September 9, 1969 FOMC Record of Policy Actions

FOMC minutes

To implement this policy, while taking account of the forthcoming Treasury refunding, System open market opera tions until the next meeting of the Committee shall be conducted with a view to maintaining the prevailing firm conditions in money and short-term credit markets; pro vided, however, that operations shall be modified, to the extent permitted by the Treasury refunding, if bank credit appears to be deviating significantly from current projections or if pressures arise in connection with foreign exchange developments or with bank regulatory changes. Votes for this action: Messrs. Martin, Hayes, Bopp, Brimmer, Clay, Coldwell, Scanlon, and Sherrill. Votes against this action: Messrs. Maisel and Mitchell. Absent and not voting: Messrs. Daane and Robertson. Messrs. Maisel and Mitchell dissented from this action for reasons similar to those underlying their dissent from the directive adopted at the previous meeting. They believed that in measuring the degree of monetary firmness or restraint the Committee should give more weight to movements in key monetary aggregates--such as the money stock, private demand deposits, total and nonborrowed reserves, and bank credit--and in longer-term interest rates. In their judgment, the fact that the monetary aggregates had been declining and longer-term interest rates had been rising in recent weeks indicated that restraint had been steadily increas ing, even though money market conditions had been relatively stable. They favored maintaining the over-all posture of restraint measured in terms of such aggregates and interest rates, and permitting more flexibility in money market conditions in order to do so. 2. Amendment to continuing authority directive. The Committee amended paragraph 2 of the continuing authority directive to the Federal Reserve Bank of New York regarding domestic

open market operations, to increase the dollar limit on Federal Reserve Bank holdings of short-term certificates of indebtedness purchased directly from the Treasury from $1 billion to $2 billion. With this change, paragraph 2 read as follows: 2. The Federal Open Market Committee authorizes and directs the Federal Reserve Bank of New York to purchase directly from the Treasury for the account of the Federal Reserve Bank of New York (with discretion, in cases where it seems desirable, to issue participations to one or more Federal Reserve Banks) such amounts of special short-term certificates of indebtedness as may be necessary from time to time for the tmporary accommodation of the Treasury; provided that the rate charged on such certificates shall be a rate 1/4 of 1 per cent below the discount rate of the Federal Reserve Bank of New York at the time of such purchases, and provided further that the total amount of such certificates held at any one time by the Federal Reserve Banks shall not exceed $2 billion. Votes for this action: Messrs. Martin, Hayes, Bopp, Brimmer, Clay, Coldwell, Maisel, Mitchell, Scanlon, and Sherrill. Votes against this action: None. Absent and not voting: Messrs. Daane and Robertson. This action was taken on recommendation of the System Account Manager, who advised that the Treasury's needs for temporary accom modation might well exceed the existing $1 billion limit in the period before the mid-September tax-payment date. It was agreed that the limit in question would revert to $1 billion at the close of business on October 7, 1969, the day on which the next meeting of the Committee was scheduled, unless otherwise decided by the Committee on or before that date.

3. Ratification of amendment to authorization for System foreign currency operations. The Committee ratified an action taken by members on August 27, 1969, effective September 2, 1969, to increase the System's swap arrangement with the National Bank of Belgium from $300 million to $500 million equivalent, and to make the corresponding amendment to paragraph 2 of the authorization for System foreign currency opera tions. As a result of this action, paragraph 2 of the authorization 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 Bank of Canada 1,000 National Bank of Denmark 100 Bank of England 2,000 Bank of France 1,000 German Federal Bank 1,000 Bank of Italy 1,000 Bank of Japan 1,000 Bank of Mexico 130 Netherlands Bank 300 Bank of Norway 100 Bank of Sweden Swiss National Bank Bank for International Settlements: Dollars against Swiss francs 600 Dollars against authorized European currencies other than Swiss francs 1,000

Votes for ratification of this action: Messrs. Martin, Hayes, Bopp, Brimmer, Clay, Coldwell, Maisel, Mitchell, Scanlon, and Sherrill. Votes against ratification of this action: None. Absent and not voting: Messrs. Daane and Robertson. The action in question had been taken by members on recom mendation of the Special Manager of the System Open Market Account. The latter had advised that the increase in the swap line would be helpful in permitting the National Bank of Belgium to cope with short-run speculative pressures on the Belgian franc arising out of the recent devaluation of the French franc and would thus contribute to stability in foreign exchange markets.