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The meeting of the Federal Open Market Committee was reconvened
in the offices of the Board of Governors of the Federal Reserve System
in Washington on Tuesday, March 7, 1939, at 10:00 a.m.


Eccles, Chairman
Harrison, Vice Chairman

Carpenter, Assistant Secretary
Wyatt, General Counsel
Goldenweiser, Economist
Williams, Associate Economist
Dreibelbis, Assistant General Counsel
Sproul, Manager of the System Open
Market Account
Mr. Thurston, Special Assistant to the
Chairman of the Board of Governors
At the request of the Committee, Mr. Goldenweiser referred to
various factors that might be taken into consideration in determining
whether a change should be made in
Federal Open Market Committee at its

the resolutions adopted by the
meeting on December 30, 1938.

He repeated that, in his opinion, the System should follow the policy
of husbanding all of the means of control that it

has for the reason

that considerable difficulty might be experienced in the future in ex
ercising an effective influence in

the field of credit control.


said that the psychological effect of a departure from a fixed port
folio was an important one, that he would regret to see that effect
dissipated unless there was a compelling reason for such action, and



that a decrease in the portfolio should be used as a signal for a def
inite change in System policy.

He added that, in his opinion, there

was no evidence of any occasion for reversing the policy of monetary
ease which had been followed by the System and that he felt it
strengthen the position of the System in
was maintained at this time.

the future if


the portfolio

He made the further observation that with

excess reserves of member banks as large as they are at present there
was little

or no economic significance in a reduction of $100,000,000

or $200,000,000 in

excess reserves.

Mr. Goldenweiser's statement was followed by a discussion of
the question whether existing circumstances were such as to call for
a change in the resolutions adopted at the December meeting.
During the discussion Mr. McKee raised the question whether

was the intention of the Committee in December, when authorizing

the executive committee to allow maturities to run off without replace
ment under certain circumstances,

that such maturities would be re

placed in the System account as soon as the market conditions justified.
A majority of the members of the Committee agreed that this was the
understanding as indicated both by the resolution itself,

which stated

that maturing Treasury bills could be allowed to mature without re
placement or pending subsequent replacement,

and by the last paragraph

of the statement released to the press at that time to the effect that
because no change in

System policy was contemplated at the time maturing

bills would be replaced to the extent that market conditions warranted.

The discussion also related to the circumstances surrounding
the action of the Board of Governors in April 1938 in reducing re
serve requirements of member banks and the relation of that action
and the Administration's policy of monetary ease to the subsequent
actions of the Federal Open Market Committee.
At the conclusion of the discussion the
motion made by Mr. Harrison at the meeting of
the Committee yesterday afternoon that the
Committee adopt resolutions containing instruc
tions to the executive committee in the same
form as resolutions adopted at the meeting on
December 30, 1938, was put by the chair and
carried, Messrs. Harrison, Szymczak, McKee,
Davis, Fleming, Leach, Martin, and Hamilton
voting "aye", and Messrs. Eccles, Ransom, and
Draper voting "no".
The reasons for the adoption of these
resolutions were substantially the same as
the reasons for similar action taken at the
meeting of the Federal Open Market Committee
on December 30, 1938, which reasons were set
forth, in part, in the minutes of the meet
ing of December 30, 1938, in the public
statement released by the Committee on that
date, and in the record of discussions in
cluded in the minutes of previous meetings
of the Committee.
In connection with his vote Mr. Draper
made the following statement:
"I wish to explain my vote on this resolution. In my
opinion many persons interested in financial affairs, and
many financial officers of business concerns who follow
the Federal Reserve weekly statements, fix their attention
particularly upon the size of the System's portfolio. To
them a change in its size means a definite change in pol
icy. And this is true, I believe, regardless of explana
tory statements to the contrary by officials of the System
or anyone else.

"Therefore, until we are ready to make a real change
in policy, I believe it most important to maintain the
portfolio at its present size. For this reason, as well
as for other reasons given by Chairman Eccles and Mr.
Ransom, at the meeting on December 30, 1938, I wish to
vote No on the Resolution."

Thereupon the meeting adjourned.