TIHE Federal Open Market Committee, charged with formation of Federal Reserve System openmarket policy, authorized at its meeting on May 17, 1951, an ad hoc subcommittee to study effect of its operations upon functioning of government securities market.' The subcommittee was organized during April and May, 1952.2 Beginning on June 9, 1952, subcommittee conducted secret hearings with various government securities dealers as witnesses.3 On November 12, 1952, ad hoc subcommittee presented its report.4 The principal recommendations of subcommittee were adopted by Federal Open Market Committee at March 4-5, 1953, meeting.5 The new ground rules were rescinded on June 11, 1953,6 but were reinstated by Federal Open Committee on September 24, 1953.7 The ad hoc subcommittee began with two assumptions: (1) that central bank control of bank reserves requires use of open-market operations and (2) that, in order to facilitate open-market operations, government securities market must have depth, breadth, and resiliency.8 According to subcommittee, the inside market, i.e., market that is reflected on order books of specialists and dealers, possesses depth when there are orders, either actual orders or orders that can be readily uncovered, both above and below market. The market has breadth when these orders are in volume and come from widely divergent investor groups. It is resilient when new orders pour promptly into market to take advantage of sharp and unexpected fluctuations in prices.9 In other words, a government securities market that is functioning properly is characterized by (1) orders to buy and sell both above and below current market pDrice; (2) a * Economist, Committee for Economic Development.