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fomc | 1,978 | Come on, Willis, goodness gracious. All right let's call the roll on my last and final offer: 6-1/2, 5-1/2 to 9-1/2, 8-3/4 to 9-1/4 moving to 9, money market directive, and pray. | 67 |
fomc | 1,978 | Mr. Chairman, is there to be a supplemental M1+? I just want to be sure. | 21 |
fomc | 1,978 | I think it would have [unintelligible]. I don't think you can watch it and be guided. | 22 |
fomc | 1,978 | Just to be clear, M1 is kind of meaningless unless it's up toward the top of this limit. There's no weight really on anything below that? | 30 |
fomc | 1,978 | No one can [unintelligible]. If it gets up above 6-1/2 for M1, then-- | 26 |
fomc | 1,978 | No, we worry about it. [But] no matter how low it goes-- | 17 |
fomc | 1,978 | So I will vote for that. | 7 |
fomc | 1,978 | Vice Chairman Volcker Yes President Baughman Yes Governor Coldwell Yes President Eastburn Yes Governor Jackson Yes Governor Partee Yes Governor Teeters No Governor Wallich Yes President Willes No President Winn A reluctant yes. Nine. | 45 |
fomc | 1,978 | We'll have canceling dissents. Well, thank you very much. Next is confirmation of the date of our next meeting, which is Tuesday November 21. Luncheon is next. I have one other announcement. Yes. | 45 |
fomc | 1,978 | I think this Committee should decide tentatively today to reassemble the day after the President announces his anti-inflation program and address ourselves to that program and how it relates to our responsibility. [We ought to discuss] what we could do in the way of [unintelligible] a public announcement, which would u... | 291 |
fomc | 1,978 | What if this Committee at long last meaningfully [unintelligible] the President's program? | 20 |
fomc | 1,978 | I'm assuming that the statement will be something that either will have or can be reasonably construed to have a substantial body of economic content. | 26 |
fomc | 1,978 | I think this is a Board matter, not an FOMC matter. | 15 |
fomc | 1,978 | I think if it were done by the FOMC it would have the potential of carrying substantially more weight to the public, both domestically and internationally. | 31 |
fomc | 1,978 | May I just ask a couple of questions? If we were divided on the effectiveness of this program, I'm thinking this could backfire on us--the fact that we're meeting and it would become known. | 40 |
fomc | 1,978 | If we were not united, I wouldn't put out a statement. | 13 |
fomc | 1,978 | Then I would wonder, if we came out endorsing the program and commenting on parts of it favorably and other parts of it unfavorably, whether we politicize the FOMC. If we indicate that we really intend to take other kinds of actions that we haven't consulted with the President about, it [might] be read as counter to hi... | 105 |
fomc | 1,978 | I think we all will. | 6 |
fomc | 1,978 | On that one aspect of it, it seems to me that holding such a meeting quickly after the announcement would permit us to construe anything that we were proposing to do as being supportive of this program and thereby blunt the charge that we were not being supportive or that we were going contrary to his [program]. | 61 |
fomc | 1,978 | Mr. Chairman I think it's fraught with danger because, first of all, I think this will be a controversial program regardless of what the White House puts out. The first charge would be that our Chairman was sort of falling into line the next day. I think we'd lose our independence. If we want to speak out as individual... | 148 |
fomc | 1,978 | It's true that the FOMC is not in the habit of issuing press releases on other people's business. | 21 |
fomc | 1,978 | I think this matter has considerable danger to us, Mr. Chairman. Anyway, we don't have to decide [today]. We'd better take a look at what that program is and if it's going to be desirable for us to speak out, then we ought to do it. | 54 |
fomc | 1,978 | We'll probably be asked about it at the next-- | 10 |
fomc | 1,978 | Yes, but there's two things, the FOMC and the Board of Governors. And if we're asked, do we opt to respond as a Board position or should it be ducked? Or are they to be individual comments or what? Those things I think have to be handled with great care. Paul. | 62 |
fomc | 1,978 | The idea of a meeting has problems, I think, which have been alluded to here. I think Ernie has hit on a very good point as to the importance of this program and its [implication] for monetary policy. But maybe the burden is the other way, I would just suggest, in the sense of any announcement. [I say that] as one Comm... | 140 |
fomc | 1,978 | I think the probability is just the reverse; I think the probability is that he's going to have a statement which says this is going to be so effective that monetary policy can ease up. | 37 |
fomc | 1,978 | That's precisely what I'm worried about. | 7 |
fomc | 1,978 | And a statement is likely to be touchy for us. | 12 |
fomc | 1,978 | It's important that we respond to that immediately, it seems to me. | 14 |
fomc | 1,978 | Well, you can't-- | 5 |
fomc | 1,978 | We respond by actions and that's-- | 7 |
fomc | 1,978 | Frankly, I think that we'd all be so wise if we'd learn after these FOMC meetings not to take calls from the press. You have no obligation to answer calls from the press. You get drawn into these individual comments that lead them to pick through and surmise what we're doing. And I don't think the FOMC ought to come ba... | 162 |
fomc | 1,978 | I sure wouldn't like to see them say that in the first place. | 14 |
fomc | 1,978 | No, I'd say that we would like to see neither. | 12 |
fomc | 1,978 | More likely [it will be expressed as] a hope that interest rates would be able to come down. That's more likely the kind of sense-- | 29 |
fomc | 1,978 | There's no question if the President gets the wage rate down to 7 percent, then that makes it a hell of a lot easier for us. | 29 |
fomc | 1,978 | That's right. | 3 |
fomc | 1,978 | What I was about to say before I forget is that Larry Roos had circulated a statement, which I got just before I came in here and didn't have a chance to read, and he has asked that we put it into the record. So I wish you all would read it and it would be officially in the record. | 65 |
fomc | 1,978 | Thank you, sir. [Statement--see Appendix.] | 11 |
fomc | 1,978 | On another matter, Mr. Chairman, I've been unhappy this year with our experience with the Ms, and the meeting today convinces me that we're certainly not sure about how to measure them or what they are. I wonder if this isn't the time to reopen the question of our guidelines. Even though we've explored it and buried it... | 99 |
fomc | 1,978 | What is going on, Steve, in terms of looking at the definitions of money and the aggregates? | 20 |
fomc | 1,978 | Well, on definitions of money, we plan, as I mentioned before, to have within two months new definitions taking account of the fact that the world has changed. With regard to the reserve base as an alternative guide, we've had various definitions of the reserve base which from time to time have had varying degrees of p... | 104 |
fomc | 1,978 | I don't want to duck the issue. I think it's a subject that needs exploration and I assume the Committee has done it before. It came up when I was first [appointed] to the Board of Governors. And the decision was--and I didn't have the background--that no changes be made at that time. Now we're coming up with a lot of ... | 83 |
fomc | 1,978 | I would propose to bring it up by that route if Governor Partee agrees to it. | 18 |
fomc | 1,978 | Let's not come up to our January and February meetings where we're trying to decide on our new policies without some pre-thought because all of us need to digest these things. They're too complicated and too difficult. Well, we have a 2:30 meeting with your Committee, John [Balles], and we might be a little late. | 68 |
fomc | 1,978 | Well, ladies and gentlemen, thank you for your early attendance. It may turn out that you will like this arrangement and we will continue it in the future. There is only one danger; I have found that Parkinson is right that work will expand to fill the [available] time. So if we came in at eight o'clock, I'm sure you'd... | 165 |
fomc | 1,978 | The first order of business is the approval of the minutes for the actions at our meeting on October 17th. And all the intervening events are included, I believe. Is that correct? | 39 |
fomc | 1,978 | Well, they're included in the Policy Record. | 9 |
fomc | 1,978 | All right, are there any corrections or changes to the minutes? Hearing none, they will stand approved. Next item: Submitted to you on November 9 was a report of the examination of the System Open Market Account. I believe all of you have received a copy. We need your acceptance of that report. Are there any questions ... | 113 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | We don't want to settle for that. Thank you, Scott. Well, timing is everything and the timing wasn't too bad. Now we've got to be sure that the Treasury promptly issues some of the foreign currency denominated securities, which will allow resources for intervention without expanding the money supply in other countries.... | 84 |
fomc | 1,978 | Have they established an amount on that? | 8 |
fomc | 1,978 | Yes, of course. The amount we agreed on was up to $10 billion, which would be [issued] over a year or so. In December they probably will issue two to three billion in German marks through a private placement. And we're trying to encourage them to place, probably before the middle of December, an issue of one or two bil... | 151 |
fomc | 1,978 | Have they reached any decisions as to the maturities? | 11 |
fomc | 1,978 | The maturities we are discussing. But the market is really for 3-to 5-year notes in Germany. And these can be placed without being termed under German law "securities." They would carry 6 to 6-1/2 percent interest and would probably be non-callable. And if the Treasury wanted to hedge during the period of their being o... | 207 |
fomc | 1,978 | Scott, [you mentioned] the $4.6 billion of our intervention; what's the foreign intervention at the same time? The footnote in the Bluebook about $11 billion is for direct placements in foreign securities in the bill market by foreign accounts. | 51 |
fomc | 1,978 | I think it probably depends on how you measure; [they're] roughly about the same over the whole period. We've taken a bigger share than we normally have. Since November 1 our share has been bigger than the others. | 46 |
fomc | 1,978 | Then the $11 billion [referred to] in the footnote in the Bluebook is from a previous period? | 24 |
fomc | 1,978 | Well, [it's] the totality of central banks; a lot of central banks ended up buying dollars due to the Swedish [unintelligible] Riksbank. | 35 |
fomc | 1,978 | As you all would expect, the great difficulty in this operation has been in D-marks. I think the operation in yen and Swiss francs has gone remarkably well and the coordination has been superb. [In] our intervention in Swiss francs, Scott, we've had an equal 50 percent intervention by the Swiss National Bank in New Yor... | 261 |
fomc | 1,978 | And when we think of these numbers we must recall that the risk on our intervention through the swap line is shared 50 percent by the other parties. So our exposure, which is what Scott is giving you, on the profit [or loss] side is only half of the amounts that we intervened through our swap lines. So when you take it... | 93 |
fomc | 1,978 | All of our intervention in New York, which has been in German marks, is for our account. It's just in the case of the Swiss that-- | 30 |
fomc | 1,978 | So our risk is half that amount; that's all I wanted to point out. So what we have in risk is not the $3.6 billion but half of that, in terms of our exposure to gains or losses. Any further discussion? | 49 |
fomc | 1,978 | Mr. Chairman, could I ask two questions? I'll put them in the form of comments that you can react to. These are both looking to the future. One, I'm assuming that the market will look to our policy to be responsive to what happens in the aggregates. That is, they will not necessarily be disappointed if interest rates d... | 132 |
fomc | 1,978 | Well, on the first question, I think many people felt that one of the items in the November 1 package was a sharp rise in the federal funds rate. And to the extent that it has drifted back in the last few days, we've had a number of people calling us wondering why the Federal Reserve has trimmed this back, and there ha... | 261 |
fomc | 1,978 | Perhaps there's a difference between the markets and the authorities with respect to that. | 15 |
fomc | 1,978 | Well, I've said the same to some of our central bank colleagues in Europe as well. | 18 |
fomc | 1,978 | Thank you. | 3 |
fomc | 1,978 | May we have your approval to ratify the transactions since the previous meeting in the foreign exchange markets? VICE CHAIRMAN VOLCKER(?). So moved. | 32 |
fomc | 1,978 | Any dissent? Hearing none, we will record that as approved. Now we have Alan Holmes with recommendations with respect to foreign currency operations. | 27 |
fomc | 1,978 | [Statement--see Appendix.] [Secretary's note: The Manager made routine recommendations to renew maturing swap drawings.] | 23 |
fomc | 1,978 | Just to make it clear, Alan, to the extent that we do acquire these currencies, we may be paying these down instead of rolling them over. So your comment was to roll them over if we had not paid them off. | 46 |
fomc | 1,978 | If we do not, yes. | 7 |
fomc | 1,978 | Any comments or questions? Yes. | 7 |
fomc | 1,978 | One observation: The November 6 letter from Bill Wallace to Murray Altmann on the examination of the [System Open Market Account] had some numbers in it about a loss on foreign exchange operations, showing that as $121.7 million. If that is to be published ever, I think it would be quite important to distinguish betwee... | 119 |
fomc | 1,978 | I think in our published reports that is set out separately. Is that correct? MR. HOLMES(?). Yes, it is. | 27 |
fomc | 1,978 | Well, that's fine. I just want to make sure, because otherwise it would by very misleading. | 20 |
fomc | 1,978 | I think they're very distinctly separated in the public report. That's a good point, incidentally. That happened on somebody else's watch. I assume you were all here during that time; I wasn't. Any other comments? Then do we have your approval to follow the Manager's recommendations? Hearing no dissent, we'll so order.... | 78 |
fomc | 1,978 | Mr. Chairman, I'm sorry, but in addition to those routine [recommendations], I have some that aren't routine. | 24 |
fomc | 1,978 | [Statement continued--see Appendix.] [Secretary's note: The Manager requested approval to renew the basic swap agreements, in either revised or old form, with the understanding that the Desk would strive for uniformity as soon as arrangements could be worked out.] | 50 |
fomc | 1,978 | Any comment? Is that satisfactory to everyone? | 9 |
fomc | 1,978 | [Statement continued---see Appendix.] [Secretary's note: The Manager recommended that actions taken on October 31 involving the approval of a $5 billion limit on the total open position and the suspension of the intermeeting limit be continued. No formal action required.] | 52 |
fomc | 1,978 | What is the Committee's desire? Would that be satisfactory? I think the operation has been going well, and I do think we need this leeway until we stabilize. | 34 |
fomc | 1,978 | [Statement continued--see Appendix.] [Secretary's note: The Manager discussed warehousing foreign currencies for the Treasury.] | 23 |
fomc | 1,978 | Alan, as I recall, when I first came here this warehousing plan was approved, so you're merely reporting that it might be activated. | 28 |
fomc | 1,978 | That's right, at this stage now the Treasury may want some changes in it. There was an early exchange of letters between Secretary Simon and Chairman Burns. And while that covered warehousing in general, it related particularly to the special sterling arrangement that the Treasury shared with us back at the end of 1976... | 62 |
fomc | 1,978 | But the arrangement that was approved here in March, as I recall, was general. | 17 |
fomc | 1,978 | It was general in nature. That's right. | 9 |
fomc | 1,978 | As you described it. | 5 |
fomc | 1,978 | Right. | 2 |
fomc | 1,978 | Chuck, did you have a question? | 8 |
fomc | 1,978 | What do we do with the currencies, Alan? | 10 |
fomc | 1,978 | Well, we invest them in whatever we can. | 10 |
fomc | 1,978 | In Germany? | 3 |
fomc | 1,978 | In the currency of whatever country it happens to be. | 11 |
fomc | 1,978 | Whatever currency it happens to be. | 7 |
fomc | 1,978 | And would we pay a rate of return to the Treasury on the warehousing? | 16 |
fomc | 1,978 | No, we would get the interest. | 8 |
fomc | 1,978 | And they take the exchange risk, Chuck. | 9 |
fomc | 1,978 | It's a way of financing for the Treasury, really. | 11 |
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