June 9, 1937 FOMC Minutes

FOMC minutes

It was the unanimous agreement of the members present that the reasons for the authority granted to the executive committee by the full Committee at its meeting on May 5, 1937, to replace maturing se curities and to make shifts between maturities of securities in the Sys tem open market account still applied and that such authority should be renewed. Upon motion duly made and seconded, and by unanimous vote, the Committee instructed the ex ecutive committee to direct the replacement of maturing securities in the System open market ac count 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 $1,000,000,00 and that the amount of bonds having maturities in excess of five years be not over $850,000,000 nor less than $500,000,000. Reference was made to questions which had been raised with re spect to the forms of resolutions adopted by the Committee and it was suggested that a special committee be appointed to consider the forms of resolutions and submit a recommendation at the next meeting. Mr. Harrison moved that the Chairman appoint of three for the purpose stated. a committee This motion, having been duly seconded, was put by the chair and carried unanimously. authority to the executive commit Thereupon it was agreed that amount of securities in the System tee to increase or decrease the total reasons as had prompted similar be renewed for the same account should full Committee on May 5, 1937. action at the meeting of the duly made and seconded, and by Upon motion directed the executive vote, the Committee unanimous

committee to make purchases and sales (including authority to allow maturities to run off without replacement) of United States Government securities for the System open market account, to such extent as may be necessary before the adjournment of the next meeting of the Federal Open Market Committee, for the purpose of preventing disorderly market con ditions, provided tnat the aggregate amount of se curities held in the account shall not be increased or decreased from the amount now held in the account by more than $250,000,000; the kinds and maturities of the securities acquired or sold to be determined in the light of current market developments. Mr. Harrison stated that at the meeting of the Presidents'Con ference on June 7, 1937, following consideration of the report submit ted by Messrs. Smead and Burgess with respect to the formula used for the quarterly readjustment of the participations of the Federal reserve securities held in the System open market ac banks in the Government that, provided there is no substan count, the Conference had recommended in the account as of July 1, 1937, the par tial amount of depreciation in the account be readjusted the Federal reserve banks ticipations of in the readjustment on the same basis as that used as of that date on Mr. Harrison stated, The Conference also recommended, April 1, 1937. to determine wheth continue their studies Smead and Burgess that Messrs. could be devised. for such adjustments satisfactory formula er a more amount of there is a small the present time that at Mr. Burgess stated appreciation in the account. seconded, and by duly made and Upon motion was au committee the executive vote, unanimous of the a quarterly readjustment thorized to make banks in the Federal reserve of the participations in accordance July 1, 1937, as of System account, as that followed and procedure same plan with the

in connection with the adjustment made as of April 1, 1937, which contemplates that before it is ac tually made the proposed readjustment will be sub mitted to the Federal reserve banks for any comments that they may desire to make. The meeting recessed at 1:05 p.m. and reconvened at 2:45 p.m. with the same attendance as at the morning session except that Messrs. Schaller and Peyton were not present. Chairman Eccles suggested that consideration be given at this meeting to the proposal that the Federal Open Market Committee adopt a plan for purchases by Federal reserve banks of Treasury bills offered to them by member banks. The proposal had been discussed informally by the members of the Board of Governors and had been considered by and the Board at a meeting yesterday. Chair the Presidents'Conference man Eccles outlined the reasons why in his opinion it would be desir able to adopt such a plan and during a discussion of these reasons of the Committee raised questions which had occurred various members respect to the objective, effects, and operation of the to them with plan. that it would be desirable if the pro Mr. Harrison suggested standpoint of its effect by the members from the posal could be studied well as upon the credit policy as situation and the entire credit upon outlining the details that purpose a memorandum and that for bill market He also of the Committee. for the consideration the plan be prepared of the Treasury Depart discussed with matter had been whether the inquired that he had not been except that it had Eccles stated ment and Chairman

mentioned it briefly to Mr. Wayne C. Taylor, Assistant Secretary of the Treasury, whom he had told that he (Chairman Eccles) proposed to submit it to the Federal Open Market Committee for consideration. Mr. Ransom suggested that the executive committee be requested to study the entire matter and submit a report thereon for the con sideration of the full Committee. There followed a brief discussion of a question raised by Mr. McKee whether the executive committee should not confine its activities to the performance of administrative functions only and not be expected to consider questions of policy, Mr. Ransom moved that it be the sense of the Federal Open Market Committee that the executive committee should consider matters of policy from time to time, whenever it is requested or desires to do so, and submit recommendations to the full Committee with respect thereto. This motion having been duly seconded was put by the chair and carried unanimously. duly made and seconded, and by Upon motion the executive committee was requested unanimous vote, proposal presented by Chairman Eccles to study the send to the members of the full and to prepare and prior to a meeting of the Federal Open Committee, be held on August 5, 1937, a Market Committee to plan in detail, including outlining the memorandum and possible effects, its objectives, mechanics that the ex any views or suggestions together with to present for the committee might desire ecutive of the full Committee. consideration the meeting adjourned. Thereupon Approved: