March 1, 1945 FOMC Minutes

FOMC minutes

he said, it was necessary to take a bank's order and to make a number of telephone calls to ascertain the best price available and then make the securities or the proceeds from the sale of securities available to the member bank only after a delay of several days. The question was raised whether the service, if provided, could be limited to small member banks or whether it would not be necessary eventually to expand it to serve all member banks and possibly others. Chairman Eccles stated that this suggestion presented the whole question, which had been discussed on various occasions in the past by the Federal Open Market Committee, of the Federal Reserve Banks under taking to act as dealers for the purchase and sale of Government securi ties in their respective districts, and he expressed the opinion that the suggestion should not be adopted unless the Federal Reserve Banks were prepared to go the whole distance of furnishing a market for Gov ernment securities in their districts. The matter was discussed but no action was taken. On November 20, 1936, the Federal Open Market Committee adopted the Federal Reserve Banks, subject to the pro a resolution authorizing Act, as amended, and the 14 of the Federal Reserve visions of Section conditions, and limitations of the Board of Governors pre regulations, direction or authorization from thereunder, but without further scribed and sell at home or Market Committee, to purchase the Federal Open and bankers' acceptances and bills of exchange abroad cable transfers,

payable in foreign currencies, to the extent that such purchases and sales might be deemed to be necessary or advisable in connection with the establishment, maintenance, operation, increase, reduction, or discontinuance of accounts of Federal Reserve Banks in foreign coun tries. The purpose of this action was to simplify the procedure in connection with the handling of accounts with foreign central banks which are subject to special supervision by the Board of Governors of the Federal Reserve System under Section 14 of the Federal Reserve Act. Mr. Sproul stated that the need for the authority granted by the resolution still existed, that the small number of accounts abroad placed a limit on use of the authority, and that if the authority were discontinued it would be necessary to get the specific approval of the Federal Open Market Committee for small transactions executed in the management of accounts which the Federal Reserve Banks have on the books of foreign central banks. There was unanimous agreement that no action should be taken with respect to the resolution at this time. At the meeting of the Federal Open Market Committee on November of the fact that securities ac 1937, it was decided that, in view 30, quired by the Federal Reserve Banks in settlement of claims against be in such small amounts as to be unimportant from closed banks would the standpoint of credit control, the Committee, until otherwise

directed by it, would interpose no objection to a Federal Reserve Bank holding any such securities acquired by the Bank or to the sale of such securities wherever such sale was deemed to be advisable by the holding bank. From the information available to the Committee this authority had not been used by the Federal Reserve Banks for a con siderable period, and it was suggested that it might well be termin ated. Mr. Gidney expressed the opinion that the authority should be continued as none of the Federal Reserve Banks could foresee when they might be called upon to use it in connection with securities held as collateral for advances to a member bank which had become insolvent because of defalcations or some other unusual situation. The matter was discussed in the light of Mr. Gidney's opinion, and it was agreed unanimously that no action should be taken to terminate or amend the authority at this meeting. of the time for the next meeting of the Federal A discussion it was tentatively agreed that the Open Market Committee ensued, and June 20 and 21, 1945, with the understand next meeting should be held Conference would be held next meeting of the Presidents' ing that the discussions (other than 19, 1945, and that any further on June 18 and prepared by System econo held tomorrow) of papers the discussions to be postwar period that policies in the problems and mists on economic days specified for place during the upon should take might be decided

the meeting of the Open Market Comittee. Thereupon the meeting adjourned. Secretary. Approved: Chairman.