the t o t a l o f the committee’ s invest*ment account up to $250,000,000. In in terp retin g the expression 'undue e f f e c t upon the money market,* the committee would expect to keep in mind any changes which might occu r in the general le v e l o f money rates, as w e ll as the extent t o which these purchases might e f f e c t a re** duct ion in the amount o f borrowings by member banks* Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E .6 . U35k 4 "While t h is p o lic y is not d irected towards bringing about a reduction in discount rates by any Federal reserve bank, nor is that immediately a n ticip a te d , i t is recognized that some lowering o f market ra tes fo r money might n everth eless ju s t i f y such a reduction la t e r in the year, e s p e c ia lly at the p rin cip a l fin a n c ia l cen ters. The recora* mendation In paragraph two is also made a fte r con sideration o f the fa ct that somewhat lower in te re s t rates o r d in a r ily operate t o check g old imports; ±n fa c t, that was one o f the e f f e c t s o f purchases o f s e c u r it ie s made in 1924* "The committee fu rth er expects to continue stu d ies o f those methods set out in the prelim inary memorandum by which increases in the System's p o r t f o l io might be brought about without increasing the amotont o f Federal reserve cre d it in the market. I t expects t o dia- cuss with the Treasury Department those methods with which the Treasury is concerned, and requests that the Federal Reserve Board g iv e consider** ation t o those p a rticu la r items, such as reserves on time d e p o sits, which re la te to the regu lation s o f the Federal Reserve Board*M Reproduced from the Unclassified / Declassified Holdings of the National Archives DECLASSIFIED Authority E .6 . l£J5k 5 Meeting o f the Open Market Investment Committee with the Federal Reserve Board 10; 30 Thursday morning, May 12 P resent; Honorable A, W, Mellon, Chairman Governor C rissin ger, and Messrs, P la tt, Hamlin, M ille r, James, Cunningham, McIntosh o f the Federal Reserve Board Governors Strong, Harding, N orris, McDougal# Fancher Mr, H arrison, Acting Secretary Dr, Goldenweiser and Mr* Eddy The Acting Secretary d istrib u te d copies o f the report o f the Open Market Investment Committee dated May 11, to g e th e r with mimeograph copy o f the prelim inary memorandum r e la tiv e to open market p o li c i e s dated May 9, 1927, and revised May 11. A fter each member o f the Board had had opportunity to read the report. Governor Strong explained that the rep ort had been prepared by the committee* a fte r thorough con sideration o f a l l the fa cto rs re fe rre d to in the prelim inary memorandum, with a view t o ou tlin in g a p o lic y fo r the next few months fo r ap** proval by the Board and the committee, with the underst an ding that the respon** s i b i l i t y fo r the execution o f the recommendations would rest with the committee# He also explained that the report had been studied by the Governors1 Conference and that it was unanimously approved by that conference* A fter a thorough dis~ cuss ion o f the report concerning which various views were expressed by the differ** ent members o f the Board, Mr* Hamlin made a motion that the report be approved. Before a ction was taken on t h is motion, Dr. M ille r moved as a su b stitu te that the report be received and made a s p e c ia l order fo r some la t e r time to be fixed by Secretary Mellon and Governor C rissin g er, A fte r discu ssion th is su bstitu te motion was passed and the meeting adjourned at 12:10 o * clo ck p* m# George L* Harrison, Act ing Se c ret ary«
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