December 16, 1958 FOMC Minutes

FOMC minutes

amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed in the aggregate $500 million. Mr. Riefler stated that in connection with the emergency planning program, System personnel were to be assigned to High Point on a rotating basis beginning in the near future. Prior authorization was needed for disclosure of Federal Open Market Committee emergency resolutions to the persons so assigned, and it was his suggestion that the Committee give a general authorization to make available to such persons the emergency resolutions, last approved at the meeting on March 4, 1958. This suggestion was approved unani mously. Mr. Rouse reported that the second meeting of the Technical Committee of the New York Money Market was held on December 10, 1958, and that the Committee was continuing its work on plans designed to avoid speculation in the Government securities market and ensuing disturbances of the kind that developed earlier this year. Among the suggestions that the Committee was considering were the following: of education be undertaken to 1. That a program and nonbank, the dangers of show lenders, both bank on little or no margin to ultimate borrowers lending who may or may not be known to them. be instituted a new statistical 2. That there important lenders would system under which reporting on the amount rate, term, collateral, report data or repurchase agreement of their loans and purposes

transactions against Government securities, and also that discussions be held with the National Association of Securities Dealers looking toward the provision by member firms of data similar to the data now reported to the New York Stock Exchange by its member firms. 3. That further exploration concerning the possi bility of a dealer organization be pursued. 5. That the feasibility of developing a system of regulation of the terms (especially margins) of loans against Government securities be explored. (The group felt that regulation would be necessary but hoped that this could be worked out within the framework of existing legislation. The Technical Committee also believed that recognition of dealers as a separate group was indis pensable to an effective regulatory system.) 5. That the Federal Reserve consider using its influence to achieve wider and more regular participation of the banking community in financing dealers. Mr. Rouse said that the job immediately ahead was to explore ways of implementing the Committee's suggestions. He added that he was planning to send a summary of the minutes of the December 10 each member of the Open Market Committee or that, if any meeting to a complete set of the minutes would be provided. member desired, On Chairman Martin's suggestion, it was decided that complete the Committee and to each sent to each member of minutes should be serving on the Committee. Bank President not currently Reserve for a dealer organiza commented that the suggestion Mr. Rouse damaging from the because it would be should be kept confidential tion out of the Technical if word got anything done of getting standpoint Committee. Secretary of the that Under Martin commented Chairman problem of on the active in working had been very Treasury Baird

speculation in Government securities and in due course would have reports from savings and loan and savings bank groups. Mr. Robertson recalled that at the last meeting of the Committee he had requested that Mr. Rouse give consideration to the problem of window-dressing of year-end bank condition state ments from the standpoint of the use of repurchase agreements. Mr. Rouse said that the officers of the Securities Depart ment of the New York Bank had been discussing the matter, that they thought it was necessary to deal with the market as it exists, and that an attempt to shut down on repurchase agreements beyond the general policy adopted by the Open Market Committee might have an effect on the market that Committee policy did not contemplate. It appeared that the place to deal with the problem was where the attempt to deal with it took place rather than to window-dressing through the market. that the problem was a difficult one. Mr. Robertson agreed years the volume of repurchase however, that in past He noted, day of the year and borrowings had jumped up on the last agreements debt and that the banks paid off appeared that the went down. It for repurchase agree Federal Reserve Bank then went to the dealers he felt offer any solution, prepared to he was not ments. While borne in mind. should be that the problem would be further consideration indicated that Mr. Rouse given to the matter.

It was agreed that the next meeting of the Committee would be held on January 6, 1959, at 10:00 a.m. Thereupon the meeting adjourned.