March 14, 1968 FOMC Record of Policy Actions: Full Text
RESERVE FEDERAL release press For immediate release June 12, 1968 The Board of Governors of the Federal Reserve System and the Federal Open Market Committee today released the attached record of policy actions taken by the Federal Open Market Commit tee at its meeting on March 14, 1968. Such records are made available approximately 90 days after the date of each meeting of the Committee and will be found in the Federal Reserve Bulletin and the Board's Annual Report. Attachment
RECORD OF POLICY ACTIONS FEDERAL OPEN MARKET COMMITTEE OF THE Meeting held on March 14, 1968 1. Authority to effect transactions in System Account. In the period since the preceding meeting of the Committee demands for gold in London and other foreign markets speculative had swelled to massive proportions. On the day of this meeting, the British authorities had temporarily closed the London gold market and had declared a Bank Holiday for the following day; the Board of Governors had approved an increase in Federal Reserve Bank discount rates from 4-1/2 to 5 per cent, effective March 15; and arrangements were made for central bank governors of countries that had been actively participating in the London gold pool to meet in Washington on Saturday and Sunday, March 16 and 17, to consider their future policy with respect to gold. The purpose of this meeting of the Committee, which was held by telephone, was to review recent developments and make such changes in the Committee's policy instruments as appeared to be needed in light of those developments. The Committee agreed that its current policy directive should be modified to permit adaptation of open market operations to the changed circumstances brought about by recent events, includ ing the discount rate action. After discussion, the following current economic policy directive was issued to the Federal Reserve Bank of New York:
recent international financial developments, In light of until the next meeting of the System open market operations with a view to maintaining firm Committee shall be conducted conditions in the money market, taking into but orderly of increases in Federal Reserve discount account the effects rates. Votes for this action: Messrs. Martin, Brimmer, Daane, Ellis, Hickman, Maisel, Mitchell, Robertson, Sherrill, Clay, Coldwell, and Treiber. Votes against this action: None. Absent and not voting: Messrs. Hayes, Galusha, and Kimbrel. (Messrs. Treiber, Clay, and Coldwell, respec tively, voted as their alternates.) to authorization for System foreign currency operations. 2. Amendment At this meeting the Committee authorized the Special Manager to undertake negotiations looking toward increases, up to specified in a number of the System's reciprocal currency arrangements, limits, on the understanding that any such enlargements--and the corresponding amendments to paragraph 2 of the authorization for System foreign currency operations--would become effective upon a determination by Chairman Martin that they were in the national interest. Specifically, negotiations were authorized for increases up to varying maximum amounts, ranging from $100 million to $400 million equivalent, in the System's two swap arrangements with the Bank for International Settle ments and in the arrangements with the central banks of Belgium, Canada, Italy, Japan, the Netherlands, Sweden, and Switzerland.
Votes for this action: Messrs. Martin, Brimmer, Daane, Ellis, Hickman, Sherrill, Clay, Coldwell, and Treiber. Votes against this action: Messrs. Maisel, Mitchell, and Robertson. Absent and not voting: Messrs. Hayes, Galusha, and Kimbrel. (Messrs. Treiber, Clay, and Coldwell, respec tively, voted as their alternates.) taken on the ground that enlargements of This action was prove helpful in coping with flows of the swap arrangements should short-term funds in foreign exchange markets if such flows became heavy in the current highly uncertain environment. The Committee in the view of the Special Manager that under existing concurred conditions it would be desirable if negotiated enlargements were to become effective immediately upon a determination by the Chairman that they were in the national interest, thus obviating the need for further Committee action. and Robertson dissented from this Messrs. Maisel, Mitchell, because of reservations about the desirability, under current action circumstances, of authorizing a substantial enlargement of the swap network before discussions were held with monetary authorities of other countries on means for coordinating international financial policies. They favored postponing consideration of increases in the swap arrangements until after the forthcoming week-end meeting of central bank governors.
meeting, on March 16, available members Subsequent to this Committee (Messrs. Martin, Brimmer, Daane, Maisel, Mitchell, of the the last voting as alternate for Mr. Hayes) Robertson, and Treiber, unanimously to authorize the Special Manager to undertake voted looking toward an increase of $250 million equivalent negotiations swap arrangement with the German Federal Bank, on in the System's the understanding that any such increase, and the corresponding amendment to the authorization for System foreign currency opera would become effective upon a determination by Chairman tions, Martin that it was in the national interest. Messrs. Maisel and Robertson indicated that they continued to hold the general reserva tions concerning swap line increases that they had expressed on March 14, but that they had voted favorably on this action becauseinasmuch as the Committee had taken the action it did on that datethey thought it appropriate to include the swap line with the German Federal Bank in an enlargement of the swap network. On March 17, available members of the Committee (Messrs. Martin, Brimmer, Daane, Ellis, Galusha, Maisel, Mitchell, Robertson, Sherrill, and Treiber, the last voting as alternate for Mr. Hayes) voted unanimously to authorize the Special Manager to undertake negotiations looking toward an increase of $500 million equivalent in the System's swap arrangement with the Bank of England, subject to the same understanding as in the actions taken on March 14 and 16.
On March 17 Chairman Martin determined that increases in the System's swap arrangements with the foreign banks listed below, in the indicated amounts (millions of dollars equivalent), were in the national interest: Bank of Canada 250 Bank of England 500 German Federal Bank 250 Bank of Japan 250 Netherlands Bank 175 Bank of Sweden 50 Swiss National Bank 200 Bank for International Settlements: System drawings in Swiss francs 200 System drawings in other authorized European currencies 400 Accordingly, effective March 17, 1968, paragraph 2 of the authorization for System foreign currency operations was amended to read as follows: 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 1,000 National Bank of Denmark Bank of England 2,000 Bank of France 100 German Federal Bank 1,000 Bank of Italy Bank of Japan 1,000 Bank of Mexico Netherlands Bank 400 Bank of Norway Bank of Sweden Swiss National Bank 600 Bank for International Settlements: System drawings in Swiss francs 600 System drawings in authorized European currencies other than Swiss francs 1,000