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Reproduced from the Unclassified / Declassified Holdings of the National Archives

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APRIL 17, 1936


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The meet ing was called to order at 1®$4Q a* m# in the offices of the
Federal Reserve Board, there being present
Governor Harrison, chairman, Governors Young, Seay, and
Schaller, and Deputy Governor Burgess, secretary.
The secretary’s report of operations was reviewed and accepted.
At this point Governor locles entered the meeting#
After a brief general discussion the meeting adjourned to the Treasury
At 11:00 a. m. the committee met with the Secretary of the Treasury in
his office, there being present in addition to those noted above Secretary
Morgenthau, Under Secretary Ooolidge, and Messrs. Bell, Haas, and Upham.
There was a brief informal discussion of the program the Treasury might
follow in its issue of Treasury bills in ensuing weeks.
The meeting then proceeded to an infonnal discussion of the proposals for
an offering of obligations to refund the First Liberty Loan bonds which had bees
called for redaction on June 15 next.
The meeting adjourned shortly before 12;00 su and reconvened at 12:00 m*
in the offices of the Federal Reserve Board.
After discussion it was voted under general authority to make shifts be­
tween maturities voted by the Open Market Committee on February 5 to convert the
holdings of First Liberty Loan bonds in system account into Treasury notes if such
notes should be offered as part of a conversion program, or into other obligations
available in the market.

In this connection it was suggested that consideration

be given to exchanging a part of the maturing obligations into short term bonds

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Reproduced from the Unclassified I Declassified Holdings of the National Archives


rather than Treasury notes in order to secure a better yield.
After discussion it was also voted to authorize shifts between maturities
in the System account up to #25,000,000 if they should be neoessary as an influence
towards maintaining an orderly market»

It was understood that this authority would

not be exercised with the aim of pegging the market at any point, but solely if nec­
essary to avoid disorderly conditions in the bond market.

2h view of the infoimal suggestion which the Secretary of the Treasury* .

had made two weeks before over the telephone that consideration might be given to a
reduction in the System portfolio of goverrsnent securities, the question was raided
whether it would be wise at this time to make some sales of such securities*



was noted that when the suggestion had been discussed by telephone two weeks ago |
with the members of the executive comaittee and with Governor Bccles, it was not
believed wise to take any action.

It was also pointed out that the Treasury was

not now in favor of making such sales at the present time.

Governor Schaller and

Governor Seay emphasised the desirability of making sales as a means of securing
more flexibility for the portfolio when it could be done properly and without dis­
Governor Harrison suggested that the principal question was whether sales
should be made simply for the purpose of establishing the principle of flexibility
before the System was prepared to make sales as a part of a general credit policy
of restraint.
Governor Harrison also reported discussions which had been held during
past months by the directors and officers of the Federal Reserve Bank of tfew York
with respect to this question, and by agreement the Secretary read a confidential
memorandum which had been prepared for and approved by the directors of the New York
bank on March 21, 1935 as representative of the views of that bank at that time*
A copy of this confidential memorandum is attached herewith*

Reproduced from the Unclassified I Declassified Holdings of the National Archives

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After further discussion and review of the question it was unanimously
decided to take no action at the present time*
The meeting adjourned at 1:15 p* m.
At 2:30 p. m. the meeting reconvened, the same persons being present*
It was suggested that a full meeting of the federal Open Market Ctomittee
should be held in the latter part of May or early in June at the time when June
financing would be discussed.
There ensued a discussion of the distribution of government eecurifips
among the Reserve banks.

GoTernor Schaller pointed out that the holdings of;* the

Chicago bank were larger than their fair proportion on the basis of the method of
allotment now being used.

The question was raised whether there should be an

attempt to make redistribution of securities to bring the holdings in&9 better
conformity with the present allotment ratios*

Question was also raised whether

and on what basis the Hew York and Chicago banks might throw into System account
their present outright holdings of government securities*
After discussion it was decided not to attempt any major readjustment at
present, but to make a gradual redistribution by filling requests for additional .
allotments i&olly from the participation of the Chicago bank in the System account
until a better equalization of holdings had been reached, and it was understood
that the Secretary would communicate with banks showing a deficit at the end of
The question of further sales of 2 7/8 per cent bonds was discussed and
it was agreed that such sales would be arranged as and when market conditions are
Governor Young raised the question whether it would not be wise to
anticipate maturities of notes when they were within six months of maturity. The

Reproduced from the Unclassified I Declassified Holdings of the National Archives





committee was in sympathy with this idea in so far as it could be arranged with
advantage in the market from time to time.
There was some informal discussion of the amount of Treasury balances in
the Reserve banks, and attention was called to the fact that these balances were
larger than usual.
There was some informal discussion of the financial implications of the
bill for social security.

The meeting adjourned at 2!50 p. m,

W. Randolph Burgess,