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BOARD OF GOVERNORS
OF THE
FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
20551
March 16, 1971
CONFIDENTIAL (FR)
Federal Open Market Committee
FROM:
Mr. Broida
For your convenient reference and records, there are enclosed
the following materials:
1.
List of members and officers of the Federal Open
Market Committee for the year March 1,1971February 29, 1972.
2.
Continuing authority directive with respect to
domestic open market operations,as reaffirmed
March 9, 1971.
3.
Authorization for foreign currency operations,
as amended March 9, 1971; and foreign currency
directive,as reaffirmed on March 9, 1971.
Arthur L. Broida,
Deputy Secretary,
Federal Open Market Committee.
Enclosures
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REC'D
INon 8/21/2020
RECORDS
SECTION
MAR 16 1971
Members and Officers of the Federal Open Market
Committee
for the year March 1, 1971-February 29, 1972
Alternates
Members
Arthur F. Burns
J.L. Robertson
George W. Mitchell
J. Dewey Daane
Sherman J. Maisel
Andrew F. Brimmer
William W. Sherrill
Frank E. Morris
Alfred Hayes
Monroe Kimbrel
Robert P. Mayo
George H. Clay
David P. Eastburn
William F. Treiber
Philip E. Coldwell
(President of Cleveland Bank)
Eliot J. Swan
Officers
Arthur F. Burns
Alfred Hayes
Robert C. Holland
Arthur L. Broida
Normand R. V. Bernard
Charles Molony
Howard H. Hackley
David B. Hexter
J. Charles Partee
Stephen H. Axilrod
Robert W. Eisenmenger
George Garvy
Lyle E. Gramley
A. B. Hersey
John E. Reynolds
Karl A. Scheld
Robert Solomon
Charles T. Taylor
Clarence W. Tow
Alan R. Holmes
Charles A. Coombs
Chairman
Vice Chairman
Secretary
Deputy Secretary
Assistant Secretary
Assistant Secretary
General Counsel
Assistant General Counsel
Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Associate Economist
Manager, System Open
Market Account
Special Manager, System
Open Market Account
Bank to execute transactions for System Open Market Account
Federal Reserve Bank of New York (until close of day of first
meeting after February 29, 1972).
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D I NRECORDS
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on
SECTION
MAR 16 1971
Continuing authority directive with respect to domesticopenmarket
operations
(As reaffirmed March 9, 1971)
1.
The Federal Open Market Committee authorizes and directs the Federal
Reserve Bank of New York, to the extent necessary to carry out the
most recent current economic policy directive adopted at a meeting of
the Committee:
(a)
To buy or sell U.S. Government securities in the open
market, from or to Government securities dealers and foreign and
international accounts maintained at the Federal Reserve Bank of
New York, on a cash, regular, or deferred delivery basis, for the
System Open Market Account at market prices and, for such Account,
to exchange maturing U.S. Government securities with the Treasury
or allow them to mature without replacement; provided that the
aggregate amount of such securities held in such Account at the
close of business on the day of a meeting of the Committee at which
action is taken with respect to a current economic policy directive shall not be increased or decreased by more than $2.0 billion
during the period commencing with the opening of business on the
day following such meeting and ending with the close of business
on the day of the next such meeting;
(b) To buy or sell prime bankers' acceptances of the kinds
designated in the Regulation of the Federal Open Market Committee
in the open market, from or to acceptance dealers and foreign
accounts maintained at the Federal Reserve Bank of New York, on a
cash, regular, or deferred delivery basis, for the account of the
Federal Reserve Bank of New York at market discount rates; provided
that the aggregate amount of bankers' acceptances held at any one
time shall not exceed (1) $125 million or (2) 10 per cent of the
total of bankers' acceptances outstanding as shown in the most recent
acceptance survey conducted by the Federal Reserve Bank of New York,
whichever is the lower;
(c)
To buy U.S. Government securities, obligations that are
direct obligations of, or fully guaranteed as to principal and interest
by,any agency of the United States, and prime bankers' acceptances
with maturities of 6 months or less at the time of purchase, from
nonbank dealers for the account of the Federal Reserve Bank of New York
under agreements for repurchase of such securities, obligations, or
acceptances in 15 calendar days or less, at rates not less than (1) the
discount rate of the Federal Reserve Bank of New York at the time such
agreement is entered into, or (2) the average issuing rate on the most
recent issue of 3-month Treasury bills, whichever is the lower; provided
that in the event Government securities or agency issues covered by any
such agreement are not repurchased by the dealer pursuant to the
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agreement or a renewal thereof, they shall be sold in the market or
transferred to the System Open Market Account; and provided further
that in the event bankers' acceptances covered by any such agreement
are not repurchased by the seller, they shall continue to be held by
the Federal Reserve Bank or shall be sold in the open market.
2.
The Federal Open Market Committee authorizes and directs the Federal
Reserve Bank of New York, or, if the New York Reserve Bank is closed,
any other Federal Reserve Bank, to purchase 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; 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 certificates held at any one
time by the Federal Reserve Banks shall not exceed $1
3.
billion.
In order to insure the effective conduct of open market operations,
the Federal Open Market Committee authorizes and directs the Federal
Reserve Banks to lend U.S. Government securities held in the System
Open Market Account to Government securities dealers and to banks
participating in Government securities clearing arrangements conducted
through a Federal Reserve Bank, under such instructions as the Committee
may specify from time to time.
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REC'D INRECORDS SECTION
MAR 16 1971
AUTHORIZATION FOR SYSTEM FOREIGN CURRENCY OPERATIONS
(As amended March 9, 1971)
1.
The Federal Open Market Committee authorities
and directs
the Federal Reserve Bank of New York, for System Open Market Account,
to
the extent necessary to carry out the Committee's foreign currency
directive and express authorizations by the Committee pursuant thereto:
A.
To purchase and sell the following foreign currencies
in the form of cable transfers through spot or forward transactions on
the open market at home and abroad, including transactions with the
U.S. Stabilization Fund established by Section 10 of the Gold Reserve
Act of 1934, with foreign monetary authorities, and with the Bank for
International Settlements:
Austrian schillings
Belgian francs
Canadian dollars
Danish kroner
Pounds sterling
French francs
German marks
Italian lire
Japanese yen
Mexican pesos
Netherlands guilders
Norwegian kroner
Swedish kronor
Swiss francs
B.
To hold foreign currencies listed in paragraph A above,
up to the following limits:
Currencies purchased spot, including currencies
(1)
purchased from the
Stabilization Fund, and sold forward
to the Stabilization
Fund, up to $1 billion equivalent;
(2)
Currencies purchased spot or forward, up to the
amounts necessary to fulfill other forward commitments;
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-2(3)
Additional currencies purchased spot or forward, up
to the amount necessary for System operations to exert a market influence
but not exceeding $250 million equivalent; and
(4) Sterling purchased on a covered or guaranteed basis
in terms of the dollar, under agreement with the Bank of England, up to
$200 million equivalent.
C.
To have outstanding forward commitments undertaken under
paragraph A above to deliver foreign currencies, up to the following limits:
(1) Commitments to deliver foreign currencies to the
Stabilization Fund, up to the limit specified in paragraph 1B(1) above; and
(2) Other forward commitments to deliver foreign currencies,
up to $550 million equivalent.
D.
To draw foreign currencies and to permit foreign banks
to draw dollars under the reciprocal currency arrangements listed in paragraph 2 below, provided that drawings by either party to any such arrangement shall be fully liquidated within 12 months after any amount outstanding
at that time was first drawn, unless the Committee, because of exceptional
circumstances, specifically authorizes a delay.
2. The Federal Open Market Committee directs the Federal Reserve
Bank of New York to maintain reciprocal currency arrangements ("swap"
arrangements) for System Open Market Account for periods up to a maximum
of 12 months with the following foreign banks, which are among those
designated by the Board of Governors of the Federal Reserve System under
Section 214.5 of Regulation N, Relations with Foreign Banks and Bankers,
and with the approval of the Committee to renew such arrangements on
maturity:
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Amount of
arrangement
(millions of
Foreign bank
dollars equivalent)
Austrian National Bank
National Bank of Belgium
Bank of Canada
National Bank of Denmark
Bank of England
200
500
1,000
200
2,000
Bank of France
German Federal Bank
1,000
1,000
Bank of Italy
Bank of Japan
Bank of Mexico
Netherlands Bank
Bank of Norway
Bank of Sweden
1,250
1,000
130
300
200
250
Swiss National Bank
600
Bank for International Settlements:
Dollars against Swiss francs
600
Dollars against authorized European
currencies other than Swiss francs
3.
1,000
Currencies to be used for liquidation of System swap
commitments may be purchased from the foreign central bank drawn on,
at the same exchange rate as that employed in the drawing to be
liquidated.
Apart from any such purchases at the rate of the drawing,
all transactions in foreign currencies undertaken under paragraph 1(A)
above shall, unless otherwise expressly authorized by the Committee, be
at prevailing market rates and no attempt shall be made to establish
rates that appear to be out of line with underlying market forces.
4.
It shall be the practice to arrange with foreign central
banks for the coordination of foreign currency transactions.
In making
operating arrangements with foreign central banks on System holdings of
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-4foreign currencies, the Federal Reserve Bank of New York shall not commit
itself to maintain any specific balance, unless authorized by the Federal
Open Market Committee.
Any agreements or understandings concerning the
administration of the accounts maintained by the Federal Reserve Bank
of New York with the foreign banks designated by the Board of Governors
under Section 214.5 of Regulation N shall be referred for review and
approval to the Committee.
5.
Foreign currency holdings shall be invested insofar as
practicable, considering needs for minimum working balances.
Such
investments shall be in accordance with Section 14(e) of the Federal
Reserve Act.
6.
A Subcommittee consisting of the Chairman and the Vice
Chairman of the Committee and the Vice Chairman of the Board of Governors
(or in the absence of the Chairman or of the Vice Chairman of the Board
of Governors the members of the Board designated by the Chairman as
alternates, and in the absence of the Vice Chairman of the Committee
his alternate) is authorized to act on behalf of the Committee when it
is necessary to enable the Federal Reserve Bank of New York to engage
in foreign currency operations before the Committee can be consulted.
All actions taken by the Subcommittee under this paragraph shall be
reported promptly to the Committee.
7.
The Chairman (and in his absence the Vice Chairman of the
Committee, and in the absence of both, the Vice Chairman of the Board
of Governors)
is authorized:
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-5A.
With the approval of the Committee, to enter into
any needed agreement or understanding with the Secretary of the Treasury
about the division of responsibility for foreign currency operations
between the System and the Secretary;
B.
To keep the Secretary of the Treasury fully advised
concerning System foreign currency operations, and to consult with the
Secretary on such policy matters as may relate to the Secretary's
responsibilities; and
C.
From time to time, to transmit appropriate reports
and information to the National Advisory Council on International
Monetary and Financial Policies.
8.
Staff officers of the Committee are authorized to
transmit pertinent information on System foreign currency operations
to appropriate officials of the Treasury Department.
9.
All Federal Reserve Banks shall participate in the
foreign currency operations for System Account in accordance with
paragraph 3 G(1) of the Board of Governors' Statement of Procedure
with Respect to Foreign Relationships of Federal Reserve Banks dated
January 1, 1944.
10.
The Special Manager of the System Open Market Account
for foreign currency operations shall keep the Committee informed on
conditions in foreign exchange markets and on transactions he has made
and shall render such reports as the Committee may specify.
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REC'D IN RECORDS SECTION
MAR 1 61971
FOREIGN CURRENCY DIRECTIVE
(As reaffirmed March 9, 1971)
1. The basic purposes of System operations in foreign
currencies are:
A. To help safeguard the value of the dollar in international exchange markets;
B. To aid in making the system of international payments
more efficient;
C. To further monetary cooperation with central banks
of other countries having convertible currencies, with the
International Monetary Fund, and with other international
payments institutions;
D. To help insure that market movements in exchange rates,
within the limits stated inthe International Monetary Fund
Agreement or established by central bank practices, reflect
the interaction of underlying economic forces and thus serve
as efficient guides to current financial decisions, private and
public; and
E.
To facilitate growth in international liquidity in
accordance with the needs of an expanding world economy.
2.
Unless otherwise expressly authorized by the Federal
Open Market Committee, System operations in foreign currencies shall
by undertaken only when necessary:
A.
To cushion or moderate fluctuations in the flows of
international payments, if such fluctuations (1) are deemed
to reflect transitional market unsettlement or other temporary
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-2forces and therefore are expected to be reversed in the
foreseeable future; and (2) are deemed to be disequilibrating
or otherwise to have potentially destabilizing effects on U.S.
or foreign official reserves or on exchange markets, for example,
by occasioning market anxieties, undesirable speculative activity,
or excessive leads and lags in international payments;
B.
To temper and smooth out abrupt changes in spot exchange
rates, and to moderate forward premiums and discounts judged to
be disequilibrating.
Whenever supply or demand persists in
influencing exchange rates in one direction, System transactions
should be modified or curtailed unless upon review and reassessment of the situation the Committee directs otherwise;
C.
markets.
To aid in avoiding disorderly conditions in exchange
Special factors that might make for exchange market
instabilities include (1) responses to short-run increases in
international political tension, (2) differences in phasing of
international economic activity that give rise to unusually
large interest rate differentials between major markets, and
(3) market rumors of a character likely to stimulate speculative transactions.
Whenever exchange market instability
threatens to produce disorderly conditions, System transactions
may be undertaken if the Special Manager reaches a judgment
that they may help to reestablish supply and demand balance
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at a level more consistentwith the prevailing
lying payments.
In such cases,
flow of under
the Special Manager shall
consult as soon as practicable with the Committee or, in an
emergency, with the members of the Subcommittee designated
for that purpose in paragraph 6 of the Authorization for
System foreign currency operations; and
D.
To adjust System balances within the limits established
in the Authorization for System foreign currency operations in
light of probable future needs for currencies.
3.
System drawings under the swap arrangements are appro-
priate when necessary to obtain foreign currencies for the purposes
stated in paragraph 2 above.
4.
Unless otherwise expressly authorized by the Committee,
transactions in forward exchange, either outright or in conjunction
with spot transactions, may be undertaken only (i) to prevent forward
premiums or discounts from giving rise to disequilibrating movements
of short-term funds;
(ii) to minimize speculative disturbances; (iii)
to supplement existing market supplies of forward cover, directly or
indirectly, as a means of encouraging the retention or accumulation
of dollar holdings by private foreign holders; (iv) to allow greater
flexibility in covering System or Treasury commitments, including
commitments under swap arrangements, and to facilitate operations of
the Stabilization Fund; (v) to facilitate the use of one currency
for the settlement of System or Treasury commitments denominated in
other currencies; and (vi) to provide cover for System holdings of
foreign currencies.
@FedFRASER