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Twenty-Sixth ANNUAL REPORT of the BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM COVERING OPERATIONS THE YEAR 1939 FOR 72 ANNUAL REPORT OF BOARD OF GOVERNORS account maturing within two years be maintained at not less than $700,000,000; and (b) that the amount of bonds in the account having maturities in excess of five years be maintained at not less than $500,000,000 nor more than $1,000,000,000. "That, in addition to such authority as may be contained in other resolutions of the Federal Open Market Committee and until other wise directed by the Committee, the executive committee be autho rized, upon written, telephonic or telegraphic approval of a ma jority of the members of the Federal Open Market Committee, to arrange for the purchase or sale (which would include authority to allow maturities to run off without replacement) of Govern ment securities in the open market from time to time for System open market account to such extent as the executive committee shall find to be necessary for the purpose of exercising an influence toward maintaining orderly market conditions, provided (1) that the total amount of securities in the account be not increased by more than $200,000,000 nor decreased by more than $200,000,000 excluding such decreases as may result from allowing Treasury bills in the account to mature without replacement under the preceding resolution, and (2) that the amount of bonds in the account having maturities over five years be maintained at not less than $500,000,000 nor more than $1,000,000,000. "That, in the event that armed conflict or political developments threatening armed conflict abroad result in serious disturbance to the Government securities market in this country, the executive committee be authorized, in addition to the authority granted by the resolutions set forth above and notwithstanding any limita tions or restrictions in those resolutions, to increase the securities in the account by not to exceed $500,000,000, and upon written, telephonic or telegraphic approval of a majority of the members of the Federal Open Market Committee by not to exceed an addi tional $500,000,000, if deemed necessary for the purpose of exer cising an influence toward the maintenance of orderly market con ditions, and, if and when market conditions warrant, to sell securi ties in the amount of any securities so purchased. Any purchases made under the authority of this resolution shall not be construed as limiting the powers granted under resolutions previously adopted at this meeting." With the exception of a change with respect to allowing bills to run off without replacement these resolutions were in the same form as the resolutions adopted at the previous meeting of the Committee and were adopted for substantially the same reasons. The change in the first two resolutions with respect to allowing Treasury bills to run off with out replacement was made for the reasons set forth in the following statement for the press which was approved at this meeting for publi cation when the first reduction was made in the amount of Treasury bills held in the account pursuant to the first resolution: "As a result of a reduction in holdings of Treasury bills, this week's statement of condition of Federal Reserve banks shows a decline of $1 in the System Open Market Account. This 1Subsequently, on June 29, 1939, the above statement was released to the press, showing a decline of $13,378,000. FEDERAL RESERVE SYSTEM 73 is in accordance with action taken by the Federal Open Market Committee on June 21, 1939. For some time past, Treasury bills have been purchased for the System's account at or near a no-yield basis and the account at times has had difficulty in replacing its maturing bills. It was decided that it would serve no useful purpose to continue full replacement of maturing bills, the supply of which is not always equal to the market demand. This action is in response to technical conditions in the bill market and does not represent a change in general credit policy." On the question of the approval of the statement Messrs. Eccles, Harrison, Szymczak, McKee, Ransom, Davis, Flem ing, Leach, Martin and Hamilton voted "aye" and Mr. Draper voted "no." MEETING ON SEPTEMBER 18, 1939 Members present: Mr. Eccles, Chairman; Mr. Harrison, Vice Chair man; Mr. Szymczak, Mr. McKee, Mr. Ransom, Mr. Davis, Mr. Draper, Mr. Fleming, Mr. Leach, Mr. Martin, Mr. Hamilton. 1. Authority to Increase the Amount of Securities in the System Open Market Account for the Purpose of Exercising an Influence Toward the Mainte nance of Orderly Market Conditions. On September 9, 1939, in accordance with the provisions of the third resolution adopted at the meeting on June 21, 1939, and at the request of the members of the executive committee, the members of the Federal Open Market Committee approved an increase of $500,000,000 in the authority of the executive committee to purchase securities for the Sys tem open market account. Upon motion duly made and seconded, and by unanimous vote, the action of the members of the Federal Open Market Committee in granting the additional authority referred to above was approved, ratified and confirmed. The outbreak of armed conflict in Europe had resulted in serious dis turbances in our markets and at the close of business on September 8 the System had purchased $317,000,000 of the $500,000,000 of purchases authorized at the meeting on June 21, 1939, for the purpose of exercising an influence toward the maintenance of orderly conditions in the Gov ernment securities market. The above action was taken to place the executive committee in a position to continue to make purchases of securities for the same purpose within the limit set. 2. Authority to Effect Transactions in the System Open Market Account. Upon motion duly made and seconded, the following reso lution was adopted by unanimous vote: "That the executive committee be directed until otherwise directed by the Federal Open Market Committee to arrange for such trans actions for the System open market account (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement) as in its judgment from time to time may be necessary for the purpose of exercising an in fluence toward maintaining orderly market conditions; provided that the aggregate amount of securities held in the account at the close of this date shall not be increased nor decreased by more than $500,000,000." 74 ANNUAL REPORT OF BOARD OF GOVERNORS This action was taken in the light of the unsettled conditions existing in our markets at the time which had resulted from the war in Europe and it was agreed that the executive committee should be given more flexible authority to execute transactions in the System account for the purpose of exercising an influence toward maintaining orderly market conditions. 1939 Members present: Mr. Eccles, Chairman; Mr. Harrison, Vice Chair man; Mr. Szymczak, Mr. McKee, Mr. Ransom, Mr. Davis, Mr. Draper, Mr. Fleming, Mr. Leach, Mr. Martin, Mr. Hamilton. MEETING ON DECEMBER 13, Authority to Effect Transactions in the System Open Market Account. Upon motion duly made and seconded, the following resolution was adopted by unanimous vote: "That the executive committee be directed until otherwise directed by the Federal Open Market Committee to arrange for such trans actions for the System open market account (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off without replacement) as in its judgment from time to time may be necessary for the purpose of exercising an influence toward maintaining orderly market conditions; provided that the aggregate amount of securities held in the account at the close of this date shall not be increased nor decreased by more than $500, 000,000." This action resulted in the renewal of the authority granted to the executive committee at the meeting of the Federal Open Market Com mittee on September 18, 1939, and was taken for substantially the same reasons as prompted the granting of the earlier authority.
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