March 17, 1941 FOMC Minutes

FOMC minutes

direct obligations be omitted from the bulletin table as a separate item and lumped with those of "other holders" or those of Government agencies and trust funds in the same manner as guaranteed obligations were shown. Inasmuch as the annual report of the Secretary of the Treasury was ready to go to the press when the matter came up the question was presented to Chairman Eccles, as Chairman of the Federal Open Market Committee, who authorized the Secretary's office to advise the Treasury that no objection would be made to the publication of the information in the annual report of the Secretary of the Treasury. Mr. Rouse stated that the question involved was one of prin ciple whether the Committee wished to authorize the Treasury to pub lish information with respect to the System account before it was published by the Federal Reserve System itself, that the matter was of no particular importance at this time because of the small amount of holdings of guaranteed obligations, but that if at any time there should be a considerable volume of transactions involving guaranteed issues and information with respect to these transactions were cur rently released it might have an undesirable effect on the market and the information might be taken advantage of by speculators. In the discussion which ensued, Mr. McKee moved that the action taken by Chair man Eccles in this matter be ratified, that the Committee recommend to the Board of Governors that separate figures with respect to direct and guaranteed holdings of the Federal Reserve Banks be shown in the weekly statements of condition of Federal Reserve Banks published by the Board and in the

Federal Reserve Bulletin, and that the Treasury be advised that no objection would be made to the publication in the Treasury monthly bulletin of data with respect to direct and guaranteed holdings of the Fed eral Reserve Banks in the manner in which they were shown in the table on page of the January 1941 Treasury bulletin. During the discussion of Mr. McKee's motion, Mr. Sproul sug gested that the publication by the Federal Reserve System of separate figures with respect to direct and guaranteed holdings of the Federal Reserve Banks be in the Federal Reserve Bulletin and not in the weekly statement of condition of Federal Reserve Banks for the reason that if publication in the latter form were adopted it would be difficult, if not impossible, to discontinue the weekly publication of the fig ures and it might be found, should it become necessary again to carry out substantial operations in guaranteed obligations, that current publication of such information would be undesirable. At the conclusion of the discussion, Mr. McKee's motion, which was duly seconded, was adopted by unanimous vote. At this point Messrs. Roy A. Young, Sinclair, Gilbert, Day, McLarin, Hitt, Leedy, and Sienkiewicz reentered the room and Mr. Rouse reviewed for their information the conditions in the Government security market during the recent period. Chairman Eccles suggested for discussion the question of the place of the Federal Reserve System as a central banking system in the existing situation, particularly in view of the lack of adequate

authority in the System to control the credit situation. He also suggested that consideration should be given to the part that the System should play in assisting the Treasury in regard to the financ ing operations of the Government. There followed a discussion of the questions raised by Chair man Eccles and of changes that might be made in the procedure for issuing Government securities. Chairman Eccles suggested that the executive committee be requested to have some preliminary studies prepared which could be presented to, and discussed with, the Presi dents of all Federal Reserve Banks before taking the matter up with the Treasury. Mr. McKee suggested a review of the available information as to the financing procedure followed during the last war. At the conclusion of the discussion, Mr. Sproul moved that the executive commit tee have studies prepared along the lines suggested during the discussion and that, when a draft of program had been prepared, the Presidents be called to Washington for the purpose of discussing the program with the understanding that, if a program could be agreed upon, it would be presented to the Treasury for consideration. Mr. Sproul's motion, having been duly seconded, was put by the Chair and carried unanimously. Mr. Fleming suggested that if possible, copies of the draft of program prepared for discussion with the Presidents be sent to them before a meeting is called so that they will have an opportunity to study it.

In a further discussion, the suggestion was made by Mr. Davis that the program prepared by the executive committee should be formu economic situation rather than on lated in the light of the entire basis of the problems immediately connected with Govern the narrower ment financing. Thereupon the meeting adjourned. Secretary. Approved: Chairman.