Borrowing in the market by the Federal Reserve Banks: an appraisal of a possible control device

Although the federal reserve authorities have at their disposal a wide selection of control devices, consideration should be given to the possibility of borrowing in the money market. Professor Viner has pointed out the potentialities of this weapon and has commented on its use by the Bank of England. A review of the Bank's experience with this control technique indicates that it is a powerful selective means of tightening the money market. It may supplement open-market sales of securities or may serve at times when that particular device cannot be used. The federal reserve banks might find borrowing in the market useful, especially since the problem of monetary control in the future will probably be the restriction of expansion of bank deposits. Since a period of experimentation must procede the regular use of a new instrument of control, it is urged that the necessary legal and administrative details be worked out so that the instrument may be available if needed.