The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
1066 A meeting of the Board of Governors of the Federal Reserve Systern was held in Washington on Saturday, July 17, 1943, at 11:00 a.m. PRESENT: Mr. Mr. Mr. Mr. Mr. Eccles, Chairman Ransom, Vice Chairman Szymczak McKee Evans Mr. Mr. Mr. Mr. Morrill, Secretary Bethea, Assistant Secretary Carpenter, Assistant Secretary Clayton, Assistant to the Chairman The action stated with respect to each of the matters hereinafte referred to was taken by the Board: The minutes of the meeting of the Board of Governors of the Fed- eral hesorve System held on July 16, 1943, were approved unanimously. Letter to the Presidents of all the Federal Reserve Banks, readas follows: "Since the maximum time for which credit for interdistrict cash items is deferred by Federal Reserve Banks is only three !;laYs, the Board has withdrawn the requirement contained in its J-etter X-2065 of November 18, 1920 (Loose-Leaf Service #4450) that changes in the interdistrict time schedule be submitted to the Board for approval before they become effective. "It will be appreciated, however, if the Board is ?romptly advised of any changes in your interdistrict or Intradistrict schedule for collection of cash items." Approved unanimously. Letter prepared for the signature of Chairman Eccles to Honorable taniel W. Bell, Under Secretary of the Treasury, reading as follows: "In response to your letter of June 7 the Board has given careful consideration to your suggestion that weekly reporting member banks be asked to report separately the amount of loans to brokers and dealers and to others, re!Otively, for the purpose of purchasing or carrying Gov,Aliment securities. 2 1067 7/17/43 -2- "Investigation of the figures already obtained from the weekly reporting member banks during and after the war loan drives seems to provide a general but reasonably adequate indication of the extent to which banks made loans for the purpose of purchasing or carrying Government secu?n_ties and of the liquidation in such loans. These figures include loans for purchasing or carrying other securities as well as Government securities, except that New York banks also report, as a memorandum item, their loans to brokers and dealers for the purpose of purchasing or carrying Government securities. The data reported by New York banks, together with information obtained from brokerage houses, the general state of the stock market, and the timing of changes in relation to war loan drives permit reasonable deductions as to the extent to which borrowings at weekly reporting member banks are for the purpose of purchasing G?vernment securities. As you suggest, a more precise in.Cation would be obtained by having all weekly reporting member banks report separate figures of loans for the purPose of purchasing or carrying Government securities. Even such figures, however, would not provide a distinction betTfeen purely speculative loans on Government securities and nose representing borrowings in anticipation of income to amortize the loans in a short time. "Reported figures summarized on the attached table show substantial increases in loans to brokers and dealers and to others for the purpose of purchasing or carrying securities between March 10 and May 5, 1943, followed by substantial declines in both types of loans. It will be 213served that the supplementary data obtained from New York ;1.t,Y banks indicate that a large part of the increase in " -) ans to brokers and dealers represents loans for the purPose of purchasing or carrying United States Government ”curities. It is reasonable to assume that the increase security loans by other weekly reporting member banks s e same period, both to brokers and dealers and to %1IjireT also reflects in large part purchases of United States Government securities with borrowed funds, although not necessarily for speculative purposes. "As I pointed out in our telephone discussion of this !natter yesterday, the Government agencies in general have °een criticized severely for collecting an increasing amount statistical data. Banks in particular have been burdened with extra reports during the war period in the face of an eve!'-growing shortage of competent personnel. I believe the addltional information which -would be provided through the x:eport suggested by you would be outweighed by the additional 1rden on the banks in providing information regarding loans , Ich make up a relatively small part of the total loans of oanks. 1068 7/17/43 -3- "While some of the loans made on Government securities have inflationary aspects, more importantly, such loans may be availed of by speculative subscribers to Treasury offerings of new Government securities. I believe, however, that this problem can best be met by requiring full payment wler?ver the subscriber receives a full allotment and by requirlng a higher percentage of down payment than heretofore when he subscriber is to receive only a part of his subscription. Alditional restraints on such speculation can also be provided by the Treasury through other regulations governing subscriptions and through the selection and pricing of the securities to be offered. . "In the above circumstances, the Board would appreciate it if you would reconsider your request. If you still feel that some such information is definitely needed, the Board would much prefer that the information be collected only from banks in New York City and Chicago and only as respects 1°ans made to brokers and dealers." Approved unanimously. Thereupon the meeting adjourned. E 4 kfM1p ecretary.
@FedFRASER