March 3, 1959 FOMC Minutes

FOMC minutes

restrictive procedure as strongly as it could be put but his (Chairman Martin's) judgment was that the methods the Committee had been pursuing were the right ones. This was true for training purposes, for development of information useful to the Committee, and for other reasons. He felt that, in general, the Reserve Bank Presidents were pursuing the right course under the existing system. It had been something of a shock to him to find that these procedures were being criticized. However, he had noted that some of those who attended the meetings and sat on the sidelines took notes of the discussion. In his view, this was a mistake. He felt that only the the official record should make notes during the person who prepared meetings. in general, Chairman Martin As to attendance and procedures him that, from the individual Reserve Bank said that it seemed to to go back to the of view, it would be disastrous President's point that when he in the past. He recalled that had existed limitations least one or two that there were at to the Board he found first came of open market the subject matter who did not discuss Bank Presidents had been that Banks. His reaction anyone in their meetings with of the feeling or understanding get any real men could not those with whom they had someone unless make a contribution problems or informed basis. on a fully these things discuss could frequently they

As to the Reserve Bank directors, all of us got exasperated at times with the unwieldy nature of the System. At times, he wondered whether the System might be holding out a fraud to the public on whether there was adequate participation by the directors of Federal Reserve Banks in System matters. There was the problem of how to get the System to pull together, and each individual President had a problem in knowing what to say to his directors. The Chairman cited a comment by one individual director that had come to him from the outside that indicated a complete lack of understanding of the dis count mechanism. He realized that the Presidents had a very difficult job, but his own view was that if the Banks were going to get the staff to participate and to develop, they would go much farther by having some of them in at these discussions. Recognizing that Mr. Bryan had stated the case for restriction as clearly as was possible, even if charges of leaks would not be his suggestions were adopted the all going to enable the System to and their adoption was not eliminated violated its trust. As or that it had not prove its guiltlessness access to Open Market records, Chairman to the list of persons having to review it in it would be desirable Martin said that he thought the responsibility for con of putting on to each President terms he wished to with whom person or persons carefully the sidering be necessary to keep Perhaps it would not consult on these matters. assumed this Reserve Bank Presidents if the individual such a list, responsibility.

Mr. Bryan said that as he had listened to the thoughtful discussion of the problem, he had been impressed by the emphasis on the advantages from many points of view of the present organiza tion and procedure. He shared an appreciation of those advantages and wished to make clear his hope that they could be preserved to the greatest extent possible. At the same time, he would re emphasize what he believed to be the overriding importance of other considerations at present. The discussion had correctly emphasized the trustworthy character of personnel at all levels dealing with Federal Open Market Committee matters. He shared that emphasis on trustworthiness but could not agree that it eliminated a requirement for far more rigid procedures than the Committee now had. It could be said that the personnel of the System was of extraordinarily high caliber, but it still had elaborate audit and examination procedures that nothing had gone amiss. This was done not in order to prove to protect the personnel. If the merely to protect the Banks but pains to prove their accounting records were cor Banks were at such for, then wasn't it even that the cash was all accounted rect and System's responsibility for monetary more important, he asked, in the that no charge of scandal far as possible in proving policy, to go as doubted that these said that he also Mr. Bryan also was well taken. Reserve Bank Presidents discretion of the be left to the matters could Federal Open Market discussion. The during this as had been suggested

Committee was a statutory body and he believed it the better part of wisdom for the Committee as such to take the responsibility for its procedure and security regulations. Mr. Robertson said that he did not think the discussion of this problem could be pulled together at this session. Various points of view had been expressed, and in his opinion it was now necessary to have these views put together by the Secretary and to have the whole subject reviewed again after all of those present had had an opportunity to study the minutes. Chairman Martin stated that this was his view, and Mr. Bryan suggested that it might be desirable in the interim to have a small committee appointed to study the matter and present a recommendation to the full Committee. that before doing that he felt it would Chairman Martin stated record of this discussion prepared and dis be preferable to have the tributed, and after all of the members of the Committee and all of the had an opportunity to review it and con Reserve Bank Presidents had call another meeting for the purpose of sider the subject further, carrying forward the discussion. general agreement with this suggestion. There was Thereupon the meeting adjourned. Secretary