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Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority E .G . 1235^ CONFIDENTIAL y M inutes o f M eetin g o f Open M arket Investm ent Committee /L ? 7 3 . ^ .^w ___________ W ashington, D. C ., November I S , 1929___________ " / 'V * f The m e e tin g was c a l l e d to o r d e r a t 10r50 a . m. th e r e b e in g p r e s e n t G overnor H a r r is o n , chairm an, and G overn ors H a rd in g , N o r r is , Faneher and M cDougal, and Mr. B u rg e ss, a c t i n g s e c r e t a r y . The p r e lim in a r y memorandum and th e s e c r e t a r y 's r e p o r t , c o p ie s o f w hich a re a t t a c h e d , w ere p r e s e n te d and c o n s id e r e d . G overn or H a r r is o n then re v ie w e d the e v e n ts o f r e c e n t w eeks in th e New Y ork m ark et, w ith s p e c i a l r e f e r e n c e to th e v a r io u s s t e p s w hich had been taken in t h a t tim e t o p r e v e n t any s h o r ta g e o f money o r advan ce in money r a t e s i n f a c e o f th e trem endous s h i f t in lo a n s t o New Y ork C it y banks from o u t - o f - t o w n banks and o t h e r le n d e r s * In t h i s c o n n e c t io n G overn or H a rr is o n d is c u s s e d p a r t i c u l a r l y the p u rch a se o f la r g e amounts o f governm ent s e c u r i t i e s by the F e d e r a l r e s e r v e banks d u rin g t h i s p e r io d . He r e p o r t e d th a t as s h o r t term is s u e s had been d i f f i c u l t t o o b t a in in la r g e b lo c k s , i t was n e c e s s a r y to a c q u ir e some o f th e lo n g e r term is s u e s and i n d i c a t e d th a t t h i s was a f a c t o r w hich w ould have t o be k ep t in mind in any e x t e n s iv e program o f p u r c h a s e s . A f t e r f u r t h e r exten d ed d i s c u s s i o n the f o l l o w i n g r e s o l u t i o n was unanim ous l y a d o p te d \ "S in c e the m eetin g o f the Committee on Septem ber 2 4, the c r e d i t s i t u a t i o n has changed a b r u p t ly . There has been a s e v e r e l i q u i d a t i o n o f c r e d i t a g a in s t s e c u r i t i e s under c ir cu m s ta n c e s w hich c o n s t i t u t e a s e r i o u s t h r e a t t o b u s in e s s s t a b i l i t y a t a tim e when th e re w ere a lr e a d y i n d i c a t i o n s o f a b u s in e s s r e c e s s i o n . T h is seems c l e a r l y to i n d i c a t e th e need o f h a v in g th e F e d e r a l R eserv e System do a l l w it h in i t s pow er tow ard a s s u r in g th e re a d y a v a i l a b i l i t y o f money f o r b u s in e s s , a t r e a s o n a b le r a t e s . " I n view o f th e s e cir c u m s ta n c e s and f o r the p u rp ose o f a v o id in g any in c r e a s e , and i f p o s s i b l e f a c i l i t a t i n g some r e d u c t i o n , in the t o t a l volum e o f member bank d i s c o u n t s , th e Committee b e l i e v e s th a t the System sh ou ld be p rep a red t o in c r e a s e the open m arket h o ld in g s o f th e F e d e r a l r e s e r v e banks th rou gh the p u rch a se o f b i l l s i f th e y can bo a c q u ir e d in s u f f i c i e n t amounts w ith o u t i n t e r f e r i n g w ith t h e i r p r e s e n t d e s i r a b l e d i s t r i b u t i o n , and i f n o t , th rou gh th e p u r chase o f Government s e c u r i t i e s . m* Reproduced from the Unclassified / Declassified Holdings of the National Archives DECLASSIFIED Authority E .6 . 1235(5 " I t is b eliev ed by the Committee that th is may bo done with sa fe ty in the in te re s t o f business r/lthout the r is k that funds so put out by the Federal reserve banks would be used to stim ulate any abnormal or unnecessary expansion o f member bank c r e d it . "The Committee a lso has in mind the f a c t that present con d ition s may p o s s ib ly develop to the p oin t where, as an emergency measure, in the in te re s t o f m aintaining banking and business s t a b i l i t y , i t may be necessary q u ick ly to purchase large amounts o f Government s e c u r it ie s in order to avoid any un due stringency in c r e d it . "The Committee th erefore recommends that the present lim it o f $25,000,000 per week on the purchase o f government s e c u r i t ie s be removed and that the Committee be authorized in lie u th ereof to purchase not to exceed $200,000,000 o f government s e c u r it ie s f o r account o f such banks as care to p a r tic ip a te , in order that i t might be empowered and prepared to make purchases o f government s e c u r it ie s as and when i t may seem to be necessary fo r the purposes, or in the con tin gen cies outlin ed above, but f only with the understanding that there be a ca re fu l current r e view by the Federal Reserve Board and the Committee o f the consequences o f any such purchases that may be made, and that > another meeting with the Board be held at any time i t may seem d e sira b le to the Board or the Committee, and that in any event there be another such meeting not la t e r than the f i r s t week in January." At 1:00 p* m. Governor Harding l e f t the meeting a;;d the meeting adjourned at 2:05 p. m. At 2:40 the members o f the Open Market Investment Committee met with the Federal Reserve Board. In a d d ition to those mentioned above there were present Governor Young and Messrs. Hamlin, M ille r , James, Cunningham, Gold&nweiser, M cClelland, "Sinead and N o e ll. The S ecretary o f the Board read to the meeting the re s o lu tio n adopted by the Open Market Investment Committee. There ensued d iscu ssio n o f the general p o lic y o f purchasing s e c u r it ie s f o r the purpose o f reducing red iscou n ts, w ith a view of f a c i l i t a t i n g or paving the way f o r e a sie r money co n d itio n s ; it y o f emergencies a risin g which would have to be met ra p id ly ; the p o s s ib il and a ls o the extent to which the committee should be authorized to adm inister any p o lic y adopted. The meeting adjourned at 4:50 p. m. W. Randolph Burgess, A cting S ecretary.
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