FOMC Minutes

Meeting of Federal Open Market Committee

March 14, 1968

MINUTES OF ACTIONS

A meeting of the Federal Open Market Committee was held on

Thursday, March 14, 1968, at 5:30 p.m.,

Martin.

at the call of Chairman

This was a telephone conference meeting, and each individual

was in Washington except as otherwise indicated in parentheses in the

following list of those participating.

PARTICIPATING:

Mr. Martin, Chairman

Mr. Brimmer

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Daane

Ellis

Hickman

Maisel

Mitchell

Robertson

Sherrill

Clay, Alternate for

Mr. Galusha

Mr. Coldwell, Alternate for

Mr. Kimbrel

Mr. Treiber, Alternate for

Mr. Hayes

(Boston)

(Cleveland)

(Kansas City)

(Dallas)

(New York)

Mr. Holland, Secretary

Mr. Sherman, Assistant Secretary

Mr. Kenyon, Assistant Secretary

Mr. Broida, Assistant Secretary

Mr. Molony, Assistant Secretary

Mr. Hackley, General Counsel

Mr. Hexter, Assistant General Counsel

Mr. Brill, Economist

Messrs. Axilrod, Hersey, Partee, Reynolds,

and Solomon, Associate Economists

Mr. Holmes, Manager, System Open

Market Account

(New York)

Mr. Coombs, Special Manager,

System Open Market Account

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Mr. Cardon, Assistant to the Board

Mr. Sammons, Associate Director,

Division of International Finance,

Board of Governors

Mr. Kiley, Associate Director, Division

of Bank Operations, Board of Governors

Mr. Ring, Assistant Director, Division of

Bank Operations, Board of Governors

Mr. Gramley, Adviser, Division of Research

and Statistics, Board of Governors

Mr. Bernard, Special Assistant, Office of

the Secretary, Board of Governors

Mrs. Semia, Technical Assistant, Office of

the Secretary, Board of Governors

Miss McWhirter, Analyst, Office of the

Secretary, Board of Governors

Messrs. Bilby and MacLaury, Vice Presidents

of the Federal Reserve Bank of New York

(New York)

Mr. Geng, Assistant Vice President of the

Federal Reserve Bank of New York

(New York)

With Messrs. Maisel, Mitchell, and Robertson dissenting, the

Committee authorized the Special Manager to undertake negotiations

looking toward increases in a number of the System swap lines, on the

understanding that any such increases and corresponding amendments

to paragraph 2 of the authorization for System foreign currency opera

tions would become effective upon a determination by Chairman Martin

that they were in the national interest.

Negotiations were authorized

for increases in the swap lines with the following foreign banks to

new levels not exceeding the amounts indicated (millions of dollars

equivalent):

National Bank of Belgium

Bank of Canada

Bank of Italy

400

1,000

1,000

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Bank of Japan

Netherlands Bank

Bank of Sweden

Swiss National Bank

Bank for International Settlements:

System drawings in Swiss francs

System drawings in other authorized

European currencies

1,000

400

300

600

600

1,000

It was agreed that the Committee would take a more liberal

view for the time being of the time period appropriate to swap drawings.

Secretary's note:

On March 17,

Chairman Martin determined that nego

tiations had been satisfactorily

completed with respect to increases,

to the levels indicated above, in the

swap lines with (1) the Bank of Canada,

(2) the Bank of Japan, (3) the Netherlands

Bank, (4) the Swiss National Bank, and

(5) the Bank for International Settlements.

On March 17 Chairman Martin made the same

determination with respect to an increase

in the swap line with the Bank of Sweden

to $250 million equivalent.

Also, members of the Committee

authorized the Special Manager to under

take negotiations looking toward increases

in the reciprocal currency arrangements

with (1) the German Federal Bank, from

$750 to $1,000 million equivalent, on

March 16, 1968; and (2) with the Bank

of England, from $1,500 to $2,000 million

equivalent, on March 17, 1968. It was

understood that such increases and the

corresponding amendments to paragraph 2

of the authorization for System foreign

currency operations would become effective

upon a determination by Chairman Martin

that they were in the national interest.

Chairman Martin so determined on March 17,

1968. Messrs. Robertson and Maisel, in

voting to approve the negotiation of a

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swap line increase with the German

Federal Bank, noted that they continued

to hold the general reservations con

cerning swap line increases at this

juncture that they had expressed at

the telephone conference meeting of

the Committee held on March 14, but

that since the majority of the Committee

had approved such increases they felt

it was appropriate that Germany also

be included.

As a result of these actions, the table contained in

paragraph 2 of the authorization for System foreign currency

operations was amended, effective March 17, 1968, to read as

follows:

Amount of

Foreign bank

Austrian National Bank

National Bank of Belgium

Bank of Canada

National Bank of Denmark

Bank of England

Bank of France

German Federal Bank

Bank of Italy

Bank of Japan

Bank of Mexico

Netherlands Bank

Bank of Norway

Bank of Sweden

Swiss National Bank

Bank for International Settlements:

System drawings in Swiss francs

System drawings in authorized European

currencies other than Swiss francs

arrangement

(millions of

dollars equivalent)

100

225

1,000

100

2,000

100

1,000

750

1,000

130

400

100

250

600

600

1,000

By unanimous vote, the Federal Reserve Bank of New York was

authorized and directed, until otherwise directed by the Committee, to

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execute transactions in the System Account in accordance with the

following current economic policy directive:

In light of recent international financial develop

ments, System open market operations until the next

meeting of the Committee shall be conducted with a

view to maintaining firm but orderly conditions in the

money market, taking into account the effects of in

creases in Federal Reserve discount rates.

By unanimous vote, procedures with respect to allocation of

securities in the System Open Market Account were revised to read

as follows:

1. The Board's Division of Bank Operations shall

assemble, in the morning of each business day, data on

the Federal Reserve note liability of each Bank and

total gold reserves of each Bank for the preceding day.

2. The Division of Bank Operations shall deter

mine from these data the amount of adjustment needed

in each Bank's gold reserves to equalize, to five

places to the right of the decimal with the last

digit rounded, the reserve ratios of the 12 Federal

Reserve Banks at the close of business on the preceding

day. The amount of adjustment, rounded to the nearest

dollar, will be furnished to the Federal Reserve Bank

of New York.

3. The Federal Reserve Bank of New York shall

then reallocate the securities in the System Open

Market Account as of the preceding day in such a

way as to provide each Bank with a net settlement

as close as possible to the amount of adjustment in

paragraph 2.

4. The Board's staff and each Federal Reserve

Bank shall then be notified of the amounts involved

and the Interdistrict Settlement Fund may be closed

after giving effect to the adjustments.

5. Profits and losses on the sale of securities

from the Account shall be allocated on the day of

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delivery of the securities sold on the basis of each

Bank's current holdings at the opening of business on

that day.

It was agreed that the next meeting of the Committee would

be held on Tuesday, April 2, 1968, at 9:30 a.m.

The meeting adjourned.

Secretary