March 22, 1960 FOMC Minutes

FOMC minutes

Mr. Young stated that the suggestion discussed in the staff memorandum had originated with the Treasury, that it would be appro priate for the Federal Open Market Committee to study the suggestion in its own self-interest, and that in his opinion a case could be developed that some participation by the System Account would be desirable from the standpoint of the Committee's objectives and purposes. Mr. Young added that the staff had not felt that it should make such a case to the Committee. Therefore, the memorandum simply attempted to summarize the principal aspects of the proposals and to highlight the main technical and procedural issues involved without presenting any detailed recommendations for System action. There was a discussion of the procedure that might be followed in considering the staff memorandum, during which the sug gestion was made that consideration of the refinancing of the 2-1/2 per cent bonds of November 1961 might be deferred until after a discussion of the proposal for acquiring maturing one-year bills for rollover in the forthcoming April auction. Mr. Young stated that to a degree the problem of the refinancing of the approximately $2 billion of one-year Treasury bills maturing on April 15, 1960, had of, although developments in connection with the been taken care Illinois, as of April 1 might cause tax assessment in Cook County, a problem to develop again. There was a possibility, he said, that a specific instruction to the Committee might wish to give the beyond the amount that acquire up to $150 million System Account to

the Account already holds of the maturing one-year bills, with the thought that, according to circumstances at the time, this addi tional amount might be permitted to run off or be used to seek an allotment of securities offered in the impending April financing. Mr. Young added that it was an open question whether the Committee would have any need to go further, such as to provide for swaps of bills. Possible additional action might be a problem for further study, once the Committee had set a course with regard to operations in the one-year bills as a continuing procedure. Vice Chairman Hayes commented that Mr. Young's remarks indicated that there might be a discussion of whether to go into the maturing April bills in a small way, after which the Committee whether it would wish to authorize any swaps. Mr. would consider the tentative suggestion in the Hayes said that he had understood was that the Committee might wish to authorize March 18 memorandum of the maturing April bills, the acquisition of up to $150 million swaps or outright purchases. to be acquired either through total was correct but that there might Mr. Young stated that this before the next question of swaps for going into the be no need meeting of the Committee. entered the meeting. point Chairman Martin At this the proposal for discussion of followed a long There either on an out with an April maturity, acquiring 1-year bills of executing swap of the techniques or through swaps, right basis to experiment might be desirable of whether it and transactions,

with swap transactions during the period between this meeting and a meeting on April 12 or whether such experimentation, if authorized, should be subsequent to completion of the forthcoming Treasury financing. There was also a discussion as to whether, apart from acquiring maturing one-year bills through swap trans actions, it would be desirable for the System Account to attempt to make outright purchases of these maturities. During this discussion, Chairman Martin pointed out that no special authoriza tion was needed for acquiring bills of different maturities on an outright basis under the Committee's general operating procedures, if such acquisitions were in accordance with the Committee's policy directive, and Mr. Larkin added the comment that System Account holdings now included bills maturing as late as January 1961. At the conclusion of the discussion, it was the consensus for engaging in swap transactions in bills that no authorization noted that as a practical matter be given at this meeting, it being possibility for using such an appeared to be little or no there basis for the purpose of authorization even on an experimental meeting of the Com bills prior to the acquiring 1-year maturing however, that further on April 12. It was understood, mittee meeting of the Committee be given at the next consideration would included in the staff memorandum of March 18, to the proposals authorizing swap transactions the possibility of 1960, including operating policy, exception to the Committee's in bills as an

reaffirmed earlier during this meeting, that precluded offsetting purchases and sales of securities for the purpose of altering the maturity pattern of the System' portfolio. It was agreed that meetings of the Federal Open Market Committee would be held on Tuesday, April 12, and Wednesday, May 4, Thereupon the meeting adjourned. Secretary