December 9, 1947 FOMC Minutes

FOMC minutes

1948, and (2) a full written statement of the procedure would be submitted at the next meeting of the executive committee and the Federal Open Market Committee for ratification: 1. That interest bearing securities in the Account be allocated at the first of the year on the basis of the expense and dividend ratio of each Bank as against all the Banks; that this allocation be the only one for the year; and that the same basis of allocation continue in use. However, profits and losses on in terest bearing securities would continue to be al located on the basis of the average holding ratio for the preceding five years. 2. Holdings of Treasury bills would likewise be allo cated on the expense and dividend ratios to the ex tent that the several Reserve Banks were able to ac quire such securities within the limits of maintain ing the reserve ratio of 35 per cent or such other percentage as the Committee may determine. Profit and loss on Treasury bills would be allocated on the basis of the current Treasury bill holding ratio Bank as of the day profit or loss is realized. of each Eccles also said that the executive committee Chairman the executive committee be authorized, should would recommend that meetings of the Federal Open Market circumstances develop between some adjustment in the allocation procedure, Committee requiring be desirable pending the next such action as appeared to to take meeting of the Committee. stated that an Mr. Rouse the recommendation In discussing of allocation and made to simplify the procedure effort had been have to deal with it only understandable to those who make it more

occasionally and to reduce the amount of work involved in carrying out the allocations. Upon motion duly made and seconded, and by unanimous vote, the recommenda tions of the executive committee were approved. Mr. Leedy suggested that consideration be given to adopting a procedure of allocation that would tend to equalize the surplus accounts of the Federal Reserve Banks in relation to their paid in capital accounts. Chairman Eccles stated that, in accordance with action taken at the meeting on October 7, the executive comittee had discussed the proposal made in a memorandum from Mr. Rouse to Mr. Sproul under date of September 30, 1947, that the authority given by the Federal Open Market Committee to the Federal Reserve Banks to purchase Gov ernment securities under resale agreements be restored, and that, while it had not reached agreement as to the action to be taken, the executive committee had approved unanimously a suggestion that a memorandum be prepared which would state fully the reasons that might be advanced for and against action by the Federal Open Mar granting the authority, that the memorandum be sent ket Committee of the Federal Open Market Committee before the to all members committee, and that the recommenda next meeting of the executive at this meeting of the full Committee that the exection be made

utive committee be authorized to grant the authority if, after con sideration of the reasons for and against such action, the committee felt at its next meeting that the authority should be granted. Upon motion duly made and seconded, and by unanimous vote, the recommendation of the executive committee was approved. It was tentatively agreed that the next meetings of the Fed eral Open Market Committee should be held on February 27 and March 1, 1948, with the understanding that the next meeting of the Presi dents' Conference would be held in Washington on February 24-26, Chairman Eccles stated that the matters which had been dis at this meeting were of very great importance from the stand cussed possible effects on the Government security market, point of their to know the actions the many people who would like that there were that it would be very unfortunate proposed to take, and Committee or make any statement in con anyone present should talk about if which would disclose in with the Committee's discussions nection Accordingly, he suggested the nature of the discussions. any way his guard not to make any statements, everyone present be on that any indication of what which might give inadvertent or otherwise, with respect to open the System might be future policies of the operations or discount rates. market

Thereupon the meeting adjourned. Secretary Approved: Chairman.