Referendum on the report of the Special Federal Reserve Committee

Bibliographic data

Monograph

Identifikator:: 1827879114

URN:: urn:nbn:de:zbw-retromon-221388

Document type:: Monograph

Title:: Referendum on the report of the Special Federal Reserve Committee

Place of publication:: [Erscheinungsort nicht ermittelbar]

Publisher:: [Verlag nicht ermittelbar]

Year of publication:: 1930

Scope:: 53 S.; graph. Darst.

Digitisation:: 2022

Collection:: Economics Books

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28 Li It may be agreed that open-market operations on occasions are Banks competitive with member banks but the limitations upon the reserve banks’ open-market powers serve to soften some of the objections which otherwise might be made against their utilization. If in add- ing funds to or withdrawing them from business use through open- market operations the reserve banks could disregard the special re- Juirements of the bill market and if they were under no obligation to heed the direction and volume of gold flows, there might be de- cided objection to bestowing such powers upon the reserve banks. As it is, however, the reserve banks’ open-market powers are usually of limited influence only, but they are important in that they serve to increase the effectiveness of other powers. COMMITTEE REPORT government Securities The bulk of open-market transactions are in government securi- ties and bankers’ acceptances. The maintenance of a discount market ‘or foreign bills in New York, and the necessity of support of an mncompletely understood type of bill—the acceptance—require at times that rates of acceptances be fixed with a view to considerations other than the use of the acceptance as a credit volume control. It is essential, therefore, that there be some asset of unquestioned value available in substantial supply, which can be dealt in by reserve banks. Fortunately government securities, especially short-term Treasury Certificates, have met these tests. Without the right to buy ind sell governments, reserve banks would be unable to exercise any i1dequate control over the volume of reserve credit. Recommendation The Committee recommends that the present powers of the reserve hanks to engage in open-market operations should be continued. Note Issues In the early days of the banking reform movement remedial plans frequently were centered upon changes in note issue provi- sions. This emphasis upon note issue was due in large part to the fact that the cause of each major disturbance was manifested superficially oy a shortage of currency and attention was concentrated upon this rather than upon the credit developments which may have been responsible for the currency strain. Since, furthermore, the provi- sion of currency was generally regarded as a government function, reform plans were careful to specify that the central institution’s 10tes should be issued only under certain tlearly indicated condi- ions. In the original Reserve Act attempt Was made to emphasize ‘he special serviceability of the new system to commerce and agri- culture by providing that reserve notes should be issued only against he collateral of paper obtained by rediscounting. Original Provisions of Law Supply of Credit Not Collateral, {s Critical Factor The main consideration, however, as experience has shown, is 10t the collateral, but the character of operations member banks are encouraged to engage in and the adequacy of the mass of credit (Continued on page 30)

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