September 30, 1958 FOMC Minutes

FOMC minutes

without, of course, making them overriding. In other words, the System should realize that this was a joint endeavor. There was a sick Government securities market, and while he had not tried to analyze all of the causes, the Federal Reserve System could not be held entirely blameless for the sickness of the market. Sumarizing the views expressed at this meeting, Chairman Martin said that it seemed very clearly the desire of the Committee to try to maintain an even keel in the market, and that no change in the policy directive appeared to be contemplated. It also seemed clearly to be the desire of the Committee to give the Desk latitude to take into account the color, feel, and tone of the market. No one appeared to favor a further increase in the degree of restraint that had been exerted; nor, on the other hand, was there a desire to ease the market. The prevailing view would be to endeavor to keep the general level of free reserves within about the same range as had prevailed during the past three weeks. Chairman Martin went on to say that if some situation should the date of the next regular Committee meeting which develop before indicated a need for a telephone meeting it would, of course, be have one. However, it was his view that telephone meetings proper to if possible. Barring unforeseen developments, it should be avoided that from now to October 21 would be too long a did not seem to him At the October 21 an even-keel policy. in which to pursue period

meeting there could be another full discussion, and then it would not be possible for the System to continue indecisively; it must decide one way or the other, and any action should be clear and decisive. Thereafter, there should be again a period of stability before and after the Treasury went into the market. Chairman Martin then asked whether there was any question about the directive or about his summation of the meeting, and no questions were raised. 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: To make such purchases, sales, or exchanges (1) (including replacement of maturing securities, and allowing 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 ex change 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) in the market to the needs the supply of funds to relating and business, (b) to fostering conditions in of commerce money market conducive to balanced economic recovery, the and (c) to the practical administration of the Account; amount of securities held in provided that the aggregate commitments for the purchase the System Account (including Account) at the close of sale of securities for the or certificates of other than special short-term this date, from time to time for the temporary indebtedness purchased not be increased or of the Treasury, shall accommodation by more than $1 billion; decreased Treasury for the direct from the (2) To purchase Reserve Bank of New York (with account of the Federal

discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such amounts of special short-term certifi cates 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. It was noted that if meetings of the Federal Open Market Committee were maintained on a three-week schedule a meeting would fall on Tuesday, November 11, which is a legal holiday in Washington and other parts of the country. After discussion of alternatives, a general preference was expressed for Monday, November 10, and it was understood that a meeting on that date would be contemplated. Some of the Reserve Bank Presidents then reported figures that had reached them during the meeting from their respective Banks concerning subscriptions to the issues involved in the current Treasury financing. It appeared from these reports that the sub scriptions were running rather favorably. Pursuant to the understanding at the Committee meeting on Mr. Rouse had distributed to members of the Open Market September 9, and the Presidents not currently serving on the Committee Committee on speculation in the of September 11, 1958, a memorandum under date the New York Bank for the market prepared at Government securities York Money Market. Under Committee of the New use of the Technical

date of September 22, Mr. Rouse also had distributed a summary of the first meeting of the Technical Committee, which was held at the New York Reserve Bank on September 15, 1958. Mr. Rouse commented that his secretary had received from Under Secretary Baird's office a request for additional copies of the two memoranda, since the supply sent originally by the New York Reserve Bank to the Treasury had been exhausted; a copy of the memorandum had gone to the President, and Secretary Anderson had asked that a copy of the summary be sent to the Secretary of Commerce. Chairman Martin stated that Mr. Mills had been designated by of Governors to head up the Board's study of speculation the Board market. He said that arrangements had in the Government securities Exchange for a representative of been made with the New York Stock Mills and members of the Board's to confer with Mr. the Exchange staff. meeting of the Federal agreed that the next regular It was Committee would be held on Tuesday, October 21, 1958, Open Market at 10:00 a.m. the meeting adjourned. Thereupon Secretary