FOMC Minutes

Meeting of Federal Open Market Committee

October 24, 1967

MINUTES OF ACTIONS

A meeting of the Federal Open Market Committee was held in

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

in Washington, D.

PRESENT:

C., on Tuesday, October 24, 1967, at 9:30 a.m.

Martin, Chairman

Brimmer

Francis

Maisel

Mitchell

Mr. Robertson

Mr. Scanlon

Mr. Sherrill

Mr. Swan

Mr. Wayne

Mr. Treiber, Alternate for Mr. Hayes

Mr.

Mr.

Mr.

Mr.

Mr.

Messrs. Ellis, Hickman, Patterson, and Galusha,

Alternate Members of the Federal Open Market

Committee

Messrs. Bopp, Clay, and Irons, Presidents of

the Federal Reserve Banks of Philadelphia,

Kansas City, and Dallas, respectively

Mr. Holland, Secretary

Mr. Sherman, Assistant Secretary

Mr. Kenyon, Assistant Secretary

Mr. Broida, Assistant Secretary

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Brill, Economist

Messrs. Baughman, Craven, Garvy, Hersey, Jones,

Koch, Partee, Parthemos, and Solomon,

Associate Economists

Mr. Holmes, Manager, System Open Market Account

Mr. Coombs, Special Manager, System Open Market

Account

10/24/67

Mr. Cardon, Legislative Counsel, Board of

Governors

Mr. Fauver, Assistant to the Board of Governors

Mr. Williams, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Reynolds, Adviser, Division of International

Finance, Board of Governors

Messrs. Axilrod and Gramley, Associate Advisers,

Division of Research and Statistics, Board

of Governors

Mr. Wernick, Assistant Adviser, Division of

Research and Statistics, Board of Governors

Miss Eaton, General Assistant, Office of the

Secretary, Board of Governors

Miss McWhirter, Analyst, Office of the Secretary

Board of Governors

Messrs. Eisenmenger, Eastburn, Mann, Brandt,

Tow, and Green, Vice Presidents of the

Federal Reserve Banks of Boston,

Philadelphia, Cleveland, Atlanta, Kansas City,

and Dallas, respectively

Mr. Meek, Assistant Vice President, Federal Reserve

Bank of New York

Mr. Kareken, Consultant, Federal Reserve Bank

of Minneapolis

By unanimous vote, the minutes of actions taken at the meeting

of the Federal Open Market Committee held on October 3, 1967, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on October 3, 1967, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period October 3 through 23,

were approved, ratified, and confirmed.

1967,

10/24/67

By unanimous vote, renewal of the $100 million standby swap

arrangement with the Bank of France from November 11 to December 29,

1967, was approved.

By unanimous vote, the open market transactions in Government

securities, agency obligations, and bankers' acceptances during the

period October 3 through 23, 1967, were approved, ratified, and

confirmed.

With Mr. Francis dissenting, 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:

The economic and financial developments reviewed

at this meeting indicate that, apart from the effects

of strikes in the automobile and other industries,

underlying economic conditions continue strong and

prospects favor more rapid growth in the months ahead.

Upward pressures on costs persist, average prices of

industrial commodities have risen further, and the

rate of increase in consumer prices remains high.

While there recently have been large inflows of liquid

funds from abroad through foreign branches of U.S.

banks, the balance of payments continues to reflect a

substantial underlying deficit. Bank credit expansion

has continued large. The volume of new security issues

is expanding again and interest rates have risen further,

reflecting in part increased uncertainties in financial

markets concerning enactment of the President's fiscal

program. In this situation, it is the policy of the

Federal Open Market Committee to foster financial con

ditions, including bank credit growth, conducive to

sustainable economic expansion, recognizing the need

for reasonable price stability for both domestic and

balance of payments purposes.

10/24/67

To implement this policy, while taking account of

forthcoming Treasury financing activity, System open

market operations until the next meeting of the Committee

shall be conducted with a view to maintaining about the

prevailing conditions in the money market; but operations

shall be modified, to the extent permitted by Treasury

financing, to moderate any apparent tendency for bank

credit to expand significantly more than currently

expected.

It was agreed that the next meeting of the Federal Open

Market Committee would be held on Tuesday, November 14, 1967, at

9:30 a.m.

By unanimous vote, the recommendation of the Steering Com

mittee for the U.S. Government Securities Market Study, that daily

reports of individual Government securities dealers regarding their

positions, trading, and borrowings be made available to senior

personnel at the Trading Desk of the Federal Reserve Bank of New York,

was approved.

Secretary's note:

On November 3, 1967

the following letter was sent to Govern

ment securities dealers over the signatures

of Secretary Fowler and Chairman Martin:

In January 1960 the then Secretary of the Treasury and

the Chairman of the Board of Governors of the Federal Reserve

System wrote the Government securities dealers requesting

their cooperation in an information program covering the

Government securities market. The program provided for the

collection, by the Federal Reserve Bank of New York, of

dealer figures on positions, volume and borrowings with

appropriate safeguards to assure the confidentiality of

individual dealer information.

In this connection Mr. Alfred Hayes, President of the

Federal Reserve Bank of New York, wrote the dealers on

10/24/67

May 17, 1960 to the effect that the dealer data would

be collected and retained in the Market Statistics

Department of that bank and that data on individual

firms would be released outside the Department only

under certain conditions which included the following:

1.

Summary figures requested by the Manager

of the System Open Market Account for

individual dealers seeking repurchase

accommodation;

2.

individual dealer reports requested by

the Manager of the Open Market Account

in market situations determined to be

disorderly; and

3.

other circumstances of an exceptional

nature.

Under these arrangements the Manager of the System

Open Market Account and his assistants have had access

to the individual dealer data only on a few unusual

occasions, whereas prior to 1960 dealers had reported

directly each day to the Desk. With the passage of time

it has become apparent that the quality of information

available to the Trading Desk for interpreting the state

of the market has deteriorated considerably because of

the lack of access to these figures. Given the Trading

Desk's responsibilities as the eyes and ears of the

Treasury and the Federal Reserve in the market, the

importance of full information should be obvious to all

market participants. The current joint Treasury-Federal

Reserve study of the Government securities market con

firms the Manager's need for more detailed information

on dealer market activities.

Accordingly, the Federal Open Market Committee and

the Treasury have approved the release of the daily

reports of the individual dealers on positions, volume

and borrowings to the Manager of the System Open Market

Account, and to a restricted list of officers and senior

staff of the Federal Reserve Bank of New York directly

responsible to the Manager. We understand that Mr. Alan

Holmes has discussed the proposed policy change with all

dealer firms, and that while some dealers have reservations

about the change in procedure, none of these is of a nature

that would cause any firm to object to the change.

10/24/67

We stress again that the purpose of the change is

to provide more accurate information about the state of

the market. No change in the data to be submitted by

your firm to the Federal Reserve Bank of New York is

involved nor is there any change in the procedures

currently in effect with respect to the supply and

publication of data. These data will not be used in

connection with particular transactions to be carried

out in the market with individual dealer firms, apart

from exceptional market circumstances of the sort where

the existing rules already provide for the release of

individual dealer figures outside the Market Statistics

Department. The Treasury and the Federal Reserve stand

ready to discuss any aspect of the statistical program

with any dealer firm at any time.

The meeting adjourned.

Secretary