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A meeting of the executive committee of the Federal Open
Market Committee was held in the offices of the Board of Governors
of the Federal Reserve System in Washington on Thursday, April 13,
1939, at 3:10 p.m.


Eccles, Chairman
Harrison, Vice Chairman
Messrs. Szymczak, Ransom and Davis,
Members of the Federal Open Market
Mr. Carpenter, Assistant Secretary of
the Federal Open Market Committee

Chairman Eccles stated that for the past three days he and
Mr. Goldenweiser had attended meetings at the Treasury which had
been called by the Secretary and had been attended by Commissioners
Douglas and Frank of the Securities and Exchange Commission, the
Secretary of Agriculture and another representative from the Depart
ment of Agriculture, and representatives of the Treasury Department
for the purpose of discussing what action might be taken by the Gov
ernment to meet the shock to business and the markets in this country
which would result from a major armed conflict in Europe.

He said

that yesterday Messrs. Harrison and Knoke of the Federal Reserve Bank
of New York, and Mr. Bartlett, Chairman of the Board of Governors of
the New York Stock Exchange, were requested to come to Washington
for further consideration of the matter today, and that at the meet
ing this morning the Secretary inquired what action the System was



prepared to take to maintain orderly conditions in the Government
security market.
Chairman Eccles said that he made it

clear that the System

would not approve any transactions for the purpose of pegging the
market but undoubtedly would be willing to take action for the pur
pose of attempting to maintain orderly market conditions and that
he would take the matter up with the members of the executive com
mittee of the Federal Open Market Committee who were in Washington.
The Secretary stated, Chairman Eccles said, that he would appreciate

if he could have an answer by 4:00 p.m. today for the reason that

he desired to be in

a position to advise the President of the pro

gram that had been agreed upon.
Chairman Eccles then referred to the draft of press statement
that had been prepared in the Board's offices last September which it
was contemplated might be issued by the Board in the event of war and
said that a recent redraft of the statement was read at the meeting
at the Treasury Department yesterday, that he suggested that instead
of the Board of Governors issuing a separate statement, it
more satisfactory if

would be

a single statement were issued covering the en

tire field of the action to be taken by the Government,

and that the

Secretary of the Treasury agreed with this suggestion.
At the meeting at the Treasury, Chairman Eccles stated,
there were discussions of three things that the System might do;

participate with the Treasury in the purchase of Government

securities for the purpose of stabilizing the Government securities


announce that the Federal Reserve banks were prepared

to loan on Government securities at par to member banks, nonmember
banks and possibly others, and (3)

reduce margin requirements on

loans made for the purpose of purchasing or carrying securities.
He stated that the first step was a matter for consideration by the
Federal Open Market Committee and that this meeting of the execu
tive committee had been called to consider the question.
It was agreed unanimously (1) that the ex
ecutive committee should ask the Federal Open
Market Committee for authority, in the event
of serious disturbance in the Government se
curities market resulting from armed conflict
abroad, to direct the Federal Reserve banks to
participate with the Treasury in outright pur
chases of securities and in that connection to
increase the System portfolio by not to exceed
$500,000,000, with the understanding that in
making such purchases it might become necessary
to exceed the $900,000,000 limitation on bonds
having maturities over five years contained
in the second resolution adopted at the meeting
of the Federal Open Market Committee on March
20, 1939, and (2) to advise the Secretary of
the Treasury that the executive committee had
agreed to request the full Committee for that
authority, it being understood that a meeting
of the full Committee would be held on Monday
or Tuesday of next week to ratify the action.
Messrs. Szymczak, Ransom and Davis stated that they were in
agreement with the action of the executive committee.
In view of the fact that there was not
sufficient time before this meeting was called
to notify Mr. Leach and afford him an opportu
nity to come to Washington to attend the meet
ing, the Assistant Secretary was requested to

call Mr. Leach and advise him of the action
taken and ascertain whether he concurred in
the action.
Chairman Eccles stated that it

was necessary for him and Mr.

Harrison to return to the Treasury for a further conference with the
Secretary and that he would suggest that, if

agreeable to the other

members of the executive committee, this meeting recess until 10:30
a.m. tomorrow when the committee would meet again for a further dis
Thereupon the meeting recessed to reconvene at 10:30 a.m.

(Secretary's note: In accordance with the request of
the executive committee, the Assistant Secretary called
Mr. Leach on the telephone at 5:10 p.m. and advised him
of the committee's action. Mr. Leach stated that he had
felt that in the event of hostilities abroad the Federal
Open Market Committee would have to take action along
the lines contemplated and that he was in agreement with
the executive committee's action. He also stated he
would attend the meeting of the executive committee to

Assistant Secretary.