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DRAFT
February 5 > 19 7 To

The M e m b e r s of the C o n f e r e n c e
of P r e s i d e n t s of the
F e d e r a l R e s e r v e Banks

From

The C o m mi tt ee on D i s c o u n t s
a n d Credits

Subject:

P r o c e d u r e s for
improved communications
in c o n n e c t i o n w i t h a
m or e f l e x i b l e d i s c o u n t
rate

This r e p o r t d e s c r i b e s v a r i o u s s u g g e s t i o n s for i m p r o v e d
c o m m u n i c a t i o n s a nd c i r c u l a t i o n of m a t e r i a l r e l a t i n g to the d i s c o u n t
r ate a n d o t h e r m o n e t a r y p o l i c y m a t t e r s that w e r e d i s c u s s e d at a
m e e t i n g b e t w e e n the m e m b e r s of the C o m m i t t e e a nd the C h a i r m a n a n d
S e c r e t a r y of the B o a r d of G o v e r n o r s on F e b r u a r y 9> 1971*
Meetings
FOMC
The r e g u l a r m e e t i n g s of the FOMC p r o v i d e a u s e f u l f o r u m
for an e x c h a n g e of vi e w s w i t h r e s p e c t to the d i s c o u n t rate.
o c c a s i o n in the pa s t ,

On

the d i s c o u n t rat e has b e e n the s u b j e c t of

d i s c u s s i o n at FO M C m e e t i n g s .

It is p r o p o s e d that at f u t u r e FOMC

m e e t i n g s p r o v i s i o n be m a d e r e g u l a r l y to give eac h B o a r d m e m b e r
a n d P r e s i d e n t an o p p o r t u n i t y to c o m m e n t on the d i s c o u n t rate.

It .

is n ot e x p e c t e d that an e x t e n s i v e d i s c u s s i o n of the rate w o u l d be
r e q u i r e d at e ach me e t i n g .

Existing circumstances would determine

the d e p t h to w h i c h the rat e s h o u l d be disc us s ed .
C o n f e r e n c e of P r e s i d e n t s
The r e g u l a r m e e t i n g s of the C o n f e r e n c e of P r e s i d e n t s
p r o v i d e a n o t h e r u s e f u l f o r u m for an e x c h a n g e of views by the
P r e s i d e n t s w i t h r e s p e c t to the d i s c o u n t rate and ot he r m o n e t a r y
p o l i c y ma t t e r s .



Some time ago w he n the FOMC met o nly q u a r t e r l y ,

2

the C o n f e r e n c e was u s e d as such a forum.
Conference provide opportunities

The m e e t i n g s of the

for the P r e s i d e n t s to lea r n more-

f u l l y the views of the d i r e c t o r s of other R e serve Ban ks on tn e
d i s c o u n t rate as w e l l as on e c o n o m i c dev e l o p m e n t s .
Since m i n u t e s of m e e t i n g s of the C o n f e r e n c e of P r e s i d e n t s
receive rather vide distribution,

their co v e r a g e of the d i s c u s s i o n s

of the d i s c o u n t rat e and o t h e r m o n e t a r y p o l i c y m a t t e r s s h o u l d be
v e r y general.
S p e c i a l C o n f e r e n c e Calls
Sp e c i a l t e l e p h o n i c c o n f e r e n c e calls* p a r t i c i p a t e d in by
the m e m b e r s of the B o a r d of G o v e r n o r s a nd the F e deral R eserve Bank.
P r e s i d e n t s , c o u l d be a r r a n g e d in the i n t e r v a l b e t w e e n r e g u l a r
m e e t i n g s of the FOMC w h e n e v e r the nex t m e e t i n g of the FOMC is
some time a way a n d d e v e l o p m e n t s such as sharp m o v e m e n t s in inter e s t
ra t e s or f i n a n c i a l or o t h e r d e v e l o p m e n t s call into q u e s t i o n the
m a t t e r of d i s c o u n t rate action.

Such calls w o u l d be a r r a n g e d at

the s u g g e s t i o n of the C h a i r m a n of the B o a r d of G o v e r n o r s or the
C h a i r m a n of the C o n f e r e n c e of P r e s i d e n t s .

The calls w o u l d p r o v i d e

an o p p o r t u n i t y f o r the p r e s e n t a t i o n of the mos t u p - t o - d a t e
i n f o r m a t i o n and the e x c h a n g e of views as to the m o s t a p p r o p r i a t e
S y s t e m r esponse.
Coamunications
Fr o m the B o a r d of G o v e r n o r s
Upon r e c e i p t of a w i r e f r o m a F e d e r a l Re s e r v e Bank to the
e f f e c t that its d i r e c t o r s ha v e v o t e d a change in the Bank's d i s c o u n t
rate, the B o a r d of G o v e r n o r s , b y c o d e d wire, w o u l d n o t i f y the other
R e s e r v e Ban k s of the d i r e c t o r s '



action,

i n c l u d i n g some b r i e f

3
i n d i c a t i o n of the "basis for the action.

When it is timely, the

B o a r d of G o v e r n o r s w o u l d i n f o r m the R e s e r v e Banks, b y t e l e p h o n e or
c o d e d wire,

of the B o a r d ' s views on the p r o p o s e d d i s c o u n t rate

.change a n d its p r o b a b l e d i s p o s i t i o n b y the Board, as we l l as the
t i m i n g of the B o a r d ' s p r o s p e c t i v e action.
The B o a r d of G o v e r n o r s w o u l d gi v e p r o m p t n o t i c e to the
R e s e r v e B a n k s of all m a j o r p o l i c y a c t i o n s t a k e n b y the Board.
E v e r y e f f o r t s h o u l d be made to give such n o t i c e to the Banks in
a d v a n c e of its r e l e a s e to the press.
The s t a f f of the B o a r d of G o v e r n o r s w o u l d p r e p a r e m o r e
p r o m p t l y the r e c o r d s of the p o l i c y a c t i o n s that hav e b e e n taken
b y the B oard, f o r c i r c u l a t i o n in dra f t f o r m to the Fe d e r a l Rese r v e
B a n k s so t h a t the c h i e f e x e c u t i v e o f f i c e r s of the Banks w o u l d have
a f u l l e r u n d e r s t a n d i n g of the r a t i o n a l e for the p o l i c y actions
t a k e n b y the B o a r d t h a n is n o w the case.
F r o m the F e d e r a l R e s e r v e Banks
The R e s e r v e Banks, b y l e t t e r or wire, w o u l d r e g u l a r l y
i n f o r m the B o a r d of G o v e r n o r s of the vi e w s of its b o a r d of d i r e c t o r s
on the d i s c o u n t rate and other p o l i c y m a t t e r s of m a j o r cons e q u e n c e .
C o n s i d e r a t i o n s h o u l d be g i v e n to such a c o m m u n i c a t i o n at the time
of e v e r y m e e t i n g of the b o a r d s of direct o r s .

Such l e t t e r s or w ires

c o u l d be sent ove r the s i g n a t u r e of the F e d e r a l R e s e r v e Bank
C h a i r m a n or P r e s i d e n t .
alternatively,

Copies of such l e t t e r s a n d wir e s or,

s u m m a r i e s of their p r i n c i p a l c o m m e n t s a nd c o n c l u s i o n s ,

m i g h t be f u r n i s h e d to all other Fe d e r a l R e s e r v e Banks as appears
a p p r o p r i a t e to the i n i t i a t i n g R e s e r v e Bank.




Copies of oth e r le t t e r s f r o m the R e s e r v e Banks to the
B o a r d of G o v e r n o r s r e l a t i n g to the d i s c o u n t rate a nd other m o n e t a r y
p o l i c y n a t t e r s c o u l d a l s o "be f u r n i s h e d to all o t h e r F ederal Reserve
Banks.
To the R e s e r v e Ban k Boards of D i r e c t o r s
A t m e e t i n g s of the R e s e r v e Ban k b o a r d s of dir e c t o r s ,
the P r e s i d e n t w o u l d give some ve r y g e n e r a l i n d i c a t i o n of the
c u r r e n t m o n e t a r y p o l i c y p o s i t i o n of the FOMC, p a r t i c u l a r l y on the
o c c a s i o n of a c h a n g e in the d i r e c t i o n of po l i c y .

G u i d e l i n e s as

to the n a t u r e a n d e x t e n t of the i n f o r m a t i o n to "be f u r n i s h e d the
d i r e c t o r s in this r e g a r d are to be d e v e l o p e d b y the FOMC or its
staff.
A t s u c h m e e t i n g s * the P r e s i d e n t s as a r e g u l a r m a t t e r
w o u l d a l s o r e v i e w the maj'or p o l i c y a c t i o n s t a k e n a nd a n n o u n c e d
b y the B o a r d of G o v e r n o r s in the i n t e r v a l b e t w e e n m e e t i n g s a n d
their significance.
a better

Such a r e v i e w w i l l p e r m i t d i r e c t o r s to make

e v a l u a t i o n of d i s c o u n t rate p r o p o s a l s .

directors'

In a d d i t i o n , at

m e e t i n g s , the o f ficers in ch a r g e of r e s e a r c h w o u l d make

some c o m p a r i s o n of d i f f e r e n c e s in his e c o n o m i c a n a l y s i s a nd that
of the s t a f f of the B o a r d of Governors.
W h e n e v e r m a j o r p o l i c y ac t i o n s are t a k e n b y the B o a r d
of G o v e r n o r s ) p a r t i c u l a r l y w i t h r e s p e c t to d i s c o u n t rate changes
a p p r o v e d b y the B o a r d , the F e d e r a l R e s e r v e Ban k s w o u l d p r o m p t l y
a d v i s e the d i r e c t o r s a v a i l a b l e , e s p e c i a l l y the C h a i r m a n a nd the
Deputy Chairman,

so that the directors'

sou r c e of i n f o r m a t i o n is

the F e d e r a l R e s e r v e and not the news media.

Such ad v i c e w o u l d be

g i v e n at a b o u t the same time the a n n o u n c e m e n t of the B o a r d ' s




5

a c t i o n is r e l e a s e d to the press.
â– Important c o m m u n i c a t i o n s , i n c l u d i n g p r e s s r e l e a s e s , f r o m
the B o a r d of G o v e r n o r s w i t h r e s p e c t to m o n e t a r y p o l i c y a c t i o n s
w o u l d b e - r e p r o d u c e d b y the F e d e r a l R e s e r v e Banks- and m a i l e d to the
directors.
P r o t e c t i o n of C o n f i d e n t i a l I n f o r m a t i o n
In o r d e r to p r o t e c t the c o n f i d e n t i a l i t y of the i n f o r m a t i o n
t h a t it is p r o p o s e d to f u r n i s h to the F e d e r a l Re s e r v e Banks, the
l e t t e r s , w i r e s a n d t e l e p h o n i c m e s s a g e s s h o u l d be d i r e c t e d to the
c h i e f e x e c u t i v e o f f i c e r s of the Banks.

This is of p a r t i c u l a r

i m p o r t a n c e in r e s p e c t of s p e c i f i c a c t i o n s taken or c o n t e m p l a t e d
that h a v e not y e t b e e n p u b l i c l y a n n o u n c e d , such as a p p r o v a l b y the
B o a r d of G o v e r n o r s of a c hange in the d i s c o u n t rate v o t e d b y the
d i r e c t o r s of a F e d e r a l R e s e r v e Bank.

To the ex t e n t f e a s i b l e , wires

r e l a t i n g to d i s c o u n t rate c h a n g e s s h o u l d be coded.
To p r o t e c t f u r t h e r the c o n f i d e n t i a l i t y of the i n f o r m a t i o n
o b t a i n e d , t h e r e s h o u l d be r e s t r i c t e d d i s t r i b u t i o n a n d d u p l i c a t i o n
of the m a t e r i a l re c e i v e d .

Under recent practice, early telephonic

a d v i c e f r o m the S e c r e t a r y of the B o a r d of G o v e r n o r s w i t h r e s p e c t
to a n t i c i p a t e d B o a r d c o n s i d e r a t i o n of a rate change v o t e d b y a
R e s e r v e Ban k has b e e n r e s t r i c t e d to the ch i e f e x e c u t i v e or a c t i n g
c h i e f e x e c u t i v e o f f i c e r s of the R e s e r v e Banks.

A "need-to-know"

t est w o u l d a p p e a r to b e a p p r o p r i a t e .
I n f o r m a t i o n r e l a t e d to p o s s i b l e d i s c o u n t rate a c t i o n s by
the B o a r d of G o v e r n o r s s h o u l d be t r a n s m i t t e d o r a l l y b y a Fede r a l
R e s e r v e B a n k P r e s i d e n t o n l y to the C h a irman of his B o a r d of D i r e c t o r s
w i t h s p e c i f i c r e f e r e n c e to the c o n f i d e n t i a l i t y of the i n f o r m a t i o n



6

and. o n l y w hen it w o u l d a p p e a r that such ac t i o n is imminent.

In

the, c o u r s e of a d i r e c t o r s ' m e e t i n g , whe n a p p r o v a l by the B o a r d
of G o v e r n o r s of a n o t h e r F e d e r a l Re s e r v e Ba n k ' s d i s c o u n t rate
a c t i o n a p p e a r s to be in p r o s p e c t ,

the P r e s i d e n t m a y i n f o r m the

d i r e c t o r s of the g e n e r a l n a t u r e of the s i t u a t i o n in ord e r that
t h e y m a y m a k e a f u l l y c o n s i d e r e d judgment.
All new directors,

a nd p a r t i c u l a r l y the C h a i r m a n a n d

D e p u t y C h a irman, s h o u l d be f u l l y b r i e f e d as to the c o n f i d e n t i a l i t y
of the i n f o r m a t i o n r e c e i v e d b y th e m a n d the n e c e s s i t y of p r o t e c t i n g
that c o n f i d e n t i a l i t y .
As to all i n f o r m a t i o n r e c e i v e d u n d e r these p r o p o s a l s for
i m p r o v e d c o m m u n i c a t i o n s , e ac h P r e s i d e n t s h o u l d e x e r c i s e j u d g m e n t
a n d d i s c r e t i o n as to w h a t i n f o r m a t i o n to t r a n s m i t to other p a r t i e s
a n d the t i m i n g of the t r a n s m i s s i o n of such information.
cc:

R o b e r t P. M a y o
F r a n k E. Morris
A l f r e d Kayes, C h a i r m a n





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102