March 4, 1958 FOMC Minutes

FOMC minutes

Messrs. Bopp, Bryan, and Leedy, Presidents of the Federal Reserve Banks of Philadelphia, Atlanta, and Kansas City, respectively Mr. Riefler, Secretary Mr. Thomas, Economist Mr. Roelse, Associate Economist Mr. Rouse, Manager, System Open Market Account At this session there was a discussion of the study that had been made by the Special Committee appointed at the meeting on January 28, 1957 consisting of Messrs. Martin, Hayes, Allen, Balderston, Erickson, and Szymczak. In accordance with the agreement at the meet ing on March 5, 1957, this Special Committee had been reviewing all of the operating procedures that had been presented in the report of the Ad Hoc Subcommittee as discussed at the meeting on March 4 and 5, 1953, with the exception of the matters relating to the housekeeping aspects of that Subcommittee's report. In the course of the discus sion, there was presented for the approval of the Committee the follow ing continuing operating policy that had last been reaffirmed at the meeting on March 5, 1957: a. It is not now the policy of the Committee to any pattern of prices and yields in the Govern support market, and intervention in the Govern ment securities ment securities market is solely to effectuate the objectives of monetary and credit policy (including correction of disorderly markets). Upon motion duly made and seconded, and by unanimous vote, the foregoing of policy was reaffirmed. statement of the Com presented for the consideration There was also which, by unanimous operating policy the following continuing mittee

action, was reaffirmed at the meeting of the Committee on March 5, 1957, pending completion and submission of a report by a Special Committee appointed at the meeting on January 28, 1957. b. Operations for the System Account in the open market, other than repurchase agreements, shall be confined to short term securities (except in the correction of disorderly markets), and during a period of Treasury financing there shall be no purchases of (1) maturing issues for which an exchange is being offered, (2) when-issued securities, or (3) outstanding issues of comparable maturities to those being offered for exchange; these policies to be followed until such time as they may be superseded or modified by further action of the Federal Open Market Committee. During a discussion of this statement of policy, Mr. Hayes said that, in an effort to promote general agreement, he would vote to approve the statement if it included the qualifying phrase, "as a general rule," after the word "shall" in the second line and after the word "shall" in the fourth line. A motion to reaffirm the statement in its existing form was approved, Messrs. Martin, Balderston, Fulton, Irons, Leach, Mangels, Mills, Shepardson, Szymczak, and Vardaman voting "yes," and Mr. Hayes voting "no." Messrs. Allen, Bopp, Bryan, Deming, Leedy, and Johns stated that, Erickson, had they been members of the Committee, they would have voted to reaffirm the foregoing statement of policy. policy was then presented following continuing operating The for the consideration of the Committee: for the System Account in the open c. Transactions the purpose of into solely for market shall be entered

providing or absorbing reserves (except in the cor rection of disorderly markets), and shall not include offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System's portfolio; such policy to be followed until such time as it may be superseded or modified by further action of the Federal Open Market Committee. Mr. Hayes stated that he would vote to reaffirm this statement of policy if the statement were amended to read as follows: Transactions for the System Account in the open market shall be entered into solely PRIMARILY for the purpose of providing or absorbing reserves (except in the correction of disorderly markets), and shall, AS A GENERAL RULE, not include offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System's portfolio; such policy to be followed until such time as it may be superseded action of the Federal Open Mar or modified by further ket Committee. Chair put a motion to reaffirm The statement in its existing form with the out the changes suggested by Mr. Hayes, this motion was carried, Messrs. and Martin, Balderston, Fulton, Irons, Leach, Mangels, Mills, Spehardson, Szymczak, and Vardaman voting to approve, and Mr. Hayes voting "no." Allen, Bryan, Deming, Erickson, Messrs. Leedy indicated that, had they Johns, and of the Committee, they would been members voted to reaffirm the existing state have ment of policy. that, had he been a Mr. Bopp stated the Committee, he would not have member of reaffirm the existing statement voted to have voted to but that he would of policy that was changed to approve a statement read as follows: in the open market the System Account for "Transactions offsetting purchases rule, not include shall, as a general

and sales of securities for the purpose of altering the maturity pattern of the System's portfolio; such policy to be followed until such time as it may be superseded or modified by further action of the Federal Open Market Committee." Mr. Hayes stated that he would be willing to vote for a statement such as Mr. Bopp had indicated he would approve. that the next meeting of the Federal Open Mar It was agreed 25, 1958, at 10:00 a.m. be held on Tuesday, March ket Committee would Thereupon the meeting adjourned. Secretary