December 17, 1957 FOMC Minutes

FOMC minutes

Open Market Committee on August 7, 1956 (Messrs. Erickson, Johns, and Robertson, Chairman). At the Open Market meeting on May 7, 1957, he (Mr. Robertson) had reported that the Committee on Float had received a document from its subcommittee and that it expected to distribute copies of its report shortly. Subsequently, the report of the System Committee for the Study of Float dated May 31, 1957 was submitted, and that report was considered by the Conference of Presidents of the Fed eral Reserve Banks on June 17, 1957. Mr. Robertson went on to say that the System Committee for the Study of Float also had prepared a report dated December 16, 1957, addressed to "The Members of the Board of Governors and the Presidents of all Federal Reserve Banks." The report had been addressed in that fashion because it referred in part to policy matters for consideration by the Federal Open Market Com and in part to operating matters pertaining to check collection mittee reference to the impact of float on open market opera as such without Robertson said that the Committee recommended: tions. Mr. Market Committee determine certain 1. That the Open questions listed in the report and give the Manage policy directives as Open Market Account appropriate ment of the take with respect to float; and to the approach it should studies referred to in the program 2. That the other Committee's report of May 31, 1957, be submitted with the committees of of the appropriate made under the direction the Presidents' Conference. 16, 1957 report of the System stating that the December After distributed by the Secretary of Float would be Committee for the Study

of the Open Market Committee in the usual manner, Mr. Robertson said that in a separate report dated November 14, 1957, the Subcommittee on Float recommended a change in the information telegraphed daily by the individual Federal Reserve Banks to the Federal Reserve Bank of New York to provide the Open Market Account Management with data on float, reserves, and borrowings. A draft letter embodying such recommendations, which letter would supersede the letter from the Board of Governors to the Federal Reserve Banks dated August 7, 1957, was distributed at this point, and Mr. Robertson said that the Com mittee for the Study of Float recommended that the Board send the proposed letter promptly, requesting that the revised procedure for reporting figures be put into effect, if practicable, beginning with the figures for Thursday, December 26, 1957. He went on to say that the proposal for reporting data was still experimental although it had been cleared with a number of the Federal Reserve Banks and that it could be changed at any time that a change seemed desirable. Mr. Mills inquired whether there was any risk that the operating officers of the Federal Reserve Banks might feel that they were having forced on them without previous review a revision in the procedure for reporting the data concerned, and in response several of the Reserve did not see any objection to send Bank Presidents indicated that they ing out the letter in the proposed form. was sent out his Bank stated that if the letter Mr. Bryan information as requested. to furnish the course, do its best would, of

However, he wished to say that he was opposed to this whole approach. He felt this a typical System mechanism by which we take up little problems while avoiding fundamental problems. The fundamental problem here was the degree to which the Open Market Account should attempt to adjust its operations to changes in float and similar influences. This was a problem on which the Committee had not come to a decision. Mr. Robertson said that the Committee for the Study of Float hoped that the recommendations in its report, which was being distrib uted by the Secretary, would result in having the Federal Open Market Committee come to grips with this problem at an early date. Cnairman Martin suggested that the Committee approve the send ing by the Board of Governors of the proposed letter, with the under standing that the Federal Reserve Banks would start furnishing the information in the new form beginning with figures for Thursday, December 26, 1957, if practicable, and in any event not later than January 9, 1958. This suggestion was approved unanimously. Note: The letter was sent Secretary's later in the day by the Board of Governors to the Presidents of all Federal Reserve Banks except New York, with a copy to New York. A copy has been placed in the files of the Federal Open Market Committee. that the next meeting of the Committee would be It was agreed scheduled for 10:00 a.m. on Tuesday, January 7, 1958. Martin referred to the proceedings of the Tribunal Chairman the alleged leakage of information up by Parliament to inquire into set

about the September 19 increase from 5 to 7 per cent in Bank rate of the Bank of England. He noted that the proceedings, which com menced at the Church House, Westminster, London, on Monday, Decem ber 2, 1957, were being reported in detail in The Times and sug gested that they would be of interest to many persons within the Federal Reserve System because of the problem that was raised of possible conflicts of interest. The Chairman also said that the proceedings before the three-man Tribunal should impress all of those attending the Open Market meetings with the necessity for keeping matters discussed at these meetings completely confidential. Thereupon the meeting adjourned. Secretary s Note: Chairman Martin then referred to a wire which he had sent to the Chairmen of all Federal Reserve Banks on December 10, 1957, concerning a draft letter which the Secretary of the Treasury planned to send to the Small Business Administration regarding financial problems of small busi ness, and there followed a discussion of the views that had been expressed by a number of the Reserve Banks in reply to the inquiry. Secretary