FOMC Minutes

Meeting of Federal Open Market Committee

September 9, 1969

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. C., on Tuesday, September 9, 1969, at

9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Martin, Chairman

Hayes, Vice Chairman

Bopp

Brimmer

Clay

Coldwell

Maisel

Mr. Mitchell

Mr. Scanlon

Mr. Sherrill

Messrs. Francis, Heflin, Hickman, and Swan,

Alternate Members of the Federal Open

Market Committee

Messrs. Morris, Kimbrel, and Galusha,

Presidents of the Federal Reserve

Banks of Boston, Atlanta, and

Minneapolis, respectively

Mr. Holland, Secretary

Mr. Broida, Deputy Secretary

Messrs. Kenyon and Molony, Assistant

Secretaries

Mr. Hexter, Assistant General Counsel

Messrs. Axilrod, Baughman, Eastburn, Gramley,

Green, Hersey, Link, Reynolds, Solomon,

and Tow, Associate Economists

Mr. Holmes, Manager, System Open Market

Account

Mr. Coombs, Special Manager, System Open

Market Account

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Mr. Cardon, Assistant to the Board of

Governors

Messrs. Coyne and Nichols, Special Assistants

to the Board of Governors

Mr. Williams, Adviser, Division of Research

and Statistics, Board of Governors

Messrs. Keir and Wernick, Associate Advisers,

Division of Research and Statistics,

Board of Governors

Mr. Bernard, Special Assistant, Office of the

Secretary, Board of Governors

Mr. Wendel, Chief, Government Finance Section,

Division of Research and Statistics,

Board of Governors

Miss Eaton, Open Market Secretariat Assistant,

Office of the Secretary, Board of Governors

Messrs. Eisenmenger, Taylor, and Craven, Senior

Vice Presidents of the Federal Reserve

Banks of Boston, Atlanta, and San Francisco,

respectively

Messrs. Hocter and Monhollon, Vice Presidents

of the Federal Reserve Banks of Cleveland

and Richmond, respectively

Mr. Kareken, Economic Adviser, Federal Reserve

Bank of Minneapolis

Messrs. Meek and Bowsher, Assistant Vice

Presidents of the Federal Reserve Banks

of New York and St. Louis, respectively

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

of the Federal Open Market Committee held on August 12, 1969, were

approved.

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on August 12, 1969, was accepted.

By unanimous vote, the action of Committee members on

August 27, 1969, to increase the swap line with National Bank of

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Belgium to $500 million, with a conforming amendment to

paragraph 2 of the authorization for System foreign currency

operations, effective September 2, 1969, was ratified.1/

By unanimous vote, the System open market transactions

in foreign currencies during the period August 12 through

September 8, 1969, were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in

Government securities, agency obligations, and bankers'

acceptances during the period August 12 through September 8,

1969, were approved, ratified, and confirmed.

By unanimous vote, the dollar limit specified in

paragraph 2 of the continuing authority directive, on Federal

Reserve Bank holdings of short-term certificates of indebted

ness purchased directly from the Treasury, was increased from

$1 billion to $2 billion, with the understanding that the limit

would revert to $1 billion at the close of business on October 7,

1969, unless otherwise decided by the Committee on or before that

date.

As amended, paragraph 2 read as follows:

The Federal Open Market Committee authorizes and

directs the Federal Reserve Bank of New York to purchase

directly from the Treasury for the account of the

Federal Reserve Bank of New York (with discretion, in

1/ Committee members had initially voted on August 15, 1969 to

authorize an increase in the Belgian swap line from $300 million to

$500 million, effective August 18. This increase was not executed.

Subsequently, the members took the action noted above.

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cases where it seems desirable, to issue participations

to one or more Federal Reserve Banks) such amounts of

special short-term certificates of indebtedness as may

be necessary from time to time for the temporary

accommodation of the Treasury; provided that the rate

charged on such certificates shall be a rate 1/4 of 1

per cent below the discount rate of the Federal Reserve

Bank of New York at the time of such purchases, and

provided further that the total amount of such certifi

cates held at any one time by the Federal Reserve Banks

shall not exceed $2 billion.

With Messrs. Maisel and Mitchell 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 information reviewed at this meeting indicates

that expansion in real economic activity slowed somewhat

in the first half of 1969 and some further moderation

during the second half is projected. Substantial upward

pressures on prices and costs are persisting. Long-term

interest rates recently have risen to new peaks, while

In

short-term rates have changed little on balance.

August the money supply decreased while U.S. Government

deposits rose somewhat; bank credit declined further on

average; the run-off of large-denomination CD's continued

without abatement; and there were further net outflows

from consumer-type time and savings accounts at banks.

The U.S. foreign trade surplus was very small in July.

The over-all balance of payments deficit on the liquidity

basis remained very large in both July and August, while

the balance on the official settlements basis shifted

into deficit in August as U.S. banks' borrowings of

Euro-dollars leveled off. In light of the foregoing

developments, it is the policy of the Federal Open Market

Committee to foster financial conditions conducive to the

reduction of inflationary pressures, with a view to

encouraging sustainable economic growth and attaining

reasonable equilibrium in the country's balance of

payments.

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To implement this policy, while taking account of

the forthcoming Treasury refunding, System open market

operations until the next meeting of the Committee

shall be conducted with a view to maintaining the

prevailing firm conditions in money and short-term

credit markets; provided, however, that operations

shall be modified, to the extent permitted by the

Treasury refunding, if bank credit appears to be

deviating significantly from current projections or

if pressures arise in connection with foreign exchange

developments or with bank regulatory changes.

It was agreed that the next meeting of the Committee would

be held on Tuesday, October 7, 1969, at 9:30 a.m.

The meeting adjourned.

Secretary