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fomc | 1,977 | Most do, but I can't swear that every one of these eligible agencies do. In the case of GNMA pass-throughs, I don't know what the situation is, but that's one that the Treasury didn't want to get into the financing bank. Whether they have the power to force them out, I don't know. | 63 |
fomc | 1,977 | Well, I think you are right. I agree with the thrust that we gave the financing bank a lot of special support in listing it and putting it into our own assets, and so forth. | 39 |
fomc | 1,977 | As the memorandum made clear, if I didn't make it clear, we can, under the terms of this, buy the Federal Financing Bank issues themselves. They are currently financing through the Treasury. But if they ever finance themselves, they would be eligible for purchase by, and presumably would be purchased by, the [Federal R... | 67 |
fomc | 1,977 | Well, then, are we ready to thank Mr. Volcker and his [sub]committee? Is there anyone among us who is unwilling to thank Mr. Volcker? | 35 |
fomc | 1,977 | You want us to look at this other-- | 9 |
fomc | 1,977 | Let's think about further instructions to the [sub]committee. I'd like to have that before me, and we will think about that later. For the present, I think this is a good report, and is there any feeling on the part of the Committee that the recommendation not be carried out? Well, I'm instructed by the Committee to th... | 71 |
fomc | 1,977 | Mr. Chairman, does this mean that the Committee has adopted the new guidelines that are-- | 18 |
fomc | 1,977 | Should we move to adopt then? I so move. | 11 |
fomc | 1,977 | Second. | 2 |
fomc | 1,977 | Any questions? Gentlemen we are three minutes late. | 11 |
fomc | 1,977 | Gentlemen, we are ready to start our meeting. As you probably recall, we hold an organization meeting in March of every year, and there is a slate of officers which somehow has emerged, and I'll ask Mr. Broida to read the names of individuals on that slate. And after the names have been read, we will be ready for a rev... | 93 |
fomc | 1,977 | Chairman, Arthur F. Burns; Vice Chairman, Paul A. Volcker; Secretary, Arthur Broida; Deputy Secretary, Murray Altmann; Assistant Secretary, Normand R.V. Bernard; General Counsel, Thomas J. O'Connell; Deputy General Counsel, Edward G. Guy; Assistant General Counsel, Baldwin B. Tuttle; Economist, Steven H. Axilrod; Assoc... | 186 |
fomc | 1,977 | Now you have heard the names of the officers as read by Mr. Broida. These are suggestions for the Committee, and any other suggestions or set of suggestions will be entertained by the Chair at this moment. And Mr. Lilly is going to start the revolution. | 54 |
fomc | 1,977 | I would move that the nominations be closed and that the Secretary be instructed to cast a unanimous ballot for the nominees contained on the slate. | 27 |
fomc | 1,977 | Second the motion. | 4 |
fomc | 1,977 | The motion has been made and it has been seconded. And now ready for discussion. Any other nominations, any dissents? All in favor will kindly say aye. ALL. Aye. | 39 |
fomc | 1,977 | Any opposed? Next, we need to designate one of our Federal Reserve Banks to handle the System Open Market Account. And there is another opportunity to start a revolution. Now, the suggestion has been that the New York Bank might continue to perform this function. Is there a motion to that effect? | 59 |
fomc | 1,977 | So moved. | 3 |
fomc | 1,977 | Motion has been made and inaudibly seconded. Any dissent? Very well, now that we know who will handle the System Open Market Account, or which [Reserve] Bank will handle it, we have to decide on the individuals who will perform the necessary functions. And we need to select a Manager of the System Open Market Account, ... | 151 |
fomc | 1,977 | [Unintelligible]. | 6 |
fomc | 1,977 | Seconded. | 3 |
fomc | 1,977 | Motion has been made very audibly that Messrs. Holmes, Sternlight, and Pardee be reappointed. | 23 |
fomc | 1,977 | Do we have an indication that they would accept the appointment? | 12 |
fomc | 1,977 | We have no such indication known, but we can proceed and make our decision, and then the individuals involved can make theirs. And if there is any dissent? I hear none. And now we need to act on the minutes on the February meeting. Is there a motion to approve? | 57 |
fomc | 1,977 | So moved. | 3 |
fomc | 1,977 | Motion has been made and probably seconded. And not hearing any objections, we will turn to Mr. Holmes's report on the foreign currency outlook. | 30 |
fomc | 1,977 | [Secretary's note: This statement was not found in Committee records.] | 14 |
fomc | 1,977 | Thank you. I am a little puzzled by the attitude of the Swiss National Bank. Why did they intervene? Why didn't they let the Swiss franc decline? They have been worried for some time. | 39 |
fomc | 1,977 | I think it was the extent that it was declining on that particular day, Mr. Chairman. It moved by about 3/4 percent, as I recall. | 33 |
fomc | 1,977 | What's wrong with that? | 5 |
fomc | 1,977 | Basically, I think the Swiss are completely happy to see the Swiss franc depreciate. But they do believe in orderly markets and wanted their presence felt. | 30 |
fomc | 1,977 | I'm still puzzled. | 4 |
fomc | 1,977 | There's a bigger drop of the Swiss franc relative to the mark. Considerably bigger than relative to the dollar. And it's their biggest trading partner. And I think they're a bit ambivalent. They worry a bit about inflation. I don't think they--I don't get the impression they're terribly unhappy, but they are not entire... | 78 |
fomc | 1,977 | Well, I have been wondering about that. | 9 |
fomc | 1,977 | There is an ambivalence there. | 7 |
fomc | 1,977 | Alan, you interpret the Swiss franc decline as a relaxation of tensions, which seems plausible. At the same time, we've got the rising gold price, usually stated to mean the opposite--do you see some way of reconciling this? | 48 |
fomc | 1,977 | Yes, I would think the rising gold price can be explained by two causes. One, the continued demand from the Mideast and the Far East, which is not really affecting any concern about European currencies. And second, with a rise in industrial production around the world, I think industrial demand for gold has picked up r... | 93 |
fomc | 1,977 | It looks as though there were a solid, nonspeculative [demand] under that price. | 20 |
fomc | 1,977 | I think it's partly that, yes. | 8 |
fomc | 1,977 | Is there any concern, Alan, about the viability of South Africa as a gold producer because of their racial problems? | 23 |
fomc | 1,977 | Well, from time to time that comes up. But I don't think that has really been a factor in gold prices. | 24 |
fomc | 1,977 | It was reported in the last Basle meeting, though, that there has been more investment interest from the United States to be seen in the European gold market--investor interest, whatever that means. But both from the spot and the futures market. | 50 |
fomc | 1,977 | Does it reflect also a concern over the cost of production of gold? | 14 |
fomc | 1,977 | Not that I know of. | 6 |
fomc | 1,977 | I have heard this--that there is a possibility a few of the mines are running into problems, thinner veins, and so forth. | 27 |
fomc | 1,977 | But the market really has handled the IMF sales--which they were very frightened about when the IMF started--remarkably well. In fact, the price seems to go up just before each auction. | 39 |
fomc | 1,977 | Any other questions about Mr. Holmes's report? If not, is there a motion to approve transactions of the Desk? | 24 |
fomc | 1,977 | So moved. | 3 |
fomc | 1,977 | Seconded. | 3 |
fomc | 1,977 | I take it the motion has been made, seconded; I hear no dissent. Do you have any recommendations, Mr. Holmes? | 27 |
fomc | 1,977 | Mr. Chairman, as I said, it has been a very dull period, and I have no recommendations at this time. We do have the Swiss franc swap maturing on April 29, but we will pay it off before we get there. | 50 |
fomc | 1,977 | All right, we'll turn now to the domestic economy. Mr. Zeisel. | 16 |
fomc | 1,977 | [Secretary's note: This statement was not found in Committee records.] | 14 |
fomc | 1,977 | Thank you very much, Mr. Zeisel. We will hear now from members of the Committee. Mr. Black, please. | 26 |
fomc | 1,977 | Jerry, I found rather interesting your comments on the outlook for federal expenditures, particularly so far as regards the shortfalls we've had, and was interested to know that you expect this to continue. Could you elaborate a little, to the extent that you know, why this has taken place? I have read everything I can... | 79 |
fomc | 1,977 | Well, nobody really does. The amount of the shortfall at this point seems to be, including a rough estimate for February, in the $9 [billion] to $10 billion range. It seems to be distributed fairly widely among expenditures categories, including unemployment insurance, Veterans Administration payments, defense, and sev... | 169 |
fomc | 1,977 | Are you sure of that? | 6 |
fomc | 1,977 | Yes, our people tell us that the average spending has gone below the anticipation, as of October in this case, by about 1 percent on average for about two decades and about 2 percent for the last half-dozen years. | 47 |
fomc | 1,977 | I'd like to see the full evidence. | 8 |
fomc | 1,977 | Probably ranges widely, some years below and some years above. Because I can certainly remember a period in the middle '60s--they ran consistently above estimates. | 32 |
fomc | 1,977 | Yes, there were times when it ran above. But as I recall the figures, there were years and years, many more years, in which spending ran below, than above--over the last decade, roughly. I might make an additional comment. A number of these items are not likely to affect activity. They are financial in nature--at least... | 219 |
fomc | 1,977 | Did you say it was $9 [billion] to $10 billion? Was that for January and February? | 23 |
fomc | 1,977 | That was for February. | 5 |
fomc | 1,977 | I thought it was running around 7. | 9 |
fomc | 1,977 | I may be wrong, I think the figure was 7 in January and an estimate of 9 in February. But that's roughly-- | 27 |
fomc | 1,977 | This is cumulative for the year? | 7 |
fomc | 1,977 | That's a cumulative figure. | 5 |
fomc | 1,977 | Mr. Chairman, I heard a theory yesterday that the new budget procedure may have something to do with this. That under the present system it is more difficult to get supplementary budgets through the Congress. And therefore the agency heads tend to put a little more into the budget than they might otherwise have done. W... | 71 |
fomc | 1,977 | Well, there's also been the theory, Mr. Chairman, as you know, that with the advent of greater inflation in the last few years, agencies have padded their estimates more, just as a protective device. And that all of this hasn't been wrung out by the executive budget process. | 58 |
fomc | 1,977 | Well, you know, none of this as far as I know has been planned even remotely, but it does put the Administration in an ideal political position. As far as the expansionists are concerned, the Administration could point to its fiscal package, and here is a policy for stimulating our economy by manipulating the budget. A... | 225 |
fomc | 1,977 | Well, they are paying attention to it, though, Mr. Chairman; there is an effort being made to find out why the shortfall. And I certainly get the impression there's every intention to try to remedy the situation. So I think the thrust of what Jerry said--that some of the shortfall may well be made up in the months to c... | 91 |
fomc | 1,977 | I think it is. | 5 |
fomc | 1,977 | Some of the shortfall would be made up by legislative increase in the expenditures for the second quarter, which in a sense are already built-in by $3 [billion] or $3-1/2 billion. | 44 |
fomc | 1,977 | Yes, Mr. Balles, please. | 9 |
fomc | 1,977 | I'd like to come back to Jerry's remarks on productivity and unit labor costs and ask him a question. As I look at the pattern for last year, it's somewhat disturbing if it were to be continued into this year, in the sense that, quarter-by-quarter last year, the rate of increase of real final sales changed pace as the ... | 209 |
fomc | 1,977 | Well, the productivity performance, if I may focus on that immediately, is very directly related to the weakness in real activity through much of the year. And typically, except in certain cyclical situations, one doesn't get good gains in productivity associated with sluggish gains in real output. And we're anticipati... | 360 |
fomc | 1,977 | That's for the year as a whole. | 8 |
fomc | 1,977 | That's for four quarters versus four quarters in 1972. | 12 |
fomc | 1,977 | Oh, I see. | 5 |
fomc | 1,977 | Yes, Mr. Roos. | 7 |
fomc | 1,977 | May I borrow Mr. Zeisel? Do you feel comfortable you've projected a growth through the four quarters for this year in GNP of about 6-1/4 percent? And I assume that's predicated on M1 and M2 growth roughly in the middle of the ranges that are presently set. Our evidence indicates that it would be difficult to reach that... | 164 |
fomc | 1,977 | Well, I will comment briefly and then turn the floor over to Mr. Axilrod for his reactions to that. As you know, our projections are basically judgmental in nature, and the translation, therefore, is not a rigorous mathematical translation. However, we do have an econometric model we use for simulations for this purpos... | 110 |
fomc | 1,977 | It assumes the rate of growth in velocity, which is sort of historically high, isn't it? | 19 |
fomc | 1,977 | Well, Mr. Axilrod, I think-- | 11 |
fomc | 1,977 | Yes, we would have to have a rather substantial growth in velocity over the next year. As you know, in this recovery, we have had periods of very substantial rates of growth of velocity of M1, particularly because of the change in financial technology. We expect some of these changes in financial technology to be conti... | 247 |
fomc | 1,977 | All right. Mr. Baughman, may we hear from you now. | 16 |
fomc | 1,977 | Mr. Chairman, I have heard some rumblings in recent weeks as people apparently are beginning to discover that, with the change in tax laws, they cannot use certain benefits under drilling and exploratory work as offsets against other income to the extent that they could previously. This is generally described as, in ef... | 175 |
fomc | 1,977 | In total manufacturing. | 4 |
fomc | 1,977 | For new manufacturing capacity. I would assume there is no reason for expecting those to be realized, but they do indicate what present thinking and intentions are. And then it occurred to me that, just to avoid the impression that Texas is a one-industry or one activity-center state, I possibly should report that thei... | 166 |
fomc | 1,977 | Well, it's clear that Texas is doing well. [Does] any member of our group differ at all basically from Mr. Zeisel's exposition? | 30 |
fomc | 1,977 | I guess we do in San Francisco, Mr. Chairman. In tracking down the somewhat less optimistic forecast that we have on real GNP--for example, the Board staff has 5 percent year-over-year, we have 4.3; Board staff has 6.2 percent gain fourth quarter-over-fourth quarter and we have only 5.5--it appears that our staff is ap... | 149 |
fomc | 1,977 | No, they're not [higher]. Our estimates are actually a bit lower. The immediate spending of the rebates--we estimate that it's about 20 to 25 percent, cumulating to a total of only about 1/3 by the end of the year. | 53 |
fomc | 1,977 | Well, currently the two staffs diverge, and my own thinking is very close to the thinking of our staff, but as far as the fiscal package is concerned, I don't think it is going to make any difference one way or another as far as the real economy goes. But whatever positive influence comes from a little larger spending ... | 166 |
fomc | 1,977 | I might just note, Mr. Chairman, that our projections, prepared at the New York Bank, track the Board's projections so closely that I suspect collusion. Except, fortunately, the pattern changes a bit through the year as whole. They come up to the same tenth of a point on both the real growth and the prices, and there's... | 79 |
fomc | 1,977 | Cut the telephone lines between them. | 7 |
fomc | 1,977 | The pattern is somewhat different in that we show a slightly more rapid growth in the second quarter and the third quarter, and then it tapers off in late '77 into '78. The point I want to make is that the analysis suggests somewhat more pressure on interest rates, I think, than is suggested by the remarks that were ju... | 194 |
fomc | 1,977 | Thank you, Mr. Volcker. Mr. Lilly now, please. | 15 |
fomc | 1,977 | Well, I have a little concern, Jerry, with your projection regarding chemicals and the primary metals and other industrial materials. I think the last couple of weeks there has been a substantial pushing up of prices in this area, and I am wondering if we are giving sufficient attention to it, because this could be the... | 77 |
fomc | 1,977 | We have been very concerned with the increase in commodities prices, Governor Lilly. There has been a range of increases among nonferrous metals; lumber, which has edged off a bit. A number of food and related items--all rather special situations, such as the coffee price run-up. But as far as the metals [are concerned... | 159 |
fomc | 1,977 | Well, I am concerned that it may be the beginning of a trend rather than an episode of it. | 21 |
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