February 10, 1959 FOMC Minutes

FOMC minutes

time to time, and (c) attainment of market conditions continuously adapted to orderly debt management and monetary operations. The Chairman indicated that the outline was being distributed as a matter of information and also to elicit the assistance of all of the Presidents. Its preparation had come about as a result of the speculation in the Government securities market last summer and the work done on that problem to date, including the work done by the New York Reserve Bank through the Technical Committee of the New York The members of the Committee, he noted, had now received Money Market. of the Technical Committee on December 10, the minutes of the meeting that had been raised, insight into the problems 1958, which provided the Treasury Baird had expressed appreciation and Under Secretary of from the Desk and from assistance that he had received of the close the System in this matter. the questions raised by the Martin noted that among Chairman an association of Govern Committee was whether work of the Technical involve a problem should develop, might dealers, if it ment securities laws. In all the circumstances, the standpoint of the antitrust from proceed in co be desirable to that it would Board had concluded the Martin) had had meetings Treasury, and he (Chairman operation with the He officials. Treasury Department and other Secretary Anderson with slightest intention was not the clear that there to make it very wished of this subject, Bank in the study of the New York minimize the role to

and that it was the intent to bring the Bank into the study to the fullest extent. Rather, the thought was that this should be a joint study of the Federal Reserve System and the Treasury, and he con sidered it extremely important that the study be a System operation. It had been agreed that the Secretary of the Treasury would get in touch with the Attorney General and that he (Chairman Martin) would be in touch with the Securities and Exchange Commission in order to be sure that those parties were alerted. While it would not be de sirable to spread the word of this project unduly, it was the desire to make a careful and intelligent study not only from the standpoint of minimizing speculation but also from the standpoint of effecting in the functioning of the Government securities market. improvements commented that the rough study outline Chairman Martin also morning and that the Board members them had just been finished this selves had not yet had an opportunity to review it. who said it was the called upon Mr. Young The Chairman then of the Treasury staff staff, with which members thought of the Board's down into three parts. the study could be broken agreed generally, that fill the gaps in in operation to part would be a fact-gathering One part would consist of while a second formation currently available, to obtain factual in the market, partly with individuals consultation ways and means of suggestions for partly to elicit information and preventing developments the market and and improving strengthening

such as occurred last year. The third part would consist of evaluating the various issues, such as the possibility of establish ing an organized exchange type of market instead of an over-the counter market, legal limitations on the use of repurchase agreements, the possibility of establishing margin requirements against Government securities, and the possibility of a dealer organization. The study would have to be carried out rather expeditiously and it would be helpful to be able to call upon the Reserve Banks for personnel to the extent necessary. Also, it was contemplated that inquiries made of banks and nonfinancial organizations would go through the Federal Reserve Banks and be handled on a personal basis so as to minimize the number of questions that might arise. Chairman Martin then commented that this was something of major importance to the work of the Federal Reserve System. He sug gested that any views on the study be transmitted direct to Mr. Young. Mr. Hayes commented that this was a highly constructive ap proach to a needed move. It was a matter that had been given much Reserve Bank of New York, and that Bank was thought at the Federal happy to cooperate. concluded the discussion by saying that he The Chairman of the New York Money Market would not hoped the Technical Committee there would be reason to call upon the Technical Com disband, for mittee for assistance.

meeting of the Federal Open It was agreed that the next Tuesday, March 3, 1959, at would be held on Market Committee 10:00 a.m. the meeting adjourned. Thereupon Secretary