FOMC Minutes

Meeting of Federal Open Market Committee

February 19,

1975

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 Wednesday, February 19, 1975,

at 9:30 a.m.

PRESENT:

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Mr.

Burns, Chairman

Hayes, Vice Chairman

Black

Bucher

Clay

Coldwell

Holland 1/

Kimbrel

Mitchel

Sheehan 2/

Wallich

Winn

Messrs. Baughman, MacLaury, Mayo, and Morris,

Alternate Members of the Federal Open

Market Committee

Messrs. Balles, Eastburn, and Francis,

Presidents of the Federal Reserve

Banks of San Francisco, Philadelphia,

and St. Louis, respectively

Broida,

Secretary

Altmann,1/ Deputy Secretary

Bernard,1/ Assistant Secretary

O'Connell, General Counsel

Entered meeting at point indicated.

Left meeting at point indicated.

2/19/75

Guy,1/ Deputy

General

Counsel

Partee, Senior Economist

Axilrod,1/ Economist (Domestic Finance)

Solomon,1/ Economist (International

Finance)

Messrs. Brandt,1/ Bryant 1 / Davis,1/ Doll 1/

Hocter,1/ Parthemos,1/ and Reynolds,1/

Associate Economists

Mr.

Mr.

Mr.

Mr.

Mr. Holmes,1/ Manager, System Open Market

Account

Mr. Pardee,1/ Deputy Manager for Foreign

Operations

Mr. Coyne, Assistant to the Board of

Governors

Mr. Keir,1/ Adviser, Division of Research and

Statistics, Board of Governors

Mrs. Farar,1/ Economist, Division of Research

and Statistics, Board of Governors

Mrs. Ferrell,1/ Open Market Secretariat

Assistant, Board of Governors

Messrs. Eisenmenger,1/ Boehne,1 / Scheld,1/ and

Jordan,1/ Senior Vice Presidents, Federal

Reserve Banks of Boston, Philadelphia,

Chicago, and St. Louis, respectively

Mr. Green,1/ Vice President, Federal Reserve

Bank of Dallas

Mr. Duprey,1/ Senior Economist, Federal Reserve

Bank of Minneapolis

Mr. Keran,1/ Director of Research, Federal

Reserve Bank of San Francisco

Mr. Ozog,1/ Manager, Acceptances and Securities

Department, Federal Reserve Bank of

New York

By unanimous vote, the resignation of Charles A. Coombs as

Special Manager for Foreign Currency Operations was accepted, effect

ive immediately.

1/

Entered meeting at

point indicated.

2/19/75

By unanimous vote, Section 5 of the Rules of Organization

was amended to read as follows, effective immediately:

The Committee selects a

Manager and Deputies.

Manager of the System Open Market Account, a Deputy

Manager for Domestic Operations, and a Deputy Manager

for Foreign Operations. All of the foregoing shall

be satisfactory to the Federal Reserve Bank selected

by the Committee to execute open market transactions

for such Account, and all shall serve at the pleasure

of the Committee. The Manager or his Deputies keep

the Committee informed on market conditions and on

transactions they have made and render such reports

as the Committee may specify.

By unanimous vote, subsections (d) and (e) of Section 272.3

of the Rules of Procedure were amended to read as follows, effective

immediately:

Section 272.3--Meetings

(d) Attendance at meetings.--Attendance at Committee

meetings is restricted to members and alternate members of

the Committee, the Presidents of Federal Reserve Banks who

are not at the time members or alternates, staff officers

of the Committee, the Manager and Deputy Managers, and such

other advisers as the Committee may invite from time to time.

(e) Meeting agendas.--The Secretary, in consultation

with the Chairman, prepares an agenda of matters to be dis

cussed at each meeting and the Secretary transmits the

agenda to the members of the Committee within a reasonable

time in advance of such meeting. In general, the agendas

include approval of minutes of actions and acceptance of

memoranda of discussion for previous meetings; reports by

the Manager or Deputy Managers on open market operations

since the previous meeting, and ratification by the Committee

of such operations; reports by Economists on, and Committee

discussion of, the economic and financial situation and

outlook; Committee discussion of monetary policy and action

with respect thereto; and such other matters as may be

considered necessary.

2/19/75

By unanimous vote, paragraph 2(C) of the Foreign Currency

Directive was amended to read as follows, effective immediately:

To aid in avoiding disorderly conditions in exchange

markets. Special factors that might make for exchange

market instabilities include (1) responses to short-run

increases in international political tension, (2) dif

ferences in phasing of international economic activity

that give rise to unusually large interest rate dif

ferentials between major markets, and (3) market rumors

of a character likely to stimulate speculative trans

actions.

Whenever exchange market instability

threatens

to produce disorderly conditions, System transactions may

be undertaken if the Manager reaches a judgment that they

may help to reestablish supply and demand balance at a

level more consistent with the prevailing flow of under

lying payments. In such cases, the Manager shall consult

as soon as practicable with the Committee or, in an emer

gency, with the members of the Subcommittee designated

for that purpose in paragraph 6 of the Authorization for

Foreign Currency Operations.

By unanimous vote, Alan R. Holmes, Peter D. Sternlight, and

Scott E. Pardee were selected to serve at the pleasure of the Committee

in the capacities of Manager of the System Open Market Account, Deputy

Manager for Domestic Operations, and Deputy Manager for Foreign

Operations, respectively, on the understanding that their selection

was subject to their being satisfactory to the Federal Reserve Bank

of New York.

Secretary's Note: Advice was subsequently received

that the selections indicated above were satisfactory

to the Federal Reserve Bank of New York.

Mr. Holland, and staff members who were not present at the

outset, entered the meeting prior to the following actions.

2/19/75

By unanimous vote, the action of members of the Federal Open

Market Committee on January 30, 1975, amending a provision of para

graph 2 of the Authorization for Domestic Open Market Operations by

striking the word "if" in the clause "or, if the New York Bank is

closed," and inserting in its place the words "under special circum

stances, such as when",was ratified.

With this amendment, paragraph 2 reads as follows:

The Federal Open Market Committee authorizes and

directs the Federal Reserve Bank of New York, or, under

special circumstances, such as when the New York Reserve

Bank is closed, any other Federal Reserve Bank, to pur

chase directly from the Treasury for its own account

(with discretion, in 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; pro

vided that the rate charged on such certificates shall

be a rate of 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 certificates held at any one time by

the Federal Reserve Banks shall not exceed $1 billion.

By unanimous vote,

Section 270.4(d) of the Regulation

Relating to Open Market Operations of Federal Reserve Banks was

amended, effective January 30, 1975, by striking the word "if" in

the clause "or, if that Bank is closed," and inserting in its place

the words "under special circumstances, such as when...."

With this amendment, Section 270.4(d) reads as follows:

2/19/75

In accordance with such limitations, terms, and

conditions as are prescribed by law and in authoriza

tions and directives issued by the Committee, the

Reserve Bank selected by the Committee (or, under

special circumstances, such as when that Bank is

closed, any other Federal Reserve Bank) is authorized

and directed, for its own account or the System Open

Market Account, to purchase directly from the United

States such amounts of Government securities as may be

necessary from time to time for the temporary accommo

dation of the Treasury Department.

By unanimous vote, the action of members of the Federal

Open Market Committee on February 18, 1975, incorporating a fee

schedule as subsection 271.4(f) in the Committee's amended Rules

Regarding the Availability of Information,was ratified.

The

subsection read as follows:

Fee Schedule.--A person requesting access to or

copies of particular records shall pay the costs of

searching and copying such records at the rate of $10

per hour for searching and 10 cents per standard page

for copying. With respect to information obtainable

only by processing through a computer or other informa

tion systems program, a person requesting such informa

tion shall pay a fee not to exceed the direct and rea

sonable cost of retrieval and production of the information

requested. Detailed schedules of such charges are available

upon request from the Secretary of the Committee. Documents

may be furnished without charge or at a reduced charge where

the Secretary of the Committee or such person as he may des

ignate determines that waiver or reduction of the fee is in

the public interest because furnishing the information can

be considered as primarily benefiting the general public,

or where total charges are less than $2.

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

of the Federal Open Market Committee held on January 20-21, 1975, were

approved.

2/19/75

The memorandum of discussion for the meeting of the Federal

Open Market Committee held on January 20-21, 1975, was accepted.

By unanimous vote, the System open market transactions in

foreign currencies during the period January 21 through February

18, 1975, were approved, ratified, and confirmed.

By unanimous vote, the open market transactions in Govern

ment securities, agency obligations, and bankers' acceptances

during the period January 21 through February 18, 1975, were

approved, ratified, and confirmed.

Mr. Sheehan left the meeting prior to the following action.

By unanimous vote, the Federal Reserve Bank of New York

was authorized and directed, until otherwise directed by the

Committee, to execute transactions for the System Account in

accordance with the following domestic policy directive:

The information reviewed at this meeting suggests that

real output of goods and services is continuing to fall

sharply in the current quarter. In January declines in

industrial production and employment were large and

widespread for the third consecutive month. The unem

ployment rate rose a full percentage point to 8.2 per

cent. Average wholesale prices of industrial commodities,

which were unchanged in December,rose moderately in

January, and prices of farm and food products declined

further. In recent months increases in average wage rates

have moderated, although they have still been large.

The decline in the foreign exchange value of the

dollar was arrested in early February by concerted central

bank intervention and a sharp decline in European interest

rates, but in recent days the dollar has declined somewhat.

2/19/75

In December the U S. foreign trade deficit increased,

but it was smaller in the fourth quarter as a whole

than in the third.

The narrowly defined money stock, after having

grown at an annual rate of about 4-1/2 per cent over

the fourth quarter of 1974, declined sharply in January.

However, net inflows of consumer-type time and savings

deposits at banks and nonbank thrift institutions were

large, and broader measures of the money stock continued

to expand. Business demands for short-term credit have

weakened in recent months, both at banks and in the

commercial paper market, while demands in the long-term

market have been exceptionally strong. Since mid-January

short-term market interest rates have fallen substantially

further, and yields on long-term securities also have

declined. Federal Reserve discount rates were reduced

from 7-1/4 to 6-3/4 per cent in early February.

In light of the foregoing developments, it is the

policy of the Federal Open Market Committee to foster

financial conditions conducive to cushioning recessionary

tendencies and stimulating economic recovery, while resisting

inflationary pressures and working toward equilibrium in the

country's balance of payments.

To implement this policy, while taking account of

developments in domestic and international financial

markets, the Committee seeks to achieve bank reserve and

money market conditions consistent with more rapid growth

in monetary aggregates over the months ahead than has

occurred in recent months.

It was agreed that the next meeting of the Committee would

be held on Tuesday, March 18,

1975.

The meeting adjourned.

Secretary