Open market operations in government securities remained an important source of Federal Reserve credit throughout the 1920s and even more so during the early 193Os, when discount window loans and Federal Reserve purchases of bankers acceptances dwindled.
During 1930 and most of 1931, however, Fed purchases of government securities were insufficient to offset net declines in discount window loans and Fed purchases of bankers acceptances. Hence, total Federal Reserve credit outstanding fell (see Figure 3).
(20) The total increase in Federal Reserve credit was less than $1 billion because of declines in discount window loans and Fed holdings of bankers acceptances, but member bank reserves increased and the money stock stopped falling.
Those officials who were critical of open market purchases during the 1920s tended to argue that Federal Reserve credit should be extended only at the initiative of member banks, through the discount window or by sales of bankers acceptances to the Fed.
Moreover, in the absence of an obvious demand for Federal Reserve credit, as evidenced by discount window borrowing or sales of bankers acceptances to Reserve Banks, McDougal and others believed that reserves created by open market purchases could result in a dangerous misallocation of credit.
(23) By 1932, discount window borrowing and Federal Reserve purchases of bankers acceptances had fallen to minimal levels, where they stayed throughout the remainder of the decade.
The bankers acceptance and call loan rates, however, did not have statistically significant seasonal patterns.
Similar plots for the commercial paper and bankers acceptance rates show that the seasonal high and low months for these rates remained the same across periods.
(38) Because the United States did not have an active bankers acceptance market before 1914, it is impossible to make a similar comparison for the bankers acceptance rate.