March 19, 1936 FOMC Minutes

FOMC minutes

in the proper administration of the System account to enable it to re place maturing securities and to make shifts in maturities to meet changing market conditions. It was also agreed that the executive committee should have some limited authority for shifts in the account from shorter maturities to Government bonds. Accordingly, upon motion duly made and seconded the committee, by unanimous vote, instructed the executive committee to direct the replacement of maturing securities in the System account with other Government securities and to make such shifts between maturities in the account as may be necessary in the proper administration of the account, provided that the amount of securities maturing within two years be maintained at not less than $1,000,000,000 and that the amount of bonds be not over It was understood that the $350,000,000. authority granted to the executive committee would continue only until by the above action of the Federal Open Market the next meeting Committee. present that the execu of the members It was also the consensus or sell (which would include have authority to buy tive committee should for the System open to run off) securities authority to allow maturities in order that the limits as to amount, within reasonable market account circumstances not act promptly if in a position to Committee might be before a further meeting make such action desirable now foreseen should of the full Committee.. made and motion duly upon Accordingly, committee, by unanimous seconded the executive or to telegraphic subject was authorized, vote, members of of the by a majority written approval direct the to Market Committee, Federal Open the

purchase or sale of Government securities for the System open market account up to an aggregate amount of $250,000,000. Upon motion duly made and seconded, authority was granted, by unanimous vote, to each individual Federal reserve bank holding Government securities in its own portfolio to replace maturing securities in such account, and, with the approval of the executive committee, to make shifts between maturi ties in the account, provided that no change in the total amount of Government securities held by the Federal reserve bank was effected by such trans actions. It was pointed out that the authority granted to the Federal re serve banks by the action last referred to above corresponded to that granted to the executive committee in connection with the administration of the System open market account and was necessary for the same reasons. President Harrison pointed out that in the past Regulation "M" covering open market operations by the Federal reserve banks had pro no obligations payable in foreign currencies shall be purchased vided that of the Federal Reserve Board. He said that the Fed without the consent had held for the account of Bank of New York for many years eral Reserve banks certain balances, particularly in the Bank of the Federal reserve Settlements, and the Bank of France; England, the Bank for International had been invested to some balances held with these banks and that the these circumstances authority He pointed out that in extent in bills. Federal reserve banks to enable the be granted by the Committee should to replace as in foreign currencies which are payable to purchase bills the account of banks for by foreign central bills now held they mature the

the Federal reserve banks so as to maintain the existing portfolio. He also pointed out that the balances originally held in the Bank of England, the Bank of France and the Bank for International Settlements had been greatly reduced and stated that he believed that in the course of time the amount held in the account with the Bank for International Settlements could be substantially further reduced. In accordance with President Harrison's suggestion, upon motion duly made and seconded, the Committee, by unanimous vote, authorized the Federal Reserve Bank of New York to direct the purchase of bills payable in foreign currencies in such amounts as may be necessary to replace maturing bills now held for the account of Federal reserve banks by foreign central banks, including the Bank for International Settlements, President Harrison pointed out that the regulation adopted by the Federal Open Market Committee requires the executive committee to Committee informed of all transactions executed under the keep the full of the full Committee and stated that it had been the practice direction in the past to send to all Federal reserve banks weekly reports of opera tions in the System open market account. After a discussion it was agreed as the of the meeting that the existing practice sense should be continued without in this regard change. as the sense of the It was also agreed member of the Federal Open meeting that any the Federal re Committee representing Market of re have the privilege serve banks should of the banks the boards of directors porting to that a meeting of participating in his election held, that the Committee Committee had been the and by-laws, and that had adopted regulations

the Committee had selected the organization which had been set up. It was agreed that there should be no report of the discussions or the positions taken by the individual members of the Committee in such discussions. It was also understood that a copy of the by-laws would be sent by the Secretary to the president of each Federal reserve bank with the advice that the by-laws might be read at the next meeting of the board of directors of the bank subject to an understanding on the part of the directors that they should be treated as confidential. The Committee noted the receipt of a letter dated March 12 to the Committee from President Hamilton of the Federal Reserve Bank of Kansas City in regard to certain purchases of Government Federal Land Bank of Omaha securities from the agreements and instructed the under repurchase copies to all members of the Secretary to furnish the matter on the program Committee and to place at the next meeting. for consideration It was agreed as the sense of the meeting the Federal Open Market the next meeting of that on April 50, with the Committee should be held not prevent the that this would understanding of an earlier meeting. calling the meeting adjourned. Thereupon Secretary. Approved: