June 17, 1958 FOMC Minutes

FOMC minutes

Treasury bills by the Account, and if the Account were to go in and purchase aggressively against the available supply of bills at a time when corporations and banks were back in the market, there would be a strong possibility of depressing bill yields to a very low level and increasing the spread between the bill rate and the discount rate to a point that would be distinctly unrealistic. He would not like to reduce reserve requirements but he was inclined this might be the only reasonable choice in the near to believe that future if present reserve projections came to pass. comments reflected his own stated that Mr. Mills' Mr. Fulton a reduction in reserve Mr. Leach said that in suggesting thinking, and not like to see the bill had in mind that he would requirements he had rate driven down too far. of the reserve projections, some further discussion After would bear the that the Board of Governors Chairman Martin said of reserves in mind. problem to be made at this meeting, regard to the decisions With comments he had in his previous inquired whether the Chairman as to general policy, the majority position correctly outlined the Chairman to Mr. Rouse, heard. Turning dissents were and no and in the directive for a change saw any need whether he asked in the negative. Mr. Rouse replied

Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Re serve Bank of New York until otherwise directed by the Committee: (1) To make such purchases, sales, or exchanges (including replacement of maturing securities, and allow ing maturities to run off without replacement) for the System Open Market Account in the open market or, in the case of 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 contributing further by monetary ease to resumption of stable growth of 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 certifi cates of indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be or decreased by more than $1 billion increased (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with in cases where it seems desirable, to issue discretion, participations to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebted ness as may be necessary from time to time for the of the Treasury; provided that temporary accommodation such certificates held at any one time the total amount of by the Federal Reserve Banks shall not exceed in the aggre gate $500 million. that the Federal Reserve Bank of New York Mr. Hayes reported House Association the publica discussed with the New York Clearing had House banks on required reserves, tion of aggregate figures for Clearing Bank, and Federal funds borrowings. from the Federal Reserve borrowings

-41l He recalled that in its report last year the Clearing House Association made such a proposal, except that the figures were to be made available only to the Clearing House banks. The New York Bank, on the other hand, felt that it would be helpful if those figures could be made public. A letter had now been received under date of June 2, 1958, stating that the Clearing House Association had discussed the matter and had concluded that the proposal was not acceptable. However, House would be willing to accept the plan if it the Clearing for making public similar information were expanded to provide for banks in other cities. said that although he had some sympathy for Mr. Hayes he thought that the signifi of the Clearing House, the position He went on had been greatly exaggerated. cance of the matter to the Presidents' Conference to say that he had reported the question to the Federal and had suggested referring yesterday to consider the was already preparing study group, which funds than the Clearing broader statistics desirability of collecting House could done, the Clearing If this were House had suggested. and would be into the matter System was looking told that the be in the near future. definitive reply to give any unable was seen any objection inquired whether Chairman Martin by Mr. Hayes, the lines suggested the matter along to handling

and no objection was heard. that the next meeting of the Federal Open It was agreed Market Committee would be held on Tuesday, July 8, 1958, at 10:00 a.m. Thereupon the meeting adjourned. Assistant Secretary