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A meeting of the Federal Open Market Committee was held
on Thursday, July 21,

1958, at 11:00 a.m.

This was a telephone

conference meeting and each individual was in Washington except
as otherwise indicated in parentheses after his name in the
following list

of those participating:



Martin, Chairman
Hayes, Vice Chairman (New York)
Fulton (Cleveland)
Irons (Dallas)
Leach (Richmond)
Mangels (San Francisco)

Mr. Treiber, Alternate Member of the Federal
Open Market Committee (New York)
Mr. Riefler, Secretary
Mr. Thurston, Assistant Secretary
Mr. Solomon, Assistant General Counsel


Thomas, Economist

Young, Associate Economist
Rouse, Manager, System Open Market
Account (New York)
Mr. Kenyon, Assistant Secretary, Board of
Mr. Koch, Associate Adviser, Division of
Research and Statistics, Board of
Mr. Keir, Acting Chief, Government Finance
Section, Division of Research and
Statistics, Board of Governors
Messrs. Larkin and Marsh, Assistant Vice
Presidents, Federal Reserve Bank of
New York (New York)
Mr. Stone, Manager, Securities Department,
Federal Reserve Bank of New York (New York)



Larkin reported that the Treasury list

this morning.

was steady

The longer maturities had risen a 32d or two,

while the intermediate-term issues were just about where they
closed last night.

Several million dollars of the 1-5/8 per cent

certificates had been offered, which was probably a testing of the
Federal Reserve, but nothing had been done for the System Account
thus far today.

Market conditions, at least so far today, sug

gested that approach.
Mr. Larkin stated that as yet no precise information was
available as to how the exchange had gone.

According to the latest

$6 billion was not accounted for, but there was no

available breakdown of that figure.
After a more detailed account of the market, as summarized

a memorandum from Mr. Thomas under today's date, a copy of which

had been placed in

the files of the Committee,


Larkin said that

if the Government securities market continued to perform as it had
thus far today, the Account Management planned to do nothing.


the event that the market should drift downward, the general ap
proach which was developed yesterday would apply.

In the event

that the market should begin to fall away sharply, the Management
would have in mind touching it up.
In reply to a question by Chairman Martin, Mr.


verified that no purchases had been made today, since the market



was reasonably steady.

Thus far, yesterday's slight downdrift

had not continued, although there appeared to be an undertone
of uncertainty.
Chairman Martin stated that some of the Committee members
in Washington were wondering whether, since nothing had happened,
the System operation should be treated as a syndicate that had
been closed, letting the market take care of itself until it


a substantially lower level.

Larkin said that basically there was agreement in New

York with that approach,
get to that lower level.

and that the question was one of how to
Some dealers had expressed the view this

morning that there should be at least nominal interest on the part
of the System today so that the market would not feel that it


Those comments could be taken for what they were worth.

Chairman Martin said that the System's operations over the

couple of days could be regarded as tantaount to a syndicate
might be desirable,


disorder should break out in



the market,

to reconvene the Committee and review the situation

rather than just to continue to touch up the market here and there.
He realized, of course, that there was still
sentiment in

a lot of bearish

the market.

Mr. Larkin stated that Mr. Rouse wanted to point out that
there was still

a delicate international situation, which constituted



an important background influence.
The Chairman commented that the international situation,
however, was no worse than it
said that he and Mr.

had been, following which Mr. Hayes

Rouse agreed that in

orderly market the System should stay out.

the absence of a dis
Chairman Martin then

commented that the market might steady out, but that in any event
the market would probably go to a lower level at some point.

Hayes said that it

disorderly market situation.
confronted with one and it


always rather hard to evaluate a


the Committee might be

should be prepared.

Chairman Martin stated that another telephone meeting to
morrow morning would be planned unless, in

the meantime, the Manager

of the Account should suggest another meeting.

Larkin stated that the Trading Room had advised of an

availability of securities in
was not showing up in

the past 20 minutes.

any downward movement of prices, the supply

of offerings seemed to be building up.
was a movement in
result in

Although this


was not huge but there

the direction of greater offers, which might

lower prices.


remained to be seen how much lower and

how fast the movement would go.
Since Mr. Larkin had mentioned the 3-1/2 per cent bonds of
1990 in

his comments,

Chairman Martin made the remark that the 3-1/2s

were below par last week.

Mr. Larkin said that the Desk had in fact


bought some of them below par.

Then they moved almost to 101,

following which they backed down.

Yesterday some were purchased

at 100-1/2.
Chairman Martin said he had merely intended to make the
point that it

would not be unusual to have a testing of the old

Mr. Larkin said that the approach would be to watch the
market carefully and, if

there were any unusual developments such

as to suggest disorderliness, to get in touch with the Chairman.
Mr. Fulton stated that such a program was satisfactory to
him and that he favored getting out of the market as quickly as

Messrs. Leach, Irons,

and Mangels expressed agreement.

Chairman Martin confirmed,


reply to a question, that

the approach would contemplate staying out of the market and just
watching closely.
Thereupon, it was agreed unani
mously to terminate the authority
granted to the Federal Reserve Bank
of New York on July 18, 1958, to pur
chase for the System Open Market
Account in the open market, without
limitation, Government securities in
addition to short-term Government
securities. This agreement was reached
with the understanding that, if condi
tions in the market should seem to
another meeting of the
require it,
Federal Open Market Committee would be
called to consider what, if any, further
action should be taken.

-6With regard to the statement in the text accompanying
the weekly statement of condition of the Federal Reserve Banks,
to be issued later today, concerning System operations in the
market, Mr. Hayes said that the proposed statement just received
by telephone from the Board's offices (which made a full disclosure
of operations) was regarded as entirely satisfactory at the New York

However, a slight change in wording, which he described, was

suggested in the interest of clarification.

It was indicated by

Chairman Martin that the suggestion was agreeable to Washington.
In reply to a question, Chairman Martin said he had in
formed Under Secretary of the Treasury Baird of the statement
concerning System operations proposed to be included in the text
accompanying the weekly condition statement.
The meeting then adjourned.