November 4, 1959 FOMC Minutes

FOMC minutes

involved the principle of whether the System was going to go into the longer-term issue every time. Mr. Szymczak said he had the reverse feeling. When the System patently was going in to help the Treasury, the market would clearly assign that as the reason. However, on an occasion when the Treasury did not appear to need any help, an opportunity was provided for the System to get away from what could become dogma. Mr. Johns noted that in this case the Secretary of the Treasury had said that he neither wanted nor solicited help and that he was only thinking of the System protecting itself against the charge of being doctrinaire. Mr. Thomas commented that he felt that it might hurt the issue for the System to hold some of the longer-term Treasury securities more than it would help. said that in talking with the Secretary of Mr. Balderston an earlier occasion than the one previously the Treasury, on the hope that the interest rate fixed mentioned, he had advanced to attract buyers so that the by the Treasury would be rich enough owning the entire issue. The Reserve would not end up by Federal of a rate of time was the question of discussion at that point said he less. Mr. Balderston or 1/8 per cent 4-3/4 per cent be so priced as not that the offering would expressed the hope

to fail in the market, thereby leaving the System with the entire issue. In view of the point just made by Mr. Thomas, Mr. Balderston asked Mr. Rouse whether there was any indication from the market as to whether non-Federal Reserve holdings of the one-year security would be substantial. Mr. Rouse replied that he thought it was generally believed that corporations would go more for the one-year certificate than the four-year note. There would be some evidence in the attrition of expectations as to rates. On the whole, however, he felt that the System would have ample company in the one-year category. Mr. Balderston said that if this were not the expectation he would vote to take some of the four-year notes for the reason Mr. Thomas had advanced. Thereupon, upon motion duly made and seconded, it was voted that all of the $5 billion 3-3/8 per cent certifi cates of indebtedness maturing on November 15, 1959, and held in the System Open Market Account would be exchanged for the 4-3/4 per cent certificate maturing November 15, 1960. this motion Messrs. Hayes, Erickson, On and Szymczak voted "no" for Shepardson, the reasons they had stated. of the Federal Open Market that the next meeting It was agreed on Tuesday, November 24, 1959. would be held at 10:00 a.m. Committee next meeting, Mr. the date fixed for the In connection with of the of Presidents of the Conference as Chairman Johns, speaking

Federal Reserve Banks, noted that a committee consisting of Governor Robertson, representing the Board of Governors, and the members of the Committee on Fiscal Agency Operations, repre senting the Presidents' Conference, had been working on problems relating to the verification and destruction of United States currency and that a joint meeting of the Board and the Presidents had been suggested in order to consider the recommendations that would soon be made available by the special committee. Mr. Johns inquired whether it would be agreeable to hold this joint meeting following the meeting of the Federal Open Market Committee on November 24, and it was decided that the joint meeting would be held at such time. Mr. Johns also referred to the fact that the Vice Chairman of the Board of Governors had referred to the Presidents' Conference for comment a letter addressed to him under date of October 30, 1959, of the Treasury with respect to proposed by the Under Secretary in the United States Savings Federal Reserve Bank participation the question whether 1960. Mr. Johns raised Bonds program during should meet on this matter today or following the the Presidents on November 24. Federal Open Market Committee meeting of the follow the latter procedure it was agreed to After discussion too long a delay in that this would not involve if it developed to the Treasury. replying

Secretary's Note: Subsequent to this meeting, it was decided that the Presidents would meet later today on the questions raised by the Under Secretary's letter. Mr. Johns then noted that if the usual schedule were observed, a meeting of the Federal Open Market Committee would be held December 15,1959. He inquired whether it would be agree able to schedule a meeting of the Presidents' Conference on December 14 and 15, and possibly on December 16 depending on the agenda that developed. There being no objection, Mr. Johns stated that the Secretary of the Conference would be instructed to make plans on the basis of a meeting of the Presidents' Conference on the dates mentioned. The meeting then adjourned. Secretary