The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
IP Reproduced from the Unclassified I Declassified Holdings of the National Archives declassified Authority E .G . IBSfc DRAFT 33 3 MINUTES OF THE MEETING OF THE OPEN MARKET INVESTMENT <£!“ (ITTEf Stm THE FEDERAL RESERVE SYSTEM, HELD AT THE FEEERAL' RESERF ___ ________________ BANK OF BOSTON, JULY 16. 1924________________ PRESENT! Governors Strong, McDougal and Harding* Mr* W ills, Chairman, Federal Reserve 3atok o f Cleveland, representing Governor Faneher* Mr, Matteson, Secretary o f the Committee* There were a lso present; Dr, A* C. M iller o f the Federal Reserve Board. Mr, F. H, C urtiss, Chairman, Federal Reserve Bank o f Boston* The meeting was c a lle d to order at 2;15 p„ m, by Governor Strong* Chairman* The minutes o f the meeting held on May 29, 1924, which had been p reviously submitted to the members o f the Committee, were f ormal ly appr o ved, The r a tio s o f p a r tic ip a tio n o f Federal Reserve 3anks in System purchases, computed upon the b a sis o f the regular monthly re p orts o f earnings and expenses, p reviou sly submitted to the members o f the Committee, were form ally approved. The Chairmans memorandum p ertain ing to the work o f the Committee with e sp e cia l referen ce to a program fo r the future, to* get her with the report o f the Secretary o f the Committee, with ac companying statements and data, were submitted,, On motion, duly made and seconded, i t was VOTED to au th oriie the Chairman to take the necessary steps to e f f e c t the exchange o f Treasury notes maturing September 15, 1924, for any short-term Government s e c u r it ie s that might be issu ed at that tim e, i f such exchange is p o s s ib le , witft the usual j j f (Jfyjf. Reproduced from the Unclassified I Declassified Holdings of the National Archives d e c l a s s if ie d Authority E .6 . U35k advices to the d iffe r e n t banks* On motion, duly made and seconded, i t was VOTED to authorize the Chairman to s e l l andj^epurchas^ / /'! s e c u r it ie s held in the S p ecial Investment Account on the next quarter ly tax p eriod , in September 1924, in the same manner as such sa les and repurchases were made through the New York and Chicago banks during the June 1924 ta x period* The question o f a temporary change in the p o lic y o f the Committee with resp ect to the d is t r ib u t io n^of bankers^acceptances 'purchased by the reserve banks was discussed at some length and i t was ttie opinion o f a l l present that the very lim ited volume o f such purchases at the present time did jriotj ju s t if y the c le r ic a l work and expense o f apportioning the purchases among the p a rticip a tin g banks. I t was, th e r e fo r e , on m otion, duly made and seconded, . * "1 VOTED that the apportionment o f b i l l s be tem porarily d is - \ continued u n til such time as the volume is s u f f ic ie n t to warrant a j resumption o f such d is tr ib u tio n . The purchasing o f b i l l s by the New York bank fo r other re serve banks was brought up in connection with the temporary discont in u a n c e o f the d is tr ib u tio n o f bankers acceptances. Governor Strong, on b eh a lf o f the New York bank, explained that the Federal Reserve Bank o f New York would do the best i t cou ld , as h e re to fo re , to execute orders fo r other Reserve Banks, when p o s s ib le , but ju s t now the rates and volume o f b i l l s made purchases d i f f i c u l t , i f not im possible. There follow ed a d iscu ssion o f the future p o licy o f the Committee with respect to increasing the volume o f short-term Govern ment s e c u r it ie s in the S p ecia l Investment Account and th e ir V Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority E .6 . 1235k —3 apportionment, The chairman’ s view, which was concurred in “by those present, was that the situ a tio n in the New York money market was now such that i t would be more advantageous to have purchases made as la rg e ly as p o ssib le in Federal reserve c i t i e s other than New York fo r the reason that the New York banks are discounting p r a c t ic a lly nothing and pur chases at th is time in New York would have a tendency to in crease the volume o f loanable funds in New York, whereas purchases made in other d is t r ic t s would have a tendency to increase the volume o f loanable funds in other se ctio n s o f the country. I t was, th e r e fo r e , on m otion, duly made and seconded, ^VOTED t o ra ise the lim it on the holdings o f Government se c u r it ie s fo r the S p ecia l Account from <^400,000,000 to a maximum of $500,000,000, such purchases t o be made at the d is c r e t io n o f the Chairman, as to p r ic e s , and to be so conducted as to avoid or minimize changes in the Credit situ a tio n or the market quotations fo r the s e c u r it ie s . The Chairman was lik ew ise authorized t o carry out the suggested plan o f hav ing purchases in so far as p o s s ib le made in other d is t r ic t s than New York; and i t was d ire cte d that the apportionment o f such purchases be on the b a sis o f estim ated d e fic ie n c ie s o f earnings as shown by the monthly fig u res to be furnished to the Secretary; such apportionment to be approved by the members o f the Committee, and the p a r tic ip a tin g banks. A fter a further d iscu ssio n with resp ect to the Comnitteef s a t titu d e toward p o ssib le purchases o f Government s e c u r it ie s beyond the $500,000,000 lim it , i t was, on motion, duly made and seconded, VOTED th at the Committee now expresses the view that i t would be in favor o f in crea sin g s t i l l further the lim it o f $500,000,000, con d ition s remain su b sta n tia lly as they now a re, and that the Federal If 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 ** 4 ta* • Reserve Board be asked to give t h is proposal i t s con sideration and furnish tb e Committee with an expression of i t s views. Dr* M iller presented a memorandum from Mr. Smead, o f the Federal Reserve Board, comparing tb e B oard's estimate o f earning a ssets required to cover 1924 expenses and dividends, taken from rep orts made to the Board by reserve banks, with a sim ilar schedule prepared by the Committee which was based on estim ated requirements fo r the year as re ported by the various banks to the Committee, The comparison d isclo se d that the Board*s fig u res covered operating expenses and dividends o n ly , whereas the Committee's statement included these items plus estimated reserves and ch a rg e -o ffs at the end o f the year; also the Committee's statement o f earnings was based on a ssets held aa o f June 30, while the Board’ s fig u res o f earninga were on the b a sis o f average during June, d aily holdings I t was understood th at before preparing new p a r tic ip a tio n ra tio s fo r August the Secretary would confer with Mr. Smead and that these r a tio s would then be submitted to the Committee b e fo re new apportionments were decided upon. In t h is connection i t was agreed to by those present that investments in Government s e c u r itie s made under the new a u th orization between now and August 1 , 1924, should be adjusted on the b a sis o f the new r a t io s . The exchange o f nearby m atu rities o f Government s e c u r itie s held in the S p ecia l Account fo r those having a longer time to run, by s e llin g tbe former and buying the la t te r in the market, was brought up fo r d is» cussion. No a ction was taken, the general view being that such tran sac tion s might in t e r fe r e with the program o f obtain ing the amount o f se c u r it ie s authorized by the Committee, and that such a change be considered when the Committee has completed a l l authorized purchases. mm Reproduced from the Unclassified I Declassified Holdings of the National Archives declassified Authority E .6 . U35 to ** 5 The Chairman reported that the suggestion had been made that the Committee buy some c ir c u la t io n bonds and that a large block o f 4s o f 1925 had been o ffe re d on a 1% b a s is . I t was the consensus o f op in ion that there would be no o b je ct in the Committee’ s buying them* In t h is same connection Dr. M iller sta ted that the Board had been advised by the Reserve Bank o f Dallas o f t h e ir d esire to s e l l in the neighborhood o f $550,000 » Zj* Consols o f 1930 owned by them and i t was suggested that the New York bank might undertake to s e l l them in the market. Governor Strong, on b e h a lf o f the New York bank, agreed to take the matter up with Governor McKinney, The question o f the time and place fo r the next meeting o f the Committee was discussed. Y/taile no d e fin ite date was fix e d i t was the general opinion that i t would be desirable to hold i t in Chicago as early in September as p o s s ib le , unless con d ition s should a rise in the meantime making an e a r lie r meeting necessary* On motion the meeting adjourned at 4:30 p . m. W. 3 . MATTESON Secretary* RSVIoSD PERCENTAGE OF PARTICIPATION OF FEDERAL RESERVE BANKS IN THE SYSTEM PURCHASES OF GOVERNMENT SECURITIES AND BANKERS ACCEPTANCES BASED ON THE EARNING ------ -----------Net Earning Less Current Expenses Paid and Accrued and Dividends Jan*l/24-June 30/24 Boston New York 4 71,312 Estimated Gross Earn ings July l/24-D eC .31/24 Based on learning Assets Held June 30 Remaining Unchanged T ota l Net Earnings Jan*l/24-June 30/24 and Gross Earnings July l/24-D ec* 31/24 Estimated Expenses July l/2 4 -D e c.3 1 /2 4 Including Dividends Estimated Chargeo f f s , Etc- 944,672 $1,015,984 $1,441,621 4 Amount o f Earnings Over o r Short o f Estimated Require ments fo r Year 1924 i 425,637- Revised of P articipj MONTH ^ UL j57- x50 0 ,8 9 1 3 , 5 i 8,ooo. 3,017,109 6,125,000 3,1 0 7 ,8 9 1 - Philadelphia 266,022 1 , 026,000 1 , 292,022 1,495,000 202,976- 2> Cleveland 261,400 1,258,500 1,519,900 2,507,000 987,100- 12% 368,530 1,152,500 1,521,030 1,180,000 341,030* 0 463,200 692,960 1,156,160 1,185,807 29,647- 195,115 1,956,087 2, 151,2 02 3,175,215 1 ,024,013- 12% 73,072 636,179 709,251 1 , 18 8 ,0 00 478,749- 6/0 10 8 ,0 0 0 828,000 936,000 1,153,000 217,000- 3* 84,300 1,067,000 1,151,300 1,538,000 386,700- 5/c 430,178 875,148 1,305,326 1,817,220 511,894- 6/0 85,000 1*504,000 1,589,000 2,544.000 955.000- 11% 11,905,238 #15,459,046 #17,364,284 #25,349,863 $8,326,609- 100% Richmond At la rrt a Chicago o t . Louis Minneapolis Kansas City Dallas San Francisco x£xpenses Exceed Earnings
@FedFRASER