January 7, 1958 FOMC Minutes

FOMC minutes

Mr. Rouse said that he thought it would be necessary to allow a week or 10 days after the payment date. There was a certain amount of underwriting that would have to be done, and this should be the minimum period to allow for distribution of these securities to be completed. He went on to say that he thought the Treasury announcement on the refunding might come about February 1 and the new financing announcement might be simultaneous with the refunding. Mr. Hayes commented that he thought the Committee had a pretty free rein for the next couple of weeks. Chairman Martin said he might be overly sensitive, but since he might be up on the Hill at any time during the next couple of months he to be in a position of having taken dethought it very important not the future. In view of the speculacisions on actions to be taken in it was not only very important to avoid any tive nature of this period, but also situations subject to leak. leaks that, in effect, we were fixing policy for Mr. Leach remarked Martin replied that it amounted next five weeks, and Chairman the much to that. pretty with making free reserves that he would go along Mr. Allen said the next two weeks, conthe plus $100 million area during available in whether at However, he questioned he had said earlier. trary to what neither add that it will wished to determine time the Committee this following our next meeting. from reserves in the period to nor subtract

Mr. Hayes suggested that the "even keel" of January 28 would be to stay where we were at that time. Mr. Shepardson said that this was not the way he had understood the Chairman' s statement. His impression was that the Chairman had in mind a line or a direction for continuing ease. Chairman Martin stated that this was not what he intended. This could not be measured precisely, he said, but he did not think that during the Treasury financing the Committee should be either increasing or decreasing the degree of ease. Mr. Shepardson inquired whether the Chairman felt that between now and the Treasury financing announcement there should be some further easing and, if so, whether it was correct that he would rather do it now than two or three weeks later. Martin stated that this was correct. He would rather, Chairman the policy we were now pursuing by having in a moderate way, continue wish to cite a figure, but he positive reserves. He did not moderate quo period. The return flow of currency did not think this was a status and he thought that we were dealing too many eddies in the stream started with a rushing torrent. directive and instructo the Committee's Turning specifically was clear that all said that it Chairman Martin tions to the Account, this time. He the directive at be a change in there should not agreed be given some Account could of the System that the Manager thought and he in this periods to operations with respect further guidance

suggested that the majority appeared to be on the side of slight positive reserves. This was not a very firm majority, however, and if the question were put to a vote it might be by a majority of only one or two. He questioned whether this was the type of thing that the Committee should be voting on but he had no desire to keep anybody from putting anything into the record to express his views. He noted that the minutes would show the statements that the individuals had made during the meeting. Mr. Hayes stated that he thought the System Account could operate along the lines of the Chairman's comments. Mr. Robertson said that he would like the record to show that he was in complete agreement with respect to maintaining an "even keel" during the Treasury's financing operations. The comments he had made heretofore would go to the immediate future; he would not ease off in the next two weeks. he thought that this had been a Chairman Martin stated that and that if there were no further comments the directive good go-around would be approved in its present form. motion duly made and Thereupon, upon seconded, the Committee voted unanimously Federal Reserve Bank of New to direct the otherwise directed by the ComYork until mittee: (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allowing maturities to run off without replacement) for the System in the case of open market or, account in the open market 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 cushioning adjustments and mitigating recessionary 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 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; direct to the Treasury from the System ac(3) To sell count 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 made as nearly as may be practicable at the prices shall be currently quoted in the open market. meeting of the Committee would noted that the next The Chairman be held on Tuesday, January 28, to be followed by a meeting on Tuesday, would meet at the time the 11. On March 4, the Committee February newly-elected members assumed their duties and would plan to stay over on March meeting adjourned. Thereupon the Secretary