July 30, 1957 FOMC Minutes

FOMC minutes

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 in debtedness 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 account for gold certificates such amounts of Treasury securities 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. Chairman Martin then referred to the memorandum that had been prepared under date of July 3, 1957, and distributed with a letter from Mr. Rouse of the same date, concerning institutional relations between the Federal Reserve Bank of New York, the Board of Governors, and the Treasury. This memorandum contained sections dealing with of the Treasury's cash balances, transactions in Govern management Treasury investment accounts, System operations ment securities for agency relations between the Treasury financings, other fiscal during Reserve Bank of Department of the Federal Treasury and the Securities the Treasury. The relations with York, and Board of Governors' New Bank except for the New York Reserve been prepared by material had which were prepared accompanying tables section and certain the last Board of Governors. staff of the by the

Chairman Martin stated what the memorandum had been put on the agenda for this meeting in the thought that, with the anticipated appointment of a new Under Secretary of the Treasury, the Committee should start exploring these relations actively and that it would be desirable to have some preliminary discussion at this time. However, the anticipated appointment had not yet been made and therefore there did not appear to be quite the same degree of urgency. Chairman Martin went on to say that Mr. Hayes had pointed out very well that a major question confronting the System related to the underwriting of Treasury issues, and he felt that this was a problem with which the System must come to grips. He then said that with Mr. Riefler's assistance he had prepared under date of July 30, 1957, a memorandum relating to techniques of debt management which would be distributed at this meeting to the members of the Federal Open Market Committee and also to the Presidents not currently serving on the Committee. Inthis connection, he commented that in the past few months he had noticed increasingly that the Treasury was tending actively to request a resumption on the part of the System of under during financing periods, and he said that writing responsibilities increasing difficulty in discussing this matter he had experienced He felt it essential that the Open Maket Com with the Treasury. important problem and that all mittee review carefully this very consideration, for he was be put on the table for points of view obtained if all concerned expressed the right answers could be sure

their views freely. It was his feeling that sometimes the dis cussions tended to be too polite in tone, whereas the meetings of the Open Market Committee are meetings of the System "family" at which all parties should feel free to express themselves fully. He had wanted these documents to be distributed so that all concerned might have the benefit of them and have a chance to be developing their views. As to procedure, he suggested that the material first be the subject of discussion by the Special Committee appointed at the meeting on January 28, 1957, which included, in addition to him self, Messrs. Hayes, Allen, Balderston, Erickson, and Szymczak. Due to vacations, Messrs. Hayes and Szymczak would not be present at the Open Market Committee meeting on August 20, but all of the members of the Special Committee apparently would be available on September 10. Therefore, he would like to have a meeting of the Special Committee on that date and, on the basis of the Special Committee's discussion, to bring the problems concerned before the whole Committee in late Septem ber or at least in early October. During a discussion of the matter, Mr. Hayes expressed the view that it might not be possible for the Special Committee to make a very the basis of a single meeting on September full or complete report on 10. Chairman Martin indicated that he recognized this possibility and had been anxious to have the this was one reason why he said that He commented that to all concerned. pertinent material distributed to tell what the that it was impossible moving rapidly and events were

Committee might be faced with in the course of the next 30 or 60 days. At the conclusion of this discussion, it was agreed that the procedure suggested by Chairman Martin would be followed. It was also agreed that the next meeting of the Committee would be held at 10:00 a.m. on Tuesday, August 20, 1957. Thereupon the meeting adjourned. Secretary