FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 19 June 2016

The Early Years Of The Fed's Primary Dealer System

from the New York Fed

A primary dealer is a government securities dealer designated, by the Federal Reserve Bank of New York, as eligible to participate in open market operations undertaken by the Bank at the direction of the Federal Open Market Committee. The primary dealer system is the nexus of designation criteria and performance requirements that stem from the decision to execute open market operations through primary dealers.

This paper presents a history of the primary dealer system from the late 1930s to the early 1950s. The paper focuses on two formal programs: the "recognized" dealer program adopted by the Federal Reserve Bank of New York in 1939 and the "qualified" dealer program adopted by the Federal Open Market Committee in 1944 and abandoned in 1953, but addresses as well the more informal predecessor and successor systems. Section 1 reviews the emergence of open market operations as a principal instrument of monetary policy in the 1920s. Section 2 describes how Robert Rouse formalized the New York Bank's informal system of "recognized" dealer counterparties following his selection as Manager of the System Open Market Account in 1939. Although the Bank typically dealt with recognized dealers, it also did business from time to time with other dealers; neither the original informal system nor the successor formal system made a sharp distinction between the two.

The focus of monetary policy changed from managing reserves to keeping interest rates low following U.S. entry into World War II. To support the new focus, the FOMC replaced the New York Bank's recognized dealer program with its own program of "qualified" dealers. As discussed in sections 3 and 4, the new format limited transactions for the Open Market Account to qualified dealers and imposed a variety of restrictions on those dealers.

[click on image below to continue reading]

Source: medialibrary/ media/r esearch/ staff_reports/ sr777.pdf?la=en

>>>>> Scroll down to view and make comments <<<<<<

Click here for Historical News Post Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Contributors


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
A Short Note on a Connection Between Marginalist Economics and Folk Medicine
Run A High Pressure Economy? Janet Yellen Does Not Understand the Problem
News Blog
Early Headlines: Asia Stocks Down, Oil Lower, Great Lakes Wind Power, Chinese Moving Mfg To US, Tesla Reports Profit, Dems Forecast To Take Senate, China's Debt And More
How Miller Stacks Up Against His Draft Class
Inside The Machine: How Two Nobel Winners Taught Us How Companies Tick
Healthcare's Dirty Little Secret: Results From Many Clinical Trials Are Unreliable
The Cleveland Indian's Unique Use Of Andrew Miller
What We Read Today 26 October 2016
Why Do So Many Price Tags End In .99
September 2016 New Home Sales Improve.
Higher GDP Growth In The Long Run Requires Higher Productivity Growth
Quantum Encryption Is Secure Because Information Encoded In A Quantum Particle Is Destroyed As Soon As It Is Measured
The Stock Market Is Up, But Mutual Fund Investors Are Fleeing
Infographic Of The Day: Google's Hidden Games
Early Headlines: Asia Srocks Mostly Lower, Energy HY Bonds Surge, Google Fiber Cutback, Shadow Banks Dominate Mortgages, NATO Crowds Russia, Coffee Surges And More
Investing Blog
Thirsty For Income? How To Thrive In This Yield Desert
Apple's First Annual Sales Decline In 15 Years
Opinion Blog
A Hard Brexit And Reduced Migration Won't Benefit UK Workers
What Triggers Collapse?
Precious Metals Blog
Inflation Surging As Platinum Signals Stock Market Decline
Live Markets
26Oct2016 Market Close: US Markets Close Lower, Boeing Shares Up, Texas Tea Stabilizes In Low 49's, Gold Falls To 1266, Friday's Fed Rate Change Promises To Be A Game Changer
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved