May 8, 1962 FOMC Minutes

FOMC minutes

As you know, there has been a spate of new issues of foreign securities in the United States either already consummated or in near contemplation. The New York market for foreign security issues is both broad and completely open to borrowers, unlike the situation in the European markets, which have very limited capacity and considerable official control. In the case of the Danish Government $20 million issue, we had discussed with Mr. Hartogsohn, Deputy Governor of the Danmarks Nationalbank, during his visit with us, the disposition of the proceeds of this issue and had been informed that he believed they would be transferred into sterling, which he likened to a borrowing from the Chase Bank, which is immediately checked out and deposited in the National City Bank. He, therefore, contacted his Governor and we have now been informed that the funds will remain in the United States until such time as the Danes need to disburse the funds here and in other countries. Similar discus sions have occurred in the case of the New Zealand $25 million issue, which, if the past pattern is followed, would result in transfer of the proceeds to the United Kingdom dollar pool; at this moment there has been no definitive reply from the New Zealand authorities as to their decision in the case of the present issue. The significance of such borrowing and immediate conversion into sterling is that the gain of dollars to the United Kingdom results in an immediate equivalent conversion into gold obtained from the U. S. Treasury. Hence, the Treasury and we consider it desirable to arrange, if possible, for con version into other currencies only as and when the need for such currencies may arise. Following a brief discussion based on Mr. Sanford's comments, it was noted that inasmuch as there had been no System foreign currency transactions during the period since the Open Market Committee meeting on April 17, 1962, no action to approve, ratify, and confirm any such trans actions was necessary. All of those present except the members and alternate members of the Committee, the other Reserve Bank Presidents, Messrs. Francis, Young, Sherman, and Kenyon then withdrew from the meeting.

Pursuant to an understanding during an executive session of the meeting of the Open Market Committee on January 23, 1962, Messrs. Martin, Hayes, and Balderston had been holding informal exploratory discussions looking toward the selection of a successor to Mr. Rouse as Manager of the System Open Market Account. At the meeting on April 17, 1962, it was agreed that this group would submit a report to the Committee for consideration at a later meeting. Such a report, dated May 1, 1962, was distributed to the Committee under date of May 3, 1962. In this report the group recommended that Robert W. Stone, Assistant Vice President of the Federal Reserve Bank of New York, be selected to succeed Mr. Rouse as Manager of the Open Market Account and suggested that the appointment be made effective on a date to be agreed upon by the Committee and the New York Bank, perhaps May 15, 1962. In a letter dated May 1, 1962, to Chairman Martin, Mr. Rouse submitted his resignation as Manager of the Open Market Account. In discussion, Chairman Martin commented that the recommendation with respect to Mr. Stone reflected both the views expressed by a number of persons outside the Federal Reserve System regarding Mr. Stone's qualifications and observation by members of the three-man group concerning Mr. Stone's work on the Desk. upon motion duly made and Thereupon, seconded, and by unanimous vote, Mr. Rouse's resignation as Manager of the System Open Market Account was accepted as of the close

of business May 14, 1962, and Mr. Stone was selected as Manager of the System Open Market Account to succeed Mr. Rouse, effective at the beginning of business May 15, 1962, it being understood that Mr. Stone's selection was sub ject to his being satisfactory to the Board of Directors of the New York Reserve Bank. Upon motion duly made and seconded, the Secretary of the Committee was requested to prepare appropriate expressions of apprecia tion for presentation to Mr. Rouse and to Mr. Woodlief Thomas on suitable occasions in recognition of their signal services to the Committee over many years as Manager of the System Open Market Account and as Economist of the Federal Open Market Comittee, respec tively. In further discussion, Mr. Treiber said he anticipated that the directors of the New York Reserve Bank at their meeting on Thursday, as Vice President and Senior Adviser May 10, would appoint Mr. Rouse of the Bank, appoint Mr. Stone as Vice President of the Bank, and approve Mr. Stone's selection as Manager of the System Open Market Account. manner of public announcement with respect to Mr. As to the it was understood that this Stone's selection as Account Manager, by the Open Market Committee along announcement would be released Mr. Rouse as Account Manager. It with advice of the resignation of of the announcement, and of the announcement was agreed that the timing of the new officer posts at the Bank for by the New York Reserve Bank be worked out between the Bank and Mr. Messrs. Rouse and Stone, would Molony, Assistant to the Board of Governors.

the next meeting of the Federal Open It was agreed that Market Committee would be held on Tuesday, May 29, 1962. The meeting then adjourned. Secretary