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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: PRESENT: Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Mr. Martin, Chairman Hayes, Vice Chairman (New York) Balderston Fulton (Cleveland) Irons (Dallas) Leach (Richmond) Mangels (San Francisco) Mills Robertson Shepardson Szymczak Vardaman Mr. Treiber, Alternate Member of the Federal Open Market Committee (New York) Mr. Riefler, Secretary Mr. Thurston, Assistant Secretary Mr. Solomon, Assistant General Counsel Mr. Thomas, Economist Young, Associate Economist Rouse, Manager, System Open Market Account (New York) Mr. Kenyon, Assistant Secretary, Board of Governors Mr. Koch, Associate Adviser, Division of Research and Statistics, Board of Governors 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) Mr. Mr. -2 7/24/58 Mr. 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. information, 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 in a memorandum from Mr. Thomas under today's date, a copy of which had been placed in the files of the Committee, Mr. Larkin said that if the Government securities market continued to perform as it had thus far today, the Account Management planned to do nothing. In 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. Larkin verified that no purchases had been made today, since the market 7/2/58 -3 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 reached a substantially lower level. Mr. 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 abandoned. was Those comments could be taken for what they were worth. Chairman Martin said that the System's operations over the last couple of days could be regarded as tantaount to a syndicate might be desirable, if disorder should break out in operation. It 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 7/2/58 -4 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. Mr. Hayes said that it disorderly market situation. confronted with one and it is always rather hard to evaluate a Conceivably, 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. Mr. 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 It was not huge but there the direction of greater offers, which might lower prices. It 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 -5 7/24/58 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 lows. 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 possible. Messrs. Leach, Irons, and Mangels expressed agreement. Chairman Martin confirmed, in 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 Bank. 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.
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