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Reproduced from the Unclassified I Declassified Holdings of the National Archives


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HELD iff

The meeting was called to order at 10*30, there being present:
Governor Harrison, chairman, Governors Young, Norris, and Fancher,
and Deputy Governors McKay and Burgess, secretary.
Governor Harrison reported on recent developments with respect to the
financial program of the administration, including the plan for purchases of gold.
There ensued a discussion of the program of purchases of government
securities, and the question was raised whether it would be desirable to stop
purchases at once.

The point was made that to do so

would involve an abandonment

of a program of gradual reduction of purchases which had been carefully outlined
at the meeting of the Federal Open Market Committee in Washington cm October 10,

A further objection lay in the probable depressing effect on the bond

market of a sudden interrupt ion of security purchases at a time when the bond
market was already adversely affected by recent developments.
After discussion it was generally agreed that the policy of gradually
diminishing purchases should be followed, and it was moved and carried that dur­
ing the coming statement week purchases of 14) to $18,000,000 should be made
unless subsequent developments make it appear inadvisable.

Mr. McKay voted in

the negative.
There was a discussion of the question of allotment of securities be^


Federal reserve banks, and it was agreed for the current statement week

for the coming week to continue to base allotments on the percentage of each
bank’s total reserves to the total reserves of the System.

Mr. McKay stated that

the Chicago bank, by reason of the action ©f its executive committee, was not in

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Reproduced from the Unclassified I Declassified Holdings of the National Archives

d e c l a s s if ie d

Authority C K O f( X ir j

a position to participate for more than 12$*

It was agreed that other banks

should be offered such amount of Chicago's participation as that bank did not take#
^ T h e question was then raised concerning the policy which should be fol­
lowed with respect to the conversion of approximately $84,000,000 Fourth 4 1 / 4 $ _
Liberty Bonds in

~^prTI 15.

System account vStich had been called for redemption next

It was suggested that, generally speaking, any considerable holding

of long term bonds was a violation of the principle of central banking.

It was

emphasized, however, quite apart from the desirability of cooperating in every
way with the Government, that with their present large holdings the Reserve banks
had a practical selfish consideration in the status of the government security
market, and that the value of the holdings might be seriously affected by any
failure of the conversion plan.


After extended discussion the following motion was passed, to be sub­
mitted to all members of the Federal Open Market Committee for their concurrences

Voted to request the members of the open market committee to
give the executive committee authority to offer for conver­
sion all or such part of the called Fourth 4 1/4$ bonds in
the System portfolio as may in the judgment of the committee
seem advisable from time to time in the light of all the cir­
The meeting adjourned at 12:55 p . m .

W. Randolph Burgess