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Reproduced from the Unclassified I Declassified Holdings of the National Archives

DECLASSIFIED

Authority E g . / o Z o )

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MINUTES OF MliTlNG OF tOCTCT

OF THE

P P M MARKET POLICY CONFlff«JCg- MAY 231 1953
A meeting of the executive committee of the Open Market Policy Conference
was called in Washington at Governor Black’s office on Tuesday, May 23, at 11 a* m.
There were present:
Governor Harrison, Chainaan,
Governors Young, Norris, Fane her
and McKay, and
Governor Black*.
Governor Harrison called attention to the fact that because of Governor
Black’s appointment to the Federal Reserve Board, there was a vacancy on the
executive committee of the Open Market Policy Conference and that with the approval
of the other members of the committee he bad invited Governor Fancher to serve in
Governor Black’s place pending another meeting of the Open Market Policy dbnference.
Governor Harrison then presented to the committee the secretary*s report
of operations and a preliminary memorandum on credit conditions which was read and
discussed in some detail.

Governor Harrisold, referred to the fact that the Federal

Reserve Board’s approval of purchases of United States Government securities by
the executive committee of the Open Market Policy Conference up to an aggregate of
#1,000,000,000 was broader in scope than the resolution adopted at the last meeting
of the conference on April 22c and stated that Governor Black had requested him to
take up with all of the members of the conference in seme appropriate fashion the
question whether or not the authority given to the executive committee by the
resolution passed at the last meeting of the conference might not be extended.
After discussion it was voted unanimously to be the sense of the executive committee
that the authority given to the executive committee at the last meeting of the con­
ference, which limits the right to purchase government securities, either in the



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market or direct from the Treasury, wto mSet Treasury requirements," should be
amended so as to remove that restriction in order that purchases of securities
may be made promptly if in the judgment of the committee such purchases are
considered desirable, whether- or not to meet Treasury requirements.

It was

pointed out that this action, if approved by the conferencei ^ould enlarge the
powers of the committee to conform to the broader action of the Federal Reserve
Board in approving purchases of United States Government obligations without the
limitation as to Treasury requirements.
Governor Black expressed himself as being in agreement with this action
by the executive committee.
The committee then discussed the general situation in the light of the
preliminary memorandum with a view to ascertaining whether or not it would be
advisable to initiate some purchases of government securities at this time.
After discussion it was unanimously voted that the committee should purchase
$25 million of government securities this statement week provided a majority
of the Open Market Policy Conference approved of the proposed extension of
authority to the executive committee.

Governor Young explained that his vote

was predicated on the assumption that the Treasury would approve this action.
Governor Black advised the members of the committee that he was in­
clined to believe that a larger amount of securities - possibly $100,000,000
or $200,000,000 - should #be purchased, when there was more evidence of a real
need therefor.

He inquired whether, if the present improvement in business

activities and prices should fall off seriously, thp committee would then be in
\

favor of heavy purchases of securities.

Members of the committee expressed the

view that they would be in favor of such purchases under such circumstances.
Governor Black then stated that in consideration of the views expressed at this
meeting, as to the possible advantages of prompt action, he was agreeable to



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the proposal to buy $25,000,000 of securities this statement weekf with the under-*
standing that, if need for more vigorous action develops, such action will be
taken promptly*
Governor Black advised the committee, prior to the final action on the
resolution to purchase government securities, about proposed legislation to
eliminate the so-called gold clause from new issues of government securities#
He showed the committee a memorandum prepared by the Treasury on this subject and
stated that the Treasury and Administration were in favor of the bill.
point Secretary Woodin joined the meeting.

At this

Governor Harrison advised the

secretary that the committee had voted to purchase $25 million of securities this
statement week, but that one of the members of the committee wanted to be in­
formed of the views of the Treasury with respect to such a program. I Secretary
Woodin stated that he and the Treasury would have no opposition to open market
operations, but he felt, as did a majority of the committee, that there is no
necessity for Treasury approval of the proposal^
At the request of Governor Black each member of the executive committee
then expressed his opinions regarding:. (1) the proposed open market operations;
(2) the problem of keeping open licensed member banks; and (3) liberalization of
membership requirements in the Federal Reserve System.

During the course of

this discussion it appeared to be the unanimous opinion that one of the most im­
portant problems now before the system is to devise a procedure or program for
keeping open all member banks which have been licensed to open.

To accomplish

this, either the Federal reserve banks should have some legal protection against
losses on account of liberal 10(b) loans made for the purpose of keeping member
banks open, or else the Reconstruction Finance Corporation Act should be amended
so as to make it possible for the R. F. C. to advance sufficient funds to keep
open any member bank that had been licensed to open.

If this were done, and

membership requirements in the Federal Reserve System were liberalized, and prompt




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action taken upon the applications of sound state banks for membership, it was
felt that it would be possible adequately to take care of all sound banks either
through liberal 10(b) loans by the Federal reserve banksf or by loans through the
R. F. &•

Governor Black reported steps which were being taken designed to handle

these problems, but stated that there might be difficulty in obtaining the
requisite amendments to the law#
During the course of the discussion it was pointed out that various
governmental agencies had substantially different yardsticks for appraising loan
values and that it would be helpful were a more uniform basis of appraising values
arrived at.

There was also some feeling that the office of the Comptroller of

the Currency was becoming more strict rather than more liberal in the reopening
of closed banks and that the present regulations of the Federal Reserve Board re­
garding the admission of state banks to membership in the system are probably
more strict than present circumstances require#




George L. Harrisonf
Cha irman*