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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

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___________ W ashington, D. C ., November I S , 1929___________
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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
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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.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102