September 12, 1961 FOMC Minutes

FOMC minutes

as he had said, Mr. Young was attending all of the working party meetings. However, the System must try to pull this together in concrete form and if possible make some suggestions to the Treasury as to whether, for example, the Stabilization Fund should be enlarged two or three times. Then the System could determine whether or not it would be desirable for the Federal Reserve to be part of this program. It could let the Congress make that decision, but the System should not just sit by idly and let the problem swirl around it. That, he thought, was what had been happening to a degree. Mr. King said that he had not intended his comments to be negative. However, he did feel that some person must make the decisions in connection with such a program and that the decisions must be clear-cut and fast. If it were decided to delegate the authority to some one person in the System, he would have no objection to such delegation and would endorse the idea. Mr. Treiber commented that he thought there were two types of First, there was the extent to which the Federal Reserve decisions. in a certain foreign currency. Second would conduct some operations Essentially, the same were the day-to-day operating decisions. there day-to-day decisions of the Trading Desk in thing was involved in the conducting open market operations. he would not envisage, then, more Mr. King asked Mr. Treiber if decisions, and Mr. Treiber replied difficulty than in making open market that he would not.

Mr. Wayne commented, by way of clarification of his earlier remarks, that he would favor entering into such a program, but with full recognition of the risks involved. Mr. Rouse commented on the degree of urgency that he saw in the matter. With the kind of international tension that existed at present, somebody must do this kind of thing, and he thought there was a time element involved in the sense of being ready, whether through the Stabilization Fund or the Federal Reserve. The Stabilization Fund resources were clearly inadequate to do the kind of job that might have to be done. Chairman Martin responded that he thought Mr. Rouse's statement was well taken. There was a real question of urgency, and that was why he had suggested that the problem should be gotten in the works. On the other hand, he felt that the System should not move too fast, although it should be on top of the problem. He added the comment that the work done by the Under Secretary of the Treasury in this field had been an excellent pioneering piece of work. The Under Secretary had shown vision and capacity in improvising with the tools ,t his command; and had demonstrated how real the need was and how effectively, under certain circumstances, the problem could be handled, but only on a bridge of sound policies. In his opinion, the foreign exchange field was one in which the country had been fortunate in having the type of leadership that had existed in the Treasury. He hoped the System would think the problem through and be as constructive as possible.

Mr. King indicated that he had some concern about the idea of operations being conducted in two different forms and raised the question whether they should not preferably be concentrated, with one agency directing the entire effort. Mr. Young pointed out in this connection that the Treasury has other jobs in connection with the Stabilization Fund. That was one of the reasons why the funds available for the particular kind of operations under discussion were so limited. He gathered that the Treasury might be left free to use the Stabilization Fund for the other happy if it were things with which it had to deal. Chairman Martin then suggested that the Committee request Mr. Young and the Division of International Finance to work with the New York Reserve Bank and the Board's Legal Division in trying to pull the parts of the problem together, and agreement with this suggestion was indicated. It was agreed that the next meeting of the Open Market Committee would be held on Tuesday, October 3, 1961, and that the next succeeding meeting would be tentatively scheduled for Tuesday, October 24, 1961. The meeting then adjourned. Secretary.

TOTAL RESERVES AVAILABLE TO SUPPORT PRIVATE DEPOSIT EXPANSION, SEASONALLY ADJUSTED ACTUAL VS. 5 PER CENT AND 3 PER CENT ANNUAL GROWTH RATES, MARCH 1 - SEPTEMBER 6, 1961 ANNUAL GROWTH RATE SINCE . MARCH 1 BASE AVAILABLE RESERVES 3 PER CENT ANNUAL GROWTH RATE SINCE MARCH 1 BASE