July 17, 1956 FOMC Minutes

FOMC minutes

said that they also were interested in the proportion of dealer volume and positions to the total activity normally carried on in the Government securities market; when told that these data are considered important trade secrets, they did not push to see what data are available at the New York Bank. However, they in quired as to the practicability of dealers being required by legis lation to submit data on a confidential basis. They also expressed a desire to revisit the New York Bank at a time when it was involved in the physical handling of a new Treasury issue. Mr. Treiber said that Messrs. Pincus and Montgomery referred to the pending House Bill No. H.R. 2643 proposing that the General Accounting Office audit the Federal Reserve System, and they indicated that Chairman Dawson might conduct hearings on the bill some time. While they thought little significance would attach to an actual audit of the Federal Reserve System by the General Accounting Office, some Congressmen might at first show curiosity regarding it. Upon leaving, Messrs. Pincus and Montgomery indicated that they had been the complexity and magnitude of operations connected impressed with and with the physical handling of new Treasury with the trading desk concerning their observations issues. They were quite complimentary carrying out this work at the New among the officers and employees any doubt that the they no longer had Bank and stated that York clearly operat public institutions were in fact Reserve Banks Federal public interest, and that stock ownership by the member ing in the

banks was incidental. Mr. Treiber said that the Bank officials found the visit pleasant and felt that it had been helpful to Messrs. Pincus and Montgomery. Chairman Martin commented that it appeared that the visit had been constructively handled. Chairman Martin stated that Professor Ira A. Scott of the University of Minnesota, who had been referred to him by Mr. Powell, had received a Merrill Foundation grant for study of the Government securities market, and that he had discussed visiting both the Board's offices and the Federal Reserve Bank of New York for the purpose of obtaining information to assist in his study. Professor Scott is currently visiting the Board's offices. Chairman Martin said that he felt the System should not make the operation of the Government securities market or the procedures followed by the System Open Market Account mysterious but, at the same time, it confidential documents available to Professor should not make any be furnished to other persons not Scott any more than they would associated with the Committee. of the Committee or otherwise members staff should be Committee or the members of the He felt that and to give him Professor Scott informally to talk with authorized Government securities operation of the regarding the information and of course documents, giving him confidential short of market to current policies information as that with the understanding that it was his Martin stated discussed. Chairman would not be

understanding Professor Scott was interested in procedures rather than in policy and in the effect that procedures might have in the long run on policy. Messrs. Powell and Roelse commented briefly on their under standing of the purpose of Professor Scott's visits, and none of the members of the Committee indicated disagreement with Chairman Martin's suggestions for giving him assistance. Chairman Martin next referred to the letter from Mr. Roelse dated June 22, 1956 and to the outline prepared by the Staff Com mittee for the study of experience under present operating procedures in the Government securities market. Mr. Roelse commented on the outline, stating that the proposal was to go as far as possible on the basis of presently available informa tion and to see what gaps existed. If it should prove necessary to go beyond available data in studying the questions in the outline, the staff committee would report back to the Federal Open Market Committee for explicit approval to collect whatever additional data might be it might be possible to obtain required. Mr. Roelse suggested that with a questionnaire to be sent additional information in connection Association's committee that is out by the New York Clearing House securities market. financing of the Government studying the include an addi that the outline might Mr. Leedy suggested the ownership of short-term Treasury topic relating to shifts in tional and Chairman to non-bank investors, commercial banks securities from

Martin suggested that this topic be transmitted to Mr. Roelse Chairman Martin also suggested that the outline be considered as an appropriate start for the Committee study and that it be approved for this purpose. There was agreement with this suggestion. It was agreed that the next meeting of the Committee would be held on Tuesday, August 7, 1956. the meeting adjourned. Thereupon Secretary