March 26, 1957 FOMC Minutes

FOMC minutes

debt and its conversion into short-term debt had been a constant drag on the System's operations. Mr. Rouse noted that at the present time member bank borrowings were at a level which in other periods would cause a great deal of con cern, because they would cause strain in the market. However, on analysis, with Chicago banks borrowing $400 million out of a total of $900 million, these figures caused concern to no one. Chairman Martin said he wished to make it clear that anyone was privileged to speak again as to how he felt operations for the System account should be carried on. that he hoped that at some time there would be Mr. Allen said for discussion of Mr. Young's phrase that monetary an opportunity policy had "validated price levels." it would be desirable for all Chairman Martin said that he felt that Mr. Young had prepared Committee to study the paper members of the of its content at a later meeting. and to have a discussion recommentations [sic] for that he had no Mr. Rouse had stated After that it be the Chairman suggested the Committee's directive, change in disagreement with this sug change, and there was no renewed without gestion. Thereupon, upon motion duly made seconded, the Committee voted and the Federal Re to direct unanimously of New York until otherwise serve Bank by the Committee: directed

(1) To make such purchases, sales, or exchanges (in cluding replacement of maturing securities, and allowing 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 recognizing uncertainties in the business outlook, the financial markets, and the international situation, and (c) to the practical administra tion 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 certifi cates of indebtedness purchased from time to time for the temporary accommodation 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 Treasury; provided that the total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million; to the Treasury from the System account (3) To sell direct certificates such amounts of Treasury securities matur for gold ing within one year as may be necessary from time to time for the accommodation 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 noted that a copy of a report by the Subcommittee on Emergency Planning (Messrs. Shepardson, Hayes, and Robertson, Chairman) under date of March 26, 1957, and at his request Mr. had been distributed commented briefly on the content of the report and the recom Robertson He stated that a staff group had reviewed mendations contained therein.

the emergency planning program and activities of the Federal Open Market Committee and that it was their unanimous opinion (1) that the structure of the planning was sound and required little change, and (2) that the effectiveness of the emergency planning activities from here forward would depend essentially on training provided by simulated problems posed in successive Alerts. The report recommended, Mr. Robertson said, that a process of review similar to the one embodied in the current report be under taken annually to see that all phases of the emergency program were kept current with developments in the general emergency planning of the Government. One of the specific recommendations was that the training of System personnel at the Securities Trading Desk of the New York Bank be continued and that personnel from the Board's staff be included in the participating group. It was also recommended that more personnel in Federal Reserve Banks be cleared so that they could participate effectively in all parts of the emergency planning, that at least two individuals from Federal Reserve Banks be sent to the Board to participate as full members of the Board's organization during each major Alert, and that each Federal Reserve Bank again review its organization to see that a sufficient number of its staff had been trained to participate effectively in these emergency operations. Mr. Robertson went on to say that in the event the Federal Open Market Committee approved the report, the Subcommittee on Emergency Operations would undertake to see that the recommendations

were carried out. After discussion, the report of the Subcommittee was approved by unanimous vote. It was agreed that the next meeting of the Federal Open Market Committee would be held at 10:00 a.m. on Tuesday, April 16, Thereupon the meeting adjourned. Secretary