Speech

Statement of Wm, McC. Martin, Jr. , Chairman, Board of Governors of the Federal Reserve System, before the House Committee on Banking and Currency, on H, R. 9285, February 29, 1956. The legislation to which my testimony is directed, namely H. R. 9285, would extend for another two years the authority of the Federal Reserve System to purchase up to 5 billion dollars of special securities directly from the Treasury, This is an operating convenience under which the borrowing is always of a strictly temporary nature and occurs primarily in tax payment periods. The authority has made it possible around such times for the Treasury to bridge temporary gaps between the Treasury's payment needs and its tax receipts, and in this way to smooth out some of the uneven flows of funds through the banking system and the money market that would otherwise result from the Treasury's operations. Avoidance, through this method of Treasury borrowing, of the sharp strains on the banking system that would otherwise arise from sudden drains on the Treasury's accounts with banks is equally as helpful to the Federal Reserve in carrying out its parallel responsibilities in the field of monetary and credit policy as it is to the Treasury in administering its fiscal responsibilities effectively. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis -2- It should be noted that the authority which this legislation would continue requires that the details of all transactions directly with the Treasury be reported in the Annual Report of the Board of Governors. I should also like to add that such borrowing, when it is outstanding, is reported separately in the weekly statement of con dition of Federal Reserve Banks. Attached to my statement is a table showing such direct purchases from the Treasury, 1942 to date. The table shows that the use of the privilege has been limited. Last year, it was possible for the Treasury to avoid such borrowing entirely. While such borrowing should be only on a temporary basis and should not be used to meet the permanent financing needs of the Treasury, situations will arise from time to time when such direct borrowing, under existing safeguards, is appropriate and helpful to the orderly functioning of the financial mechanism. The Board of Governors, accordingly, endorses the proposed legislation and recommends its enactment. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis FEDERAL RESERVE BANK HOLDINGS OF SPECIAL SHORT-TERM TREASURY / CERTIFICATES PURCHASED DIRECTLY FROM THE UNITED STATES, 1942--Feb. 1.956 (In millions of dollars) Date Amount Date Amount L942—June 16 58 1943—Mar. 20 768 19 70 21 768 20 47 22 603 21 47 23 700 22 3h 21* 512 23 9h 25 1*32 Sept. 15 324* 26 381* 16 189 27 301* 17 286 28*' 301* 18 76 29 104 19 53 30 1*0 20 53 June 15 805 Nov. 27 139 16 659 28 329 17 350 29 329 18 256 30 1*22 19 212 Dec. 1 98 20* 212 10 16 Sept. 8 11 15 11*5 9 126 10 243 L943— Jan. 29 115 11 21*6 30 202 12* 246 31* 202 13 211* Mar. 2 3 11* 179 1* 171* 15 1*21* 5 351* 16 258 6 543 7* 51*3 1945—Mar. 15 4 8 591 Dec. 4 107 9 648 5 318 10 632 6 374 11 790 7 484 12 940 8 1*81* 13 1,043 9* 484 14* 1,0143 10 202 15 1,302 16 1,250 1949—June 15 220 17 981 16 127 18 836 19 778 1950—Mar • 15 108 June 15 105 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 2 - Date Amount Date Amount .95l--June 1 100 1953—Mar. 23 333 2 100 2k 186 3* 100 25 63 Dec. 17 320 26 k9 June 5 196 .952—Jan. 22 55t 6 196 23 22 7* 196 Mar. 17 811 8 374 ]8 kk2 9 491 19 311 10 451 20 338 11 358 21 338 12 506 22 338 13 506 23* 338 14* 506 2k 189 15 999 2$ 170 16 1,172 26 14 17 823 27 123 18 364 June 16 472 19 992 17 536 20 992 18 413 21* 992 19 249 22 908 29 231 23 608 21 170 2k 296 22* 170 23 74 1954—Jan. 14 22 2k 47 15 169 Sept. 15 103 16 169 16 257 17* 169 17 221 18 323 18 242 19 k2k 19 134 20 323 20 134 21 306 21* 134 22 283 22 6 23 283 24 283 L953—Mar. 18 110 25 203 19 104 26 3 20 189 Mar. 15 134 21 189 16 190 22* 189 * Sunday or holiday• L/ The power of the Federal Reserve Banks to purchase securities direct from the U. S* Treasury was restored by the Second War Powers Act, approved March 27, 1942. There were no issues during the years 1944, 1946, 1947, 1948,and 1955. Interest rate 1/4 per cent throughout. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

William McChesney Martin, Jr. (1956, February 28). Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/speech_19560229_jr.

@misc{wtfs_speech_19560229_jr.,
  author = {William McChesney Martin, Jr.},
  title = {Speech},
  year = {1956},
  month = {Feb},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/speech_19560229_jr.},
  note = {Retrieved via When the Fed Speaks corpus}
}