September 1, 1959 FOMC Minutes

FOMC minutes

Chairman Martin commented that he thought this statement was quite correct. He said that in endeavoring to summarize the meeting he had tried to recognize monetary politics, economics, and various statements around the table. In doing so, it struck him that it would not be well to change the directive at this point. If this meeting were one that was reported to the public, he did not think that justification could be shown for a change. The Chairman then stated that, if there were no serious dissents, the present wording of the directive would be retained. No comments were heard in response to this statement. 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: (1) To make such purchases, sales, or exchanges (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 exchange 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) to relating the supply of funds in the market to the needs of commerce and business, (b) to restraining inflationary credit expansion in order to foster sustainable economic growth and expanding employment opportunities, and (c) to the practical the Account; provided that the administration of of securities held in the System aggregate amount for the purchase or (including commitments Account the Account) at the close of sale of securities for other than special short-term certificates this date,

of indebtedness purchased from time to time for the temporary accommodation of the Treasury, shall not be increased or decreased by more than $1 billion; (2) To purchase direct from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the temporary accommodation of the Treasury; pro vided 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. Turning to the level of reserves, Chairman Martin stated that it appeared the Manager of the Account would have to use his own judgment. Mr. Szymczak apparently was the only member of the Committee who would like to see net borrowed reserves go up to $550 million. With regard to the discount rate, the Chairman noted that agreement on the rate is not a subject for action at meetings of the Open Market Committee. It could only be said that a majority of the members of the Board of Governors evidently would be disposed to look with favor on an increase in the discount rate some time after Labor Day. Mr. Robertson added the comment "soon after Labor Day and before Congress adjourns." At the instance of Mr. Treiber, there followed comments as meetings were scheduled at the respective to the dates when directors' Reserve Banks. Chairman Martin noted that the discussion at this meeting had or might not be taken. actions that might references to future included

For this reason particularly, he urged caution on the part of those in attendance with respect to discussing the meeting with other parties. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, September 22, 1959, at 10:00 a.m. Chairman Martin then referred to the discussion at the Com mittee meeting on August 18, 1959, regarding the appropriate degree of accessibility to the discount window for member banks acting as "underwriters" in connection with Treasury financings and inquired whether anyone had additional points that he would like to make at this time. There being no comments in response to this invitation, the Chairman indicated that he thought the matter could be left as it stood. At the Chairman's request, Mr. Leach commented, for the concerning a visit paid to the Federal information of those present, August 21, by Congressman Patman Bank of Richmond on Friday, Reserve from the House of Representatives. and several of his colleagues referred to a letter received subsequently from Mr. Leach also of the group, in which Mr. Oliver of Maine, a member Congressman the status and respect to of questions with raised a number Oliver it was the intention Mr. Leach said Richmond Bank. of the operations of its ability on to the best answer those questions of the Bank to would be the Bank's reply copies of basis but that an independent Reserve Banks. and to the other to the Board sent

Chairman Martin also referred to letters sent recently by the Under Secretary of the Treasury to the Board and the Reserve Bank Presidents requesting comments regarding suggestions of Senator Javits of New York relating to a "peace bond" campaign as part of the savings bond program. The Chairman said that it might be well for the Presidents to send copies of their replies to the Under Secretary to the Board for its information. At least one of the Presidents indicated that he was con sidering taking advantage of language in the Under Secretary's letter which suggested that a reply was optional. Question was raised with the Chairman whether he had in mind that the Open Market Committee should respond, and Chairman Martin replied that he did not envisage Committee was disposed to make one or such a response unless the unless Senator Javits should pursue the matter. The meeting then adjourned. Secretary