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Reproduced from the Unclassified / Declassified Holdings of the National Archives DECLASSIFIED Authority E o . i o ^ o j \ CONFIDENTIAL MINUTES OF MEETING 01 THE OPM MARKET POLICY CONFERENCE TUESDAY, NOVMBSR 15, 1932, WASHINGTON, D. C, A I' . • The m eeting was c a lle d to order at 11 a* m ., th ere being present the fo llo w in g Governor H arrison, chaiiman, and Governors Young, N o r r is , Fancher, Seay, Black, McDougal, Geery, M artin , Hamilton, McKinney, and Calkins* The Conference voted to re c e iv e and place on f i l e th e report o f th e s e c re ta ry r e la t in g to operations in the system account since th e la s t m eeting o f the Conference on July 14, 1932* The chaiiman read t o the Conference the p relim in ary memorandum which had p re v io u s ly been m ailed to each member o f th e Conference, He then r e fe r r e d to the fa c t that at the Joint Conference th e day b efo re he had reviewed the Open Market operations o f the system since la s t February, o u tlin in g p o lic ie s and ob je c t iv e s and commenting upon the e f fe c t s o f those operations on the c re d it and banking p o s itio n o f the country. While i t was not necessary again to review that gen eral statem ent, he discussed the s p e c ific problem now b efore the Conference, that is , whether the systan should buy more s e c u r it ie s , s e l l same o f the present h oldin gs, o r le a v e th e account sta tio n a ry * He mentioned that th e net in flu en ce o f the various fo rc e s a ffe c t in g the excess res e rv e p o s itio n o f ‘ member banks in th e next few weeks v e r y probably would be in the d ir e c t io n o f a reduction o f those excess re s e rv e s . The gold in flo w has lessened somewhat in the past s e v e ra l weeks, the ra te o f return o f currency frcm hoarding has slackened and we are now fa c in g the season when currency c ir c u la tio n might be expected to expand f o r h o lid a y pur poses. A d iffe r e n t set o f fa c ts w i l l e x is t a ft e r the turn o f the year. A l l o f th e msabers o f the Conference were o f the opinion that th ere is no occasion to buy more s e c u r itie s at the present tim e. The question f o r the s Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority 2 d e c is io n o f the Conference th e r e fo r e was whether the system should now s e l l some o f i t s present holdings o r lea ve the account s ta tio n a ry . In discussing th is question the chairman expressed h is opinion that in a l l the circumstances which were mentioned the system should not s e l l now and that the question o f when it should do so was one which should he determined l a t e r in the lig h t o f circumstances as they might develop in the fu tu re . Governor McDougal stated that in h is opinion th ere was c e r ta in ly no reason fo r in creasin g the syston account at the present tim e and th a t, w h ile he would not recommend sales o f present holdings at the mcment, n everth eless, he thought it n igh t be w ise not to rep la ce some o f our Decsnber m a tu r itie s . Governor Seay said that in considering the problem we should keep in mind that the p rovision s o f the G la s s -S te a g a ll B i l l , a u th orizin g the Reserve Banks to 6 pledge government s e c u r itie s as c o lla t e r a l f o r Federal reserve notes e x p ire ^ on March 3 next unless fu rth e r extended by Congress. Governor Calkins suggested that i t might be wise t o au th orize the Executive Committee to decrease the present holdings up to an amount o f $150 m illio n , provided the excess reserves o f menber banks do not go belov/ £250 m illio n s * Governor Young said that i t would be p re fe ra b le not to make any change in the system holdings b efore the turn o f the year; that he favored allow in g some o f our holdings to mature, but that i t would be b e tte r to do so a f t e r the turn o f the year rath er than b e fo re . He f e l t , howeve'r, that even though we should not make any change in th e account u n t il a ft e r the turn o f the year., i t might be w ise now through d is c r e e t but in fe rn a l comment through th e press to l e t the public know that a reduction in the account might be expected a ft e r the turn o f the year. Governor Fancher expressed the opinion that we should do nothing now, but that perhaps we should lo o k towards a considerable reduction o f our holdings during January, Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority /O^Oj 3 Governor Hamilton stated that in h is opinion it was important from the point o f view o f the banks o f the country that we do nothing u n t il the Treasury ta x program is c le a r , perhaps sometime a ft e r December 15, Governor N o rris mentioned th e Importance o f economy in government fin a n ce, but stated he did not b e lie v e th ere was much chance o f an e a r ly adoption o f an econcmy program. He then stated that he did not fa v o r making any advance announcement o f our program, as might be im plied from Governor Youngf s remarks. He did f e e l , however, that at the time we do make a change in the system account i t must be ex plained to the country through d is c re e t p u b lic ity ; not by any foim al statanent o f the Federal Reserve Board or o f any Federal reserve bank, but through u n o ffic ia l advice to key nev/spaper men. Governor N o rris agreed f u l l y with the opinions p re v io u s ly expressed that th ere should be no change in the account at the present time* Governor Seay ranarked that w hile i t is no doubt true that January might be a b e tte r time than the present to allow s e c u r itie s to run o f f , n everth eless, we must recogn ize the fa c t that we should take advantage o f any fa vo ra b le opportu n ity to do so, perhaps even during December, Governor McDougal said he would lik e to see the systems holdings reduced; that th ere is too much reserve c re d it in the market and that w hile January might be a b e tte r opportu nity, n eve rth e le s s , th ere is ju s t ific a t io n fo r doing so now, e s p e c ia lly as we cannot see c le a r ly what may be ahead o f us and that we should take advantage o f present o p p o rtu n ities. Governor N o rris then made the fo llo w in g mot ion : "th at i t is the consensus o f the Conference that no change should be made at th is time in the amount o f the syst® i holdings o f government s e c u ri t i e s , and that th ere should be another m eeting o f the Cpen Market P o lic y Conference during the f i r s t week in January to consider the system ’ s p o lic y in the lig h t o f conditions as th ey ex ist at that tim e .” Reproduced from the Unclassified I Declassified Holdings of the National Archives DECLASSIFIED Authority 4 Following this motion, which was duly seconded, there was a discussion about the time of the meeting, Governor Calkins and Governor Seay raising the question whether it would be preferable to have it about the middle of Decaaber. Governor Seay then offered a substitute motion to the effect that the December maturities be allowed to run off without replacanent and that there should be another meeting of the Open Market policy Conference the first week in January. This motion was seconded by Governor McDougal, but when put to a vote it was not carried, ✓ Governor Seay and Governor McDougal voting in the affirmative, but the other ten governors voting in the negative. Governor Norris* motion was then carried un animously. After this action of the Conference there was a general discussion of the book profit in the systsn account with particular reference to the reserve that had been set up last year against losses existing at that time* It was the consensus of opinion that our present holdings should not be written up to market values but that the amount set up as reserve against losses last year should be restored to surplus« The meeting adjourned at 1 o*clock* George L* Harrison, Chaiiman* GLH:MAR
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