The Indianapolis times. [volume] (Indianapolis [Ind.]) 1922-1965, 1935-11-30
u. S. SECURITY
HOLDINGS SALE
RECOMMENDED
Prevent Credit Expansion
Is Goal of Advisory
Council.
BY RICHARD L. GRIDLEY

WASHINGTON. Nov. 2e.-Sale Of
a portion of the Federal Reserve
Banks s2.43O. 100000 government Sc
curity holdings as a means Of re-
stricting possible future credit
expansion has been recommended
bv the Federal Advisory Council, 1t
was learned today.
The Federal Reserve Board, how
ever. probably will ignore the sug-
gestion for the time being. particu-
larly in view of the forthcoming
Treasury December financing which
may involve more than billion dol
lars.
The advisory council. an unofficial
advisory body of the Reserve Board
comprising one representative from
each of the u Federal Reserve Dis
tricts. made its recommendation 10
the open market committee Of the
Reserve board which is charged with
fixing of the boards open market
politices.
Definite Policy Revealed
The recommendations were the
outcome of the councils meeting
with the Reserve board last week
when the entire credit initiation
situation was canvassed. It was not
until today that it was revealed that
the council has adopted a definite
policy to reduce credit imitation pos
sibilities by direct sale of the Re-
serve banks government securities.
Sale of a portion of the govern
ment securities would tend to soak
up a corresponding portion of the
| $4,000 100000 excess reserves of the
member banks on which it is eSti-
mated a credit imitation of more
than $30,G00.000000 could be built.
1t was said in authoritative quar-
ters however. that the Reserve
board plans no action at this time to
disturb the present credit situation.
This is in line with implications
given in a statement last week by
Mariner S. EccleS. chairman of the
board. that the board would not
take immediate action to pare down
excess reserves.
Further Borrowing Forecast
Meanwhile. the Treasury went
ahead with its December borrowing
program. Falling due Dec. IS are
S418.291,900 of 81 per cent notes
which probably will be refunded into
new obligations.
In addition to this operation.
] =
Treasury will seek to borrow an
ether $500000,000 in new money"
which would carry the public debt
across the S3O00O.000, 900 mark to
another all-time peak
Indications that the Treasury
would seek another large volume Of
funds were seen today on its de-
ciSion to refrain from borrowing
S50000000 additional this week on
short term bills, picture that has
been carried on for the last seven
weeks.
A total of s5000000O in bills are
being sold this week but the pro-
ceeds will go to repayment of a.
similar obligation that is due. In the
last seven weeks SiOO,0OOOO0 has
been borrowed weekly. giving the
Treasury S50000.0OO in new money"
every seven days.
Abandon Open Market Policy
1t is apparent that Treasury Is
deslrouS of having the Reserve
banks continue to hold their s2.430.-
100000 Of government securities.
These were bought by the banks
during the Hoover and the earlv
days of the Roosevelt administra-
ton in an effort to force easier
credit conditions and thus stimulate
business. These open market pur-
chaseS were abandoned two wears
ago and some observers said sale of
the securities in the open market at
THIS time might tend to depress the
| government security market.
II the banks hold the securities
until the government completes its
winter and spring financing needs
the Treasury could borrow on much
better terms.
After this period is passed. Adj
mlnlStration officials are counting
on near balance of the Federal
budget which would reduce borrow
ing needs. Then it would be ms
siole for the banks to sell their gov
eminent holdings TO restrict credit
expansion without interfering with
financial operations Of the Treasury.