FOMC Minutes

A meeting of the Federal Open Market Committee was held on

Tuesday, November 26, 1963, at 11:30 a.m., EST.

This was a telephone

conference meeting and each individual was in Washington except as

otherwise indicated in parentheses in the

ollowing list of those

participating:

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

Hayes, Vice Chairman

Balderston

Bopp

Clay

Irons

Mills

(New York)

'(Philadelphia)

(Kansas City)

(Dallas)

Mitchell

Robertson

Scanlon

Shepardson

(Chicago)

(College Station, Texas)

Messrs. Hickman (Cleveland), Wayne (Richmond),

Shuford (St. Louis), and Swan (San Francisco),

Alternate Members of the Federal Open Market

Committee

Messrs. Ellis (Boston), and Deming (Minneapolis),

Presidents of the Federal Reserve Banks of

Boston and Minneapolis, respectively

Mr. Young, Secretary

Mr. Sherman, Assistant Secretary

Mr. Kenyon, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Noyes, Economist

Messrs. Brill, Furth, Holland, and Koch,

Associate Economists

Mr. Stone, Manager, System Open Market Account

(New York)

Mr. Coombs, Special Manager, System Open Market

Account (New York)

Mr. Molony, Assistant to the Board of Governors

Mr. Cardon, Legislative Counsel, Board of Governors

Mr. Broida, Assistant Secretary, Board of Governors

11/26/63

Mr. Williams, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Yager, Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Mr. Patterson, First Vice President, Federal

Reserve Bank of Atlanta

This meeting was held on the first business day of the Board

of Governors and several of the Federal Reserve Banks following the

death of President Kennedy on November 22, 1963.

At the request of the Chairman, Mr. Stone made a statement in

which he reported that the Government securities market had opened on

a firm and confident tone this morning.

There was some buying through-

out the maturity scale but little, if any, selling by investors.

were no signs of selling pressure--panicky or otherwise.

There

Prices on

Treasury coupon issues maturing in 1966 and later had risen slightly,

and those on shorter maturity coupon issues were about unchanged.

Treasury bill rates were unchanged to one basis point lower, with the

rate declines centered in the issues maturing in late February and in

March.

The market was giving an excellent account of itself.

Corporate stock prices were making a good recovery, Mr. Stone

continued, from the depressed levels they had reached on Friday afternoon after news of the attack on the President had been received.

At

11:00 a.m. the Dow-Jones average was up 10.47 points on a heavy volume

of trading.

(Subsequently, Mr. Stone reported a gain of 14.64 points

in the Dow-Jones average by 11:30 a.m.)

11/26/63

-3Mr.

in

Stone commented that market ideas concerning the bidding

the Treasury bill

auction scheduled

for

later

in

the day ranged

around rates of 3.50-3.52 per cent on the three-month bill and 3.64These bidding ideas were close

3.66 per cent on the six-month bill.

to the rates on outstanding bills of comparable maturities.

The current outlook for member bank reserves was still

of clarification, Mr. Stone said.

The latest estimates

in

need

for the

statement week ending November 27 indicated net borrowed reserves of

$5 million,

but

it was not clear how firm this figure was.

market had opened with a comfortable tone.

The money

In view of the indicated

need for reserves and the uncertainty prevailing in the money market,

the Desk was buying Treasury bills for delivery on the same day to

insure that there would be enough reserves in the banking system to

prevent

the money market from becoming unduly tight and generally to

maintain the steady atmosphere that had prevailed recently.

recalled that

and ha

the Desk had planned to buy

Mr. Stone

bills on the preceding Friday

been engaged in a market "go-around" when the news of the

attack on the President was received.

The Desk was now indicating to

the market that it was picking up where it had left off on Friday, to

avoid conveying a feeling of concern about market developments or any

ideas regarding rate levels.

Friday's estimates had pointed to net

borrowed reserves of $333 million for the statement week ahead.

If

the market situation should turn adverse, Mr. Stone said, it would be

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11/26/63

necessary only to step into the market a day early to supply reserves

that in any case would be needed for the following week.

(Later in

the meeting Mr. Stone noted that new reserve estimates still indicated

net borrowed reserves of $5 million for the current statement week,

but that the estimate for the next statement week now stood at net

borrowed reserves of $446 million.

He reported that the Desk had just

bought about $220 million Treasury bills in the market and would take

additional bills being sold by foreign accounts into the System's portfolio.)

Mr. Stone concluded by saying that in view of the market's

good performance he did not feel that any special instructions from

the Committee were needed to deal with the present situation.

In his

judgment there was ample room within the Committee's existing instructions and leeway to deal with any turn in the market that seemed likely.

Mr. Coombs supplemented his telegraphic report of the preceding

day, a copy of which has been placed is the files of the Committee, by

noting that the foreign exchange markets had remained quiet and orderly

this morning.

Exchange rates were being held by the foreign central

banks, where necessary, at the same levels as those that had prevailed

on Friday and Monday, and the Federal Reserve Bank of New York planned

to do the same in the New York market after the European markets

closed.

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11/26/63

In the case of the Swiss franc, Mr. Coombs continued, the

dollar had moved off the floor to a level of 4.3160 while the dollar

rate on the guilder had also moved above the temporary support point

of 3.5990 introduced by the Netherlands Bank on Monday.

The mark

continued in demand, however, with the Bundesbank taking in $4 million

on Monday and $28 million today.

The New York Bank planned to absorb

one-half of the latter amount through a swap drawing.

Mr. Coombs observed that the London gold market was quiet

this morning, with small volume and a fixing price identical with

that of Monday.

Prices subsequently moved down to $35.08-.09.

Far

from losing gold, the London gold pool had gained $44 million since

Friday, primarily owing to Russian sales.

He had no recommendations

to make to the Committee.

Chairman Martin commented that in his judgment the Account

Management had handled things well during this period with respect

to both foreign exchange and domestic transactions.

the purpose of this meeting as purely precautionary.

He described

Observing

that it seemed desirable for the Committee to consider whether any

change was appropriate in its current economic policy directiveto

reflect the death of the President, the Chairman read a draft paragraph that had been suggested as a possible replacement for the

second paragraph of the directive adopted et the preceding meeting of

the Committee (November 12, 1963) and asked for comments.

11/26/63

The Committee members favored revising the directive along

the general lines of the proposal, and the discussion was concerned

primarily with specific phrasing.

Thereupon, upon motion duly made

and seconded, the Federal Reserve Bank

of New York was authorized and directed,

until otherwise directed by the Committee,

to execute transactions in the System

Account in accordance with the following

current economic policy directive:

It is the Federal Open Market Committee's current policy

to accommodate moderate growth in bank credit, while maintaining conditions in the money market that would contribute to

continued improvement in the capital account of the U. S.

balance of payments. This policy takes into consideration

the fact that domestic economic activity is expanding further,

although with a margin of underutilized resources; and the

fact that the balance of payments position is still adverse

despite a tendency to reduced deficits.

It also recognizes

supply,

and the reserve

in

bank

credit,

money

the increases

base of recent months.

To implement this policy, System open market operations

shall be conducted with a view to cushioning any unsettlement

that might arise in money markets stemming from the death of

President Kennedy and to maintaining about the same conditions

in the money market as have prevailed in recent weeks, while

accommodating moderate expansion in aggregate bank reserves.

Votes for this action: Messrs. Martin

Hayes, Balderston, Bopp, Clay, Irons, Mitchell,

Robertson, Scanlon, and Shepardson. Vote

against this action: Mr. Mills.

Mr. Mills dissented for the same reasons he had dissented from

the directive adopted at the meeting of November 12, 1963; he thought

the Committee should modify its policy to one of greater ease.

11/26/63

-7Mr. Robertson, while voting favorably on the directive, indi-

cated that he would have preferred to continue the previous directive

and to issue a supplementary instruction to the Federal Reserve Bank

of New York to cushion any unsettlement in financial markets that

might stem from the President's death.

Thereupon the meeting adjourned.

Secretary