The discount market is enlarged also by the open-market operations of both the member banks and the federal reserve banks. Member banks buy, as do the federal reserve banks, from discount companies, note-brokers, and other holders of bills. The Federal Reserve Act permits the federal reserve banks, under rules and regulations prescribed by the Federal Reserve Board, to purchase and sell in the open market bankers' acceptances and bills of exchange of the kinds and maturities made eligible by the act for rediscount, with or without the indorsement of a member bank, such purchasing and selling being permitted with banks, firms, corporations, or individuals. The open-market purchases have been made chiefly by the reserve banks in New York and Boston, which are the principal acceptance markets. Some of the interior reserve banks, however, participate in the open-market purchases of the Federal Reserve Bank of New York under an agreement approved by the Federal Reserve Board, the New York bank allotting to the interior banks certain amounts of its purchases. In order to maintain an open market for bankers' acceptances, the reserve banks of Boston and New York have been called upon to make heavy purchases, and then it has been necessary for these banks, in order to maintain their reserves, to make large sales of acceptances. The total amount of acceptances bought in the open market by the twelve banks has grown as follows:

Year

Amount

1915

$ 65 million

1916

368

1917

909

1918

1,809

1919

2,825

1920

3,218

The open-market operations throw the reserve banks into competition with the member banks for investments. Besides giving the reserve banks a source of earnings and enlarging the discount market, they give the reserve banks a control over the money market and over the member banks. It is expected that, when the foreign exchanges are again on a gold basis and are more normal and stable, the reserve banks will be able to influence the importation and exportation of gold by entering the open market.