FOMC Minutes

A meeting of the Federal Open Market Committee was held in the

offices of the Board of Governors of the Federal Reserve System in Washing

ton on Saturday, March 1, 1952, at 10:00 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

Sproul, Vice Chairman

Bryan

Earhart

Evans

Leach

Mills

Powell

Robertson

Szymczak

Vardaman

C. S. Young

Mr. Carpenter, Secretary

Mr. Sherman, Assistant Secretary

Mr. Vest, General Counsel

Mr. Thomas, Economist

Mr. Rouse, Manager, System Open Market Account

Mr. Thurston, Assistant to the Board of Governors

Mr. Riefler, Assistant to the Chairman, Board of

Governors

Mr. Youngdahl, Chief, Government Finance Section,

Division of Research and Statistics, Board

of Governors

Mr. Carpenter reported that advices of the election for a period

of one year commencing March 1, 1952, of members and alternate members of the

Federal Open Market Committee representing the Federal Reserve Banks had been

received, that each newly elected member and alternate member had executed

the required oath of office, and that it

Counsel,

was the opinion of the Committee's

on the basis of advices received, that the following members and

alternate members were legally qualified to serve:

Allan Sproul, President of the Federal Reserve Bank of

New York, with William F. Treiber, First Vice Presi

dent of the Federal Reserve Bank of New York, as

alternate member;

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Hugh Leach, President of the Federal Reserve Bank of

Richmond, with J. A. Erickson, President of the

Federal Reserve Bank of Boston, as alternate member

C. S. Young, President of the Federal Reserve Bank of

Chicago, with Ray M. Gidney, President of the Federal

Reserve Bank of Cleveland, as alternate member;

Malcolm Bryan, President of the Federal Reserve Bank of

Atlanta, with Delos C. Johns, President of the Federal

Reserve Bank of St. Louis, as alternate member;

C. E. Earhart, President of the Federal Reserve Bank of

San Francisco, with J. N. Peyton, President of the

Federal Reserve Bank of Minneapolis, as alternate

member.

Chairman Martin referred to section 2 of article II

of the Federal Open Market Committee,

of the by-laws

as amended August 5, 1949, which pro

vides that the Secretary of the Board of Governors of the Federal Reserve

System shall be the Secretary of the Committee, stating that in order to

divide the work of members of the staff at the Board of Governors more

effectively, he would recommend that the by-laws of the Committee be amended

to provide that at its first meeting on or after March 1 of each year the

Committee shall elect a Secretary and an Assistant Secretary to serve until

the first

that if

meeting on or after March 1 of the next year.

He went on to say

this change were made he would suggest that Mr. Riefler, presently

Assistant to the Chairman of the Board of Governors,

be elected Secretary

and that Mr. Thurston, presently Assistant to the Board of Governors,

be

elected Assistant Secretary, to serve until the first meeting on or after

March 1, 1953.

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At the Chairman's request, Mr. Carpenter read drafts of changes

that might be made in sections 2 and 6 of article II

and section 2 of article

III of the by-laws in order to carry out Chairman Martin's suggestion.

revised sections as read by Mr. Carpenter are as follows:

ARTICLE II.

Section 2.

OFFICERS

Secretary and Assistant Secretary.

At its first

meeting on or after March 1 of each year the Committee shall

elect a Secretary and an Assistant Secretary to serve until the

first

meeting on or after March 1 of the next year.

It

shall

be the duty of the Secretary to keep minutes of all meetings of

the Committee and a complete record of the action taken by the

Committee upon all questions of policy relating to open market

operations and he shall record the votes taken in connection

with the determination of open market policies and the under

lying reasons assigned therefor.

He shall have custody of

such minutes and records and shall perform such other duties as

the Committee may require.

In the absence of the Secretary of

the Committee, the Assistant Secretary shall act as Secretary

pro tem.

Section 6.

Filling Vacancies. At any meeting the Committee

may fill any vacancy in the office of Chairman, Vice Chairman,

Secretary, Assistant Secretary, Economist, Associate Economist,

General Counsel, or Assistant General Counsel.

The

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ARTICLE III.

Section 2.

Secretary.

EXECUTIVE COMMMITTEE

The Secretary of the Federal Open

Market Committee shall act as the Secretary of the Executive

Committee and it

shall be his duty to keep minutes of all meet

ings of the Executive Committee, furnish copies thereof to the

members of the Executive Committee,

duties as may be required.

and perform such other

In the absence of the Secretary,

the Assistant Secretary of the Federal Open Market Committee

shall act as Secretary pro tem.

Upon motion duly made and seconded, and

by unanimous vote, amendments to the by-laws

of the Federal Open Market Committee as set

forth above were adopted, effective immediately.

Thereupon, upon motions duly made and

seconded, and by unanimous votes, the follow

ing officers of the Federal Open Market Com

mittee were elected to serve until the election

meeting of the

of their successors at the first

Committee after February 28, 1953, with the un

derstanding that in the event of the discontinuance

of their official connection with the Board of

Governors or a Federal Reserve Bank, as the case

might be, they would cease to have any official

connection with the Federal Open Market Committees

Wm. McC. Martin, Jr.

Allan Sproul

Winfield W. Riefler

Elliott Thurston

George B. Vest

Woodlief Thomas

George W. Mitchell, Earle L. Rauber,

Oliver P. Wheeler, Charles W.

Williams, John H. Williams, and

Ralph A. Young

Chairman

Vice Chairman

Secretary

Assistant Secretary

General Counsel

Economist

Associate Economists

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Upon motion duly made and seconded, and

by unanimous vote, the Federal Reserve Bank

of New York was selected to execute trans

actions for the System open market account

until the adjournment of the first

meeting

of the Committee after February 28, 1953.

Mr. Sproul stated that the Board of Directors of the Federal

Reserve Bank of New York had selected Mr. Rouse as Manager of the System

Open Market Account, subject to the selection of the Federal Reserve Bank

of New York by the Federal Open Market Committee as the Bank to execute

transactions for the System account and his approval by the Federal Open

Market Committee.

Upon motion duly made and seconded, and

by unanimous vote, the selection of Mr. Rouse

as Manager of the System Open Market Account

was approved.

Upon motion duly made and seconded, and

by unanimous vote, the following were selected

to serve with the Chairman of the Federal Open

Market Committee (who under the provisions of

the by-laws is also Chairman of the executive

committee) as members and alternate members of

the executive committee until the selection of

meeting of the

their successors at the first

Federal Open Market Committee after February 28,

1953:

Members

James K. Vardaman, Jr.

Oliver S. Powell

Alternate Members

Abbot L. Mills, Jr.

J. L. Robertson

R. M. Evans

M. S. Szymczak

(To serve in the order

named as alternates for

Messrs. Martin, Vardaman,

and Powell)

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Members

Allan Sproul

Hugh Leach

Alternate

Member

C. S. Young

Malcolm Bryan

C. E. Earhart

(To serve in the order

named as alternates for

Messrs. Sproul and Leach)

Reference was made to the resolution adopted by the Federal

Open Market Committee on November 20, 1936, authorizing each Federal Re

serve Bank to purchase and sell at home and abroad cable transfers and

bills of exchange and bankers' acceptances payable in foreign currencies

to the extent that such purchases and sales may be deemed to be necessary

or feasible in connection with the establishment, maintenance, operation,

increase, reduction, or discontinuance of accounts of Federal Reserve Banks

in foreign countries.

Mr. Sproul stated that, as had been the case for the

past several years accounts were now maintained with the Bank of Canada

($17,384), the Bank of England ($10,4

6 8 ),

and the Bank of France ($42.79),

and that while its use would be only infrequent if at all he would recom

mend that the authority be continued in its present form.

Upon motion duly made and seconded, and

by unanimous vote, it was agreed that no

action should be taken at this time to amend

or terminate the resolution of November 20,

1936.

There was a discussion of the action of the Committee on November

30, 1937, as renewed from time to time since then, under which it was

agreed that inasmuch as securities acquired by the Federal Reserve Bank.

in settlement of claims against closed banks would be in such small amounts

as to be unimportant from the standpoint of credit control, the Federal

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Open Market Committee would interpose no objection to a Federal Reserve

Bank holding such securities or to their sale whenever such sale was deemed

advisable by the holding bank.

In the discussion, it

was stated that the

authority had not been used for some years and that it

that need for it

would arise in the near future.

did not seem likely

It was suggested, therefore,

that the authority be terminated with the understanding that if

arose which made it

appear that it

circumstances

would be useful the Committee would con

sider the matter at that time,

Upon motion duly made and seconded, and

by unanimous vote, it was agreed that the

authority granted at the meeting of November

30, 1937, should be terminated, effective im

mediately.

Mr. Sproul referred to the amended authority granted to the

Federal Reserve Banks by the Federal Open Market Committee on October 4,

1951, with respect to repurchase agreements covering short-term Treas

ury obligations with nonbank dealers in United States Government securi

ties qualified to transact business with the System open market account.

In response to a question from Chairman Martin, Mr. Rouse stated that the

authority was useful as a supplementary market instrument and that he

would recommend it

be renewed on the same basis as the existing authority.

Upon motion duly made and seconded, and

by unanimous vote, it was agreed that no action

should be taken at this time to amend the authority

granted at the meeting on October 4, 1951.

In a discussion of the procedure for the allocation of securi

ties in the System open market account as approved at the meeting of the

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Committee on March 8, 1951,

it

was stated that the existing procedure was

working satisfactorily, that there had been no suggestions for change, and

that in the absence of objections it

should be continued without amendment

at this time.

Thereupon, upon motion duly made and

seconded, and by unanimous vote, it was

agreed that no change should be made at

this time in the method of allocating

securities as approved at the meeting of

the Federal Open Market Committee on

March 8, 1951.

Chairman Martin then referred to the published terms on which

the Federal Reserve Bank of New York transacts business with qualified

dealers in United States Goverment securities for the System open market

account,

stating that he had no suggestions for a change in the terms at this

time.

Upon motion duly made and seconded, and

by unanimous vote, it was agreed that no

change in the statement of terms should be

made at this time.

In a discussion of who should receive copies of the weekly

report of open market operations prepared by the Federal Reserve Bank

of New York, Mr. Rouse suggested that in addition to changes made

necessary by changes in the official status of individuals associated

with the Committee,

the list

be changed to provide that a copy also be

sent to Assistant Secretary of the Treasury Overby who would be working

with the Committee on debt management and monetary and credit matters.

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Upon motion duly made and seconded, and

by unanimnus vote, the distribution of the

weekly report of open market operations prepared

by the Federal Reserve Bank of New York was ap

proved as follows:

1.

2.

The members of the Board of Governors.

The Presidents of the 12 Federal Reserve

Banks.

3. The Secretary, the Economist, and the

Associate Economists of the Federal

Open Market Committee.

4. The Secretary of the Treasury.

5.

The Under Secretary of the Treasury.

6. The Assistant Secretary of the Treasury

working on debt management problems.

7.

The Fiscal Assistant Secretary of the

Treasury.

8.

The Chief of the Division of Bank Opera

tions of the Board of Governors.

9. The officer in charge of research at each

of the Federal Reserve Banks which is not

represented by its President on the Federal

Open Market Committee.

10. Mr. Treiber, alternate member of the Federal

Open Market Committee; the Assistant Vice

President of the Federal Reserve Bank of

New York working under the Manager of the

System Account; the Manager of the Securities

Department of the New York Bank; the Vice

President in Charge, and the Manager of the

Research Department of the New York Bank;

and the confidential files of the New York

Bank as agent for the Federal Open Market

Committee.

Mr.

Carpenter referred to the action taken at the meeting

of the Federal Open Market Committee on March 1-2, 1951, authorizing

the Chairman of the Committee to appoint a Federal Reserve Bank as

agent to operate the System account temporarily in case the Federal Re

serve Bank of New York was unable to function.

He stated that the

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authorization was given for possible use in the event of a bombing

disaster and that it

would appear desirable to continue it.

Upon motion duly made and seconded, and

by unanimous vote, it was agreed that there

should be no change in the authorization given

to the Chairman by the action taken at the

meeting of the Committee on March 1-2, 1951.

Chairman Martin referred to the action at the meeting of the

Federal Open Market Committee yesterday, in which it

was agreed that the

Secretary of the Treasury should be advised that the Federal Open Market

Committee, after considering the memorandum on Government Financing in

1952, agreed that the use of a marketable security would be preferable to

a nonmarketable issue in

this year.

long-term Treasury financing operations later

At that meeting it was also agreed unanimously that (1) the

question of recommendations to be made to the Treasury concerning the ob

taining of new money later this spring and other matters relating to Treas

ury financing be left to the executive committee and (2) that no change

should be made in the Committee's current policy of neutrality in the

market under which market forces of supply and demand are permitted

to have their effect with a minimum of System intervention except to

the extent necessary to promote orderly market conditions.

Upon motion duly made and seconded, and

by unanimous vote, these actions of the Com

mittee were reaffirmed and approved.

With respect to the general direction to be issued to the ex

ecutive committee,

Mr. Rouse stated that, in view of the prospect that

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the Treasury might wish to sell short-term securities direct to the Fed

eral Reserve Banks in

an amount approximating $1.25 billion in order to

smooth the effect of tax collections on the reserve position of banks over

the March tax payment period, he would recommend that the limitation con

tained in the second paragraph of the direction relating to purchases

direct from the Treasury of special short-term securities for the tempo

rary accommodation of the Treasury be increased from the present figure

of $1 billion to $2 billion.

Thereupon, upon motion duly made and

seconded, the following direction to the

executive committee was approved unani

mously with the understanding that the

limitation contained in the direction

would include commitments for the System

open market account:

The executive committee is directed, until otherwise di

rected by the Federal Open Market Committee, to arrange for such

transactions for the System open market account, either in the

open market or directly with the Treasury (including purchases,

sales, exchanges, replacement of maturing securities, and letting

maturities run off without replacement), as may be necessary, in

the light of current and prospective economic conditions and the

general credit situation of the country, with a view to exer

cising restraint upon inflationary developments, to maintaining

orderly conditions in the Government security market, to relating

the supply of funds in the market to the needs of commerce and

business, and to the practical administration of the account;

provided that the aggregate amount of securities held in the

account at the close of this date other than special short-term

certificates of indebtedness purchased from time to time for the

temporary accommodation of the Treasury shall not be increased

or decreased by more than $2,000,000,000.

The executive committee is further directed, until other

wise directed by the Federal Open Market Committee, to arrange

for the purchase for the System open market account direct

from the Treasury of such amounts of special short-term certifi

cates of indebtedness as may be necessary from time to time for

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the temporary accomodation of the Treasury; provided that the

total amount of such certificates held in the account at any one

time shall not exceed $2,000,000,000.

In a discussion of a date for the next meeting of the Committee,

it was tentatively agreed that it should be held during the week of June

16, 1952, at which time it was expected that there would also be a meeting

of the Presidents'

Conference and of the Board of Trustees of the Retire

ment System of the Federal Reserve Banks.

Thereupon the meeting adjourned.

Secretary.