April 16, 1957 FOMC Minutes

FOMC minutes

and Friday there had emerged the cumulative effects of what had tran spired over the preceding two weeks. The operation of the System ac count would give special attention to these cumulative forces during the course of the next three weeks. In response to Chairman Martin's request for comments, Mr. Hayes said that he was slightly at variance with the consensus but he was per fectly happy to try to make the majority views work out, Mr. Shepardson said that be would like to report a conversation he had had with a lumberman in the Pacific Northwest a few days ago, the gist of which was that market pressures were causing the operator to "face up" to the problem of dealing with excesses that had crept into the business in recent years. Mr. Shepardson said that this seemed to him to represent a start of the kind of thinking the Committee would like to achieve in industry. said that he concurred heartily in the desira Chairman Martin bility of adjustments of prices, but he thought all members of the Com should keep in front of them constantly the problem the Treasury mittee was facing and the relationship of the Committee's operations to that Committee would be making a very serious mistake if it problem. The this relationship at any time, he said, minimized this problem and had made when he mentioned the cumulative noting the comment Mr. Larkin the wrong side. Now that the Committee had forces which might work on Chairman said, it must be position in the market, the reasserted a just as much harm on the forces that can do aware of these cumulative

"other" side as they did before on the side of ease. He reiterated a view that he had expressed in an earlier meeting that the country did not have a satisfactory Government securities market to work with to day and that eventually something would have to be done to get a market with more adjustability than the present market. However, the Committee should be extremely careful on swings such as it had seen recently. It should never overlook the Treasury needs. Members of might or might not approve the way in which the Treasury the Committee was running its affairs, but the Committee should not attempt to operate the Treasury. There was a real obligation that the Committee must fulfill without in any way subordinating itself to the Treasury. Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Reserve Bank of New York until otherwise directed by the Com mittes: such purchases, sales, or exchanges (in (1) To make cluding replacement of maturing securities, and allowing to run off without replacement) for the System maturities or, in the case of account in the open market open market securities, by direct exchange with the Treasury, maturing light of current and prospective as may be necessary in the situation of the and the general credit economic conditions supply of funds in (a) to relating the country, with a view business, (b) to of commerce and market to the needs the in the interest of inflationary developments restraining recognizing uncertainties economic growth while sustainable markets, and the outlook, the financial in the business practical administra and (c) to the international situation, aggregate amount of provided that the tion of the account; account (including commitments held in the System securities the account) at of securities for the purchase or sale for special short-term date, other than the close of this from time to time indebtedness purchased certificates of

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 ac count of the Federal Reserve Bank of New York (with discre tion, in cases where it seems desirable, to issue participa tions 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; (3) To sell direct to the Treasury from the System ac count for gold certificates such amounts of Treasury securi ties maturing 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. the next meeting of the Committee would It was agreed that be held at 10:00 a.m. on Tuesday, May 7, 197. the memorandum that Mr. Balderston Chairman Martin mentioned 3, 1957 concerning the problem of distributed under date of April had to the Trading Desk the program that the guides that would indicate He stated that he had also re Committee desired to have followed. interest in the discus Mr. Bryan expressing his ceived a letter from be deferred until discussion of this subject He suggested that sion. the next meeting of the Committee. had been made that that the suggestion Martin stated Chairman Open Market Committee taken by the Federal of Policy Actions the Record than on an annual basis, meeting to meeting rather be prepared from greater detail in somewhat Riefler commented request Mr. and at his for this decision. as to the reasons

Thereupon Secretarythe meeting adjourned.