March 15, 1977 FOMC Record of Policy Actions

FOMC minutes

acceptances. The words "when appropriate" were added at the beginning of the paragraph and the dollar limit on holdings of bankers acceptances specified at the end of the paragraph was reduced from $1 billion to $100 million. As amended, paragraph 1(b) read as follows: to buy or sell in the (b) When appropriate, open market, from or to acceptance dealers and foreign accounts maintained at the Federal Reserve Bank of New York, on a cash, regular, or deferred delivery basis, for the account of the Federal Reserve Bank of New York at market discount rates, prime bankers acceptances with maturities of up to nine months at the time of acceptance that (1) arise out of the current shipment of goods between countries or with States, or (2) arise out of the storage in the United within the United States of goods under contract of sale or expected to move into the channels of trade within a reasonable time and that are secured through out their life by a warehouse receipt or similar document conveying title to the underlying goods; provided that the aggregate amount of bankers acceptances held at any one time shall not exceed $100 million; Votes for this action: Messrs. Burns, Volcker, Coldwell, Gardner, Guffey, Jackson, Lilly, Mayo, Morris, Partee, Roos, and Wallich. Votes against this action: None. This action reflected a decision by the Committee that the System should permit its existing holdings of bankers acceptances to mature and that it should no longer purchase these instruments

outright under ordinary circumstances. It was noted that present System holdings were in excess of the newly established limit of $100 million, but it was anticipated that maturities within the next 2 months would reduce holdings below that level. The Committee also agreed that the Federal Reserve should remain an active participant in the market for bankers acceptances by continuing to make with dealers repurchase agreements that are secured by bankers acceptances and by continuing to serve as agent in buying and selling acceptances for the accounts of foreign central banks. action, the Committee noted that the market In taking this for bankers acceptances was well developed and efficient and longer in need of support through Federal Reserve participation. no purchases and sales of acceptances had not been Also, outright size to contribute materially to the needed volume of sufficient of open market operations in recent years. However, repurchase in acceptances had been a useful tool in meeting agreements short-term needs for bank reserves.

3. Review of continuing authorizations meeting of the Federal Open Market This being the first election of new members from the Federal Committee following the Banks to serve for the year beginning March 1, 1977, the Reserve Committee followed its customary practice of reviewing all of its continuing authorizations and directives. The Committee reaffirmed the paragraphs of the authorization for domestic open market operations not affected by the preceding action, the currency operations, and the foreign authorization for foreign currency directive, in the forms in which they were presently outstanding. The Committee also reaffirmed the procedural instructions with respect to proposed or ongoing operations under the foreign currency documents, and the special authori zation relating to System obligations in Swiss francs, in the forms adopted effective December 28, 1976. Votes for these actions: Messrs. Burns, Volcker, Coldwell, Gardner, Guffey, Jackson, Lilly, Mayo, Morris, Partee, Roos, and Wallich. Votes against these actions: None.

In reviewing the authorization for domestic open market operations, the Committee took special note of paragraph 3, which authorizes the Reserve Banks to engage in the lending of U.S. Government securities held in the System Open Market Account under such instructions as the Committee might specify from time to time. That paragraph had been added to the authorization on on the basis of a judgment by the Committee that October 7, 1969, circumstances such lending of securities was in the existing reasonably necessary to the effective conduct of open market of open market policies, and operations and to the effectuation that the authorization would be reviewed on the understanding the Committee concurred in the periodically. At this meeting of the Manager that the lending activity in question judgment remained reasonably necessary and that, accordingly, the authorization should remain in effect subject to periodic review.