June 20–21, 1939 FOMC Minutes

FOMC minutes

deemed necessary for the purpose of exercising an influ ence toward the maintenance of orderly market conditions, and, if and when market conditions warrant, to sell securi ties in the amount of any securities so purchased. Any purchases made under the authority of this resolution shall not be construed as limiting the powers granted under resolutions previously adopted at this meeting. The committee composed of Messrs. Sproul, Thurston, Goldenweiser, and Williams reported and the Secretary read to the members of the Com mittee the draft of a revised statement which they had prepared. Certain changes were informally proposed during the discussion that followed. Upon motion duly made and seconded, the Committee authorized the executive com mittee to release for publication the fol lowing statement when the first reduction takes place in the amount of Treasury bills pursuant to the foregoing resolution of the Federal Open Market Committee: As a result of a reduction in holdings of Treasury bills, this week's statement of condition of Federal Re banks shows a decline of $____ in the System serve Account. This is in accordance with action Open Market taken by the Federal Open Market Committee on June 21, Treasury bills have been pur 1939. For some time past, account at or near a no-yield chased for the System's at times has had difficulty in re basis and the account It was decided that it would placing its maturing bills. full replacement of no useful purpose to continue serve supply of which is not always equal maturing bills, the is in response to demand. This action to the market market and does not conditions in the bill technical in general credit policy. represent a change agreed, however, that the It was the statement should second sentence in reduction takes place be omitted if no the statement is issued at next week and a later date. upon the approval of the The vote was as follows: "aye" foregoing statement Harrison, Szymczak, McKee, Messrs. Eccles,

Ransom, Davis, Fleming, Leach, Martin, and Hamilton; "no" - Mr. Draper. Attention was directed to the fact that at the last meeting of the Federal Open Market Committee there had been referred to a special committee composed of Messrs. Draper, Leach, and Martin the question of the advisability of causing periodic or other audits to be made of the System open market account, and there was read by the Secretary to the Committee the report dated April 19, 1939, of this special commit tee which contained a recommendation "That a resolution be adopted re questing the Board of Governors to cause its examining force in the future to furnish the Secretary of the Open Market Committee a report of each examination of the System Open Market Account". There followed a brief discussion of the practice pursued heretofore by the examiners of the Board of Governors of the Federal Reserve System. Upon motion duly made and seconded, and by unanimous vote, the recommendation of the special committee was approved. In this connection it was agreed unani mously that the Secretary should immediately advise the Chief of the Division of Examina tions of the Board of Governors of the action taken by the Committee with the suggestion that he communicate at once with the Board's examiners who it was understood were then at the Federal Reserve Bank of New York. the earlier discussion during the meet Reference was made to ing relating to the advice to be given to the Secretary of the Treasury with respect to the action of the Committee. Upon motion duly made and seconded, the was authorized to Chairman of the Committee

advise the Secretary of the Treasury of the action which the Committee had taken with re spect to the proposed reduction in the amount of Treasury bills held and in that connection the understanding was stated that the Chairman in advising the Secretary of the Treasury would call to his attention the importance of there being no publicity with respect to either the action or the proposed statement until the statement is released by the executive com mittee. Mr. Harrison then reported to the Committee that the regu lar weekly report of open market operations which is prepared at the Federal Reserve Bank of New York is sent to all members of the Fed eral Open Market Committee, to its Secretary, Mr. Morrill, to its Economist, Mr. Goldenweiser, to the Presidents of the Federal Reserve banks who are not members of the Committee, to the Secretary of the Treasury and to his Assistant, Mr. Daniel W. Bell, and to Mr. Smead, Chief of the Division of Bank Operations of the Board of Governors; and that copies are also furnished to Mr. Rounds, who acts for Mr. Sproul in his absence in handling operations in the Government se curity market, and to Mr. Sanford, as Assistant Secretary of the Fed Bank of New York. Mr. Harrison said also that copies eral Reserve Assistant Vice President, under Mr. are being given to Mr. Matteson, to Mr. Matteson's successor when Mr. Sproul, and should be given the bank on June 30, 1939. ceases active service with Matteson Upon motion duly made and seconded, of the weekly report the distribution was approved by Mr. Harrison described unanimously.

Thereupon the meeting adjourned at 1:05 p.m. Secretary.