Describes the prewar and wartime evolution of primary dealers and the supervision of those dealers by the Federal Reserve Bank of New York and the FOMC.

Explains the March 1953 decisions of the FOMC regarding the post-Accord execution of monetary policy, including (a) adoption of a policy of “bills preferably” in open market operations, (b) System reluctance to support Treasury offerings of coupon-bearing debt directly with outright purchases, and (c) System support for Treasury offerings with bill purchases.

Describes the imposition of an additional restriction on the scope of open market operations when the FOMC decided that System transactions should not be undertaken for any reason other than reserves management.

Sets the stage, previewing how the Accord of March 3, 1951, produced a sharp break in the conduct of open market and Treasury debt management operations and how institutional practices like “bills preferably,” the active use of repurchase agreements in open market operations, the extension of open market operations to coupon-bearing debt, and the advent of regular and predictable auction sales of coupon-bearing debt came about during the next quarter century.

Examines two disastrous Treasury offerings in the summer of 1958, including the near-failure of a large offering of one-year certificates of indebtedness, the decision of the Federal Reserve to intervene to prevent a failed offering, and the reaction of government officials, members of Congress, and others.

Discusses the initial implementation of monetary policy under the operating regime adopted in 1953, including the use of free reserves as a policy guide and the communication of policy instructions from the Open Market Committee to the manager of the System Open Market Account.

Describes the increasingly complicated operating environment of open market operations and the continuing problem with secondary market liquidity (as dealers became reluctant to carry large positions in the face of historically high and volatile interest rates). The FOMC responded by introducing repo auctions, by expanding the universe of dealers allowed to enter into System repurchase agreements, and by combining outright purchases with matched sale-purchase agreements when dealer inventories were low and the repo market became illiquid.

Describes the response of Treasury officials to criticism of its debt management policies and operating procedures. Describes the extension of regular and predictable auction offerings from thirteen-week bills to twnety-six-week and one-year bills, the introduction of cash (rather than exchange) refundings, and the introduction of advance refundings.

Describes the extension of the book-entry system to include securities owned by member banks and securities held by a member bank acting as a custodian for a customer.