July 17, 1956 FOMC Minutes: Full Text
A meeting of the Federal Open Market Committee was held in the offices of the Board of Governors of the Federal Reserve System in Washington on Tuesday, July 17, 1956, at 10:00 a.m. PRESENT: Mr. Martin, Chairman Mr. Balderston Mr. Johns Mr. Mills Mr. Powell Mr. Shepardson Mr. Treiber Mr. Vardaman Mr. Fulton, Alternate Mr. Williams, Alternate Messrs. Bryan and Leedy, Alternate Members, Federal Open Market Committee Messrs. Leach, Irons, and Mangels, Presidents of the Federal Reserve Banks of Richmond, Dallas, and San Francisco, respectively Mr. E. C. Harris, First Vice President, Federal Reserve Bank of Chicago Mr. Riefler, Secretary Mr. Thurston, Assistant Secretary Mr. Vest, General Counsel Mr. Thomas, Economist Messrs. Abbott, Parsons, Roelse, and Young, Associate Economists Mr. Rouse, Manager, System Open Market Account Carpenter, Secretary, Board of Governors Mr. Secretary, Board of Mr. Sherman, Assistant Governors Mr. Miller, Chief, Government Finance Section, Division of Research and Statistics, Board of Governors Mr. Gaines, Manager, Securities Department, Federal Reserve Bank of New York Upon motion duly made and seconded, unanimous vote, the minutes of the and by
meeting of the Federal Open Market Com mittee held on June 26, 1956, were ap proved. Chairman Martin stated that advice had been received of the election of Mr. Treiber as a member of the Federal Open Market Com mittee for the month of July 1956, succeeding Mr. Sproul whose resigna tion became effective June 30, 1956, and that Mr. Treiber had taken the oath of office for this position. Before this meeting there had been distributed to the members of the Committee a report covering open market operations during the period June 26 through July 11, 1956, and at this meeting a supple mentary report covering commitments executed July 12 through July 16, 1956, inclusive, was distributed. Copies of both reports have been placed in the files of the Committee. Mr. Rouse referred to the current Treasury refunding (an offer 12-1/2 month 2-3/4 per cent notes in exchange for $12,388 million ing of notes due August 15, 1956 and $550 million 1-1/2 per cent 2 per cent 1, 1956), stating that it now appeared likely that notes due October because of the desire of would be a fair amount of attrition there cash rather than the securities to receive many holders of maturing of three million bales referred to a sale issues. Mr. Rouse also new was to be for which payment Credit Corporation of cotton by Commodity would be financed that this sale and to the fact on August 1 received bank loans. He and partly through bankers' acceptances partly through the reserve position would not affect while this operation stated that
of banks, since the CCC would have to make payment on a similar dollar amount of guaranteed crop loans on August 1, it might have an effect on the rate structure since the total financing cost for bankers' acceptances would approximate 4 per cent or about the same as the rate that would be charged by banks on loans to prime borrowers on this collateral. Mr. Rouse did not feel that the banks were likely to raise their prime rate, but he thought there was some chance that the acceptance rate would be increased. Mr. Rouse also stated, in response to a question, that he thought there was no likelihood that the banks would reduce the 1-1/2 per cent commission fee on acceptances. Upon motion duly made and seconded, and by unanimous vote, the open market transactions during the period June 26 through July 16, 1956, inclusive, were approved, ratified, and confirmed. Chairman Martin called upon Mr. Young who made a statement on the economic situation substantially as follows: Economic activity recently has been showing broad strength, with most recent data confirming an upward tilt to the over-all trend. Broad strength also appears a characteristic of economic conditions abroad. Wholesale prices domestically have been relatively stable for two months now, but average consumer prices have shown more upslant than for some time. Abroad in industrial countries, trends of average prices continue upward. Credit demands throughout the economy remain very active and business and financial sentiment feature an optimistic tone. Thus far, the impact of the steel strike appears to have been limited to the steel industry and closely related activities. recently reported facts merit brief review: The most 1. The big statistical news is a revision of the GNP estimates. These show that the decline in activity from 1953 was somewhat more moderate than shown by previous to 1954 the recovery from mid-1954 to the third estimates and that quarter was larger than earlier estimates indicated. The since the third quarter are about quarter-to-quarter changes
the same for the two estimates. The revised first quarter GNP estimate comes to $403 billion, which compares with $399 billion under the old estimate. The revised second quarter estimate reaches $107 billion, compared with a pre liminary $402 billion on the old basis. 2. In the rise of GNP from the first to the second quarter this year, most components were up. The important exceptions were consumer durables, mainly automobiles, and residential construction. 3. Personal income on the new basis probably averaged $32 billion in the second quarter, up $4 billion from the first quarter. Major income shares, except farming, all rose further; farm income showed little change but was below last year by about 7 per cent, 4. Industrial production in June is tentatively esti mated at 141. This is down from May but still within the range of the past ten months. 5. The decline in output at factories and mines from May to June reflects a combination of lower steel production and a slight reduction in textile, rubber, and leather products output. Reduced output in these lines was offset in part by some rise in output of producers' equipment and building materials. 6. Retail trade in June remained at the record May high. For the whole second quarter, retail sales probably averaged close to the volume of the fourth quarter of last year despite reduced levels of auto sales, and above the first quarter average. Sales at nondurable goods stores were especially strong. June sales at department stores were slightly above May levels and, so far in July, sales at department stores look up a little from June. sales in May generally showed a definite 7. Business upswing after six months of modest up and down movement. At the end of May the book value of business inventories up $7 billion, or 9 per cent above a year ago, partly was a higher price level. Inventory sales ratios reflecting have been quite stable in recent months, after rising in late 1955 and early 1956, and, except for automobiles, are for the period since 1951. Auto still below the average declined over 200,000 units mobile inventories at dealers over May and June. of residential construction 8. The dollar volume figures show a and the latest has been receding, activity decline. At the same time, housing further very modest of about 1.1 million units. hold at an annual rate starts confirm that a on housing vacancies Most recent reports
relatively low vacancy rate continues. Also, field reports from builders continue to indicate a conservative inventory of unsold houses. Advances in rents for May were the largest reported for any month since 1953; moreover, advances were reported for more cities than in any month since that time. Mortgage lending in the second quarter was down from high first quarter rate of last year but about at the fall rate of 1954. 9. Business construction activity featured mixed trends in June with commercial construction down and industrial con struction up strongly. Total construction held close to the record May rate. 10. Nonfarm employment in June was at a new peak of 51.4 million persons, up 1.4 million from a year ago. Manufactur ing employment has declined somewhat since the end of last year (with production workers down and salaried workers up), but there were more than compensating gains in employment in finance, service, construction, and State and local government. 11. Unemployment at mid-June stood at 2.9 million, up 300,000 from May, but the increase was largely seasonal. Un employment claims were somewhat higher than last year in auto producing states, but generally lower in other areas. The number of long-term unemployed, those seeking work 15 weeks or longer, was at last fall levels. 12. Average hourly earnings in manufacturing have continued to rise this year, and in June at factories were 2-1/2 per cent above beginning of year earnings, and 6 per cent over a year ago. Average weekly earnings, while up from a year ago, have shown little gain this year because of a drop in average hours of work. 13. Average wholesale prices declined slightly from mid May to mid-June, have risen slightly since then, and are 3-1/2 per cent higher than a year ago. The significant price develop past two months is that there have been fewer ad ment of the downs of industrial prices than in earlier vances and more mark months of the year. Prices of basic commodities, except copper, been showing weakness, have strengthened over the past which had were up 10 per cent from Farm prices early in June month. levels. Since early June, farm December and about at year ago been about offsetting, with the average price changes have steady. largest one-month rose in May-the Consumer prices such as for foods, services Higher prices rise in two years. A further rise to the rise. and used cars, contributed rents, by the June index. to be shown prices is expected in consumer a little more will probably average prices at mid-June Consumer by farmers for ago; prices paid above a year than 1 per cent
family living expenses have recently been reported to be 2 per cent higher. 15. The Dun and Bradstreet survey of business expec tations taken before the steel strike showed widespread confidence in business prospects for coming months but with some widening divergence in views. Optimists increased in frequency, the first increase in a year, but so did the pessimists; thus, the no-change proportion declined. The most striking shift in sentiment related to inventory positions; the proportion expecting higher inventories de clined and the proportion expecting lower inventories in creased. As for the steel strike itself, a few comments may be useful: (1) A strike terminated shortly will not greatly affect prospects. (2) If the strike lasts a month industrial production, because of primary and secondary output effects, will be re duced 5 to 6 index points. Towards the close of the month, shortage effects will begin to be marked in railroad equip ment, heavy construction, and public works. An extension of the strike into August would lower industrial production a little further and have aggravated effects on the activities mentioned. workers have been of about 600,000 steel (3) Incomes affected directly and of a good many thousand secondary workers indirectly. Some strikers are receiving vacation being and nonstriking workers in the steel pay for the time in secondary industries affected are industry and workers for unemployment compensation. Thus, some cushion eligible effects is operative. But the to the income contraction will cumulate as the period of strike is income effects extended. could well cause into August A strike extending (4) a little for the third quarter. GNP to decline will be of the strike important impacts One of the (5) rate of business inventory invest its downward effect on the runs, the greater will be the ment. The longer the strike effect on stocks and the subsequent upward effect downward or demand to replenish them. about $9 a ton have advances averaging (6) Steel price operation. If this continuing in announced by mills been the industry after upon by is the one determined price rise effect of raising the it will have the strike settlement, by .5 per cent. prices at wholesale average of all commodity price effect. Other price raising This will be the direct
effects will occur as steel users, where demand conditions permit, pass along higher steel prices in higher prices for fabricated steel items. Mr. Thomas said that indications of strength in the economy both here and abroad were revealed by the analysis of business de velopments and that these indications of strength were supported by recent credit developments in the United States. There has been a large volume of new corporate securities issues, the total for the first seven months of this year approximating $6 billion against $4.8 billion last year and a smaller amount in 1954. Pressures in the corporate securities market have been indicated by a continuation of yields at relatively high levels during May and June. State and local issues of new securities also were larger during the first half last although less than in 1954. There has been a of this year than large accumulation of unsold securities issues in dealers' inventories. continues strong with rising prices approaching pre The stock market highs and with some increase in trading activity. vious were somewhat larger and receipts Treasury expenditures estimates but a cash surplus of over $5 slightly less than previous year ending in June 1956. still was shown for the fiscal billion expenditures have receipts and of July, both the first half During borrowing of $2 - $2-1/2 estimates. New Treasury been higher than probably will be needed during August. billion weeks ending July 11, declined in the three Loans at city banks of June and bank first three weeks sharply in the having risen after
holdings of Government securities continued to decline. Total bank credit during the past six weeks, however, showed a net increase compared with a decrease last year; loans increased less than last year, but holdings of Government securities decreased much less than in the corresponding weeks of last year, reflecting bank purchases of securities during the tax period this year. The money supply in creased in June more than seasonally, and during the first half of 1956 the annual rate of increase was about 1-1/4 per cent. In the first half of July deposits at city banks declined. Turnover of money has increased substantially in the past year, probably 5 or 6 per cent. Businesses evidently have used available funds more actively than in the earlier period and have drawn down on both their cash and their holdings of Government securities in addition to increasing their borrowings since the beginning of this year. Bank reserves have fluctuated widely in recent weeks, reflect ing to a considerable extent unusually erratic variations in float and in Treasury balances at the Federal Reserve Banks. Mr. Thomas referred in a staff memorandum on The to projections of bank reserves contained July 13, 1956, copies of Treasury Cash Requirements dated Outlook for borrowed reserves have at this meeting. Net which were distributed past four weeks, he in each of the well below $200 million averaged this statement week be around $250 million are expected to said, and net borrowed reserves In order to maintain million next week. and $200 per cent per annum provide for a 3 level and to the $200 million around
growth in deposits, as well as to take care of seasonal changes in deposits and currency, Mr. Thomas said that the System probably would need to purchase $200 to $300 million of securities per month from July through November and about $600 million in December to take care of year-end needs. Should the Committee feel that a more restrictive credit policy was called for, purchases would, of course, be smaller. Chairman Martin next called upon Mr. Treiber who comented on the economic situation and credit policy along the following lines: The steel strike, of course, darkens the horizon and poses many unknowns. Except for the strike, business activ ity appears to be expanding and the outlook appears strong. Consumer demand has strengthened; automobile inventories have been reduced; other retail inventories have attained a better balance; business capital outlays are very high; total employment has attained a record peak; and residential con struction apparently is stabilizing at a high level. Prices in general are firm, with retail prices advancing. We may expect an increase in steel prices. Whatever the wage settlement in the steel industry, it is likely to be emulated in other industries. There is likely to be a cost-price push with a gradual increase in the price of manufactured goods. The demand for bank credit will probably continue high, although it is likely to be reduced temporarily as a result of inventory liquidation. The fourth quarter is expected to bring a renewed demand. There appears to be a heavy demand for new capital in the corporate and municipal markets. We should not relax credit restraint any further. In the last three weeks, member banks' borrowing from the Federal Reserve Banks has averaged about 3/4 of a billion dollars while net borrowed reserves have averaged about $150 million. The money market has been easier than expected, easier than planned. A substantial amount of reserves was released to offset an expected contraction in float, but float did not contract as expected. Offsetting action re sulted in large sales of Treasury bills by the System follow ing shortly upon large purchases. In May we were plagued with the opposite problem. Then the actual statistics had a way of turning out more severe
than the projections had indicated. This range of experi ence over two months emphasizes the fact that precision of figures is difficult or impossible and that caution is called for, both within and outside the System, in the interpretation of figures. We are now in the midst of a Treasury refunding opera tion and we may expect the Treasury to undertake cash financ ing shortly. We should contribute to the maintenance of an even keel in the market. Subject to the usual caveats about "net borrowed reserves", we should move to the extent that may be practicable, in the light of the Treasury's financing operations, toward a higher range of net borrowed reserves than we have had in the last three weeks. A range of $200 $400 million would seem appropriate, resolving doubts toward the higher part of the range. The officers of the Federal Reserve Bank of New York believe that there should be no change at this time in the Bank's discount rate. Mr. Irons said that he was in substantial agreement with the by Messrs. Young and Treiber regarding the economic situa comments made tion. Conditions in the Dallas area are very strong, he said, with record levels and industrial pro retail trade holding at approximately The steel strike thus far has had no ap duction at a very high rate. Irons said, although some of the effect in the Dallas area, Mr. parent to be finding increased difficulty smaller oil producers are reported strike runs well into August, it in obtaining steel pipe. If the is high and effects. Employment to have increased could be expected in the Dallas Dis tight. The drought labor market is relatively the past six weeks, particularly worsened during the has broadened and trict has improved situation The automobile last three weeks. during the declined consider new cars having stocks of with dealers' noticeably cars ranging from supplies of new in Dallas reporting ably, dealers Demand for over 30 days. none with virtually to 30 days, 12 days
bank loans has moderated, Mr. Irons said, there having been little tax borrowing during June and loans of reporting member banks having been relatively stable for several weeks. Banks point out that while loan demand is still strong it is not nearly as active as it was some three months ago. There has been less borrowing at the Dallas Re serve Bank, discounts having run around $20 million in recent weeks compared with a $40-$45 million level a short time back. Mr. Irons said that he thought the credit situation during the past few weeks may have gotten easier than the Committee intended and that he hoped the Committee would firm up the situation, with due regard for the Treasury' financing problems. It would be desirable to take ad vantage of any opportunity to firm up the money market and to avoid any indications of further ease. He would not favor a change in the discount rate or any other action of that sort which would move toward ease Mr. Mangels said that the Twelfth District picture continued employment is up in all to be one of expansion. Nonagricultural latest figures. While there according to the States of the district softness in lumber and plywood manufacturing, continues to be some the situation is improving. Demand for credit seems to be moderating has reported that deposits Mangels said, and one bank somewhat, Mr. have increased substantially recently in accounts ranging from in the easing reported considerable banks have down. Some $250,000 of competition reappearing and there is an indication money situation
among banks in developing borrowing customers. A definite slowing of real estate development also has been reported, not because of a lack of mortgage funds but because of a lack of buyers for houses. The automobile situation is well in hand according to reports and the prospects are that dealers will have cleared out 1956 models before the 1957 cars start coming into the market. Mr. Mangels said that a report from one bank was in contrast to the foregoing, that bank having indicated that money is still tight and that it is having to screen loans carefully. This bank had also indicated that it might have to start borrowing from the Reserve Bank in order to meet its situation during the near term future. Only five banks have borrowed from the San Francisco Bank during July, Mr. Mangels said, and on July 13 only two banks were borrowing, for a total of One of these has been a relatively persistent borrower $$ million. the other came into the Reserve Bank recently for some time, and of seasonal agricultural needs. for a relatively small sum because crop conditions in its area. Mr. This bank indicated favorable week directors of the San that at a meeting last Mangels stated 3 per cent discount to retain the existing Francisco Bank voted some voting to reduce was not unanimous, but that the decision rate anticipate in know what to He did not 2-3/ per cent. the rate to definite possibility that but felt there was a August, of course, time on the the rate at that vote to reduce the directors would should not be the Twelfth District banks in that member grounds
penalized by a higher rate than applied generally throughout the country. Mr. Powell said that the Minneapolis District continued to show a two-way trend with the larger cities reporting very active business and the western agricultural sections of the district show ing less satisfactory conditions. Residential construction has not fallen below the total for last year during the first six months of 1956; employment is at a high level; bank debits are up substantially; and department store sales are high. Unemployment is very low. The western part of the Minneapolis District reflects the fact that the spring wheat crop is expected to be the smallest in many years. The eastern part of the district, however, is showing a more favorable outlook both for crop production and for dairy products. Bank de posits have declined. Demand for loans has been extraordinarily heavy and banks have disposed of practically all of their short-term investments in order to meet this loan demand. Any further loan ex pansion would probably find them increasing borrowings at the Reserve Bank. Mr. Powell noted that at the present time the city banks in District are borrowing relatively heavily but that the Minneapolis very few other banks in that district are using the Reserve Bank However, at a meeting of directors last week discount facilities. present 3 per cent discount rate of the view was expressed that the a hardship on borrowing banks in the Minneapolis Bank was working have to borrow in the near and on banks which would that district
future to meet seasonal agricultural needs. Mr. Powell stated that while the existing 3 per cent rate was reaffirmed, it was by a di vided vote and that he would not be surprised if the directors at their next meeting voted to reduce the rate to the level generally applicable at the Reserve Banks. Mr. Powell felt that there was no reason for having excessive ease in the money market now and that until the steel strike was ended it would be desirable to continue about the existing degree of pressure in the market. This would call for somewhere in the neighborhood of $200 million of negative free reserves. However, he felt it would be necessary for the Com mittee to watch the situation very closely since at this time it could not be determined whether action would be required to increase restraint or to ease conditions during the fall months. Mr. Harris said that business activity in the Seventh Fed was mixed, automobile and farm implement centers eral Reserve District activity in most other district cities moving showing weakness, with With respect to the automobile industry, along at a high brisk pace. and Flint remains high and that unemployment in Detroit he stated the fall months it may be expected during that while some increase years' seniority may with as much as five is felt that some workers There will be the current year. back to work during not be called work week extend the average producers to for automobile a tendency strike would A prolonged steel add more personnel. rather than to and an Mr. Harris said, on the Midwest, effect have a substantial
extended work stoppage might reduce employment below the levels now anticipated for the fourth quarter of this year. Commercial and industrial loans at Seventh District banks have declined over the past three weeks, following the sharp increase in borrowings for tax purposes during the two weeks ending June 20. The recent drop includes not only repayment of loans made to meet the June 15 tax payments but also a drop in credit needs in metals and metal product firms generally resulting from a reduction in inventories. In con trast to the outlook in the automobile industry, Mr. Harris felt that farm income should continue to increase in coming months. Farmers' cash receipts and net income in the corn belt part of the Chicago District are expected to be above 1955 levels during the next few months, as is income in the dairy area. There is no evidence thus far, however, that district farmers are increasing their purchases of either producers, or consumers' durable goods. Mr. Harris also commented on steel prices on the basis of quotations offered in con nection with the building program for the Chicago Bank, stating in substance that the prices quoted were higher than those for other large buildings put up in Chicago in recent years, with an indication that an escalator clause would be inserted in any contract for steel prices growing out of the current steel in order to meet increased strike. Mr. Harris stated that he would not like to see a change in the present time but would like to see operations the discount rate at
of the Committee continue about as they have been in recent weeks, with no increase in pressure unless some development made it clear that that was necessary. His view would be that net borrowed re serves of around $200 million, rather than a higher figure, would be about right, Mr. Leedy indicated that no significant changes had occurred in economic conditions in the Tenth District recently. Considering policy for the next three weeks, he felt that two considerations would largely determine the Committee's action: one, the uncertain ties growing out of the steel strike, the other the cash financing that the Treasury apparently will soon offer, perhaps about the time of the next meeting of the Committee. Mr. Leedy said that consider he felt policy for the next few weeks should con ing these factors, the situation that the Committee has attempted to main tinue about the last few weeks. He would not go as far as Mr. Treiber tain during in permitting net borrowed reserves to have an upper had indicated would not wish to see any much as $400 million but he range of as net borrowed reserves had been indication of easing. He felt that than would have been desirable. during the past few weeks lower needs of the strike and the financing were not for the steel If it might well be that the Committee Mr. Leedy suggested Treasury, position of banks. of the reserve of further tightening thinking might need the Committee three weeks end of another fact, at the In to the pressure. adding somewhat to to give consideration
Mr. Leach said that the furniture industry in the Fifth District recently has reported some weakening in its prospects including some pressure for price declines. New orders in the textile industry also have continued small. Despite conditions in these two important Fifth District industries, Mr. Leach said that underlying factors were quite strong as indicated by an in crease in employment and the prospects of a high level of trade. The steel strike has been reflected in a decline in loadings of coal, with the captive mines closing down. Mr. Leach said that he thought the Committee should continue to try to maintain a con sistently tight rein on credit conditions, bearing in mind the needs of the Treasury. He would have in mind net borrowed reserves around the $250 million level, and he would not recommend any change in discount rate of the Richmond Bank at this time. Mr. Vardaman said that on the basis of the comments thus far made this morning and of his own observations, he felt it would be most unfortunate to show any inclination toward tightness at the present time. He agreed that it might become necessary to tighten up six weeks hence, but there was also a possibility that the System might have to loosen credit in that period. He did not see how the Committee could justify letting net borrowed reserves go to the $400 as an upper range by Mr. Treiber, and he million level mentioned its operations with a the Committee would continue would hope that from exceeding $200 million. view to keeping net borrowed reserves
If there were to be any deviation from this figure he would prefer that it be below rather than above, since this was not the time for any tightening action. Mr. Vardaman said that he could see no harm resulting from a uniform discount rate at this time along the lines indicated by Messrs. Mangels and Powell, and it might be healthy to have such a development. Mr. Mills said he proposed to reassess the tactical results of System operations since the last meeting of the Committee as to whether they in reality at any time produced a sense of ease or the actual degree of ease that had been referred to. The movement of negative free reserves during the intervening period since the last meeting has been down, he said, but despite that fact there are very that the greater availability of reserves, at least clear indications in negative free reserves, has not produced a degree of as reflected to the objectives of the Committee's ease that has been disadvantageous restraint that within relative limits policy of restraint-a policy of on Federal funds hold con We have seen the rate should be continued. would suggest that Mills said, which 2-3/4 per cent, Mr. tinuously at a degree of tightness in the money is a degree of restraint and there supply situation. the over-all reserve not reflected in market that is (and a repetition reserve week during the last the same time, At discounts at the level of reserve week) in the current would be seen would also or above, which $800 million Banks averaged the Reserve
suggest that, at a time when reserves were more available, banks had simultaneously to resort more strongly to the discount window. This indicates an element of tightness in the money market that has not otherwise been revealed. It is very possible that the need for dis counting has come from an uneven distribution of reserves on the one hand and, on the other hand, from a need for additional reserves by some banks experiencing seasonal demands for loans. In illustration, Mr. Mills pointed out that although reserve city banks for several days past had held a margin of excess reserves which presumably moved into the market as Federal funds, reserve conditions remained rela tively tight due to a less ample supply of excess reserves at country banks and scant reserves at central reserve city banks. The flow of new corporate and municipal securities at rising interest rates was cited as another indication of market tightness. The fact that such new securities had only been moved at higher in terest rates and that they had not gone into commercial bank port folios in any considerable volume was taken not only as a confirma objectives but also as evidence that tion of the Committee's policy the market had not been oversupplied with reserves. It was Mr. Mills' opinion that the Committee may be putting too much emphasis on the little emphasis on the free reserves and too factor of negative he felt that the latter Bank discounts, and factor of Federal Reserve factor currently deserved closer attention than the Committee may be inclined to apply to it.
Concern has been expressed about the ultimate inflationary effects of the steel strike, Mr. Mills noted, and he stated his feeling that the Committee could not look too far ahead and attempt predictions, A certain effect of the strike and the curtailment of supplies would be to stretch out the capital expansion programs and this should take off some of the upward pressure on prices. Another result might be that businessmen, instead of coming out of the strike period with a sense of overoptimism, would recapitulate their think ing and adopt a more sober and cautious attitude toward the future. Mr. Mills said that using negative free reserves as the common denominator of the Committee's policy objectives, a $200 seem to be out of line for the period im million level would not three weeks, it was diffi Judging from the past mediately ahead. harmful results if they fell see that there would be any cult to reason to change the dis There seemed to be no below that level. the Committee should move at the present time and count rate inclination to take action to day and avoid the cautiously from day be foreseen accurately situations that cannot in anticipation of too far in advance. under cultiva agricultural acreage noted that Mr. Shepardson from a year ago. is down a little country as a whole tion for the with some showing extremely varied, areas are from different Reports conditions which severe drought others showing prospects but good crop
have particularly affected cattle in some sections. While the number of fed cattle is likely to be going down, with reasonable improvement in finished cattle prices, the number of grass-fat cattle that will move to market is likely to increase considerably and this would mean lower prices. The sale of cotton that Mr. Rouse mentioned is already causing some concern as to its possible effect on foreign trade rela tions and domestic cotton prices. Mr. Shepardson noted that the level of consumer prices has shown some increase recently, and he also com mented to the effect that one outcome of the steel strike that appeared to be almost a certainty would be an increase in wage rates and in prices. He felt that the Committee should be concerned with these developments and that it should be prepared to act in whatever way seemed to be called for. In other words, he would hold a tight rein on credit at the present time and maintain a "snug" position, neither increasing pressure nor letting it up, but making it clear that the Committee was prepared to move in whatever direction appeared to be necessary. Subsequently, Mr. Shepardson referred to Mr. Powell's report there was some comment among country banks in the Minnesota that rate would be more appropriate that a 2-3/4 per cent discount District meeting their seasonal needs during the crop than a 3 per cent rate in he had discussed with represen Mr. Shepardson said that moving period. of Agriculture the question the United States Department tatives of credit restraint program, were objecting to the existing whether farmers
and he had been informed that that Department had no complaints of undue credit tightness in agricultural areas at the present time. Mr. Fulton noted that 40 per cent of the country's steel production is accounted for in the Cleveland District, and that this factor made the district very cognizant of the strike. Thus far, there had been little general effect. Retail sales have held steady and delinquencies on personal instalment loans have not in creased thus far in strike areas. The strike is on a very friendly basis, Mr. Fulton said, but comments he had received indicated there would not be an early settlement. Substantial quantities of steel inventories are being worked off, although structural shapes for use in the construction industry are in short supply. This will cause postponement of construction operations into the winter months with increased costs and other adverse effects. He noted also that Lake Erie harbors and he stated reasons 28 ore boats are tied up in be a scarcity of ore in the spring of next year. why there would be prepared to take felt that the Committee should Mr. Fulton the end of the steel strike. of a surge of borrowing with cognizance see greater ease than what has already occurred, He would not like to of ease that had come into concern about the degree and he felt some past couple of weeks. Nega because of float during the the market million range would seem appro tive free reserves in the $200-$250 extent to which the resurgence the Committee could see the priate until
of business and borrowing would take place and how developments in the steel and automobile industries would affect business generally. Mr. Fulton said that he would maintain the present level of discount rates. Mr. Williams reported a comment by Chairman Meinel of the Philadelphia Bank that the effects of the steel strike on the steel industry are likely to continue for some time after the strike is settled because of the unbalanced situation caused by the strike. He also reported the results of a current survey of industrial economists in the Philadelphia District, most of whom indicated that their companies anticipated a high level of demand for their products during the remainder of 1956. They also indicated in general that plant expansion plans were going ahead on schedule, although one of the economists thought that industry might wind up with some over capacity, particularly on the part of firms that added to capacity without developing new products. Department store sales in the Philadelphia area continue strong, Mr. Williams said, and are up during the latest four weeks and 5 per 9 per cent from last year half of this year. Inventories are not high cent for the first to sales. Business is good in resort areas. The Philadelphia relative something of a problem on discounts, Bank continues to have Reserve Country banks seem to be in better shape particularly by city banks. having readjusted their posi as far as discount needs are concerned, would be how to city banks, the problem time ago. At the tions some
handle the situation if the usual seasonal and year-end rise demand for credit takes place from the existing high level. The System's problem, Mr. Williams said, is one of staying with the strike situa tion and being prepared for constructive action at the time the strike ends. In his judgment, net borrowed reserves in a range between $200 $250 million would be appropriate. Mr. Bryan said there had been no dramatic development in the Sixth District economy since the preceding meeting. Some of the banks that had been borrowing considerably at the Reserve Bank have ceased to borrow lately. The textile industry is definitely unhappy, and Mr. Bryan commented particularly on the competition that industry is experiencing from goods manufactured in Japan. The Mediterranean fruit fly has appeared in Florida this year and threatens to do considerable damage over a much wider area. Mr. Bryan said that he was confused by the economic situation. He was impressed by the steel strike and felt whatever settlement took place the strike would have inflationary that the direct cost standpoint and as a effects in the end, both from other wage demands. He was also impressed pattern for settlement of price index has already moved upwards, by the fact that the consumer result in great damage to the in the wrong direction. This could on the part of the a good deal of confidence economy and destroy more impressed with he was more and Mr. Bryan said that consumer. the country is facing formation problem magnitude of the capital the that while arguments thinking was net of his decade. The in the next
could be made to the effect that economic activity may slow down, he was more inclined to think it would "bolt." As to credit policy, his position was that he would keep a tight rein on credit. He would not reduce the discount rate at the present time and, in conducting open market operations, he would be somewhat reluctant, supplying reserves on the lesser side rather than on the more generous side. Mr. Johns said that no change in the discount rate of the St. Louis Bank was contemplated at the present time. He would be reluctant to appear to lean in the direction of greater pressure, however, and he did not know what had been accomplished in the last three weeks in the direction of achieving the stability for which Chairman Martin had argued at the preceding meeting. Mr. Johns said that it seemed to him that there had not been a very theatrical exhibition of stability, and while he was not criticizing anybody for what had been done he did not know what should be done about the situation from here on. He would not increase the pressure; he certainly would not appear to relax the pressure. At the risk of seeming to harp on the question and recognizing that it was a matter over which neither the Reserve Banks nor the Fed Committee had legal jurisdiction, Mr. Johns said that eral Open Market the Committee that there was at the preceding meeting of he had felt possibility of adjusting reserve of interest in the some indication
requirements downward this autumn. He now sensed that this possibility had been written off as something that could not be done and that it was believed that whatever adjustments were to be made would be carried out in the open market and at the discount window. Mr. Johns said that if reserve requirements are now too high and if the Committee anticipated the need to supply $1.8 billion of reserves during the remainder of this year, and in view of the prospect that the Treasury would be coming to the market for additional cash, it seemed to him that there should be some way of reducing reserve requirements and doing it in a manner that would meet the situation. He could find very little evidence of any desire to take this course and he expressed regret. Mr. Balderston said that between now and the Committee's next meeting, the same target that was adopted three weeks ago would seem is, net borrowed reserves of around a quarter to be appropriate--that of the steel strike would doubtless of a billion dollars. The length rebound after the strike is termi affect the height of the business the inflationary impact of the wage nated. This fact, together with that will be triggered by the strike settlement, and price increases that will need to be create inflationary tendencies will probably a continuation of the moment, however, vigorously. For dealt with rates would of existing discount policy and open market the present with the dual present posture The System's seem to be indicated. greater firmness either toward permit it to move rate will discount the public. without confusing greater ease need be, toward or, if
Mr. Balderston said that he shared the concern expressed by Messrs. Shepardson, Fulton, Williams, and Bryan that this fall may bring problems that will call for quick and effective action. Open market operations can be used flexibly, as has been evident during the past month, even though the kind of stability that the Committee antici pated had not resulted. The desk was able in that period to meet an unexpected turn of events with fair success and without confusing the general public, Mr. Balderston said. However, if the System were to back and fill on discount rates just in advance of a period that may call for use of a rate increase the results might be unfortunate. For that reason, Mr. Balderston said that he thought the Committee should continue its present policy for the next three weeks and be ready for any eventuality. Martin said that there seemed to be an undertone Chairman in the comments this morning that might eventually develop into a conflict of views but that he gathered that, as of the present moment, of the Committee continued to be appropriate the existing directive of around a quarter of a present conditions and that a level to would be as appropriate a dollars of net borrowed reserves billion the operations during the as could be arrived at to indicate figure to the System actions The Chairman then referred next three weeks. Reserve Banks effec rates at the Federal taken increasing discount followed since that to the credit policy April 13, 1956, and tive the policy had worked reasonably the whole, he felt that time. On
well and that subsequent events had more or less vindicated the position taken in mid-April. Recent events, apart from the steel strike, have been in the direction of strength in the economy, Chairman Martin said, adding that after the April action the posture of the System was one of defense. At this time, he felt that it would be desirable for the Committee to put itself in the position of being able to "turn the wheel" a little one way or the other but of keeping a tight hold on the wheel. During the past year the price level had appeared to remain fairly stable but that was because farm product prices had been down while other prices had been rising. Chairman Martin said he was not in favor of relaxing or of tightening the supply of bank reserves at this time but that within the frame work of the present directive the Committee should keep itself in a position to go in either direction in its operations without feeling a jerk. Chairman Martin said that the Committee should not minimize the importance of the steel strike. His feeling was that a strike such as this was always a disaster and that it was most unfortunate that there were those individuals who were minimizing its importance it was a good thing. He agreed with the comment of or saying that Chairman Meinel of the Philadelphia Bank, reported by Mr. Williams, strike would be felt for some time after a that the effects of the create more dif that this would adding the statement settlement, System. Money and credit policy ficulties for the Federal Reserve
is only one item and a minor item in dealing with cost-price effects of the strike, the Chairman said, and it would be very difficult to conduct operations in this period against the judgments that would take place. The Committee would have to be very careful about the general public's reaction to the credit policy followed during that period. Chairman Martin then referred to Mr. Johns' comment on reserve requirements. He was sympathetic to a reduction in reserve require ments, he said, but a move of that sort must be considered against the possible effects of the cost-price mechanism that may be expected during the next few months. He would not recommend action on reserve requirements at the present time. One of the factors to be considered was the lack of familiarity on the part of the public with the use of that instrument as contrasted with its familiarity with the use of open market operations. With respect to the discount rate, Chairman Martin said that he sympathized with the problems confronting Messrs. Mangels and Powell and their directors. The System should take encouragement from the conscientious and careful consideration and efforts that Reserve Banks and their boards shown on the part of the were being matters. It was not regarding this and other credit of directors like this to be sure what position possible for anyone in a period However, Chairman Martin said that he felt personally, was right. meeting, that during a period he had indicated at the preceding as
of Treasury financing it would be most unfortunate to have any change in the discount rates. This was a problem before the two Banks now having the higher rates. One approach was to suggest that they should "not sell out at the bottom of the market., It was a problem how to convey this idea to the boards of directors and to bring about an understanding of the possibility that the System might wish to move up to a 3 per cent rate across the board before long. Chairman Martin emphasized that he did not know whether this action would be called for, but it was one possibility that should be out in front of the entire System. The System moved slowly, balancing problem. He felt that the different he said, and it had a their activities reasonably of the System had been coordinating parts open market meetings had been and that the discussions at the well the System. He hoped this well as a clearing house for serving very to prejudge the While he was not attempting could be continued. System should not be develop, he thought the situation that might was something that that the cost-price rise beguiled into believing business must face that anyone in It is something could be ignored. taken place. the rise has actually face it before the System must and remarks and to Mr. Treiber's then referred Chairman Martin about net the usual caveats subject to that, to his suggestion that might move to the extent the System should borrowed reserves, operations financing the Treasury's light of in the be practicable existed in than had reserves of net borrowed higher range toward a
the last three weeks, and to Mr. Treiber's specific suggestion that a range of $200-$400 million net borrowed reserves would seem appro priate. While he had sympathy with the thinking back of this sugges tion, Chairman Martin said that during the period of the Treasury's financing his view was that a figure of net borrowed reserves around the $250 million level would be appropriate, recognizing that the management of the account would have difficulty in trying to move within any narrow range. The Chairman commented that he did not like to see a range in free reserves from negative $391 million to positive $14 million if that could be avoided, although he was not making this comment as a criticism of the handling of operations during the past three weeks. In summing up, Chairman Martin said that he interpreted the desire of the Committee at this time to be that it should neither tighten nor relax, but that it should keep its present position of having as tight a rein as could be held within the limits of the Committee's existing directive. There was no indication of disagreement with this suggestion, and Chairman Martin then called upon Mr. Rouse for his comments as to whether negative free reserves in the approximate range of $250 $200 million presented any problems for operations of the account. would like to revert to Chairman Mr. Rouse said that he Martin's comment toward the end of the meeting held three weeks ago reserve figures. What we really are on the use of net borrowed the market rather of feeling in said, is a degree after, Mr. Rouse
than any particular figure. We have had and are having at the moment the tightest situation in New York that has existed in a long time. New York banks are in debt to the extent of around $500 million, about $250 million to the Reserve Bank and about $250 million to other banks. That situation has gotten worse through this recent period of ease and the banks are now in the process of getting themselves out of debt. The same situation is true in the other central reserve city. If the banks get out of debt, the figures of net borrowed reserves could well remain the same as they have been, but the degree of pressure might really be much less even with the same net borrowed reserve figure. This was one of the things that Mr. Rouse thought Mr. Treiber had in mind in suggesting a possible range of $200-$400 million for net borrowed reserves. Mr. Rouse said that he also thought this was one of the things that Chairman Martin had in mind when he commented at the last meeting to the effect that he would not be concerned figure of net borrowed reserves ran up toward $00 million. if the Mr. Rouse said that he also wished to call attention to the matter of float and the difficulty it was causing in using projec tions of net borrowed reserves. He did not know whether anything Reserve Banks either as a group or could be done about this by the the System would give more consideration singly, but he hoped that in float were and irregular variations since the wide to the problem of the situation. adding to the difficulties
Mr. Mills said that it seems that the Committee's decisions are built so largely around market considerations that it is in danger of losing sight of its responsibilities for making credit adequately available. He noted that Mr. Rouse had called attention to the efforts of central reserve city banks to liquidate their dis counts at the Federal Reserve Banks. The published statements of these banks, Mr. Mills said, indicate that a further reduction in their investments in U. S. Government securities will be necessary if they are to reduce or liquidate their discounts at the Federal Reserve Banks and at the same time hold their loan and investment positions. Such action would have to be taken at the same time that these banks and, in fact, banks in the reserve city and country bank areas will begin to experience an increasing demand for seasonal loans. With such a central reserve city bank picture, it is doubtful the liquidation of U. S. Government securities to retire whether Federal Reserve Bank discounts could bring more than a fleeting sense of ease, which would itself disappear as soon as the mounting An absolute return to tight market demand for loans must be met. short, Mr. Mills felt that without conditions would then occur. In by which these banks could the only practical means new reserves by liquidating U. S. Govern loan demands would be meet their seasonal the Federal Reserve Banks. or discounting at ment securities that Mr. Rouse had pointed up very Chairman Martin said several times about the Committee had had clearly the discussions
7/17/6 placing undue reliance on the figures of net borrowed reserves. When we talk about a range of $200-$250 million of net borrowed reserves, the Chairman said, we really are talking about that as an indication of a "quality" of tightness and not as an actual figure. It is in that framework that these figures are discussed. The Committee had to have some kind of a guide in trying to judge or indicate the operations that would carry out its policy, Chairman Martin said, and as he had indicated several times, he sometimes wished that the Committee had another way of gauging operations than by use of free reserves. Chairman Martin went on to say that the comment Mr. Rouse had made about float was pertinent and that it would be desirable for all of us to consider how to deal with the problem. The Chairman then referred to the comment by Mr. Mills, stating that none of us wished to fail to exercise our responsibilities for supplying credit to the market where and when it is needed. How ever, we must not lose sight of the cost-price factor and of what The Committee must continue to balance credit can do to that factor. Mr. Rouse whether he had other edge. He inquired of on the razor's the Committee, with to be issued by regarding the directive comments at this meet that had taken place framework of the discussion in the in the negative. and Mr. Rouse responded ing, approve a that the Committee Martin then suggested Chairman Bank of New Federal Reserve to the existing directive renewal of the
York, with the understanding that the general framework of the discus sion at this meeting would be taken as a guide for the Manager of the System Open Market Account in carrying on operations between now and the next meeting. Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Re serve Bank of New York until otherwise directed by the Committee: (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allow ing maturities to run off without replacement) for the System open market account in the open market or, in the case of maturing securities, by direct exchange with the Treasury, as may be necessary in the light of current and prospective economic conditions and the general credit situation of the country, with a view (a) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary developments in the interest of sustainable economic growth while taking into account any deflationary tendencies in the economy, and (c) to the practical administration of the account; provided that the aggregate amount of securities held in the System account (including commitments for the purchase or sale of securities for the account) at the close of this date, other than special short-term certificates of indebted ness purchased from time to time for the temporary accommoda tion of the Treasury, shall not be increased or decreased by more than $1 billion; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treas total amount of such certificates held ury; provided that the at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million; from the System ac direct to the Treasury (3) To sell such amounts of Treasury securi count for gold certificates year as may be necessary from time ties maturing within one
to time for the accommodation of the Treasury; pro vided 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 referred to Operation Alert 1956 scheduled for the period July 20-26 and to the proposal approved at the meeting of the Federal Open Market Committee on January 10, 1956 for a pro gram to train and maintain a group of men as widely dispersed as possible familiar with open market operations who could carry on in an emergency. This program, to be inaugurated at the Federal Reserve Bank of New York in October of this year, would contemplate training at two levels: to be trained in the (1) Technical personnel, detailed mechanical operations of the System Open Account. It is planned that personnel of this Market type will be assigned on a rotating basis for train ing at the Federal Reserve Bank of New York for a period of approximately two weeks. might conceivably be called (2) Personnel who make decisions carrying out policy, that is, upon to for the role of Manager of the System understudies Account or of his immediate top assistants. Open Market will also be assigned to New York on a Such personnel of approximately three rotating basis for a period weeks. two trainees in that not more than it is planned Under this program, at any one time. assigned to New York will be both categories that he felt the forthcoming Martin went on to say Chairman to be scanning personnel occasion for offered an appropriate alert that the Reserve and he suggested trainee program assigned in this
Bank Presidents consider in the near future members of their staff who might be so assigned. Chairman Martin also asked that the Presi dents send to the Secretary of the Committee at the end of the forth coming exercise the names of one or two nominees for each of the categories of personnel to be trained as indicated above, in order that an appropriate schedule of time of assignments for training at the New York Bank could be worked out. Chairman Martin next reported on a meeting held in the Board's offices on Friday, July 13, 1956, of a steering committee of commercial bankers working on emergency defense planning measures for the banking system as a whole. This committee, of which Mr. John J. McCloy, Chair man of the Board of Directors of The Chase Manhattan Bank, serves as chairman, was concerned primarily at this meeting with a program for commercial banks and preparation of a defense manual that might be made available to the banks. The program had been developed in co operation with the Treasury Department, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Bankers Association, and Messrs. Florence and Cocke, Presi American of the American Bankers Associa and Vice President, respectively, dent representatives of that association. attended the meeting as tion, on behalf of the Presidents' Conference, Chairman Martin stated that, an outline of the work being presented to the meeting Mr. Williams in connection with Federal Reserve Banks done in the individual Mr. J. W. Allison was serving planning. He also stated that defense
as Special Consultant to the Board of Governors in connection with defense planning matters. At Chairman Martin's request, Mr. Treiber reported on the visit to the Federal Reserve Bank of New York on July 5 and 6, 1956 of members of the staff of the Committee on Government Operations of the House of Representatives, discussed at the meeting on June 26, 1956. He stated that Mr. William Pincus, Associate General Counsel, and Mr. Orville J. Montgomery, Counsel, of the Committee arrived at the New York Bank on Thursday morning, July 5, and after a review of the scope of the work performed by the Bank as fiscal agent of the Treasury, they visited the trading room and spent most of their time during the two days in the Securities Department of the Bank. They also spent some time in the Government Bond Department, the Safekeeping Department, and the Securities Custody Department, and they made a tour of the Bank. Mr. Treiber said that Messrs. Pincus and Montgomery were interested in a wide field of activities but centered their attention on the advisory services and operating functions performed by the securities dealers in connection New York Bank and by the Government issuance of Treasury securities. They were especially with the of the dealers in the Govern interested in the role and significance operated, and how the Reserve market, how that market ment securities particularly for Treasury accounts, and Bank's trading is conducted, Treasury. Mr. Treiber York Bank with the of the New the relationships
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
Also: Record of Policy Actions