February 28, 1945 FOMC Minutes

FOMC minutes

meeting of the Federal Open Market Commit tee held on December 11, 1944, were ap proved. Upon motion duly made and seconded, and by unanimous vote, the actions of the executive committee of the Federal Open Market Committee as set forth in the minutes of the meeting of the executive committee on December 11, 1944, were approved, rati fied, and confirmed. Mr. Rouse distributed copies of a report prepared at the Fed eral Reserve Bank of New York covering open market operations during the period from December 11, 1944, to February 23, 1945, inclusive. He also presented a supplemental report covering operations in the ac count on February 24-27, 1945, and discussed the important points covered by the two reports. Copies of the reports have been placed in the files of the Federal Open Market Committee. The reports stated among other things that, since the previous meeting of the Federal Open Market Committee, the New York Bank had sold from the System account a total of $111 million of taxable bonds. Upon inquiry as to the effect of these sales on the market, Mr. Rouse repeated the statement contained in the report first referred to that had little influence on the upward trend other than to these sales had maintain orderly conditions in the market. raised the question whether, in view of the Chairman Eccles made from the System account follow large sales that might have to be offset gold imports and the return of currency from ing the war to

circulation and the possible effects of such sales on the earnings of the Federal Reserve Banks, it was desirable for the System to con tinue to sell its longer-term securities. At the conclusion of a brief discus sion of the point raised by Chairman Eccles, upon motion duly made and seconded and by unanimous vote, the transactions in the System account during the period from De cember 11, 1944, to February 27, 1945, in clusive, were approved, ratified, and con firmed. Chairman Eccles then referred to the letter received by him, as Chairman of the Federal Open Market Committee, under date of De cember 22, 1944, from Secretary of the Treasury Morgenthau requesting that the Federal Open Market Committee take appropriate steps, over a suitable period of time, to bring the yields of Treasury certificates of indebtedness back to approximately their September 1, 1944, levels. He also referred to the interim reply to Secretary Morgenthau's letter by Mr. Sproul on December 27, 1944, and to the subse which was made with the Secretary and others at the quent discussion of the matter at which time the position was taken by Treasury on January 10, 1945, him (Chairman Eccles) and Mr. Sproul that the situation in the certifi cate market was secondary in importance to a review of the entire-program were reached during the discussion financing. No conclusions of Treasury it was understood that Eccles said, but the Secretary, Chairman with and the Treasury would of the Board of Governors members of the staff of a suggested financing program with a view to preparing a draft confer

that might be agreed upon and that another meeting with Under Secretary of the Treasury Bell and other Treasury representatives should be held on January 16, 1945. Messrs. Eccles and Sproul reviewed the important matters dis cussed at the January 16 meeting as well as at a subsequent meeting on February 9. Mr. Sproul outlined briefly the important matters relating to Treasury financing which were discussed with Under Secretary of the Treasury Bell when he met with the Presidents on February 26, and with Secretary of the Treasury Morgenthau when he met with the Presidents yesterday afternoon for the purpose of discussing steps to be taken in connection with the policing of subscriptions to Government securities during war loan drives. Attention was then turned to the recommendations that might be made by the Federal Open Market Committee to the Treasury in connection with the program for the Seventh War Loan Drive. While this discussion was in progress the meeting recessed and reconvened at 2:15 p.m. with the same attendance as at the morning session except that Mr. Golden weiser was not present. At the conclusion of the discussion it was understood that Messrs. Rouse, Piser, and Kennedy would prepare a draft of memorandum the conclusions reached at this meeting, that the memo setting forth randum would be presented for discussion and approval at the meeting

of the Federal Open Market Committee to be held tomorrow, and that when Messrs. Eccles and Sproul met with Secretary Morgenthau tomorrow afternoon at 3:00 p.m. the memorandum would be presented as the recom mendation of the Federal Open Market Committee. Thereupon the meeting adjourned. Secretary. Approved: Chairman.