July 23, 1958 FOMC Minutes

FOMC minutes

Mr. Irons expressed agreement with the Chairman's position, stating that a clear statement would be desirable. He regarded this as a very unusual situation. Mr. Leach likewise expressed agreement and noted that in any event the System's purchases of bonds would be divulged in the weekly statement in its usual form. Chairman Martin then stated that, if he understood correctly, all of the members of the Committee seemed quite well agreed that they would like to make as clear a statement as possible. That being the case, work on the details could continue for the balance of the day. Also, the Treasury would be advised of the nature of the pro posed statement. Mr. Fulton agreed that the public should be informed, for this was a very unusual situation. Mr. Thomas inquired when it was expected that the Treasury the results of the exchange offering, and Mr. Larkin would announce that there had been no indication so far as to how the exchange commented that, aside from the System's subscription, was going. He would guess of $7 to $8 billion. might be in the neighborhood total subscriptions indications in the Twelfth Mr. Mangels reported on tentative that total subscriptions as of yesterday were District. He stated would come in this that most of the subscriptions very small but afternoon. Committee mem that one of the Martin then stated Chairman swap of bills to the proposed was opposed bers in Washington

previously mentioned by Mr. Larkin unless there were strong reasons. Mr. Hayes said that he thought the reason given, namely, to add to the bills to be run off July 31, was a highly persuasive one. It would be a very natural operation and a logical one. Messrs. Mangels, Irons, Leach, and Fulton indicated that they would favor the proposal, following which Mr. Robertson stated that he was opposed to "swaps" in principle, but that the usual rules were off as of the moment. Therefore, he felt that the Account Management would have to use its own judgment. Mr. Balderston stated that he would favor as large a runoff of bills as possible. Returning to the question of the weekly statement, Chairman Martin said that one possibility which ought to be considered would be just to issue the statement in its usual form and then perhaps to make an announcement in company with the Treasury when the Treasury announced what had happened on the exchange. Mr. Hayes stated that he would not favor such a procedure. suggestion of putting enough in the weekly He would lean toward the to reflect what had been done. statement that he would, also, but that he had The Chairman stated on the table because of the effect thought the matter should be put of the statement on the market. of the issuance for his views about then asked Mr. Rouse Chairman Martin of days after for the next couple course of the market the possible

tonight, and the latter stated that in view of what had already been done and what the System was doing today, the longer end of the market should be kept in about the same position until the Open Market meeting next Tuesday. It was not the intent to push the market up, but on the other hand it was not the intent to let it go down if a few modest purchases would keep it steady. Chairman Martin stated that this was a matter of judgment and that he therefore wanted the matter to be on the table. After a statement by Mr. Hayes that there should be another telephone meeting of the Committee if anything substantial happened in the market, the Chairman said that another telephone meeting would be for tomorrow at 11:00 a.m. However, it ought planned in any event recognized and borne in mind that in correcting a disorderly to be condition the Committee had not yet established a peg. said that no peg had been established and that he Mr. Rouse would hope to avoid the appearance of one. he would have no objection if the Account Mr. Balderston said market a bit between now and the meeting Management touched up the up should be on a scale-down However, any touching next Tuesday. market at the levels which would have pegged the basis or the System prevailed this morning. agreement with these of the Committee expressed Other members comments.

After some further discussion of latest market develop ments, Mr. Thomas asked how well distributed the System purchases had been from the standpoint of the dealers, and Mr. Rouse stated that the purchases had not been well distributed. Of the purchases yesterday, those from one dealer were particularly heavy. Mr. Thomas commented that this raised the question whether it could be said that one group of dealers was being favored against others and that certain dealers were being encouraged to stir up business, to which Mr. Rouse replied that the mere fact of the purchases might on the theory that the eco be encouraging them to stir up business changed and that credit policy probably would nomic situation had any distinctions be the Desk was not making be changed. However, securities as offered. It was simply buying tween dealers. The meeting then adjourned.