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A meeting of the Federal Open Market Committee was held
on Tuesday, November 24, 1964, at 3:30 p.m , EST.

This was a

telephone conference meeting and each individual was in Washing
ton except as otherwise indicated in parentheses in the following
list of those participating:


Martin, Chairman
Hayes, Vice Chairman

(New York)


(St. Louis)
(San Francisco)
(Petersburg, Virginia)


Sherman, Assistant Secretary
Broida, Assistant Secretary
Hackley, General Counsel
Brill, Associate Economist
Stone, Manager, System Open
Market Account
Mr. Coombs, Special Manager,
System Open Market Account

(New York)
(New York)

Mr. Molony, Assistant to the Board
of Governors
Messrs. Katz and Reynolds, Associate
Advisers, Division of International
Finance, Board of Governors
Mr. Furth, Consultant, Board of Governors
Miss Eaton, General Assistant, Office of
the Secretary, Board of Governors
Mr. Sanford, Vice President of the Federal
Reserve Bank of New York
(New York)

On the day preceding this meeting, the Bank of England had
increased its discount rate from 5 to 7 per cent, and the Board of
Governors had taken two actions:

(1) it had approved actions by

the directors of five Federal Reserve Banks increasing the discount
rates of those Banks from 3-1/2 to 4 per cent, effective November 24,
1964, and (2) it had amended the Board's Regulation Q to increase
the maximum rates that member banks were permitted to pay on time
deposits and on savings deposits held for less than one year, also
effective November 24, 1964.
Chairman Martin observed that he had called this meeting in
light of the Board's actions of the preceding day and in view of


continuing pressures on the pound in foreign exchange markets that
might necessitate some further assistance to the United Kingdom.
At the outset, the Chairman said, he wanted to emphasize the need
for everyone participating in these discussions to exercise great
care to protect the confidentiality of the matters to be discussed
and thus avoid contributing to public unrest.

He thought the Syst m

personnel deserved congratulations on the manner in which the actions
of the preceding day had been carried out.

The situation was still

difficult, however, and it was quite possible that the United
Kingdom would need additional assistance in its efforts to defend
the pound.

A specific purpose of this meeting was to consider

whether the Committee would wish to authorize an increase in the



reciprocal currency arrangement with the Bank of England by $250

million to $750 million.

The Chairman then asked Mr. Coombs to

report the most recent market developments to the Committee and
to make any recommendations for Committee action that he thought
Mr. Coombs reported that both sterling and the dollar had
made a reasonably strong showing on the European exchange markets

the morning hours today.

Around noon, European time, however,

the situation swung around sharply as heavy selling pressure on
sterling developed in the continental market centers.
England had made a

firm stand at rates around $2.7860, intervening

both in London and New York, but had
in the process.

The Bank of

Reserve losses

suffered heavy reserve losses

so far

today, Mr. Coombs said,


amounted to $213 million, mainly arising out of intervention operations

in London.
So far as

the Federal Reserve Bank of New York and the Bank

of England could tell,
had triggered

in a

there had been no special event

this speculative attack.

It rather

today which

seemed to be

continued lack of confidence in the ability of the Labor

Government to defend



suspicion of the British

Government had been greatly aggravated by widespread resentment in
the European business and financial communities over the 15 per
cent surcharge placed on British imports

near the end of October,



and by widespread rumors of an impending breakdown in political

financial cooperation.

As of the moment,

the British had

now fully utilized not only the $500 million of

continental and

Canadian central bank credits, but had also drawn the entire
$500 million available under the Federal Reserve swap line.
Furthermore, Mr. Coombs said, it seemed to be fully

accepted not only in European governmental circles but also in
the exchange markets that the prospective $1 billion drawing by
the British Government on the International Monetary Fund might

be utilized to pay off $1 billion in credits obtained by the
United Kingdom during the past two months.

In effect,


the present credit resources of the British Government had now
been exhausted and further intervention to defend
become a charge on the British reserves.

sterling would

The market sensed this

The British Government, Mr. Coombs continued, thus
the prospect of a

severe depletion of their already limited reserve

availabilities unless

the present crisis of confidence could
As he saw it,

somehow be countered.


there were now two main

the British might decide to devalue sterling.

This would probably precipitate an international financial


the first magnitude.


He would expect to see a major speculative

drive on the London gold market and sooner or later an even more



dangerous attack on the U.S. dollar.

If the British devaluation

were to trigger devaluations of other currencies, such an attack
on the U.S. dollar might develop swiftly and in a huge volume.
Mr. Coombs thought, therefore, that it was essential to
avoid at all costs recourse to the devaluation alternative and to
try to deal directly with the confidence factor by putting on a
display of international financial cooperation through a new and
very large package of short-term credit to the U.K.

He thought

that the situation was extremely dangerous and that a "now or
never" effort should be made.

In round figures, Mr. Coombs said,

the Committee might think in terms of a total international credit
package of $2 billion over and above the present swap line of $500
million and the short-term European and Canadian Bank credit of
$500 million, both of which would be presumably repaid out of the
British drawing on the IMF.
In building up such a $2 billion package, Mr. Coombs thought,
the U.S. share would probably have to be about $500 million.


was hopeful that the Treasury or the Export-Import Bank might be
able to provide $250 million, one-half of the U.S. share.


remaining $250 million from the U.S. side should, he believed, be
provided by an increase in the Federal Reserve swap line with the
Bank of England from $500 million to $750 million.

Chairman Martin asked Mr. Hayes if he had any comments,
and Mr. Hayes replied that he would add only that he was fully
in accord with Mr. Coombs' recommendation.
Mr. Hickman asked what the prospects were for obtaining
the $1.5 billion credits from non-U.S. sources called for by the

Mr. Coombs replied that since noon, European time,

when the market situation had reversed, he had discussed the
problem with officials of the Bank of Canada, who were now
consulting with their Government.

He thought there was a fair

and perhaps a good chance that the Canadians would put up $150

He also had alerted the German Federal Bank to the

situation, but so far he had not been able to contact any other
central banks.
Mr. Hayes reported that in a conversation with officials
of the Bank of England this morning he had suggested that the U.S.
might be able to help assemble the package of credits.

They had

asked, however, that no steps in this direction be taken until
they had hac an opportunity to decide whether they wanted the
Chairman Martin said that, in his judgment, the issue
before the Committee now was whether the Federal Reserve was
prepared to increase the reciprocal currency agreement with the
United Kingdom by $250 million if a package of credits such as that



outlined by Mr. Coombs was put together.

The British might decide

not to request such credits, but thac matter, he thought, was
outside the purview of the Committee at present.

He would hope

that the System would adopt a posture of being as helpful as it
Mr. Wayne asked whether his understanding was correct that
the proposed Committee action today would be conditional on the
development of a package of credits such as had been described and
also on a decision by the Bank of England that they needed such

Chairman Martin replied in the affirmative.

He thought

it would be helpful to authorize an increase in the swap line today
on those two conditions, so that the System would be in a better
position to act,



over the next several days which

included the Thanksgiving Day holiday in

the U.S.

and a weekend.

Mr. Wayne commented that he felt the Committee should act
with promptness and forcefulness.
Mr. Hackman said his only question was whether the proposed
authorization might not be too limited.

Perhaps the Committee

should authorize an increase of as much as $500 million in the
swap line with the United Kingdom in light of the possibility that
the amounts to be sought from other sources might not all be forth



Mr. Mills said he was somewhat concerned that the approach
being taken might reflect some elements of panic on the System's

There had been no discussion of conditions that the Federal

Reserve System might place on a further extension of credit to the

He was not clear as to what assurances the Committee

might have that assistance rendered at this time would plug the
gap and save the situation rather than simply constitute a further
contribution and a further liability assumed by the Federal Reserve.
Mr. Hayes could have been in error ir offering the System's services
in the effort to make up this package.

The continental European

countries might well view such actions as reflecting more than
enlightened self-interest on the System's part; perhaps they would
take them to :.ndicate that the situation posed a problem to the
U.S. and that there was concern about the stability of the dollar.
It seemed to Mr. Mills that it would be better for the British to
make their own arrangements.
Mr. Hayes responded that it was primarily the task of the
Treasury, rather than of the System, to see that the British made
the best possible arrangements and to assure that their program
was successful.

He also emphasized that the System was not taking

any risks under procedures followed for the swap arrangements.


to how the package was arranged, he agreed that the other countries
should help.

However, it was conceivable to him that the attitude



of continental European countries toward the proposed package of
credits would be strengthened if
supported it


they felt

that the United States

This country clearly had a self-interest in

avoiding a crisis that could involve the dollar.
Mr. Mills said that he was not challenging the suggestion
that the United States should be helpful ir

the present situation.

But he did have doubts about the approach on psychological grounds.
There was no certainty that the proposed package would solve the

and he was sure that the continental Europeans would not

approach the problem without concern over the means by which it
ultimately would be resolved.

Daane said it

was correct.

seemed to him that Mr.


In his own thinking he began with the view that Mr.

Coombs had expressed:

that the proposed package of credits was

by far the better of the two alternatives Mr.
and it


was the last resort open at present.

Coombs had outlined,

with respect

to the U.S. share, he agreed that the Committee should demonstrate
its willingness to participate, in the interest of furthering
international financial cooperation.

But he thought it would be

better for the larger share of the total package to come from
sources other than the United States,

particularly since the drain

on sterling had come from countries other than the U.S.
believe it

would be wise for the arrangements

He did not

to have the appear

ance of reflecting primarily Anglo-American cooperation.


Mr. Hayes agreed.

With respect to Mr. Hickman's comment,

he felt that the Committee should consider increasing the swap
line by $250

illion at present with the realization that the

Special Manager might want to recommend that the Committee
authorize a larger increase if necessary to make up a deficit in
the total package.
Chairman Martin said that he thought Mr. Mills had touched
on a macter of legitimate concern, but one that was a problem
primarily for the United Kingdom and the U.S. Treasury.

In his

opinion $250 million was a reasonable amount by which to increase
the swap line at present.

He added that the negotiations for the

total package would have to take place promptly, and he inquired
whether the Committee was prepared to authorize the recommended
Thereupon, an increase in the swap
arrangement with the Bank of England to
$750 million, as recommended by Mr. Coombs,
was approved unanimously, subject to the
agreement of the Bank of England and to
the satisfactory development of a package
of credits of the type described by Mr.
Coombs. In taking this action, it was
understood that the aggregate amount of
foreign currencies held under reciprocal
currency arrangements authorized in the
continuing authority directive with
respect to foreign currency operations
was increased by $250 million to $2.350



Chairman Martin reiterated that the matters discussed at
this meeting should be considered highly confidential by all con

He added that Committee members not in Washington would

be kept informed of developments.
Thereupon the meeting adjourned.
Secretary's Note: Acvice of completion
of the arrangements for assistance to
the United Kingdom was received on
November 25. An amended continuing
authority directive was transmitted to
the Federal Reserve Bank of New York,
and the following anrouncement was
released to the press at approximately
2 p.m. EST:
The Federal Reserve System and the U.S. Treasury today
issued the following statement:
Eleven countries and the United Kingdom today made
arrangements providing $3 billion to pack up Britain's
determination to defend the pound sterling.
Today's funds are in addition to the $1 billion
drawing the United Kingdom will obtain from the International
Monetary Fund at the end of this month under an existing
Austria, Belgium, Canada, France Germany, Italy, Japan.
The Netherlands, Sweden, Switzerland, and the United States,
joined by the Bank for International Settlements, moved
quickly to mobilize a massive counter attack on speculative
selling of the pound.
The International Monetary Fund drawing, which can have
a maturity up to 3 years, will enable the British to pay off
all outstanding short term credits from central banks,
including the Federal Reserve. The currency swap arrangement
with the Federal Reserve System has been raised by $250 million
to $750 million, and a $250 million credit has been made
available by the U.S. Export-Import Bank.
(These amounts
are included in the total package of $3 billion.)