August 1, 1961 FOMC Minutes

FOMC minutes

audited statements and interim data, if desired. This applied not only to the Bank but also to other customers of the dealers; the dealers' statements were readily available. A customer doing a sub stantial business with a dealer would want to know the dealer's financial situation, and that information was available. The only reason he saw for going further was that, as indicated in the memo randum, some members of the Congress had expressed an interest. The information was wanted by the staff of the Joint Economic Committee, apparently, and possibly by some of the members of the Committee. Personally, he did not see any other reason for going ahead with this project. It would be asking a good deal of the dealers, and he did not feel that the System should put itself in the position of taking the onus upon itself. Mr. Fulton said that this was his own reaction. If the New was now getting adequate information and the Congress York Bank Congress might be expected to ask for it. He felt wanted more, the that the System would be putting itself at the end of a limb if it tried to read the mind of the Congress and badgered the dealers to it could not have amicable relations with them. A the extent that request might be looked upon by the dealers as forcing them to com ply because of their relationships with the System. this was not a joint effort of Mr. Johns inquired whether so that the System would not the Federal Reserve and the Treasury, take the onus entirely upon itself.

Chairman Martin confirmed this statement. He added that he thought a good point was being made as to whether the dealers were being harassed too much. In point of fact, however, the dealers had been relieved of a good deal of harassment by virtue of the manner in which the study of the Government securities mar ket had been handled by the Treasury and the Federal Reserve. Mr. Swan commented that in the longer run there might be some advantage in doing some further steering, both from the stand point of the Federal Reserve and from the standpoint of the dealers. Therefore, he would be inclined to favor the current proposal, but with the understanding on the part of all concerned that this was than in the immediate interest of the System. in the public interest rather on that basis, he would not want the dealers did not want to go along If that it would be possible to explore the to force them, but he felt dealers without the System taking too much onus on itself. matter with the Mr. Young expressed agreement with what Mr. Swan had said. This interest. There had been a good deal of was a matter of the public time to time, and in part this criti criticism about the market from arisen because of the inadequacy of information. The Joint cism had asked the assistance of the System in getting Economic Committee had statements of the dealers over a number of years. The financial System was unable to provide the information, and the Joint Committee information itself. Thereafter, one of the then went out and got the

points that the Committee staff was prepared to formalize through a letter from the Chairman of the Committee was specifically along these lines; that is, a request for the development of standardized financial reporting on the part of the dealers. However, the Treas ury and the Federal Reserve indicated to the Committee staff that they were willing to try to work out something in cooperation with the dealers. If the matter were to be dropped, it was likely that a letter would be received. Mr. Thomas commented that it had been said to the Joint Com mittee that the dealers' statements were satisfactory for the System's purposes. However, the statements were in such varied forms that probably nobody but the System could understand them, and this attempt to get on an organized basis could be justified from that standpoint. It was difficult for the System to justify the point of view that it had enough information, because it could not present the information to the Joint Committee when asked. Mr. Wayne inquired whether it was not true that the System and the Treasury would be approaching the dealers on a cooperative basis as an alternative to some other approach that the dealers might like less. If so, he saw no reason not to enter into exploratory discussions. Chairman Martin and Mr. Young confirmed that this was the intent.

Chairman Martin also expressed the view that it would be advisable to go ahead and explore the subject with the individual dealers. He would not want to impose an undue burden on the dealers. However, the System needed all of the information it could get as to what was going on in the Government securities market. Some day it would be necessary to have more information than was available at the present time. Chairman Martin then said if, in the light of this discus sion, there was no objection, the Steering Group would be authorized to explore the matter with the nonbank dealers, and no objections were heard. The Chairman added the comment that he would not want the dealers to obtain any impression that the Committee was not taking this matter seriously because it might involve some added work for the dealers. The matter should be explored in a serious manner to see whether the problem could not be worked out without subjecting the dealers to undue hardship. It was agreed that the next meeting of the Committee would be held on Tuesday, August 22, 1961, and it was understood that the next succeeding meeting would be scheduled for Tuesday, September 12, The meeting then adjourned.