February 29, 1944 FOMC Minutes

FOMC minutes

in the South and Mr. Upgren discussed some of the longer-range prob lems of banking. Mr. Goldenweiser presented a picture of the possible relationships between the volume of postwar employment and production, after which Mr. John H. Williams discussed some of the monetary prob lems of the war and postwar periods. Transcripts of these statements have been placed in the files of the Federal Open Market Committee. In the discussion which followed, Chairman Eccles stated that the economists had presented some far-reaching questions for which answers would have to be found if serious difficulties were to be avoided in the postwar period, that the Federal Reserve System was as well qualified as any organization to supply some of the answers to these questions, and that he hoped the economists of the System would direct their studies to this end. Subsequently and pursuant to author ity granted at this meeting, the statement of terms upon which the Federal Reserve Bank of New York will transact business with brokers and dealers in United States Government securities for the System ac count was approved by the members of the executive committee in the form set forth below: "TERMS ON WHICH FEDERAL RESERVE BANK OF NE YORK WILL BROKERS AND DEALERS IN UNITED STATES TRANSACT BUSINESS WITH FOR THE SYSTEM OPEN MARKET ACCOUNT GOVERNMENT SECURITIES Committee has directed the Fed "The Federal Open Market referred to as the Bank of New York (hereinafter eral Reserve United States Government securi Bank) to transact business in with reputable brokers System open market account ties for the qualifications and securities who meet the and dealers in such

"agree in writing to comply with the terms and conditions set forth below. "1. In determining whether a person (indi vidual, partnership or corporation, including a bank) is a qualified broker or dealer with whom the Bank will transact business, and the extent to which business will be transacted with such person, the following factors will be taken into consideration: (a) Integrity, knowledge, and capacity and experience of management; (b) Observance of high standards of commercial honor and just and equitable principles of trade; (c) Willingness (in the case of a dealer) to make markets under all ordinary conditions; (d) The volume and scope of business and the contacts such business provides; (e) Financial condition and capital at risk of business; and (f) The reliance that can be placed on such person to cooperate with the Bank and the Federal Open Market Committee in maintain ing an orderly market for Government se curities; to refrain from making any recom mendations or statements or engaging in any activity which would encourage or stim ulate undue activity in the market for Government securities; and to refrain from disclosing any confidential information which he obtains from the Bank or through his transactions with the Bank. "2. The Bank will obtain from such person an agree ment in writing to comply with the following terms and conditions: (a) He will furnish the Bank with a statement for the confidential information of the Bank and the Open Market Committee showing as of the close of business each business day: (1) The total amount of money borrowed (directly and indirectly); (2) The par value of all Government se curities borrowed; long and short, His position, both (3) in Government securities, classified by classes of securities and maturity by issues, if so requested groups (or by the Bank);

"(4) The volume of transactions during the day in Government securities, classi fied by classes of securities and ma turity groups (or by issues, if so re quested by the Bank); and (5) Such other statistical data as in the opinion of the Bank will aid in the execution of transactions for the Sys tem open market account. (b) At or before the completion of each transac tion with the Bank, he will furnish the Bank with a written notification disclosing whether he is acting as a broker for the Bank, as a dealer for his own account, as a broker for some other person, or as a broker for both the Bank and some other person. In the ab sence of a special agreement to the contrary with the Bank with respect to a particular transaction, he will not act as broker for any other person in connection with any transaction with the Bank, and he will re ceive no compensation or profit of any kind in connection with the transaction other than the specified commission paid him by the Bank. absence of special arrangements with (c) In the the Bank, delivery of securities will be made at the office of the Bank before 2:15 p.m. on the next full business day following the day of the contract and all payments by the broker or dealer will be in immediately available funds. He will furnish the Bank not less frequently (d) than once during each calendar year with a report of his financial condition as of a date not more than 45 days prior to the de the report to the Bank in form ac livery of ceptable to the Bank and prepared or cer by a public accountant acceptable to tified the Bank; and, upon the request of the Bank, it with a statement of condi he will furnish by his books as of a date tion as shown specified by the Bank. informed him of the Bank shall have (e) Unless to purchase or sell a particular its desire he will not of Government securities, issue other person offerings of solicit from any

"or bids for any issue of Government securi ties for the purpose of placing himself in a position to offer to sell to or buy from the Bank securities of such issue. "The Federal Open Market Committee has further directed that the Bank decline to transact any further business with a broker or dealer in any case in which the Bank has con cluded that the broker or dealer no longer meets the qualifi cations set forth above or has willfully violated or failed to perform any of the terms and conditions set forth in the agreement. "To the Federal Reserve Bank of New York: "The undersigned hereby agrees to meet the qualifications and to comply with the terms and conditions set forth above. "Dated: (Signature)" adjourned with the understanding that a Thereupon the meeting Open Market Committee would be held tomorrow, meeting of the Federal March 1, 1944, at 10:00 a.m. Secretary. Approved: Chairman.