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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 September 12, 1937, at 11:00 a. m.
PRESENT:

Mr. Eccles, Chairman

Mr. Harrison, Vice Chairman
Mr. Broderick
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Szymczak
McKee
Ransom
Davis
Sinclair
McKinney

Mr. Martin
Mr. Day
Mr.
Mr.
Mr.
Mr.
Mr.
Mr.

Morrill, Secretary
Wyatt, General Counsel
Goldenweiser, Economist
Williams, Associate Economist
Dreibelbis, Assistant General Counsel
Burgess, Manager of the System Open
Market Account
Mr. Carpenter, Assistant Secretary of
the Board of Governors of the Federal
Reserve System
Mr. Thurston, Special Assistant to the
Chairman of the Board of Governors of
the Federal Reserve System
Chairman Eccles stated that he had talked over the telephone
with Mr. Wayne Taylor, Assistant Secretary of the Treasury, and Secretary
Morgenthau with respect to the program of action suggested at the meet
ing of the Federal Open Market Committee yesterday afternoon and had
stated that the Committee and the Board of Governors were of the opinion
that, while the System could meet the situation by acting alone through
the open market,

it

was also felt that the most desirable action would

be the proposed joint action by the System and the Treasury.

Chairman

9/12/37
Eccles said that Secretary Morgenthau stated that the Treasury would be
glad to cooperate in a program along the lines suggested and that he would
take the necessary steps to release gold from the inactive account to the

extent of $300,000,000 upon being advised of the adoption of the proposed
program.
During the discussion of the proposed program there were presented
the following resolutions:
RESOLVED, That, until the adjournment of the
next meeting of the Committee, the executive com
mittee is authorized to direct the purchase in
the open market from time to time of sufficient
amounts of Treasury bills or other short-term
Treasury obligations to provide funds to meet
seasonal withdrawals of currency from the banks
and other seasonal requirements, for the purpose
of maintaining at member banks an aggregate
volume of excess reserves adequate for the con
tinuation of the System's policy of furthering
economic recovery through monetary ease; and
the executive committee is authorized from time
to time to direct a reduction of the holdings
of such obligations when the seasonal influences
are reversed or if other influences make their
retention unnecessary for the purposes of this
resolution. It is understood that the executive
committee, in the exercise of this authority, will
not increase or decrease by more than $300,000,000
the amount of securities now in the System open
market account without another meeting of the Fed
eral Open Market Committee.
RESOLVED, That, with a view to cooperation
in effectuating the policy declared in the above
resolution the Committee recommend to the Board
of Governors of the Federal Reserve System that
it request the Secretary of the Treasury favor
ably to consider the desterilization of approxi
mately $300,000,000 of gold out of the Treasury

9/12/37
inactive account, the time and method of such
desterilization to be determined by the Secretary
of the Treasury in consultation and cooperation
with the executive committee of the Federal Open
Market Committee.

Upon motion duly made and seconded,
the foregoing resolutions were adopted by
unanimous vote.

The meeting then recessed with the understanding that the
Board of Governors would convene to consider the request of the Fed
eral Open Market Committee that the Board request the Treasury to de
sterilize $300,000,000 of gold.
Following this recess the Committee reconvened with the same
attendance as at the earlier session and the Chairman stated that the
Board of Governors had voted unanimously to act in accordance with the
request of the Federal Open Market Committee.
Thereupon consideration was given to the

form of statement to be issued to the press
regarding the action taken by the System, and
the following statement was approved unani
mously for release in the morning papers of
September 13, 1937, with the understanding
that before such release the Chairman would
ascertain that the Secretary of the Treasury
approved the portion of the statement regard

ing the agreement on his part to release gold
from the inactive account:
"The Federal Open Market Committee met in Washington
on September 11 and 12 and reviewed the business and credit
In view of the expected seasonal demands on the
situation.
and credit during the coming weeks
currency
banks for
Executive Committee to pur
the Committee authorized its
chase in the open market from time to time sufficient amounts

9/12/37
"of short term U. S. Government obligations to provide
funds to meet seasonal withdrawals of currency from the
banks and other seasonal requirements.
Reduction of the
additional holdings in the open market portfolio is con
templated when the seasonal influences are reversed or
other circumstances make their retention unnecessary.
"The purpose of this action is to maintain at member
banks an aggregate volume of excess reserves adequate for
the continuation of the System's policy of monetary ease
for the furtherance of economic recovery.
"As a further means of making this policy effective,
the Open Market Committee recommended that the Board of
Governors of the Federal Reserve System request the Secre
tary of the Treasury to release approximately $300,000,000
of gold from the Treasury's inactive account.
The Board
of Governors acted upon this recommendation and the Secre
tary of the Treasury agreed to release at once the desired
amount of gold. This will place an equivalent amount of
funds at the disposal of the banks and correspondingly in
crease their available reserves.
"This action is in conformity with the usual policy
of the System to facilitate the financing of orderly mar
keting of crops and of autumn trade. Together with the
recent reductions of discount rates at the several Federal
Reserve banks, it will enable the banks to meet readily
any increased seasonal demands for credit and currency and
contribute to the continuation of easy credit conditions."
The members of the Committee concurred in the opinion that the
reasons for the authority previously granted to the executive committee
to replace maturing securities and to make shifts of securities in the
System open market account were still

present and that the authority

granted at the meeting of the Committee on June 9, 1937,

should be re

newed.
Upon motion duly made and seconded, and by
unanimous vote, the Committee instructed the ex
ecutive committee to direct the replacement of
maturing securities in the System open market ac-

9/12/37
count with other Government securities and to make
such shifts between maturities in the account as
may be necessary in the proper administration of
the account, provided that the amount of securities
maturing within two years be maintained at not less
than $1,000,000,000 and that the amount of bonds
having maturities in excess of five years be not

over $850,000,00 nor less than $500,000,000.
Reference was made to the question of quarterly readjust
ments of participations of the Federal reserve banks in the securi
ties held in the System open market account and to the consideration
which had been given to the matter by the executive committee since
the meeting of the full Committee on June 9, 1937.
It was agreed unanimously that further con
sideration of the matter by the Federal Open Mar
ket Committee should be deferred until the next
meeting of the committee.
The Chairman withdrew from the meeting at this point to ad
vise the Secretary of the Treasury of the action taken by the Fed
eral Open Market Committee and the Board of Governors with respect
to the desterilization of gold and by the Committee with respect to
the purchase of Government securities to offset seasonal influences.
Upon his return, the Chairman stated that he had read to the Secre
tary of the Treasury the proposed press statement and that the
Secretary had stated that it

was very satisfactory to him and

that he would deposit at once with the Federal reserve banks gold
certificates in the amount of $300,000,000,

with the expectation

that the funds would be withdrawn from the Reserve banks

in the

course of the next two or three weeks and used to meet Treasury

9/12/37
expenditures.

-6
In the circumstances, Chairman Eccles said, the Secretary

suggested that it

would not be necessary for the executive committee

to confer with him regarding the matter.
The procedure outlined by the Secre
tary of the Treasury was approved unani
mously.
Thereupon the meeting adjourned.

Secretary.

Approved:
Chairman.