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FEDERAL OPEN MARKET COMMITTEE CONFERENCE CALL
May 20,

1982

Secretary's Note

No transcript exists for this conference call.
However, a
staff memorandum written on the day of the call summarizes the nature
of the call and is attached.

BOARD OF GOVERNORS
or

THE

FEDERAL RESERVE SYSTEM

Office Correspondence
To

FOMC Files

From

Nancy Steele NMS

Date

May 20, 1982

Subect* Drysdale situation
Notes on May 20, 1982 Conference
Call.

The purpose of this call was to review the general market
situation in the wake of the Drysdale problem.

It was noted that the

unwinding of this situation was likely to take some time and that firm
data on the dollar volume of securities involved were not yet available.
As to the System's role, it was understood that the Desk would stand
ready to lend securities to assist in the efficient functioning of the
government securities market in accordance with the broadened terms
and conditions for such lending approved by the FOMC in a vote conducted
late yesterday and today.

It was further understood that the Desk would

not be restricted in its lending by a dollar limit, but would encourage
borrowers to seek securities elsewhere first.

All loans made by the System

must be fully collateralized and the Desk should also ensure that sufficient
collateral margin (which might appropriately be higher than that required
in normal circumstances) is

tendered by the borrower.

Very tentative

estimates of the order of magnitude of prospective demands for loans of
securities from the System portfolio were:

at least $1-1/4 billion by

$400-$500 million by

and smaller

amounts by a number of other potential borrowers.
The broader question of how to avoid a recurrence of this kind
of problem in the future was also discussed.

As an initial step in that

direction it was decided that Mr. Sternlight and other representatives

-2-

from the New York Reserve Bank would attend upcoming sessions scheduled
by the Government Securities Dealers Association on this subject.

It

was also agreed that the question of whether to seek regulatory authority
to deal with such problems should be studied and that at some future time
the Chairman might initiate discussions with the Treasury on this matter.