March 1, 1948 FOMC Minutes

FOMC minutes

27, 1948, a letter covering the recommendations that had been agreed upon would be prepared and submitted to the members of the executive committee for approval. He suggested that, in view of the changes in the membership of the full Committee, it would be desirable at this meeting to confirm the authority to the executive committee to send the proposed letter. Upon motion duly made and seconded, and by unanimous vote, the executive committee was authorized to prepare and present to the Treasury recommendations with respect to Treasury financing and debt management in accordance with the discussion as recorded in the minutes of the meeting of the Federal Open Market Committee on February 27, 1948. Mr. Carpenter read the direction issued to the executive committee at the meeting of the Federal Open Market Committee on 9, 1947, authorizing the executive committee to arrange December for transactions in the System open market account. In a discus changes in the wording of the direction, it was sion of desirable should be omitted from a agreed that the words "more closely" of the direction which would then clause in the first paragraph "for the purpose of relating the supply of read as follows: of commerce and business". the market to the needs funds in that would be of the authority was also a discussion There next few weeks in committee during the needed by the executive of security purchases by the of the probable large volume view

Federal Reserve Banks growing out of pressure upon the reserve po sition of banks because of income tax collections. At the conclu sion of the discussion Chairman Eccles stated that, should such action be desirable, additional authority could be granted to the executive committee by telephone approval of the members of the full Committee, and he suggested that the authority of the exec utive committee be continued with the same limitations as to amounts as were fixed at the meeting on December 9. Upon motion duly made and seconded, and by unanimous vote, the following direction to the executive committee was approved, with the understanding that the limitations contained in the direction would include commitments for the System open market account: The executive committee is directed, until otherwise directed by the Federal Open Market Committee, to arrange for such transactions for the System open market account, either in the open market or directly with the Treasury (including purchases, sales, exchanges, replacement of maturing securities, and letting maturities run off with out replacement), as may be necessary, in the light of the general credit situation of the country, for the administration of the account, for the mainte practical nance of stable and orderly conditions in the Government purpose of relating the sup security market, and for the to the needs of commerce and ply of funds in the market aggregate amount of securi business; provided that the at the close of this date other ties held in the account certificates of indebtedness than special short-term for the temporary accommoda from time to time purchased increased or decreased shall not be tion of the Treasury by more than $3,000,000,000. further directed, until committee is The executive by the Federal Open Market Committee, otherwise directed

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 accommodation of the Treasury; provided that the total amount of such certificates held in the account at any one time shall not exceed $1,500,000,000. At Chairman Eccles' request, Mr. Rouse reviewed the discus sion at the meeting of the executive committee on February 26, 1948, concerning the complaint of dealers who were not qualified to do business with the System open market account that they were being forced out of business because the Federal Reserve Banks had been the principal buyers of Government securities in recent weeks and because they could not qualify to do business with the System ac count under the terms established by the Committee in 1944. During a discussion of the matter along the lines set forth in the minutes of the executive committee meeting referred to, views were expressed to the effect that a careful study of the situation should be made, particularly with respect to the position of the smaller dealers, whether the present rules should be modified to enable to determine to qualify to transact business directly with additional dealers the System account. Bank had been asked to stated that the New York Mr. Sproul executive committee, which would make a comprehensive report to the the matter and report to the full Committee. reexamine committee, at its stated that the executive Chairman Eccles 26, considered again the desirability of making meeting on February

a special report to Congress of the kind referred to at the October meeting of the Federal Open Market Committee with respect to the monetary and credit problems with which the Committee had to deal, and that the executive committee had agreed unanimously that in view of the events that had transpired since last October there would be no point in making the report, and that such a recommen dation should be made to the full Committee. He outlined the reasons for the recommendation, and Mr. Sproul added that, while the Committee might again wish to consider the matter, he felt there was no basis for making a report at this time. Following a discussion, the recom mendation of the executive committee was approved unanimously. The date for the next meeting of the Federal Open Market Committee was set tentatively for Thursday and Friday, May 20 and 21, 1948, with the understanding that a meeting of the Presidents' Conference would be held in Washington on May 18 and 19, 1948, and that the details of the program for the week would be worked out by the Secretaries of the Committee and the Presidents' Confer ence. Thereupon the meeting adjourned. Secretary. Approved: Chairman.