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Reproduced f mt e U c a s f e I D c a s f e Holdi s o t e N t o a A c i e
ro h n l s i i d e l s i i d
ng f h a i n l r h v s

Authority E q. i o S o i



WASHINGTON, D. C., JUNE 23, 1930,

The meeting was ealled to order at 10:40 a* b u , there being present
Governors Harrison {chairman), Norris, P&ncher, McDougal, and
Deputy Governors pstddock and Burgess (secretary)*
A preliminary memorandum reviewing credit conditions, and the secretary* s
report were submitted to the meeting*
Governor MeDougal expressed his desire to explain to the committee the
reasons underlying Chicago*s participation in the last purchase of Governments,
even though as a member of the committee he had opposed the purchase*

He expressed

the opinion that when the transaction was under consideration there was a surplus
of available credit; that money rates were low, and in his opinion too low, and
consequently he had voted accordingly*

Subsequently it was concluded that not­

withstanding the action referred to, Chicago would accept its participation in the
purchases because of a desire to support the majority of the committee in so far
as possible*
Governor McDougal further stated that under conditions now current,
rather than to further increase the System* s holdings of securities, he would be
willing to lot the market have a part of the present holdings of the system, and,
furthermore, would favpr letting acceptances go to the investing public where they
are in great demand, even though the System* s holdings mi git be materially reduced*
Governor McDougal then moved that no further purchases of Government
securities be made for System account at tbis time.
Governor Harrison stated that the occasion for the meeting was to review
the results of purchases of $50,000,000 of securities in the first two weeks in
June and to determine whether the executive canmittee desired to recommend any
further action to the Open Market Policy Conference,

Ho then reviewed recent


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developments in business and in the banking situation* pointing out that the busi**
ness situation appeared to be growing worse rather 'than better* that eatports aI>e
still falling off, that ecueaodity prices continue to decline and that there was
as yet no definite indication of a turn for the better.

He stated that it was the

view of the directors of the New York bank that the Reserve System should continue
to do everything possible to establish money conditions which would be favorable
to the recovery of business* and particularly which* would provide an ample supply
of funds for the bond market and thus afford means of distributing capital to
those businesses and sections of the world where purchasing power for our surplus
goods is now seriously curtailed*

The recent purchase of government securities

had been followed by seme further easing of money rates and by some improvement
in the bond market* though that market was not strong and was having difficulty
in meeting fully the demand for capital funds for business use.

This purchase of

securities had* however* been largely offset by a decline in the bill holdings of
the Reserve System, and it had become clear that in order to keep some surplus
supply of funds in the money market and thus stimulate the bond market it would
be necessary to continue the purchase of Government securities further*
Harrison stated that the directors of the New York Reserve Bank


voted at their

last meeting that in their opinion further purchases in the amount of about
$25*000,000 a week should be continued*
Governor Fancher left the meeting at lit30 and returned about 12; 15*
Governor Norris stated that the directors of his bank were opposed to
any further purchases of Government securities*

He indicated that in his view

the current business and price recession was to be ascribed largely to over-pro due**

and excess productive capacity in a number of lines of business rather than

to financial causes, and it was his belief that easier money and a better bond
market would not help the situation but on the contrary might lead to further in~
creases in productive capacity and further over-production#

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Governor McDougal*s motion was then carried by a vote of four to one:
that it was the opinion of the executive committee that it was not desirable at
this time for the Federal Reserve System to undertake any further purchases of
Government securities for System account at this time.

Governor Harrison voted

in the negative.
Question was raised as to whether it would be desirable to distribute
realized profits held in the Open Market Investment Account at the end of the half
year rather than waiting until the conclusion of the year as had been voted at the
Governors Conference in the autumn of 1929.

It was agreed by those present that

it was not desirable to make any change in the procedure agreed upon at that time
inasnuch as keeping the profits undistributed for the calendar year made it possibl
to average out profits and losses.

Governor Harrison raised the question as to

what would be the policy of the System in case it was found that discounts of the
System began to increase accompanying a continued seasonal decline in bill holdings
It was agreed by those present that any considerable increase in discounts should
lead to a further consultation as to the policy to be pursued, since an increase
in discounts was not desirable at this time.
The meeting adjourned at 1;35|># m.
During lunch at the Hotel Washington at which all members of the
committee were present the earning position of the different Reserve banks, as
shown by a tabulation of actual figures for the first five months and estimated
figures for the last seven months of the year was discussed.

It was agreed by

those present that it would not be desirable to have a general redistribution of
security holdings in the System account, in view of the fact that most of the
Reserve banks would prohably show a loss in their operations for the year, and any
distribution would simply operate to reduce the deficit shown by one bank at the
expense of increasing the deficit shown by another bank.

Those present, there­

fore, agreed that the distribution of purchases of bills and governments should

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continue to be made on the same basis as in recent months; that is, on the basis
of the size and general earning requirements of the banks as determined by their
expenses, dividends, and charge offs#
The meeting reconvened at 3:35 p. m. with the Federal Reserve Board,
there being present
Vice Governor Platt and Messrs. Hamlin, James, and Pole, and hlso
Messrs. McClelland, Smead, and Carpenter* and
For the committee, Governors Harrison, No iris, and Fancher, and
Deputy Governors Paddock and Burgess.
Governor McDougal found it necessary to take an earlier train.
Governor Harrison reported the findings of the Conference, stated the
position of the New York bank, and summarized the views of the other members of
the committee.

These views were further amplified by Governor Norris, Governor

Fancher, and Mr. Paddock.

There ensued a general discussion.

Mr. Platt submitted to the meeting a letter dated June 16 from Governor
Calkins, a copy of which is attached herewith*

The meeting adjourned at 4:30 p. i *