September 22, 1959 FOMC Minutes

FOMC minutes

Hearing no indication that any member of the Committee wished to be recorded as voting otherwise, the Chairman stated that the directive would be so renewed. Thereupon, upon motion duly made and seconded, the Committee voted unanimously to direct the Federal Reserve Bank of New York until otherwise directed by the Com mittee: (1) To make such purchases, sales, or exchanges (in cluding 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 oppor tunities, and (c) to the practical administration of the provided that the aggregate amount of securities Account; System Account (including commitments for the held in the sale of securities for the Account) at the close purchase or special short-term certificates of of this date, other than from time to time for the temporary indebtedness purchased shall not be increased or accommodation of the Treasury, 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 it seems desirable, to issue discretion, in cases where or more Federal Reserve Banks) such participations to one certificates of indebtedness of special short-term amounts time to time for the temporary as may be necessary from that the total the Treasury; provided accommodation of held at any one time by the amount of such certificates shall not exceed in the aggregate Federal Reserve Banks $500 million. Economic Com of the Joint to the request Mr. Rouse referred on September 1, reported at the meeting through Senator Douglas, mittee

1959, that that Committee be furnished with aggregate figures over a period of years on Government security dealers' positions, volume of purchases and sales, and borrowing. In a letter to Senator Douglas on September 11, 1959, he (Mr. Rouse) had explained that all but two of the dealers had given permission to supply the requested information. Since these two had declined on the grounds that the burden and expense of preparing the data would be unreasonable, he had informed the Senator that the Federal Reserve would not be able to furnish the totals desired. This was because the position of at least one of the two nonreporting dealers might be revealed, since both of the nonreporting dealers (one large and one very small) had furnished 1957-1958 material that had been published in the Treasury-Federal Reserve study of the Government securities market. Thus, if their figures were to be omitted from a series covering a period of years, their positions might be by a process of subtraction. Mr. Rouse said that, accordingly, revealed to Senator Douglas that the Joint Economic his letter had suggested from the dealers if the Com obtain the information directly .Committee procedure would be desirable. mittee concluded that such he and Mr. Riefler had now went on to say that both Mr. Rouse Joint Economic Mr. Knowles, Economist, calls from received telephone for the period since a series of figures requesting that Committee, that had agreed total for the firms by adjusting the 1950 be furnished reported by the it by the proportion data so as to raise to supply the covered by the the 1957-58 period firms during two nonreporting

Treasury-Federal Reserve study. Mr. Rouse said that he had pointed out to Mr. Knowles that such method of adjustment might produce mis leading figures. While such a series could be prepared, Mr. Rouse said that he would not wish to furnish it to the Committee unless it were accompanied by a statement that clearly pointed out the statistical defects in the procedure. Mr. Riefler said that although he felt the suggestion made by Mr. Knowles was statistically unsound, there had been a commitment to furnish data on dealers' positions, if in so doing the Federal Reserve did not reveal directly or indirectly the positions of individual dealers. Therefore, Mr. Riefler felt that if the Joint Economic Com make a written request for the figures, including a mittee desired to statement as to how it wanted the estimated totals prepared, there for declining to comply with the Committee's would not be a good basis request. and at Chairman Martin's suggestion, it After some discussion were received from the Joint was agreed that if a written request on the basis outlined the preparation of figures Economic Committee for with the request with the be no objection to complying there would they would be the figures were transmitted that when understanding of a series on the unreliability a statement commenting accompanied by in the manner suggested. prepared near the con to the discussion then referred Mr. Balderston problem of regarding the on May 26, 1959, of the meeting clusion

estimating the money supply. He recalled the understanding that the System Research Advisory Committee be asked to prepare a memorandum setting forth the problem and perhaps making some suggestions, and he inquired of Mr. Thomas as to the progress toward developing such a memorandum. Mr. Thomas reported that a preliminary memorandum was now being prepared by a subcommittee and that it would be considered by the System Research Advisory Committee at a forthcoming meeting. Chairman Martin noted that the next meeting of the Committee would be scheduled for Tuesday, October 13, 1959, unless there were objection. In view of the fact that Tuesday, November 3, which normally would be the date for the following meeting, was an election holiday in some States, he suggested that it might be desirable to schedule that meeting for Wednesday, November 4. After brief discussion, it was the next two meetings of the Committee would be held on agreed that Tuesday, October 13, and Wednesday, November 4, 1959. Thereupon the meeting adjourned. Secretary