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Reproduced from the Unclassified I Declassified Holdings of the National Archives

Authority d C O f d s r i a ^ p i

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MARCH 13, 1935*

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The meeting was convened at 10:40 a. m* at the offices of the Federal
Reserve Board, there being present
Governors Young, Fleming, Seay, and Schaller, and
Deputy Governor Burgess, secretary*
In the absence of Governor Harrison, Governor Young was elected chairman
pro tern.
Mr. Burgess reported that in accordance with the agreement of the
members of the committee by telephone, and under authority of the resolutions
adopted by the Federal Open Market Committee on February 4 to buy, sell, or shift
up to $250,000,000 of government securities, one half of the called Fourth 4 1/4
per cent Liberty bonds held in the System open market account had been delivered
to the Treasury for conversion into the new 2 7/8 per cent bonds, and that there
was still held in System account #42,367,700 of these bonds.

While the committee

had authorized the sale of these bonds in the market when possible, (with
corresponding purchases of other maturities) the market for Fourths had not been
strong enough to carry out the operat ion without interfering with the conversion*
Mr* Burgess reported that the Federal Reserve Bank of Hew York had followed the
same procedure as the committee with respect to its holdings of %12,000,000 of
Fourth 4 1/4 per cent Liberty bonds.
After discussion it was agreed that the remainder of these bonds in the
System account should be sold in the market if it could be done without depressing
the market and thus interfering with the conversion#

If this was not possible it

Was agreed that they should be converted into the new 2 7/8 per cent bonds with

Reproduced from the Unclassified / Declassified Holdings of the National Archives

the understanding that an attempt would be made later to shift into other maturi­
ties a sufficient amount to avoid relatively excessive holdings of a single bond
Mr. Burgess also reported that under the agreement of the committee to
buy up to $25,000,000 of bonds in order to maintain an orderly market, the follow­
ing purchases had been made:
For System Account

750,000 - 3

$ Treasury bonds 1951-55

775,000 - 3 l/2$ Treasury bonds 1949-52
4.050.000 - Fourth Libertys, for later delivery
1.100.000 - 3

$ Treasury bonds of 1951-55 for later delivery

2.240.000 - 3 1/8$ Treasury bonds 1949-52 for later delivery
System holdings of Treasury bills had been reduced by an

amount cor­

responding to the amounts of the above purchases actually delivered.

As the

market improved it might be possible to resell to the market some of the bonds
delivery of which had not yet been taken.

He also reported that the Treasury had

now undertaken to make purchases of called Fourths for its own account in order
that the System might not be loaded up with too large an amount of this maturity
in view of its already large holdings.
There was then a brief discussion of the question whether the Treasury
should call for redemption on June 15 any or all of the First Liberty Loan Bonds
now outstanding.
At 11:00 a. m. the committee adjourned to the office of the Secretary of
the Treasury, there being present in addition to the committee,
Secretary Morgenthau, Under Secretary Coolidge, and Messrs.
Bell, Haas, and Upham.
Governor Young reported the action of the committee with respect to its
holdings of called Fourth 4 l/4 per cent Liberty Bonds, and with respect to

Reproduced from the Unclassified I Declassified Holdings of the National Archives


purchases of bonds in the market to maintain an orderly market#

There ensued a

discussion of the proper function of the Federal Reserve System with respect to
the government security market, in the course of which there was pointed out the
necessity for a bank of issue to maintain a large proportion of its assets in short
term securities which can be liquidated rapidly at a time when it becomes the duty
of the bank to exercise restraint,*
There followed an extended informal discussion on the question of whether
the Treasury should call for redemption on June 15 the first Liberty Loan bonds.
All the members of the executive committee with the exception of Governor Seay
recommended that the First 4 1/4 per cent bonds be called, but that the First
3 1/2 per cent bonds should not be called at this time.

Governor Seay recommended

that both issues should be called#
At about twelve o ’clock the meeting adjourned briefly to Under Secretary
Coolidgefs office where the discussion was continued.
At 12:20 p. m, the committee returned to the Federal Reserve Board
After a brief further informal discussion of general iliatters* the
meeting adjourned at 12:45 p. m.

W. Randolph Burgess,