June 28, 1943 FOMC Minutes

FOMC minutes

short-term securities in relation to total Government securities out standing was much smaller than at present. He suggested that when the present program of increasing the weekly bill offering to $1,000,000,000 was completed the amount of the weekly offering should not be increased further and that it might be desirable to issue a security with a nine months' maturity and a 3/4 per cent rate which the System would stand ready to purchase under a repurchase option as is now done with bills, which would make it unnecessary for the System to undertake to maintain a pattern of rates on maturities of less than nine months. Mr. Sproul felt that such an arrangement might create more of the present time, and he doubted the wisdom a problem than existed at a 3/4 per cent rate on what in effect would of undertaking to guarantee the opinion that such an arrangement would be a one-day bill. He was of of rates" as that was al problem of "playing the pattern not solve the the profits were larger, and into notes and bonds where ready moving by Chairman Eccles would encourage that that the change proposed tendency. Eccles' suggestion, fol was some discussion of Chairman There which members of the executive he reviewed the discussions lowing which which they the Treasury, and the recommendations committee had had with financing which had in connection with the had made to the Treasury, the procedure fol a discussion of There was also just been announced. with members of instance of conferring the Treasury in this lowed by

the executive committee and talking on the telephone with several of the Presidents, and there was agreement on the part of those present that it would be helpful if a procedure could be developed by which the Presidents would have an opportunity to learn of the recommenda tions of the members of the executive committee before the Presidents' individual conversations with the Treasury took place. All of the members of the Federal Open Market Committee were in agreement with the suggestion that the direction with respect to the purchase of bills issued to the Federal Reserve Banks at the meeting of the Federal Open Market Committee on March 2, 1943, should be changed to conform to the understanding reached at the meeting on Federal Reserve Banks would treat all purchases May 15, 1943, that the made pursuant to the direction as being subject to the condition that, the seller before the maturity of the bills, the Re upon request of bills of like amounts and ma serve Bank would sell to him Treasury turities at the discount rate of 3/8 per cent per annum. Thereupon, upon motion duly made and seconded, the following direction by unanimous vote, with the was approved that resales of Treasury understanding held under option would be for bills when so requested by immediate delivery the option holder: by the Federal Open Market Until otherwise directed are directed to Reserve Banks the 12 Federal Committee, may be offered to such all Treasury bills that purchase of 3/8 per cent per basis at the rate Banks on a discount the condition that purchases to be upon annum, any such request of the seller Bank, upon the the Federal Reserve

before the maturity of the bills, will sell to him Treas ury bills of like amount and maturity at the same rate of discount. All bills purchased under this direction are to be held by the purchasing Federal Reserve Bank in its own account and prompt reports of all such purchases are to be made to the Manager of the System open market account. There was also agreement that in the absence of some unfore seen development it would not be necessary to hold another meeting of the Federal Open Market Committee before a date in the early part of September, which it was suggested might be the 6th or 7th of that month, and that in order that the executive committee might have suf ficient authority during that interval the limitation on the authority to increase or decrease the amount of securities held in the account should be increased. Thereupon, upon motion duly made and seconded, the following direction by unanimous vote, with the was approved understanding that the limitations con tained in the direction were understood to include commitments for purchases or sales of securities for the System ac count: committee be directed, until other That the executive Market Committee, to ar directed by the Federal Open wise the System open market ac for such transactions for range market or directly with the count, either in the open sales, exchanges, replace Treasury (including purchases, letting maturities run maturing securities, and ment of be necessary in the prac replacement), as may off without of the account, or for the purpose tical administration level of prices the present general of maintaining about or for the purpose of Government securities, and yields supply of funds in the market; of maintaining an adequate held in amount of securities that the aggregate provided

the account at the close of this date (other than special short-term certificates of indebtedness purchased from time to time for the temporary accommodation of the Treas ury and Treasury bills purchased pursuant to the direc tions of the Federal Open Market Committee issued under dates of March 2 and June 28, 1943) shall not be increased or decreased by more than ,1,500,000,000. That the executive committee be further directed, until otherwise directed by the Federal Open Market Com mittee, to arrange for the purchase for the System open market account direct from the Treasury of such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary ac commodation of the Treasury; provided that the amount of such certificates held in the account at any one time shall not exceed $1,500,000,000. Thereupon the meeting adjourned. Secretary. Approved: Chairman.