FOMC Minutes

A meeting of the Federal Open Market Committee was held in

the offices of the Board of Governors of the Federal Reserve System

in Washington on Wednesday, February 28, 1945,

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

at 10:15 a.m.

Eccles, Chairman

Sproul, Vice Chairman

Szymczak

McKee

Ransom

Draper

Evans

Leach

Young

Mr. Davis

Mr. Peyton

Mr. Morrill, Secretary

Mr. Carpenter, Assistant Secretary

Mr. Goldenweiser, Economist

Messrs. John H. Williams, Kincaid, and

Edmiston, Associate Economists

Mr. Wyatt, General Counsel

Mr. Rouse, Manager of the System Open

Market Account

Messrs. Piser and Kennedy, Chief and As

sistant Chief, respectively, of the

Government Securities Section, Divi

sion of Research and Statistics of

the Board of Governors

Messrs. Alfred H. Williams, Gidney, Gilbert,

and Leedy, alternate members of the Federal

Open Market Committee

Messrs. Flanders and McLarin, Presidents of

the Federal Reserve Banks of Boston and

Atlanta, respectively

Mr. Clerk, First Vice President of the Federal

Reserve Bank of San Francisco

Mr. Dolley, Director of Research and Statistics,

Federal Reserve Bank of Dallas

Upon motion duly made and seconded,

and by unanimous vote, the minutes of the

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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,

covered by the two reports.

and discussed the important points

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

these sales had had little

referred to that

influence on the upward trend other than to

maintain orderly conditions in

the market.

Chairman Eccles raised the question whether, in view of the

large sales that might have to be made from the System account follow

ing the war to offset gold imports and the return of currency from

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2/28/45

circulation and the possible effects of such sales on the earnings

of the Federal Reserve Banks,

tinue to sell its

it

was desirable for the System to con

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

which was made by Mr. Sproul on December 27, 1944, and to the subse

quent discussion of the matter with the Secretary and others at the

Treasury on January 10, 1945,

at which time the position was taken by

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

of Treasury financing.

No conclusions were reached during the discussion

with the Secretary, Chairman Eccles said, but it

was understood that

members of the staff of the Board of Governors and the Treasury would

confer with a view to preparing a draft of a suggested financing program

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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

with the program for the Seventh War Loan Drive.

connection

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

setting forth the conclusions reached at this meeting, that the memo

randum would be presented for discussion and approval at the meeting

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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.