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

tCopyrisht. 1885. BY United Press
WASHINGTON. Nov. 29.-Sale OF
portion of the Federal Reserve
Banks s243O.OOOOOO government Sc
curity holdings as means of re-
stricting possible future credit
expansion has been recommended
by 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 a billion dol
lars.
The advisory council an unofficial
advisory body of the Reserve Board
comprising one representative from
each of the y 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 recommendation were the
outcome of the councils meeting
with the Reserve board last week
when the entire credit imitation
situation was canvaSSed It was not
until today that it was revealed that
the council has adopted a definite
policy to reduce credit initiation pos
Sibilities by direct sale of the Re-
serve banks government sercurities.
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 initiation of more
than 30,00O000,00O could be built.
1t was said in authoritative quar-
ters. however, that the Reserve
board plans no action at this time 10
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 215 per cent notes
which probably will be refunded into
new obligations.
In addition to this operation.
however, it is believed likely the
Treasury will seek to borrow an
other $500O00.000 in new money"
which would carry the public debt
across the S30OOO,OOOOOO 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
s50,000000 additional this week on
short term bills. picture that has
been carried on for the last seven
weeks.
A total of s5O.OO0.OOO in bills are
being sold this week but the pro-
ceeds will go to repayment of
similar obligation that is due. In the
last seven weeks 500. 100000 has
been borrowed weekly. giving the
Treasury s50000.000 in new money"
every seven days
Abandon Open Market Policy
1t is apparent that Treasury il
DESTROYS of having the Reserve
banks continue to hold their S2.43O.-
100000 of government securities.
These were bought by the banks
during the Hoover and the carly
days of the Roosevelt administra-
ton in an effort to force easier
credit conditions and thus stimulate
business. These open market pIIr-
chaseS were abandoned two years
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. Ad-
officials are counting
on near balance of the Federal
budget which would reduce borrow
ing needs. Then it would be DOS
slble for the banks to sell their gov