After the Accord: A History of Federal Reserve Open Market Operations, the US Government Securities Market, and Treasury Debt Management from 1951 to 1979

Cover
Half-title
Series information
Title page
Copyright information
Dedication
Contents
List of Charts
List of Tables
List of Boxes
Foreword
Acknowledgments
Treasury Officials
Federal Reserve Officials
The Many Varieties of Dealer
1 Introduction
	Open Market Operations after the Accord
		Bills Preferably
		Repurchase Agreements
		Open Market Operations in Coupon-Bearing Debt
	Treasury Debt Management after the Accord
Part I The System and the Market in the 1940s
	2 The Government Securities Market
		Wartime Interest Rate Ceilings
		From the End of the War to the End of 1949
		The Primary Market
			Bill Auctions
			Cash Subscription Offerings
			Exchange Offerings
			Federal Reserve Participation in the Primary Market
		The Secondary Market
		The Postwar Secondary Market
		The Role of Dealers in Primary Market Offerings
		Appendix. The Objective of the Prohibition on Direct Purchases of Treasury Securities by Federal Reserve Banks
	3 Reserves, Reserve Requirements, and Reserves Management
		Reserve Requirements
			Demand Deposits
			Time Deposits
			Computation Periods
		Reserves in Aggregate
		The Inter-Bank Market for Federal Funds
		Reserves Management
		Appendix. Treasury Cash Management
		Appendix. Identifying the Sources and Uses of Reserves
	4 The Institutional Framework of Open Market Operations
		The Recognized Dealer Program
			Formalization of the Recognized Dealer Program
		Advent of the Qualified Dealer Program
			Revising the Institutional Framework of Open Market Operations
			Implementing the Revised Framework
			The Qualified Dealer Program at the End of the 1940s
		Appendix. Orderly Markets
			The September 1939 Intervention
			A Reexamination
Part II The Accord and Its Aftermath
	5 The Accord
		Run-Up to the Accord
		The Accord
			The Nomarketable Bond Offering
		After the Accord
	6 Taking Stock
		The New York Reserve Bank Study
			The Existing Framework
			Prospects for Fundamental Change
				An Exchange Market
				Direct Trading by Federal Reserve Banks
				Reliance on Nonmarketable Long-Term Debt
			Prospects for More Modest Changes
				Expanding the Number of Qualified Dealers
				Expanding System Supervision of the Treasury Market
			Relations between the System and the Treasury
			Summing Up
		The Ad Hoc Subcommittee Study
			System Intervention
				Bills Preferably
				Treasury Financings
			Dealer Qualification Requirements
			Market Intelligence
	7 New Directions
		Market Intervention
		Dealer Relations
			Market Intelligence
		Subsequent Actions
			The End of the Qualified Dealer Program
			Publicizing the New Restrictions on Market Intervention
	8 Challenging the New Restrictions
		The April 1953 Bond Offering
		The Mid-May Executive Committee Meetings
			The May 6 Meeting
			The May 13 Meeting
			System Open Market Account Activity and Reserve Availability in May
		Breakdown and Intervention
		Revisiting the Restrictions on Intervention
			Reimposition
		The Controversy Becomes Public
	9 An Additional Limitation on the Conduct of Open Market Operations
		A Swap Authorization
		Pushback
		Round Two
Part III The New Regime
	10 Monetary Policy in 1954
		Monitoring Economic Activity
		Monetary Policy
			The Directives
			The Minutes
		Why Free Reserves?
		Caveats
	11 Policy Instruments for Reserves Management
		Outright Purchases and Sales of Treasury Bills
		Repurchase Agreements on Short-Term Treasury Securities
			Repurchase Agreements before the Accord
				Postwar Reinstatement
				Linking the Floor on Repo Rates to the Treasury Bill Rate Instead of the Discount Rate
			Consequences of the Accord
			Repurchase Agreements in 1954
			Robertson's Resistance to System Repurchase Agreements
				The Opening Round
				Robertson's Critique
				A Proposal
			Reconciliation
			Subsequent Events
	12 Monetary Policy in 1955
		Economic Activity
		FOMC Directives
		Money Market Indicators
		Treasury Offerings of Coupon-Bearing Debt
			Attrition on Exchange Offerings
			Maintaining an Even Keel
			Increases in the Discount Rate
		Defensive Operations
			Repo Rates
			When Reserves Needed to Be Drained
				Two Work-Arounds
	13 Pragmatism in the Accommodation of Treasury Offerings
		Repurchase Agreements on Rights
		Intervention
		Intervention by Another Name
	14 1956 and 1957
		Defensive Operations
			Currency
			Float
			Treasury Balances at Federal Reserve Banks
			Forecasting Errors
		Accommodating Treasury Offerings
			The May 1957 Refunding
			Subsequent Offerings in 1957
		The Continuing Importance of Repurchase Agreements
Part IV Summer 1958 and Its Consequences
	15 The Summer 1958 Treasury Financings
		An Overview of 1958
		Run-Up to the June Financing
		The June Financing
			Results of the Financing
		The Aftermath of the June Financing
			The Treasury Enters the Market
			Trading on July 8
			Treasury Reveals Its Purchases
		Iraq and Lebanon
		The July Refunding
			Friday, July 18
			The Subscription Period (Monday, July 21 to Wednesday, July 23)
			Denouement
		Aftermath to the July Refunding
	16 Innovations in Treasury Debt Management
		A Need for Change
			Treasury Issuance of Coupon-Bearing Debt from 1953 to 1958
			Gaines's Critique
			Treasury Bills - A Bright Spot
			Friedman's Recommendations
		Treasury's Innovations
			Issuing and Redeeming Coupon-Bearing Debt on a Regular Schedule
			Twenty-Six-Week Bills
			Year Bills
			Cash Refundings
				The Problem of SOMA Reinvestments
			Advance Refundings
		Why the Treasury Declined to Extend the Auction Process to Coupon-Bearing Securities
	17 The Treasury-Federal Reserve Study of the Government Securities Market
		Market Statistics
			Advent of the Reporting Dealer Program
				Initial Discussions
				A Joint Staff Proposal
				Implementation
		Dealer Finance
		Prospects for a Dealer Association
Part V The End of Bills Preferably
	18 The 1958-1960 Gold Drain
		Gold in the International Payments System
		The London Gold Market
		The Place of Gold in FOMC Deliberations
		The Break-Out of London Gold Prices
		The Place of Gold in FOMC Deliberations After the Break-Out
		Contemplating the Future
	19 Operation Twist
		How Economists Viewed the Term Structure of Interest Rates
		The February 7 Executive Session of the Federal Open Market Committee
		Conducting Open Market Operations in Longer-Term Securities
		What, Exactly, Were the Objectives of the New Program?
		Disengagement?
		The Scale of Open Market Operations in Longer-Term Securities
		Abandoning the 1953 Operating Principles
		Operation Twist after 1961
			New Policy Instruments
			New Empirical Evidence
		The End of $35 Gold
Part VI The 1960s
	20 Treasury Debt Management in the 1960s
		Secular Variation of Marketable Debt
		Treasury Bills
			Regular Bills
			Bill Strips
			Tax Anticipation Bills
		Certificates, Notes, and Bonds
			Mid-Quarter Refundings
			Stand-Alone Offerings for New Money
			Advance Refundings
				Advance Refundings after Mid-1965
		The Two Worlds of Treasury Finance
			An Experiment in Auctioning Bonds
	21 Monetary Policy in the 1960s
		1961 to 1965
		1966
			The August Money Panic
		1967-1969
		Even Keel
	22 Repurchase Agreements in the 1960s
		System Access to Repo Collateral
			Relaxing the Two-Year Maturity Limit
			Eliminating the Two-Year Maturity Limit and Permitting Back-to-Back Repos
			System Repos on Agency Collateral
		Matched Sale-Purchase Agreements
		An Unsuccessful Effort to Introduce More Flexible Repo Pricing
Part VII Updating Market Infrastructures: The Joint Study
	23 The Association of Primary Dealers
		Arrivals and Departures
		Federal Reserve and Treasury Thinking About a Dealer Association
		Precipitating Events
		Formation of the Association of Primary Dealers
	24 Dealer Finance
		Dealer Finance and the Role of Money Market Banks as Residual Lenders
		Recommendations of the Joint Study Steering Committee
		Response of the Federal Open Market Committee
	25 The Government Securities Clearing Arrangement
		Settling Transactions in Treasury Securities before 1965
			Intracity Settlements
			CPD Settlement
		Origins of the Clearing Arrangement
		The Pilot Program
		Intracity Transfers
		Balancing the Demands of Competing Settlement Systems
		Remarks
	26 Securities Lending
		The Inpetus for a Federal Reserve Securities Lending Program
		The Joint Study Proposal
			The Staff Study
			Discussion by the Steering Committee
			The FOMC Response
		The 1969 Fails Crisis
		The FOMC Revisits Securities Lending
		Whether to Lend Against Short Sales
	27 The Book-Entry System, Part I
		Origins of the Book-Entry System
		Issues in Creating a Book-Entry System
		The First Implementation
		The Second Implementation
		What Remained to Be Done
Part VIII The 1970s
	28 Treasury Debt Management in the 1970s
		Marketable Treasury Debt in the 1970s
			Regular Bills
				Thirteen- and Twenty-Six-Week Bills
				Nine-Month Bills and One-Year Bills
				Bill Strips
			Irregular Bills
				The Fed's Direct Purchase Authority
			Notes and Bonds
			Average Maturity
		The Introduction of Treasury Note and Bond Auctions
			The May 1970 Refunding
			The First Auction
			Subsequent Auction Offerings of Notes and Bonds
			Consequences of Bond Auctions for Advance Refundings
			Fine-Tuning the Auction Process
				A Failed Auction and the Advent of Yield Auctions
				The End of Single-Price Auctions
			A Last Harrah for Fixed-Price Offerings
		The Advent of Regular and Predictable Note and Bond Offerings
			The Introduction of Two-Year Cycle Notes
			Extending Regular and Predictable Issuance to Intermediate-Term Notes
			Mid-Quarter Refundings and Fifteen-Year Bonds
		A Recapitulation of Treasury Debt Management Innovations in the 1970s
	29 Monetary Policy in the 1970s
		1970-1971
		1972-1973
		1974-1979
		Complications
			Fluctuations in Autonomous Factors
				Currency
				Treasury Deposits at Federal Reserve Banks
				Float
			Bank Borrowing at the Discount Window
			Consequences of Uncertainty
		The End (sort of) of Even Keel
	30 Open Market Operations in the 1970s
		The Operating Environment
			Intraweek and Interweek Variation in Bank Demand for Reserves
			Treasury Cash Management
		The Continuing Problem with Liquidity
			Competitive Repo Pricing
			System Repos with Bank Dealers
			Another Way around the Barn
		Outright Transactions in Federal Agency Debt
			Reconsideration
			Subsequent Events
Part IX Infrastructure in the 1970s
	31 The Secondary Market in the 1970s
		Primary Dealers
		The Interdealer Broker Market
			Managing the Risks of Blind Brokerage
			Separating Reporting Dealer Status from Primary Dealer Status
		The Rise of Screen Brokers
	32 The Book-Entry System, Part II
		The Insurance Crisis
		Expansion of the Book-Entry System
		Confronting the Limits of Technology
		The End of the GSCA and the End of Definitive Securities
	33 Coda
		Initial Actions
			The 1953 Operating Principles
			Even Keeling
		A Metaphor for Change
		Treasury Debt Management
			Auctions of Coupon-Bearing Debt
			Regular and Predictable Offerings
		Open Market Operations
		Failed and Supplanted Initiatives
		Inter-Agency Accommodations
			Operation Twist
			Treasury Cash Management
			Cash Management Bills
		Market Infrastructure
			Government Securities Clearing Arrangement
			Book-Entry II
			Securities Lending
			The Association of Primary Dealers in US Government Securities
		Recapitulation
	34 After 1979
		Treasury Debt Management
			New Securities
			Auction Innovations
		Market Infrastructure
			Drysdale
			ESM and Bevill, Bresler
			The Government Securities Clearing Corporation
			Access to the Interdealer Broker Market
References
Index