March 27, 1956 FOMC Minutes

FOMC minutes

to have this authorization come up at every meeting or whether it should be reviewed at longer intervals, such as at the organizational meeting of the Committee held in March of each year. Thereupon, the following authorisa tion 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 Treasury bills; (b) Shall be for periods of not to exceed 15 calendar days; (c) Shall cover only Government securities maturing 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. 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. Mr. Leedy stated that as a result of Chairman Martin's comments 6, 1956, regarding the desirability of training at the meeting on March he had raised with the in open market matters, additional personnel appropriate to mail a copy of question whether it would be Secretary the prepared at the Federal of open market operations the weekly report

Reserve Bank of New York to the vice president in charge of the Denver Branch. Mr. Leedy said that Vice President Puckett of that Branch was not assisting him regularly on open market matters but that he felt it would be helpful to Mr. Puckett in developing more knowledge of the open market operations if he could receive the report regularly. It was Mr. Leedy's understanding that in the past distribution of this report had been confined to persons actually assisting the members of the Committee or other Reserve Bank Presidents in open market matters, and for that reason he had suggested that the Secretary bring the matter up for discussion. Chairman Martin stated that he would favor anything which would assist in developing the personnel throughout the System that would have to take over these matters in the future. It was incumbent upon the members of the Committee to attempt to develop personnel in this manner. He did not see how this could be done satisfactorily if the degree of restriction on open market material continued to be as great in the future as he thought it had been at times in the past. Mr. Leach stated that he felt a distinction should be made be distributing the report for informational purposes and distributing tween who in the opinion of a Reserve Bank President or a Com it to persons receive the material for educational development. mittee member should should be widely distributed for purposes He did not think the report to send it to him but it would be appropriate of general information, of whether he was a branch manager for educational training regardless

or in some other position. In response to a question from Mr. Johns, Chairman Martin stated that no suggestion had been made that minutes be made avail able to such individuals but that in his view the same general approach should govern. Thereupon, it was agreed unanimously that it would be appropriate for a Presi dent of a Reserve Bank or a member of the Committee to request that the weekly open market report or other open market material be made available to individuals for train ing purposes even though such individuals might not at the time be actively assisting in connection with open market matters and regardless of where the individual was serving within the Federal Reserve System. In taking this action, it was understood that the Secretary would be notified of all such requests. Chairman Martin referred to Mr. Sproul's memorandum of March 21, operating policies of his appraisal of certain continuing 1956, giving Market Committee, stating that the memorandum was very the Federal Open well as provocative. He suggested that all members of stimulating as Presidents study the material care the Committee and other Reserve Bank that a day be set aside for a separate meeting at which this fully and it was not desirable to He thought that subject would be considered. agenda within the regular of this matter on the include consideration therefore, that and it was his suggestion, meeting of the Committee, scheduled for Tuesday, April 17, next meeting of the Committee be the the understanding that the Committee would also meet at 1956, with

9:30 a.m. on Wednesday, April 18, 1956, for the express purpose of considering the procedure that it might wish to follow in re-examining the continuing operating policies to which Mr. Sproul had referred. Mr. Sproul stated that he thought there were two questions involved. One was the matter of procedure and whether the continuing operating policies should be adopted annually or whether they should be considered at each meeting of the Committee. The other question had to do with the substance of these statements of operating policy and the whole present general policy of the Federal Open Market Com mittee with respect to operating in the Government securities market. Mr. Sproul said that he thought the first of these questions might and a decision reached in a meeting such as Chairman be considered for April 18, whereas the second question would re Martin suggested quire a much longer period of consideration and study. agree with this view. Martin stated that he would Chairman suggestion for the Chairman Martin's to be held on April 17 and 18 was meeting approved unanimously. adjourned. the meeting Thereupon Secretary