July 24, 1958 FOMC Minutes: Full Text
A meeting of the Federal Open Market Committee was held on Thursday, July 21, 1958, at 11:00 a.m. This was a telephone conference meeting and each individual was in Washington except as otherwise indicated in parentheses after his name in the following list of those participating: PRESENT: Mr. Martin, Chairman Mr. Hayes, Vice Chairman (New York) Mr. Balderston Mr. Fulton (Cleveland) Mr. Irons (Dallas) Mr. Leach (Richmond) Mr. Mangels (San Francisco) Mr. Mills Mr. Robertson Mr. Shepardson Mr. Szymczak Mr. Vardaman Mr. Treiber, Alternate Member of the Federal Open Market Committee (New York) Mr. Riefler, Secretary Mr. Thurston, Assistant Secretary Mr. Solomon, Assistant General Counsel Mr. Thomas, Economist Mr. Young, Associate Economist System Open Market Mr. Rouse, Manager, Account (New York) Secretary, Board of Mr. Kenyon, Assistant Governors Adviser, Division of Mr. Koch, Associate Board of Research and Statistics, Governors Government Finance Mr. Keir, Acting Chief, of Research and Section, Division Board of Governors Statistics, Marsh, Assistant Vice Messrs. Larkin and Reserve Bank of Presidents, Federal New York (New York) Securities Department, Mr. Stone, Manager, New York (New York) Reserve Bank of Federal
Mr. Larkin reported that the Treasury list was steady this morning. The longer maturities had risen a 32d or two, while the intermediate-term issues were just about where they closed last night. Several million dollars of the 1-5/8 per cent certificates had been offered, which was probably a testing of the Federal Reserve, but nothing had been done for the System Account thus far today. Market conditions, at least so far today, sug gested that approach. Mr. Larkin stated that as yet no precise information was available as to how the exchange had gone. According to the latest information, $6 billion was not accounted for, but there was no available breakdown of that figure. After a more detailed account of the market, as summarized in a memorandum from Mr. Thomas under today's date, a copy of which had been placed in the files of the Committee, Mr. Larkin said that if the Government securities market continued to perform as it had the Account Management planned to do nothing. In thus far today, should drift downward, the general ap the event that the market would apply. In the event proach which was developed yesterday away sharply, the Management should begin to fall that the market in mind touching it up. would have Martin, Mr. Larkin to a question by Chairman In reply since the market had been made today, that no purchases verified
was reasonably steady. Thus far, yesterday's slight downdrift had not continued, although there appeared to be an undertone of uncertainty. Chairman Martin stated that some of the Committee members in Washington were wondering whether, since nothing had happened, the System operation should be treated as a syndicate that had been closed, letting the market take care of itself until it reached a substantially lower level. Mr. Larkin said that basically there was agreement in New York with that approach, and that the question was one of how to get to that lower level. Some dealers had expressed the view this morning that there should be at least nominal interest on the part of the System today so that the market would not feel that it was abandoned. Those comments could be taken for what they were worth. Chairman Martin said that the System's operations over the of days could be regarded as tantaount to a syndicate last couple disorder should break out in It might be desirable, if operation. and review the situation to reconvene the Committee the market, here and there. touch up the market to continue to rather than just a lot of bearish there was still of course, that He realized, sentiment in the market. out that wanted to point that Mr. Rouse Larkin stated Mr. which constituted situation, international still a delicate there was
an important background influence. The Chairman commented that the international situation, however, was no worse than it had been, following which Mr. Hayes said that he and Mr. Rouse agreed that in the absence of a dis orderly market the System should stay out. Chairman Martin then commented that the market might steady out, but that in any event the market would probably go to a lower level at some point. Mr. Hayes said that it is always rather hard to evaluate a disorderly market situation. Conceivably, the Committee might be confronted with one and it should be prepared. Chairman Martin stated that another telephone meeting to morrow morning would be planned unless, in the meantime, the Manager of the Account should suggest another meeting. Mr. Larkin stated that the Trading Room had advised of an availability of securities in the past 20 minutes. Although this was not showing up in any downward movement of prices, the supply building up. It was not huge but there of offerings seemed to be was a movement in the direction of greater offers, which might how much lower and remained to be seen lower prices. It result in how fast the movement would go. cent bonds of the 3-1/2 per Larkin had mentioned Since Mr. remark that the 3-1/2s Martin made the his comments, Chairman 1990 in had in fact that the Desk Larkin said week. Mr. below par last were
bought some of them below par. Then they moved almost to 101, following which they backed down. Yesterday some were purchased at 100-1/2. Chairman Martin said he had merely intended to make the point that it would not be unusual to have a testing of the old lows. Mr. Larkin said that the approach would be to watch the market carefully and, if there were any unusual developments such as to suggest disorderliness, to get in touch with the Chairman. Mr. Fulton stated that such a program was satisfactory to him and that he favored getting out of the market as quickly as possible. Messrs. Leach, Irons, and Mangels expressed agreement. Chairman Martin confirmed, in reply to a question, that the approach would contemplate staying out of the market and just watching closely. Thereupon, it was agreed unani mously to terminate the authority granted to the Federal Reserve Bank of New York on July 18, 1958, to pur chase for the System Open Market Account in the open market, without Government securities in limitation, addition to short-term Government This agreement was reached securities. with the understanding that, if condi tions in the market should seem to it, another meeting of the require would be Open Market Committee Federal to consider what, if any, further called action should be taken.
With regard to the statement in the text accompanying the weekly statement of condition of the Federal Reserve Banks, to be issued later today, concerning System operations in the market, Mr. Hayes said that the proposed statement just received by telephone from the Board's offices (which made a full disclosure of operations) was regarded as entirely satisfactory at the New York Bank. However, a slight change in wording, which he described, was suggested in the interest of clarification. It was indicated by Chairman Martin that the suggestion was agreeable to Washington. In reply to a question, Chairman Martin said he had in of the Treasury Baird of the statement formed Under Secretary be included in the text operations proposed to concerning System condition statement. the weekly accompanying The meeting then adjourned.
Also: Record of Policy Actions