January 10, 1956 FOMC Minutes

FOMC minutes

within one year as may be necessary from time to time for the accomodation of the Treasury; provided that the total amount of such securities so sold shall not exceed in the aggregate $500 million face amount, and such sales shall be made as nearly as may be practicable at the prices currently quoted in the open market. Chairman Martin next brought up the authorization for re purchase agreements. Neither the Manager of the Account nor any member of the Committee suggested any change in that authority. Thereupon, the following authorization was approved by unanimous vote The Federal Reserve Bank of New York is hereby authorized to enter into repurchase agreements with nonbank dealers in United States Government securities subject to the following conditions: 1. Such agreements (a) In no event shall be at a rate below whichever is the lower of (1) the discount rate of the Federal Reserve Bank on eligible commercial paper, or (2) the average issuing rate on the most recent issue of three-month Treas ury bills; (b) Shall be for periods of not to exceed 15 calendar days; (c) Shall cover only Government securities matur ing within 15 months; and (d) Shall be used as a means of providing the money market with sufficient Federal Reserve funds to avoid undue strain on a day-to-day basis, of such transactions shall be included in the 2, Reports of open market operations which is sent weekly report to the members of the Federal Open Market Committee, covered by any such Government securities 3. In the event repurchased by the dealer pursuant agreement are not or a renewal thereof, the securities to the agreement Reserve Bank of New York thus acquired by the Federal shall be sold in the market or transferred to the System open market account, that there had been distributed imme Chairman Martin noted 9, 1956, from the meeting a report dated January diately before this

1/10/6 -28 Subcommittee on Defense Planning (Messrs. Shepardson, Sproul, and Robertson), and he called upon Mr. Robertson, as Chairman of that committee, for comment on the report. Mr. Robertson stated that the report of the Subcommittee on Defense Planning was based upon his memorandum dated September 29, 1955, which had been distributed to the members of the Committee in October. The program now submitted by the committee prescribed the ways and means for carrying out a plan essentially as proposed in the memorandum referred to, as supplemented by suggestions made by Mr, Sproul and recorded in the minutes of the meeting held on October 25, 1955. This involved the means for rebuilding the Com mittee in the event of an emergency, the authorization for purchases of Government securities by individual Federal Reserve Banks under certain conditions, a proposal that the Open Market Committee provide guides for the Reserve Banks in the exercise of their discretion re garding purchases of Government securities, and a training program so the Federal Reserve System would be that a number of persons within in the event of an emer to carry on open market operations available gency, noted that one of the proposals in the subcom Mr. Earhart Reserve Bank of New York adopt mittee's report was that the Federal centers of each weekly to the relocation the practice of sending accounts and daily advices of pertinent open market Reserve Bank copies of the be accompanied by discontinuance (This would of transactions.

maintenance of duplicate records as now done by the Federal Reserve Bank of Chicago.) He noted that in at least the Twelfth District there was more than one relocation center and that the records center might not necessarily be at a relocation center. He raised the question whether it might be possible to send the proposed reports of accounts and transactions to the records center as a preferable means of assuring that they would be available in the event of an emergency. Mr. Robertson responded that the intention was to have such reports at the place where records would be available to the relocation center, and he suggested that it be understood that any problems of distribution by the New York Bank of the reports mentioned be handled individually by the Reserve Bank concerned in consultation with the Secretary of the Committee. Chairman Martin stated that in a telephone conversation with this morning, the latter had indicated that he was prepared Mr. Sproul on the program proposed in the subcommittee's to have the Committee act Chairman Martin inquired whether any other report at its meeting today, or suggestions concerning the of the Committee had questions members of comment, he suggest in the report. In the absence program proposed by the Defense the program as submitted the Committee approve ed that Planning Subcommittee, last paragraph of the report Mr. Treiber noted that the for adoption by the of appropriate resolutions suggested that drafts

Open Market Committee and drafts of the guides referred to for pur chases of Government securities by individual Federal Reserve Banks and for the use of personnel who might assume responsibility for leadership in reactivation of a Government securities market, be prepared by a group to be appointed by the Open Market Committee from members of its staff having to do with open market operations. He inquired whether it was contemplated that this committee be appoint ed at the present meeting. Mr, Robertson stated that he contemplated that this would be until the Secretary of the Committee had had an opportunity deferred be followed in implementing the subcom to consider the procedures to mittee's report. Thereupon, upon motion duly made and and by unanimous vote, the report seconded, of the Subcommittee on Defense Planning was with the understanding that the approved necessary steps would be taken to carry out the program outlined. Thereupon the meeting adjourned. Secretary.