May 24, 1960 FOMC Minutes

FOMC minutes

reduction of the discount rate was a different thing from an increase. In the fall of 1957 the Treasury postponed a financing operation temporarily, if he remembered correctly, because the Federal Reserve System was prepared to decrease the discount rate, but there was only a short interval between the two actions. Had the System been moving in the opposite direction, it would have been an entirely different matter. Mr. Bopp pointed out there are relatively short, and few, intervals when the System is free to move on the discount rate. If the Treasury should take up these intervals by advance refunding or similar operations, the opportunities for discount rate action would become very limited. Mr. Robertson commented that if there was to be a move on the move should be made not after advance refunding took discount rate, that Balderston and Bopp expressed before such time, and Messrs. place but agreement. attitude of the System be one Martin suggested that the Chairman he issued a word of In a further comment, of flexible, watchful waiting. conversations after most careful in their those present be caution that all left the room today. they Mr. Rouse dated a memorandum from referred to Martin then Chairman date from Mr. of the same a memorandum which transmitted May 20, 1960, Bank of New York, of the Federal Reserve Assistant Vice President Larkin, the Open Market given by under the authorization operations summarizing at the meeting 1960, and renewed on April 12, at its meeting Committee

on May 3, 1960, to acquire up to $150 million of one-year Treasury bills maturing July 15, 1960, either by outright purchase or by swapping other Treasury bills. Mr. Larkin's memorandum indicated that a total of $91.5 million of the bills maturing July 15, 1960, had been acquired under this authorization, so that total holdings of such bills, including holdings of $13.4 million acquired by outright purchase prior to April 12, 1960, amounted to $104.9 million. Mr. Rouse commented that if the Treasury was successful in developing a better cash position so that it could cut down by $500 million when it came to the rollover, the present holdings of the bills due July be sufficient. On the other hand the situation 15, 1960, would probably was not clear. Therefore, he would suggest that the outstanding authorization for acquisition of the July 15 bills be renewed. Under it, he noted, there was still leeway to acquire up to $58.5 million of such bills. inquired whether anyone had heard of repercussions Chairman Martin of the transactions in the one-year bills, and no in the market because was in a way rather strange that heard. Mr. Rouse said it comments were comment, because the swap transactions there seemed to have been no market be identified in some cases as swaps. that had been undertaken could clearly authorization was the outstanding Committee Mr. Thomas noted that Martin added that bills, to which Chairman acquisition of July limited to the acquisition of one-year July bills as far as Desk was limited to the the stating that, Mr. Rouse agreed, transactions was concerned. bills by swap

as far as outright purchases were concerned, it was his understanding that the Account had authority to acquire other issues of the one-year bills, and no disagreement with this comment was heard. Mr. Hayes said he supposed that at some time the Committee would wish to consider authorizing acquisition of the one-year bills of October 17, 1960, on a basis similar to the authorization relating to the July 15 bills. However, he thought there was no hurry to consider that matter. Mr. Rouse expressed the view that the operation in the July 15 bills should first be completed so that the Open Market Committee might make an appraisal as to whether it wanted to authorize further operations in one-year bills along the lines of the current authorization. Thereupon, it was agreed to renew until the next meeting of the Open Market Committee the authorization given on April 12, 1960, and renewed on May 3, 1960, to acquire for the System Open Market Account either by outright purchases or by swaps of other bills, up to $150 million of one year Treasury bills maturing July 15, 1960. Mr. Robertson dissented from this action to the extent that it involved acquisition of the one-year bills by swap transactions, as opposed to outright purchases. It was agreed that the next meeting of the Federal Open Market Committee would be held on Tuesday, June 14, 1960, and that the succeeding meeting would be held on Tuesday, July 5, 1960. letter from Mr. Hayes which noted receipt of a Chairman Martin of the members of to call to the attention that he might want suggested thereon that the not currently serving and the Presidents the Committee

New York Bank would welcome visits to the Desk. The Chairman said he would like to support this invitation to learn firsthand what was going on at the Desk whenever visits could be worked out. Mr. Hayes said his thinking was in terms of rather extensive visits, perhaps in the order of a week, during hich members of the Committee teeth into the operations of the Desk and see what was could sink their actually going on there. Reserve Bank Presidents (Messrs. Chairman Martin noted that three to testify before the Subcommittee and Mangels) had been called Hayes, Allen, that was to hold hearings in of the House Banking and Currency Committee retirement of Federal provide for the 8516, which would with H.R. connection Reserve Bank stock. The meeting then adjourned. Secretary