September 21, 1938 FOMC Minutes

FOMC minutes

system open market account to such extent as the executive committee shall find to be necessary for the purpose of exercising an influence toward maintaining orderly market conditions, provided (1) that the total amount of securi ties in the account be not increased or decreased by more than 200,000,000, and (2) that the amount of bonds in the account having maturities over five years be maintained at not less than $500,000,000 nor more than $900,000,000. On behalf of the special committee (Messrs. Davis, Ransom and Sinclair) appointed to consider Section 6 of Article I of the by-laws of the Federal Open Market Committee and to submit a report and recom mendation thereon, Mr. Davis stated that the committee wished to submit the following recommendation: "That the last sentence of Section 6 of Article I, which reads as follows, be eliminated: 'Except as herein provided, no reports on the meetings of the Committee shall be made to any person or persons whatsoever.' "The committee has concluded that the foregoing sentence, apart from being somewhat redundant, is unnecessarily re strictive and, when literally construed with the preceding sentence of Section 6, prevents the members of the Committee from reviewing with officials and directors of the Federal Banks the background and reasons for past actions Reserve or meetings and tends to restrict the members of the Com obtaining from these sources valuable back mittee from on matters to be deliberated by the ground information the sentence will not re The elimination of Committee. nature of the matters considered and move the confidential acted on by the Committee." Mr. Davis stated that, if In explanation of the recommendation be authorized to the Committee would the members of it were approved, reserve banks of the Federal and directors with the officers discuss Committee but not Federal Open Market actions of the wholly completed

the actions which are currently effective or continuing matters of policy. He said that the special committee did not feel that a reso lution could be written which would define satisfactorily the matters that properly could be discussed, but that if it were clearly understood that the members of the Committee were expected to regard as strictly confidential actions and policies of the Committee which were still currently effective or continuing matters of policy, the Committee could rely on the judgment of its members to determine what constituted past and completed actions of the Committee which they would be at liberty to discuss with officers and directors of Federal reserve banks. Upon motion duly made and seconded, and by unanimous vote, the recommendation of the committee was approved, and the by-laws were amended accordingly. Mr, Davis stated that at the meeting of the executive committee of the Federal Open Market Committee on September 15, 1938, an informal request was made that he and Mr. Sinclair prepare a draft of a letter to Mr. Burgess with respect to his service as Manager of the System that the following letter was submitted for Open Market Account and the consideration of the Committee: "The members of the Federal Open Market Committee of your resignation as Vice have learned with regret Bank of New York and as of the Federal Reserve President of the System Open Market Account. Manager System has had a one in the Federal Reserve "No the development of you have had with closer contact than meeting its responsibilities of the System for the facilities

"in the important field of credit control or a more in timate relation with the execution of the policies which have been adopted in the discharge of these responsibili ties. The mature judgment which you were thus able to bring to the councils of the present Federal Open Market Committee as the newest instrument provided by the Congress to carry out the System's task in this field has made your service as Manager of the System Open Market Account an invaluable one. "The close ties of friendship which were formed when you were associated with the members of the Federal Open Market Committee in meeting common problems is of great worth to them and they all join in wishing you every pos sible success in your new undertaking." Upon motion duly made and seconded, the letter was approved by unanimous vote. Mr. Harrison stated that on two or three occasions recently he and Mr. Ransom had had an opportunity to discuss with the Secretary of the Treasury the policy of the Treasury Department with respect to discussion of the matter was had at the gold imports, that a further this morning when reference was made to the fact Treasury Department that the rapid increase to the present figure of $844,000,000 in the the general fund, of which $683,000,000 was free amount of gold held in public attention and comment in the gold, had attracted considerable of the Treasury with respect as to what the policy press and otherwise view of present indications particularly in the gold was to be, to in the near future substantially increased the account would be that advised, Mr. Harrison said, gold imports. The Secretary by further banks from time the Federal reserve to deposit with that he planned the round offset gold imports, gold to amounts enough time in round to with a result actual imports slightly above to be amounts deposited

that there would be a small reduction in the amount of gold held in the account as long as the program was continued. Following Mr. Harrison's statement the meeting adjourned. Secretary. Approved: Vice Chairman.