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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 E .6 . IBSfe EXTRACT Of HIKOTES Of THE KL&TIffG OF THE OFES MARXSt IHVESTME8T COBBIITTEE HITS THE FEDERAL RESERVE BOARD HELD III WASHIIGTO*, FRIDATf DECEMBER 19, 1384^ 2 * PERTAI8IKG TO THE ACTIVITIES Of THE 0PS8 MARKET IHVESTMEST COMMITTEE / ^ < i ^ PRESEHTi Xeasrs* C ria e ln g e r, P l a t t , H a a lin , i i l l a r , «Taaee, Cunninghaa l > (le a b c rs o f th e Federal Reeerve Board) Honorable G . B. K inston, Qndar S ecretary o f th e Treasury Honorable V. t t c l n t o * , C om ptroller o f the Currency le a a r i. S tro ng, H arding, Pancher, IcDougal and R o rrla (Keabere o f th e Op«a Market Xnveataent C o a aittee ) H r. Mmtteson (S e c re ta ry o f th e C o a a itte e ). Governor C rls a ln g e r c a lle d the s e a tin g to o tile r a t 10s SO a . a . Governor Strong thee presented w r itte n rep o rta by h ia e e lf as Qtairman o f tlie C o a aittee and by the S ecretary e f th e C o a a itte e « M reviewed recant a o t iv it le a w ith r e la tio n to the C o a a itte e ' a account aa follow er (1 ) S e llin g March 15, 1025 o e r tifio a te a o f indebtedneaa and Treasury Hotea in o rd er to provide an a p p o rtu n lty fo r subscribers to the new Treaaury 4# loan to obtain s e c u ritie s to be need in exohange f o r th e nee bonda. Aa the a a rk e t waa bar# o f theee s e c u ritie s th e C oaaittee supplied f r e e ly , fro a a t par e e n t. b aaia down to one tran sa ctio n on a 1 per o ent. b a a la , o e r t if io a t e a to th e e x te n t th a t about $35,000,000 o f the Systea holding# o f Maroh e a tu r itie s were liq u id a te d . (2 ) Purchase o f o th e r U nited S tatea Govemaent a e o n rltle a fo r the C o a aittee account In o rd er to to rn bade in to the a a rk e t the funds taken c o t th ro n g the aale o f the $85,000,000 IIarch a a tn r itie e re fe rre d t o , thereby avoiding the a a rk e t lo s in g th is e n tir e aaount o f ftends. th e r e s u lt was to replace a l l o f theee a a le a , except about $17,000,000. Reference vae aleo aade to the $65,000,000 o f December 15, 1924 a a t u r lt ia e which were p a r t ia lly replaced by the purohaee o f $15,000,000 o f o th e r lastaee o f sh o rtto ra s e c u r itie s , thus reducing the S ystea'e account by $50 ,£00,000 w ith o u t any appre c ia b le e f f e c t on the aoney a a rk e t. Digitized for JL a FRASER *, jfcw-vuc i I / 7/ 2- S ' 5 3 3, - / - L . ~ r Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority E .6 . - 2 - I f was the fe e lin g o f th e C o a alttae th a t f r o * now on the account should l probably n o t be increased above th e present aaount and th a t fro® t in e to t ia e «e should liq u id a te soae o f our h o ld in g s . I t was also f e l t th a t i f aeaber bank: borrowing should be necessary, i t would b est be ia th e fo ra o f discounts and when th e seasonal re ta in o f funds takes p lace a f t e r January 1 th e discounts would aot as a b u ffe r along w ith a a tu rin g b i l l s and sales o f s e c u ritie s to absorb the re tu rn flow o f h o lid a y cu rrency. I f thea th e re is any excess o f fands I t a ig h t be ad visable to a a rk e t soae o f the In ve stae n t account. I t was considered th a t the w ithdraw ing o f soae 170,000,000 by the Treasury fro a d ep o sitin g banks to aake i t s payaents d uring the Deeeaber 15 ta x period a ig h t Induce soae fu rth e r borrowing and in a n tic ip a tio n the Seserve Bank o f lew Tork expects I t w i l l be necessary to advance th e b i l l r a te to&5 per cen t. That would l ik e l y be th e la s t advance to aake |tt present and would r e s u lt In having the saaa r a t e , 5 per c e n t., on both b i l l s and discoun ts. A fte r considerable discussion as to what th e reserve banks* buying ra te fo r acceptances should be and as to the probable e ffe o t o f a change to $ p er c e n t ., I t was the opinion th a t th e ra te on b i l l s a a tu rin g over 50 days should be 5 p e r cent* snd th a t f o r the present the t 5 /4 per ce n t, r a te on sh ort b i l l s should co n tin u e, w ith a gradual change la t e r on to 5 p er c e n t, as and when condition s w arranted. I t was, howevert considered th a t in view o f the p o s s ib ility o f a change la th e s itu a tio n a f t e r January 1 th e C o a aittee should arrange to a e e t s h o rtly th e r e a fte r to review the e ffe c ts o f th is ra te change on the aoney aiarket and the e f f e c t o f m y sales b e fo re any fu rth e r actio n Is take n . i r . B a a lin then aoved th a t the Board note with approval the re p o rt o f the C o a a itte e , in c lu d in g I t s proposed fu tu re ac tio n as oontained in the statements o f the The meeting adjourned a t 12*40 p. a (Signed) >• B. la tte s o n Secretary