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MINUTES OF MEETING OF THE EXECUTIVE COM M ITTEE OF THE FEDERAL ADVISORY COUNCIL April 7, 1943 At 11:10 A. M., the Executive Committee of the Federal Advisory Council convened in the Conference Room of the Federal Reserve Building, Washington, D. C., on Wednes day, April 7, 1943, the Vice President, Mr. Harrison, in the chair. Present: Mr. George L. Harrison, Vice President; Messrs. Charles E. Spencer, Jr., B. G. Huntington, Robert V. Fleming, and WTalter Lichtenstein, Secretary. Various matters concerned with the bond drive about to begin were discussed. The meeting adjourned at 11:30 A. M. WALTER LICHTENSTEIN, Secretary. 6 MINUTES OF JOINT CONFERENCE OF THE EXECUTIVE COMMITTEE OF THE FEDERAL ADVISORY COUNCIL AND THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM April 7, 1943 At 11:35 A .M .,a joint conference of the Executive Committee of the Federal Advis ory Council and the Board of Governors of the Federal Reserve System was held in the Board Room of the Federal Reserve Building, Washington, D. C., on Wednesday, April 7, 1943. Present: Members of the Board of Governors of the Federal Reserve System: Governors M . S. Szymczak, John K. McKee, Ernest G. Draper, and Rudolph M. Evans; also, Messrs. Lawrence Clayton, Assistant to the Chairman; Chester Morrill, Secre tary of the Board of Governors; Liston P. Bethea, Assistant Secretary of the Board of Governors; Walter W yatt, General Counsel; E. A. Goldenweiser, Director, Division of Research and Statistics. Present: Members of the Executive Committee of the Federal Advisory Council: Mr. George L. Harrison, Vice President; Messrs. Charles E. Spencer, Jr., B. G. Huntington, Robert V. Fleming, and Walter Lichtenstein, Secretary. The Vice President of the Council discussed the effects of the Social Security Program. There was some discussion of Treasury financing and methods to be used in the com ing drive. The Vice President of the Council stated that there evidently had been a misunder standing as to the attitude of the Council toward direct purchases from the Treasury by the Federal Reserve System. The Vice President of the Council made it clear there had not been any general discussion in the Council of this subject but that it was his jbelief the majority of the members of the Council were opposed to direct purchases from the Treasury by Federal Reserve Banks. The meeting adjourned at 12:45 P. M. WALTER LICHTENSTEIN, Secretary. 7 HINU'TES^O? *SE*T11IG OF THE KXKCUTIVS (Xm iYTF* Ji 1 FEDERAL ADViroilY COUNCIL April 7 , r C i S— Spot**, o ^ f ; ^ s ts n ^ t : ^ derRX Advi- ^ »• *>■* ’ ■ » « .« . S T i * S . ' E ? x £ i ‘K : .h.lr. Present: Mr. George L» Harrison, Vice President! Mensr-,. Cha-le, F nobert V. K U a i n g , ana Walter Lichtenstein, sUreteryl ' TOe Secreb.rjr reported tfcnt H r. Bro,n , u Jems 19 4 3 still i l l and that Kr. Lane *fco b*"1 « • * “ »?P°int«d as alternate for Hr. Broen for this seating had sent i t#iegr--3 tfcst he u.jl and ran unible to attend th« meeting. to be present but probably hie tr in *as la te. Kr. Huntinpton H rriijon, stated th---1 one oi the recent act? passed by Congress permitted bills to be scid on ’’bids or otherwise.** Cona^ iuently, it would be possible to sell sEktil bsn&s b ills up to 100,030 without necessity of requiring bids for tceaie Be sx;>o 3*4id that fee had bi»en inlorsed that Chain&sn Eccles had stated on 5036 occasion or other that the ae&bers of the Council had & proved direct pur chases from the Treasury by the System. The records showed that this was not correct. Chairman Eccles had sssde a statement in regard to direct purchases to the aeabers of the Council on February 1 5 , 1943* but the Council had not taken a Tote on the subject and, as a Batter of fa c t , Harrison and Spencer had raised objections, thou.-jh Wakefield had a hproved* H^rri~on stated, in respect to the cjaiag drive, that Nee Tork bin^s of depositors but in most sections banks had refused to give out the aasas of tiieir depositors* i t is possible that Philadelphia m y reveal ^ oaaes. In lashing ton names were sent tc the Committee but amounts o~ deposits •ere not given. In other sections, tshile navies were not sent to coissiutees in charge of bond s a i n s , staffs of the larger>banka were soliciting their own positors. rev*.-led names bad de Sijeneer aaid that in soae cases U r g e accounts with he«d office* in 1** lorlc were entering subscriptions in Boston* He mas a*ra*w v ‘ «-** it rtfjbt be necess ry to sake delivery of the bonds in S ^ Y o r k awl con *H«rable ex ense would be incurred shipping securities -~o + g ^ Yc rk, * hu. tut it -ould be better si»ply to transfer ba-ancesfro. B o s t o ^ M w * ^ , ** odiously it is merely cotaaon sense to transfer eoney r* -her Jjbb fi!-~r.--->a pointed out that in the caB? ° l P | ^ “ ° * e° 0ffices sere ^ w>t practicable to nt«r subscriptions in bj.1 t,la ” fftee ••in *ined. The buying ould have to fail be clone by the head o f il ^ U i. The meetinp adjourned at 11* n* ® g* &BIUTES OF JOIHT COSFEpjgHCB OF ?n - ftYVYT'TTWtp ^ op th^ fkdehal 1m m;i BOAiiD OF GOnWORS Of"th^ * oom ivtm . nj>BUL RSSKRTB SXSTiJI April 7 , 19^3 federal Advisory Council a n d t h l ^ 0Baf t! 9* of the held in the Bo rd fex» of the Federal Reserve B u U a X / ^ s h t a g ' ^ T Syste., Pr* S“ t‘ “ “" b rB ° f tl“ * * “ « of a * " ™ * ™ of the Federal H e i r , , # S. Governors K. Ssyncsak, John K. BcKee. Ernest G D rea r -nrt Sadal;* K. rvansj also, Lawrence Clayton. Assist -r-t t - «- n . \ ' 'X Morrill, Secretary of th. Bo. rd of u l t L t Secretary of the Bo rd of Governors; Walter ^yatt, G m »r .i Coun^l*~r" A Goldenweiser, Birector, Bivij ion of Research snd Statistics! ‘ ' “ Council: Prerent: Herabcrs of tha Executive Coatiittoe of the Federal Advisory J Mr. George L. Harrison, Vice President; fiessrss. Charles t . Spencer, J r ., B. G. Huntington, Ho’oert V. Fleming, *nd filter Li chtens tain, Secretary. Mr. Huntington joined the meeting at 11s 50 A. M. Harrison discussed the effects of social security. Ee doe* not believe tr. .t tae present plan would necessarily aean the socialisation or nationalization of in.'iirance c apanies* In fact, insurance companies might well support the pl&a *,« jsaking people raore insurance conscious. Harrison went on to state thit lz*re wn3 not, in the opinion of most observers, such demnd for loans from brinks for thf- ur ose of buying government securities. One of the reasons for this was &at the drive to reduce personal Indebtedness had been very effective. McK^e. Iowa, Texas, and Colorado had inquired whether the Board had banged it -vi -w that the .ia it of borrowing for the purpose of purchasing gov?maeat bond- should he six non th s. He judged from this inquiry that seme of the districts were interested in the question. fcrriBon does not believe it ould help the Treasury to have the limit * lee o! the loans extended. I f Jborrowors were allowed a xonge period than *onths, the loan** would still be in effect ^h^n a nnr- drive started and this *Wild »itifjat+$ against the success of such a drive. vitin* McK-:;e said that m m political subdivisions had passed legislation per - f j nds to be invented in United State* g w n w e n t samirltlM. Som Xito Misr.nchunetts had alrays penaitted this. ~ H a r r i s r e it e r a t e bis plea that s e e plan of £ “ £e™itted7~ThIThnd m t M well in the lest war ^ * * £ " ^ V ^ i U ./ i f that buy whwi Cenai,. H« _J o in W out insurance companies -o u ld nore b" they coul - use funds accumul itod between drives* As it sorae insurance co*p*nii?xN would feel they could not afford to have their funds li« idle waiting for a new drive and thus would invest accumulnted funds eisewhere. He went on to say that various plans had b-*en suggested to couple the sale o:' Insurance with the sale o bonds. The insurance com v ie , however, did not wijih to give the i*. ression of competing for funds with the government and sc would act only if the Trtiasury were in entire accord. Sgymczak 3'iid that it was no*- too late to rake a change in rea.ect to the six sonths limit for borro ing as far as this coming drive •» concerned. Harrison stated a a in that a ll three methods (op^n market operations, borrowin:- by h nxs, and redera ticn of reserves) should used to Gain tain re serves. The majority of th> members of the Council wer«» p~obbiy not in aver cf direct porehases by the System from th'-; Treasury but the matter had not been discussed. Chairman Eccles had made a statement and the plan proposed had found fiver with - kefleld but both Harrison and Spencer had expressed opposition* There had really not boon any general discussion. ie says McK saturing b ills. ho is only in favor of d irect ur chases to ta*e c ^re of Szymc >'< states oh: t direct urchases should be used while drives were in prepress, which was really Keelec* point. Harrison says i f the 3o rd begins to finance the Treasury directly on the basis of 3/8*3 of 1%, then, if times oecame still sore difficult, men like Pitman would argue there was net really any n?-ed of paying 3 /8 ' s of 1%9 and the Federal :eserve banks ought to lend needed funds to the Treasury without any interest charge* Solden^eiser stated that the overdraft has been used in recent times by the Treasury tc avoid th necessity oi* drawing down the Ear Lo-m Deposit accounts and thereby reducing excess reserves* Szymczak said that the T r e a s u r y had sold directly to the System on t*o occasions* Harrison s id the Council felt direct buying should not be used to inurr se exc^na res* rv r, and he also believed it should not be used with the ides of later reselling th b ills as this would disrupt tho organisation of dealers* F^oalnr- say country ban-wS would, in his o inion, not be interested in •ecariti^s paying 3 /8 * s of 1 %m McKee states that it was the intention to ^.imit sales without requiring bids to £100,000 per bank. fa^rrlr.on feels that what small banks \mnt is a security with coupon ittached* rieming stated that he had been asiced by the Feder-il Reserve Ban* of Hichs»on i to fet In touch with the correspondents in hin district and try to induce these to buy bills but had found fjre it reluctance on the part of the smaller otncs* 1c be sure, I f the present b ill ponding in Congress exempts sny War Loan -v4« Deposit accounts froes the F . D. I . C. assessment and reserve rfiquirenents, it Ri^ht be that saall banks would bo -willing tc open War Loan Depop.it accounts and buy bills* H-.rri:-on instructed the Secretary of* the Council to ;>ut on the agenda for the May meetings direct purchase of bills by Federal Reserve banks for the urpose of creating excess reserves. Mc^oe said soaeone should ^ork up a ->fi.rtial payment plan to submit to the Treasury before the next financing is due. Harrison agreed to have a brief prepared on the subject of partial paysent plans. He feels the coBsnitaant should be directly to the Treasury, f*nd the Treasury should hold the bond?? until the.^e were fully paid. bring up the of Sror a b u lletin in the "Aaerican ?nc clain s th at bank employees aay be deferrable. Harrison stated that Line Young had as.tod hia tc raised by Colonel Slooaer Jersey in March 29, 1913$ question Banker* of Fleainr said that it ould be better for franks U remain in a kind of twilight sone as other ire they Eight coae under the jurisdiction of the United States Saployaent Be rd. Karri:-: on said that ti t^biliaatica plan juct published seeded to oait central banks. He hopes the Be trd &p.y be able to have central banks play sone part in any sack international plnn. Goldenweiser b e ^ ie w s that central ban^s still have & function ;s the aoney to cose from the various nation,-;! econosies w ill be handled by the central Darjts. Of course, it say destroy the control of the Federal Reserve System over the money aarket* Flesting asked about the new loans tc be made by the Regional Agricultural Credit Corporations. Evans says it *a s to be like V Loans, but there is not such enthusiasa. A b ill pending in Congress would provide insurance. For ex&aple, if it cost a arner 150.00 an acre to plant tomatoes, then i f he had 5 acres he *ould get a certific te whi-ih he could take to hit bank and borrow $?50* It would be a sort of ercentage guarantee which would be bankable. Harrl: on raised the question of the difficulty created for national corporations by a oeals froa a ll centers for subscriptions* The difficulty arises fro* the fact that the of each district based on deposits. He suggests that tha issue a steteasent explaining Treasury quotas are the situation. Spencer s t a t e d that Boston had funds of cor. orations w ith head offices in Mew Yoric. r<mc of these corporations would m ke subscriptions in Boston but uii %nt securities delivered in Net- York ■hich would create unnecessa ry ex; ense. The aeeting adjourned at 12*45 '*'•
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