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fomc
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Okay we have the ranges established. Thank you very much. Let's go to the next item--domestic open market operations and a report by Mr. Sternlight. You have been waiting patiently, Peter.
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[Statement--see Appendix.]
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Thank you very much. I believe our legislation passed over the weekend and included the collateral matter. Did you know that?
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No, I was not aware of that.
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So we thought we'd give you that good news.
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I'm glad to hear that.
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Ken will report to us on these legislative matters at lunch. I think that will help us a bit. All right, we need the ratification of the transactions since the previous meeting; [a report on them] has been circulated. Unless I hear an objection, we will consider those ratified. Hearing none, we so order. The next item ...
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Well, I think I batted 50-50 on the first round. Mr. Chairman, I have only two brief comments, one of which is not quite appropriate because I'm not sure what the Committee did or didn't do with M1+. With regard to the directive, the Committee might wish to give particular consideration at this meeting to a money marke...
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Steve, thank you. I happened to come to the same conclusion in the sense that I think we're dealing with considerable uncertainties and I would prefer to have a money market directive under these conditions. However, I don't find any one of these [Bluebook alternatives] too attractive. My feeling would be that we shoul...
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My inclination, more or less consistently with what I said earlier, would be to move the federal funds rate to 9 now, and maybe provide a range of 8-3/4 to 9-1/2. The M2 range for alternative [unintelligible] looks to me consistent with what we just decided for the long run. I don't know what you can say about M1 in pa...
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Ernie.
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Mr. Chairman, I find alternative 2 acceptable, but I would be prepared to put the bottom of the funds rate at 8-3/4. I guess I would construe Paul's comment as pretty much embracing that. I think there's no need to elaborate further.
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Okay. Phil.
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Mr. Chairman, I would get rid of M1 in this particular item and move to the money market directive. I think M2, contrary to what Steve says, ought to be our principal focus right now. It does have a heavy share of M1 in it anyway. And I agree with Paul that we ought to be watching with a great deal of care and maybe gi...
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Dave.
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I would go the money market directive. I would retain M1 but give much less weight to it and have an 8-3/4 to 9-1/4 funds range, and I too would move to 9 percent. I think it would be easy to get there and the market impact has already been accomplished with a discount rate increase.
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8-3/4 to 9-1/4?
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Yes.
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I didn't say, Mr. Chairman; I would prefer M2 at 5 to 9.
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5 to 9. Murray, did you get Dave's?
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I'd take alternative 2.
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Alternative 2. Thank you. Phil Jackson.
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I would drop M1 entirely from the operational specifications today. I would give M1+ a 3 to 7 range and M2 a 6 to 10 range. And I'd have a money market directive with an 8-3/4 to 9 percent range, going to 8-7/8 immediately. I recognize, gentlemen and lady, that that's really picking at straws and I've argued against th...
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Well, I think the money market directive is most important. And I regard a range for the funds rate of 8-3/4 to 9 as staying right where we are. We are at 8-7/8 percent, I think, and that just gives us a little latitude on both sides. I would argue that we ought to stay there for the time being for several reasons. Fir...
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Nancy.
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Well, I would favor a money market emphasis in the directive. I would also favor a federal funds range of 8-3/4 to 9 percent. I feel very strongly that we have moved very rapidly over the past four months and it's time to sit back and see what we've done. We certainly haven't done that to date. As to the aggregates, gi...
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Well, no, I said 7.
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It seems to me that's a better way than giving a range.
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Okay, thank you. Henry.
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Well, I would go with the money market directive. I would keep M1 but put a low weight on it--say, 1/4--and put 3/4 weight on M2, much as I am skeptical of M2 as a general proposition. But in this situation, I don't see any other alternative. I would like to have M1+ as an additional guide. For the amounts, which are v...
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Mark.
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I would just like to point out [something], Mr. Chairman, again making the distinction that nobody seems to find acceptable. Pre-ATS, assuming no adjustment were going to take place, if we had a 7 percent growth in M1 for the 2-month period, given the current expectation for October of around 3-1/2 percent, it would me...
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What's your bottom on that Mark?
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8-3/4.
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Okay. Willis.
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Steve, have the TT&L changes been factored into your November estimates?
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We would not expect that to have any impact on the money supply. We would expect it to go into effect somewhere in the first week of November. But we expect it to have an impact on the distribution of Treasury balances between the Fed and the banks and some effect, therefore, on Alan's operations in the market in the t...
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I think my preference would be a money market [directive] with an 8-3/4 to 9-1/4 [fed funds] range and alternative 2, I suppose, [given] our lack of knowledge of what's happening.
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Alternative 2?
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Yes.
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Okay, thank you. Next, John Balles.
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I like very much what Henry Wallich had to say and earlier than that, Frank Morris. I think in view of the uncertainty that we face in the near term on M1, M1+, etc., there's still an argument to be made--and I won't bother repeating it--for just placing more weight on M2. And I think that 3/4 weight would be a good th...
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Thank you, John. Bob Black.
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Mr. Chairman, I share the temptation of most people to use a money market directive. But I don't really like money market directives, even though there's a lot of uncertainty now, because I believe there would be a lot of uncertainty next time and if we do it this time, we may do it again. Despite that, I would go ahea...
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You'd rise above principle also.
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Rise above principle? No, I'm not really going to do that. I'm going to stick with principle and say that I'd really rather go with an aggregates directive, although I don't object to anybody else feeling the other way. The problem I have is that the short-run ranges to me don't really tie in very well with our long-ru...
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Thank you, Bob. Roger Guffey.
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Thank you, Mr. Chairman. I think we would adopt the ranges for M1 and M2 that are set forth in alternative 1. With respect to M1+, in view of the comments earlier, I have no objection to setting ranges for that for internal operating procedures. And if I was misunderstood before, I'd like to correct that. I have no obj...
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Thank you, Roger. Bones.
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Mr. Chairman, without repeating many of the other fine points made, I think we would opt for alternative 2, a money market directive, the range for the federal funds rate, though, of 8-3/4 to 9-1/4, and moving promptly to 9.
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Thank you, Bones. Bob Mayo.
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Well, my arguments have all been given. I would come out at 8-3/4 to 9 [for the funds rate], with 3-1/2 to 6-1/2--the 3-1/2 being irrelevant--for M1. A 6 to 10 percent range is okay for M2, and I'd leave it at that. I would interpret the present rate as being 8-7/8 and if we want to go above 9, I think we ought to have...
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Frank.
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I would opt for a federal funds range of 8-3/4 to 9-1/4 and move immediately to 9. I think we've got to keep probing until we find the level of rates that is going to stabilize the money supply. I also feel, given the degree of monetary restraint that now requires, that it would be associated with higher levels of inte...
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Thank you, Frank. Lawrence, are you clean-up hitter again?
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I'd say don't throw my M1 out. If we have M1, without ATS [I'd suggest a range of] 3 to 5 and for M2, 5 to 9. And I think most important of all is widening the federal funds range. If we try to stick to anything below 9-1/4 or 9-1/2, we can't possibly control the aggregates as we're trying to do. So I'd suggest 8-3/4 t...
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I missed your M1. What was it?
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3 to 5.
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Well, thank you all. Let's see what we have. A mess. Well, looking at the voting members, the consensus on the federal funds range is 8-3/4 to 9-1/4, I would say. There are a few 9-1/2s and there are a few 9s, but we don't have a majority of 9s without getting some 9-1/4s. On M2, it's about split between 6 and 10 and 5...
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That seems a little high to me. I was just mumbling to myself.
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Well, you may be right because not many people really put a number down. So there were several drops and several passing. What is your pleasure?
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The money market directive did win.
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Oh yes, I think the money market directive is clearly the consensus. And I would say using M1 in some way was a consensus, too. M2, if you want to split it, it's 5-3/4 to 9-3/4, obviously. Have you ever done that? And on the fed funds rate nobody is below 8-3/4 and [most have the top at either] 9 or 9-1/4. You [suggest...
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Well, of those who expressed [a view on] that, five expressed going to 9. That's a little less than half of the eleven [voting members]. The others didn't [say]. One of them was 8-7/8 and that was Phil Jackson. Nobody else expressed much--MR. PARTEE(?). I agree with Phil.
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What was yours, Ernie?
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I did not say [anything about] going to 9 immediately but I would prefer that.
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And I would stay at 8-7/8.
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We're going to have to try some go-arounds and see what we can come up with. One thing we're going to probably [agree on], if you look at the consensus, [is] the money market directive. So let's forget that; everybody or a very large preponderance seems to [prefer that]. I don't know of anyone who [favored] a monetary ...
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Just the voting members?
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Just the voting members.
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Would you repeat that?
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M1, not to exceed 7; M2, 5-1/2 to 9-1/2; federal funds, 8-3/4 to 9-1/4, and going to 9. How many of the voting members would vote for that? Six. That's a majority isn't it?
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That 7 is a little high.
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You didn't vote in favor of this?
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No, just because the 7 is too high.
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It's only because of that 7 that I agreed to the lower range on M2.
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We need some compromise to get a broader consensus here. I assume that the weight on M1 is not equal the way it usually is on this. I assume everybody kind of agreed with that.
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And that it would be a cap sort of thing?
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I don't want to take an official vote because I'd like to have more than a very thin majority. Paul, can't you see your way clear to this? It's a very reasonable proposition.
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Hang in there, Paul.
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Let me just argue the other side. The 7 is awfully high when we're getting this automatic transfer.
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Would you prefer a 6 to 10 on M2, and 6-1/2 on M1?
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No. I don't prefer that 6 to 10 either.
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You just said we're getting the automatic transfer; that makes it uncertain what M2 will be. The M2 will be higher than it would otherwise be.
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But M2 looks plenty high to me.
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We have a majority for this proposition but I think it's too thin and I'd like to see if we can gain some other support. Let's see. Paul didn't vote for it; Willis didn't vote for it, Nancy didn't vote for it, and Mark didn't vote for it. Well, let's try another one just for a second: [For M1] a cap of 7; for M2 a rang...
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Yes. MR. EASTBURN(?). Mr. Chairman, would you like to try what you had first with a cap of 6?
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Then 6 to 10 on M2?
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No, I'd leave it 5-1/2 to 9-1/2.
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I think you'll lose my vote.
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Let's just do it. If we had a cap of 6, and the others 5-1/2 to 9-1/2, and 8-3/4 to 9-1/4 going to 9, how many would vote for that? Seven. That got more votes than the other one did. Here's my final proposition. I'll give you a deal you can't turn down: M1, a cap of 6-1/2; M2, 5-1/2 to 9-1/2; and fed funds, 8-3/4 to 9-...
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Mr. Chairman, if you went to 9, could we then have the suggestion that there would be consultation before moving beyond 9?
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We could have that.
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We wouldn't ordinarily do it anyhow, unless we're at the top of those ranges.
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We went to the top of the range very quickly this last time.
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We were already there.
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We were already there last month. This month we're starting off with a much lower base.
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It was a very biased vote--biased toward the aggregates.
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We'll start out with 6-1/2 to see if we can get more than 7 votes.
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Oh all right. Don't you fellows who were for the 6 give up now. Come on vote. Seven. We lost somebody. Who'd we lose? Yes, we lost Willis.
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