November 16, 1955 FOMC Minutes

FOMC minutes

2. Reports of such transactions shall be included in the weekly report of open market operations which is sent to the members of the Federal Open Market Committee. 3. In the event Government securities covered by any such agreement are not repurchased by the dealer pursuant to the agreement or a renewal thereof, the securities thus acquired by the Federal Reserve Bank of New York shall be sold in the market or transferred to the System open market account. Chairman Martin suggested that it might be desirable to set the date for the next meeting of the Federal Open Market Committee on Tuesday, December 13, 1955, with a view to having a full scale review of the eco nomic and credit situation at that time and with the further thought that the following meeting of the Committee might be held after the turn of the year. There was unanimous agreement with this suggestion. Chairman Martin said that, without implying criticism of anyone, there was one other matter which he would like to mention at this time. An article on the Committee's policy had appeared in the magazine "Business Week" shortly after the meeting held on October 25, 1955, and contained comments reflecting so closely the substance of the article it could have been written without that he did not see how the meeting what went on at that meeting having some person who was familiar with He reiterated that he was not implying that any discussed the matter. had complete confidence he said that he the meeting and one had discussed of the members of the Committee and the others who participated in all him and he felt it article had impressed However, the in the meetings. the meetings be extremely who participated in that all those necessary on in any such meetings. about what went about their discussions careful

Chairman Martin then called attention to a copy of a letter from Congressman Brent Spence, Chairman of the House Banking and Currency Committee, dated October 25, 1955, requesting comments by the Board of Governors on a bill, H. R. 569, introduced in the House of Representatives on January 5, 1955, by Mr. Patman, which proposed to increase to 12 the number of members of the Board of Governors of the Federal Reserve System and to provide that their terms of office shall be six years, and to abolish the Federal Open Market Committee and transfer its functions to such Board. Chairman Martin said that copies of Congressman Spence's letter and the bill had been distributed at this meeting and that he would appreciate suggestions or comments which might be of assistance to the Board in preparing a response which, he hoped, could be submitted to Mr. Spence not later than the first part of January. He also noted that Mr. Balderston had suggested that comments be sent in in time to be considered at the meeting of the Committee on December 13, 1955. Mr. Sproul referred to the request made by Senator Douglas, first discussed at the meeting of the Committee on September 14, 1955, regarding a visit which the Senator proposed to make to the Federal Reserve Bank of New York, probably between October 20 and November 1, the purpose of observing the handling of open market operations. for He stated that Senator Douglas, accompanied by Dr. Achinstein, had 27, and 28, in response to the invita visited the Bank on October 26, which he as Vice Chairman of of the Federal Open Market Committee, tion the Committee had sent to the Senator by letter dated October 6, 1955.

Mr. Sproul then described the visit in substantially the following terms: Each morning Senator Douglas and Dr. Achinstein came to the bank at about 9:30 and had a preliminary talk with Mr. Rouse and me. At the first such meeting, I spoke to them of the possible adverse effects of publicity concerning their visit, which might be played up as a Senate investigation of open market operations with possible unfortunate repercussions in the Government securities market. I pointed out that if they attended the dealer conferences, or listened in on market telephone conversations which would necessitate disclosure of their being "on the line," there might be a flood of rumors. Senator Douglas said he wished to avoid anything of the sort and, so far as I know, no publicity attended the visit. At 10 o'clock or shortly thereafter each day, they went to the trading room and stayed there the rest of the morning. After lunch at the bank, we usually went over any questions that had come up, and they would leave in the early afternoon. The Senator' s chief interest appeared to be how policy directives are translated into action, how operations are actually carried out in the market, and how the System is kept advised of open market operations. We showed them the forms and data we regularly use in analyzing the position of the banks and the money market each day, except the reports of individual dealer's position and volume. They also sat in on the eleven o'clock telephone calls to the Board and Federal Reserve Bank of Dallas (the latter was the other Reserve Bank being included in the call during that week), and were informed of conversations with the Treasury on its position, of our regular routine surveys of the market, of transactions which are carried out for System Account, the Bank's account, Treasury account and foreign or member bank account, and of the information which we supply regularly to the Federal Open Market Committee and to all of the Federal Reserve Banks. to be well satisfied with his visit The Senator appeared to report on it to his Committee. He and said he intended own views as to policy formulation gave no indication of his Market Committee or the method and means by the Federal Open asked what questions or its operations. When of conducting our performance, he evaded the criticisms he might have about sat by and let the Senator Dr. Achinstein largely question. His role seemed to be talking and ask the questions. do the and to pull together the information obtained, pre to observe visit, and to before each day's to brief the Senator sumably report for the Senator. help prepare a

Chairman Martin stated that he was glad to have this report of Senator Douglas' visit and that he felt the Committee was indebted to Mr. Sproul and to the New York Bank for the manner in which they had handled Senator Douglas' request and visit. Thereupon the meeting adjourned. Secretary