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FIFTIETH
Annua{ Report
OF THE
BOARD OF GOVERNORS
of the Federal Reserve System
COVERING OPERATIONS FOR THE YEAR
Period
Description
Purpose
lanuarymid-May
Reduced System holdings of U.S. Government securities and then increased them in line with seasonal
and moderate growth needs of the economy. Total
holdings rose about $470 million on balance, owing
mainly to net purchases of issues maturing in more
than 1 year. Member bank borrowing rose slightly to
a level of about $150 million in the first half of May.
To offset seasonal downward pressures on short-term interest rates
early in the period and to provide for growth in bank credit and
the money supply at a rate consistent with minimizing capital outflows in accordance with the policy of slightly reduced reserve
availability adopted at the December 18, 1962, meeting of the
Federal Open Market Committee.
Mid-Maylate-July
Reduced the degree of reserve availability slightly further. System holdings of U.S. Government securities
increased nearly $1.2 billion, about one-fifth representing net purchases of issues maturing in more
than 1 year. Member bank borrowing increased further, averaging $275 million over the period.
To achieve a slightly greater degree of firmness in the money market in order to minimize the outflow of capital while continuing
to provide reserves for moderate monetary and credit growth.
Mid-July
Raised the discount rate from 3 to 31h per cent.
Raised maximum interest rates payable by member
banks on time deposits (other than savings) and
certificates of deposit with maturities of 90 days to
6 months from 2Y2 to 4 per cent and with maturities
of 6 months to 1 year from 3V2 to 4 per cent.
To help reduce short-term capital outflows by firming U.S. short-term
money market rates and permitting member banks to compete more
effectively for foreign and domestic funds.
Reduced a little further the degree of reserve availLate-Julyability. System holdings of U.S. Government securiDecember
ties increased about $1.1 billion, of which more than
one-half represented purchases of securities with
maturities of more than 1 year. Member bank borrowing averaged about $325 million over the period.
To attain slightly more firmness in the money market, in the context
of a higher discount rate, with a view to minimizing the outflow
of funds abroad while offsetting seasonal reserve drains and providing for growth needs of the domestic economy.
Raised margin requirements on loans for purchasing
or carrying listed securities from 50 to 70 per cent
of market value of securities. Also increased retention requirements on proceeds of sales from undermargined accounts from 50 to 70 per cent.
To help prevent excessive use of stock market credit, which had increased sharply since July 1962, when margin requirements were
lowered from 70 to 50 per cent.
November
8
9
ANNUAL
REPORT OF BOARD OF GOVERNORS
with the Guidelines and up to a total of $100 million equivalent. Pur
chases may be at rates above par, and both purchases and sales are to be
made at the same rates.
Votes for this action: Messrs. Martin, Hayes, Bald
erston, Bopp, Clay, Irons, Mills, Mitchell, Robertson,
Scanlon, and Shepardson. Votes against this action:
None.
November 26, 1963
Authority to effect transactions in System Account.
This meeting was held by telephone on the first business day
following the death of President Kennedy. It was called for the
purpose of considering whether action by the Committee was
required to deal with any actual or potential unsettlement in
domestic financial markets or in foreign exchange markets stem
ming from the President's death.
Reports by the Manager and the Special Manager of the Sys
tem Open Market Account indicated that there was no evidence
of adverse market developments as of late morning. The Account
Manager reported that the Government securities market had
opened with a confident tone, and that prices at the opening
were unchanged or slightly higher on securities of various ma
turities. The stock market already had made a good recovery
in early trading. The Special Manager noted that gold and for
eign exchange markets were steady, and that where necessary
central banks were acting to maintain foreign exchange rates
at their previous levels.
The Committee decided that it was desirable, as a precaution
ary measure, to revise its current economic policy directive in
order to insure that the Federal Reserve Bank of New York
would have ample authority to deal with any unsettlement that
might develop. The revision was confined to the second para
graph, and the directive was issued in the following form:
It is the Federal Open Market Committee's current policy to accom-
FEDERAL RESERVE SYSTEM
modate moderate growth in bank credit, while maintaining conditions in
the money market that would contribute to continued improvement in
the capital account of the U.S. balance of payments. This policy takes
into consideration the fact that domestic economic activity is expanding
further, although with a margin of underutilized resources; and the fact
that the balance of payments position is still adverse despite a tendency
to reduced deficits. It also recognizes the increases in bank credit, money
supply, and the reserve base of recent months.
To implement this policy, System open market operations shall be
conducted with a view to cushioning any unsettlement that might arise in
money markets stemming from the death of President Kennedy and to
maintaining about the same conditions in the money market as have
prevailed in recent weeks, while accommodating moderate expansion in
aggregate bank reserves.
Votes for this action: Messrs. Martin, Hayes, Bald
erston, Bopp, Clay, Irons, Mitchell, Robertson, Scan
lon, and Shepardson. Vote against this action: Mr.
Mills.
Mr. Mills dissented for the same reasons he had dissented from
the directive adopted at the meeting of November 12, 1963; he
thought the Committee should modify its policy to one of greater
ease.
December 3, 1963
1. Authority to effect transactions in System Account.
Information on economic and financial developments since
the death of President Kennedy, while quite incomplete, sug
gested that the economy had shown little tendency to depart from
the path of continued moderate advance in over-all activity and
broad stability of commodity prices. Business and consumer
confidence appeared to have remained firm and widespread.
Unsettlement in sensitive commodity and security markets had
been minimal, and corporate stock prices had quickly recovered
from the losses suffered on November 22. Speculative switching
out of dollars into other currencies or gold had been limited.
More complete data on domestic activity in October confirmed
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@FedFRASER