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A meeting of the Federal Open Market Committee was held in
the offices of the Board of Governors of the Federal Reserve System
in Washington on Monday, February 28, 1938, at 3:45 p.m.
PRESENT:

Mr. Eccles, Chairman
Mr. Szymczak
Mr. McKee
Mr. Ransom
Mr. Davis
Mr. Sinclair
Mr. McKinney
Mr. Martin
Mr. Day
Mr. Morrill, Secretary
Mr. Wyatt, General Counsel
Mr. Goldenweiser, Economist
Mr. Williams, Associate Economist
Mr. Dreibelbis, Assistant General Counsel
Mr. Burgess, Manager of the System Open
Market Account
Mr. Carpenter, Assistant Secretary of the
Board of Governors of the Federal Re-.
serve System

Upon motion duly made and seconded,
and by unanimous vote, the minutes of the
meeting of the Federal Open Market Com
mittee held on November 29, November 30,
and December 1, 1937, were approved.
Upon motion duly made and seconded,
and by unanimous vote, the actions of the
executive committee of the Federal Open
Market Committee as set forth in the
minutes of the meetings of the executive
committee on November 30-December 1, and
December 13, 1937, were approved, rati
fied and confirmed.
Mr. Burgess referred to the report submitted by the Federal
Reserve Bank of New York under date of February 24, 1938, of transactions
effected in the System open market account since the last meeting Of
the Federal Open Market Committee, and outlined briefly the transactions

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which had taken place since February 24 and up to the close of business
February 28, 1938.

The transactions and the resulting changes in the

maturities of securities held in the System account were discussed, in
cluding particularly the reduction which had taken place in the System's
holdings of longer term bonds.
During the discussion, Mr. Young, President of the Federal
Reserve Bank of Boston, joined the meeting as an alternate for Mr.
Harrison who was unable to attend the meeting because of illness.
Upon motion duly made and seconded,
and by unanimous vote, the transactions
in the System open market account since
November 29, 1937, and up to the close of
business February 28, 1938, were approved,
ratified and confirmed.
Attention was directed to the memorandum which had been pre
pared by Mr. Williams in response to an informal request of the members
of the Federal Open Market Committee on the subject "Did the Raising
of Reserve Requirements Cause the Depression?"

Copies of a draft of

the memorandum had been sent to the members of the Committee by Mr.
Williams under date of February 11, 1938, at which time he stated that
he was giving consideration to adding another section to the memorandum
and that the memorandum was only in draft form.

At this meeting he

stated that, after considering the matter further, he had decided not
to make any further addition to the memorandum, as the subject matter
of the contemplated additional section could be treated more appro
priately in an entirely separate memorandum, and that, therefore, he

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wished to submit the memorandum in

the form in which it

was sent to

the members of the Committee on February 11.
After a discussion of various sec
tions of the memorandum, upon motion duly
made and seconded, it was voted unanimously
(1) to accept and file the report, with
the understanding that the conclusions set
forth therein did not necessarily repre
sent the views of the members of the Fed
eral Open Market Committee, and (2) to
request Mr. Williams to prepare, for
submission to the members of the Committee
before the next meeting of the Federal
Open Market Committee, the second memo
randum covering the material which he had
contemplated putting in a fourth section
of the report.
In taking this action it was agreed
that the Secretary should send under con
fidential cover to the Presidents who are
not members of the Federal Open Market
Committee copies of the memorandum sub
mitted by Mr. Williams at this meeting,
and, when completed, copies of the second
memorandum to be prepared by him.
Reference was then made to the action taken at the meeting of
the Federal Open Market Committee on November 30, 1937, when Chairman
Eccles was requested to appoint a special committee to consider and
submit a recommendation to the full Committee as to the position to be
taken with respect to the extent, if

any, to which the Presidents and

boards of directors of the Federal reserve banks should be advised of
discussions and actions of the Federal Open Market Committee.

On be

half of the committee (Messrs.Szymczak, McKee and Sinclair) Mr. Szymczak

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stated that the committee had met on various occasions and decided to
submit to the Federal Open Market Committee the following recommenda
tions:
1.

That the Presidents of the Federal reserve banks who
are not members of the Federal Open Market Committee
be invited to the preliminary discussions at the
time of the regular meetings of the Federal Open
Market Committee for advice and information. Thus
the Presidents' Conference would precede or follow
the regular meetings of the Federal Open Market Com
mittee.

2.

That the Federal Open Market Committee consider the
adoption of a method by which members of the Federal
Open Market Committee may freely discuss matters con
sidered and actions taken at meetings of the Committee
with the Presidents of the Federal reserve banks who
are not members of the Committee. The method to be
adopted should be consistent with the provisions of
the rules and regulations of the Federal Open Market
Committee.
In explanation of the second recommendation, Mr. Szymczak stated

that the committee had not reached a unanimous decision on a recom
mendation as to the method by which the Presidents might be advised of
discussions and actions of the Federal Open Market Committee, but were
unanimously of the opinion that the question of giving such informa
tion to the directors of the Federal reserve banks should not be raised
at this time.
Upon motion duly made and seconded,
recommendation was approved
the first

unanimously.
In connection with the discussion of the second recommendation,

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reference was made to section 6 of Article I of the by-laws of the
Federal Open Market Committee which provides that proceedings, deliber
ations, discussions and actions of the Committee, except as required
by law and except as authorized by the Committee,
confidential,

shall be strictly

and Mr. Young stated that he felt that the section was

unduly restrictive, that he was not willing to be placed in the posi
tion of being unable to discuss with his directors matters relating to
the Federal Open Market Committee and its deliberations and actions,
and that the section should be amended.
There followed a general discussion
of the question raised by Mr. Young, at
the conclusion of which, upon motion

duly made and seconded, the following
resolution was adopted by unanimous vote:
RESOLVED, That the members of the Federal Open Mar
ket Committee be authorized to discuss in confidence

with the President of any Federal reserve bank the mat
ters considered and actions taken at meetings of the
Committee and its

executive committee.

Mr. Young stated that, while he had voted for the resolution,

he wished again to make it clear that he did not approve the section
of the by-laws of the Federal Open Market Committee referred to above.
Mr. Sinclair moved that the Com
mittee during its session tomorrow
consider the appointment of a special
committee to study section 6 of Article
I of the by-laws of the Federal Open
Market Committee and to submit a report
and recommendation as to changes in
the section at the next meeting of the
Federal Open Market Committee.

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Mr. Sinclair's motion, having been duly
seconded, was put by the chair and carried
unanimously.

Thereupon the meeting recessed,
with the understanding that the next

session would be held on March 1 at
11 a.m.

Approved:
Chairman.