November 27, 1967 FOMC Record of Policy Actions

FOMC minutes

Austrian schillings Belgian francs Canadian dollars Danish kroner Pounds sterling French francs German marks Italian lire Japanese yen Mexican pesos Netherlands guilders Norwegian kroner Swedish kronor Swiss francs foreign currencies listed in paragraph A B. To hold above, up to the following limits: held spot or purchased forward, (1) Currencies up to the amounts necessary to fulfill outstanding forward commitments; Additional currencies held spot or purchased (2) forward, up to the amount necessary for System operations to exert a market influence but not exceeding $150 million equiv alent; and Sterling purchased on a covered or guaranteed (3) of the dollar, under agreement with the Bank of basis in terms England, up to $200 million equivalent. C. To have outstanding forward commitments undertaken under paragraph A above to deliver foreign currencies, up to the following limits: (1) Commitments to deliver foreign currencies to the Stabilization Fund, up to $350 million equivalent; (2) Commitments to deliver Italian lire, under special arrangements with the Bank of Italy, up to $500 million equivalent; and (3) Other forward commitments to deliver foreign currencies, up to $550 million equivalent.

D. To draw foreign currencies and to permit foreign banks to draw dollars under the reciprocal currency arrange ments listed in paragraph 2 below, provided that drawings by either party to any such arrangement shall be fully liquidated within 12 months after any amount outstanding at that time was first drawn, unless the Committee, because of exceptional circumstances, specifically authorizes a delay. 2. The Federal Open Market Committee directs the Federal Reserve Bank of New York to maintain reciprocal currency arrangements ("swap" arrangements) for System Open Market Account for periods up to a maximum of 12 months with the following foreign banks, which are among those designated by the Board of Governors of the Federal Reserve System under Section 214.5 of Regulation N, Relations with Foreign Banks and Bankers, and with the approval of the Committee to renew such arrangements on maturity: Amount of arrangement (millions of Foreign bank dollars equivalent) Austrian National Bank 100 National Bank of Belgium 225 Bank of Canada 750 National Bank of Denmark 100 Bank of England 1,500 Bank of France 100 German Federal Bank 750 Bank of Italy 750 Bank of Japan 750 Bank of Mexico 130 Netherlands Bank 225 Bank of Norway 100 Bank of Sweden 200 Swiss National Bank 250 Bank for International Settlements System drawings in Swiss francs 250 System drawings in authorized European currencies other than Swiss francs 600 Committee also reviewed certain transactions At this meeting the that had been made during the preceding week by the Federal in sterling number of U.S. commercial banks. Reserve Bank of New York with a York Bank had sold sterling from System Account Specifically, the New

holdings to the U.S. commercial banks, for delivery on Tuesday, November 21, and had concurrently repurchased forward an equiva lent amount of sterling from each bank for delivery on Friday, November 24. Similar transactions were conducted for Treasury account, with sales for delivery on Wednesday and repurchases for delivery on Friday. These transactions were carried out to enable the U.S. commercial banks to make deliveries of sterling on Tuesday and Wednesday, under contracts they had made on Friday, November 17. The commercial banks involved had originally entered into those contracts in order to balance their positions in sterling, in accordance with their customary practice, after accommodating com mercial customers and correspondent banks that had desired to sell sterling forward. At the time they made the spot contracts, the commercial banks had expected to acquire the necessary sterling in the market on Monday, November 20, but were unable to do so because the British authorities had declared that day to be a bank holiday. The New York Bank took measures to insure that such transactions did not provide relief to any commercial bank to the extent that it was short sterling as a result of operations on its own initiative. In cases where the banks had over-all short positions in sterling as of Friday, November 17, an amount equal to that short position was deducted from the amount made available by the New York Bank, except where the short position could be explicitly justified by the bank in question.

The broad purpose of these transactions, from the System's point of view, was to avoid the disorder in the foreign exchange market that might have resulted from widespread defaults on foreign exchange contracts. The transactions were carried out with the concurrence of a majority of the Subcommittee authorized, under the terms of paragraph 6 of the authorization for System foreign currency operations, to act on behalf of the Federal Open Market Committee when necessary to enable the New York Bank to engage in foreign currency operations before the Committee could be consulted. After discussion at this meeting, the Committee unanimously approved, ratified, and confirmed these transactions, along with other System transactions in foreign currencies since the previous meeting.