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fomc | 1,978 | Strengthening the foreign exchange value of the dollar or giving due regard to strengthening it. | 17 |
fomc | 1,978 | That's what it says here--giving due regard to strengthening the-- | 13 |
fomc | 1,978 | Really "supporting" is a better word, isn't it? | 13 |
fomc | 1,978 | Strengthening means you are going to continue to run it up, and I don't know how far we will run it up. | 25 |
fomc | 1,978 | Giving due regard to the developments in international exchange markets. | 11 |
fomc | 1,978 | Well, I think we need a little more positive statement. Support is okay. There's nothing wrong with support. I think we ought to leave something in here about the domestic markets. I really do. We shouldn't [base] our actions solely on international [markets]; that's the only point. Okay. Any other changes on page 14? | 68 |
fomc | 1,978 | Mr. Chairman, I would just suggest that the Committee be prepared to answer, when this reaches the public, whether in fact the Vice Chairman's wording means that the Committee would tighten or fail to lower the funds rate when the dollar is weakening. I think that question will inevitably come up at that time, whereas ... | 106 |
fomc | 1,978 | Well, does the Committee buy the Volcker language with the word "support"? MESSRS. PARTEE and COLDWELL. Paul, could you read it? | 35 |
fomc | 1,978 | Well, "while giving due regard to developing conditions in domestic financial markets and supporting the value of the dollar in the foreign exchange markets." That's the way you have it, Mr. Altmann? | 39 |
fomc | 1,978 | Well, "strengthening" or "supporting" the foreign-- | 14 |
fomc | 1,978 | Yes, I think that ought to go first. | 10 |
fomc | 1,978 | "...and to developing conditions in domestic financial markets." All right, I don't hear any dissents. On page 15 was there a problem, Steve? | 31 |
fomc | 1,978 | No, I assume we don't need "in an orderly fashion." And I would just like to call the Committee's attention to the last paragraph beginning on the bottom of page 15, which used to be in the directive and we have added it again in case the Committee wants to include this. It spells out what is implicit. | 66 |
fomc | 1,978 | Yes, we did it before and we took it out the last time because of the particular circumstance. I think it should go back in. Now that we have done all of this-- | 37 |
fomc | 1,978 | There's an extra sentence in here if we're going to drop M1. In the middle of the page [it says "weight is to be given to M1 if it appears to be growing at a rate close to or above]..." | 47 |
fomc | 1,978 | That whole section will come out. And we will take out the reference to M1+. Now that we have done all of this, let me ask Alan and Peter: Can you fellows live with this? | 41 |
fomc | 1,978 | It seems to be reasonably clear to me, Mr. Chairman. It's hard to be very disorderly within a 1/4 point range. The fed funds range is really quite a good one and very appropriate in the current market. | 47 |
fomc | 1,978 | Is the range too narrow for you? You're okay. Well, thank you all very much. We have a few minutes to get organized to make our trip, and I appreciate it. We will come back here for lunch. Now, we do have a meeting on December 19 for Christmas, and at that time Mark will be even mellower. | 70 |
fomc | 1,978 | Mr. Chairman, do we have a schedule for 1979? | 14 |
fomc | 1,978 | Do we have a schedule for '79 yet? We had a problem, Steve, about meetings. Chuck. | 22 |
fomc | 1,978 | We intend for the December meeting to have the report of our subcommittee on addressing the question of procedures and practices with regard to the new Humphrey-Hawkins bill. That will at a minimum require a change in the February meeting date and the July meeting date, so that we can meet sometime before we have to su... | 132 |
fomc | 1,978 | Because of the timing of these special reports. | 9 |
fomc | 1,978 | That's right. And because of the special reports, we really will have a longer-term thrust, I think, in policy as a result of the Humphrey-Hawkins changes in the Federal Reserve Reform Act. So, therefore, we might not need to meet quite so frequently; it would be perhaps more on a five or six week interval rather than ... | 95 |
fomc | 1,978 | Do you have enough information yet, Chuck, if we bought your proposal, to name the date for February? | 22 |
fomc | 1,978 | What did we decide--the 6th? | 10 |
fomc | 1,978 | We were thinking of the 6th and 7th. It might have to be a 2-day meeting. | 24 |
fomc | 1,978 | We will probably have to have two days of meetings because of-- | 13 |
fomc | 1,978 | This report has to be out on the 20th and it's the first one so we need some time. | 22 |
fomc | 1,978 | And likewise with July. | 5 |
fomc | 1,978 | If we are going to have a 2-day meeting, the sooner we get it on people's calendars-- | 21 |
fomc | 1,978 | What about July, Steve? | 6 |
fomc | 1,978 | I think it was--I may be off a little bit on the dates--somewhere around the 12th or 13th. I can't remember. | 32 |
fomc | 1,978 | Well, can you give us some tentative dates at lunch? | 12 |
fomc | 1,978 | We really ought to know that. | 7 |
fomc | 1,978 | So we can at least block out the time. | 10 |
fomc | 1,978 | Well, some of these schedules change all the dates throughout the year, so I think it might even be premature to give tentative dates. | 27 |
fomc | 1,978 | Those two we ought to be able to pin down, I think. | 14 |
fomc | 1,978 | Just February and July. Let's get February tied down for sure. | 13 |
fomc | 1,978 | Good morning, ladies and gentlemen. I appreciate everyone's willingness to meet so late in the morning, given your usual preferences for early sessions. I've taken the liberty of trying to develop a format for today's meeting that I hope will prove useful and beneficial. If not, we can certainly adjust it back. I would... | 415 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Thank you, Scott. Any questions? Henry. | 10 |
fomc | 1,978 | It's reported that support for the dollar in Europe may flag because of the oil price increase and the desire to see that reduced in terms of their local currencies. In fact, the drop that you note in the dollar has already undone something like 1/3 of the oil price increase, as far as the countries with strong currenc... | 75 |
fomc | 1,978 | Yes, well, if I seem a little agitated, I've just gotten off the phone with the Bundesbank on that precise point. And all I got was a lecture. Obviously, this is not official policy on the part of the German government or any other government, but I was told it was about time that we did something on fundamentals and a... | 118 |
fomc | 1,978 | What does that mean? | 5 |
fomc | 1,978 | Well, the selling was coming out of the Middle East more. The New York market itself was quiet; it was quiet from noon on. It was a heavy cluster of names that came out of the Middle East. | 43 |
fomc | 1,978 | Phil, did you have a question? | 8 |
fomc | 1,978 | Just to clarify that last comment, that's all. | 10 |
fomc | 1,978 | Yes, Dave? | 4 |
fomc | 1,978 | I have a question about the Greenbook; it's on this subject and perhaps Ted could address it. The last paragraph of the Greenbook supplement talks about the prospects for the dollar in the next year and concludes that with an improvement in the trade surplus and the relative inflation performance the dollar should abou... | 79 |
fomc | 1,978 | Well, I think it's fair to say there's a possibility it might improve, but the consensus of the staff here was that the dollar would be about where it was--and in fact the Greenbook was written in the early part of last week. | 49 |
fomc | 1,978 | Before this. | 3 |
fomc | 1,978 | Before this, so that suggests that there would be some improvement certainly from current levels. In fact, as far as the staff when we do this forecasting, it's sometimes helpful to use a number rather than words as we do in the Greenbook. So that tends to include a range of plus or minus 2 percent. Again, I think the ... | 100 |
fomc | 1,978 | Chuck. | 2 |
fomc | 1,978 | Just to follow up on that, though, Ted: If the price rise for oil means that our trade balances are less good by a few billion dollars by the end of the year, isn't it true that other countries would be proportionately even less well off as a result? That is, we import less oil than Germany, Japan, Switzerland, or Fran... | 94 |
fomc | 1,978 | Well, you reminded me of something that I didn't say. The other thing we had not included was the OPEC price rise. For the year as a whole, that has very little effect compared to what we've been assuming before. We've estimated now maybe 3/4 of a billion dollars for the year as a whole. However, it adds to the current... | 203 |
fomc | 1,978 | Relative to GNP or what? | 7 |
fomc | 1,978 | No, not relative to the GNP, but in terms of the oil bill. So the figures--that $2 billion is the largest number that's around. While it is true that we have a lower dependence on imported oil than Japan or Germany, we have a large overall oil bill and, therefore, any increase will add to the psychologically important ... | 74 |
fomc | 1,978 | It is also larger relative to our balance of payments, which I think is the main-- | 18 |
fomc | 1,978 | Yes, I think that's more important. | 8 |
fomc | 1,978 | You also have had the kind of psychological imponderables and the one that Henry raised. | 18 |
fomc | 1,978 | You mean our oil bill is a larger proportion of our imports than would be the case in Germany? | 20 |
fomc | 1,978 | Because our imports are small; the oil proportionate to GNP-- | 14 |
fomc | 1,978 | [Unintelligible.] | 6 |
fomc | 1,978 | That's hard to work through. Then our exports must also be smaller relative to-- | 16 |
fomc | 1,978 | They are. | 3 |
fomc | 1,978 | Scott. | 2 |
fomc | 1,978 | You also have the psychological imponderables beyond just the forecasting tools the economists normally use in terms of the expectations towards policy. Governor Wallich raised one point--that the Europeans may allow their rates to rise. And there is the feeling that perhaps the United States may let the dollar drop as... | 85 |
fomc | 1,978 | Thank you, Scott. We need an action to ratify the transactions since the previous meeting. I think the details have been circulated. Are there comments or objections? Hearing none, we will record that as approved and move on to domestic open market operations and the report from Mr. Sternlight. | 59 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Thank you, Peter. Questions or comments? | 9 |
fomc | 1,978 | Can you elaborate on your last comment a little bit? | 11 |
fomc | 1,978 | Well, as I mentioned, the dealers had a very poor year in 1977--the worst since we have kept records of this. As a group, the primary dealers had losses on the order of $100 million. This past year was not that bad, but it was a poor year. The figures we have together at this point suggest a magnitude of roughly $30 mi... | 257 |
fomc | 1,978 | Peter, have the losses been concentrated in a few dealers or are they pretty generally scattered throughout? | 19 |
fomc | 1,978 | In '77 losses were very general. Only a few dealers made very slim profits and almost all of them made losses. There's been more of a scatter--more dispersion--this past year. A few have turned in a not too bad performance and some have been quite heavy losers. | 56 |
fomc | 1,978 | Bob Black. | 3 |
fomc | 1,978 | What are the implications of that for monetary policy, Peter? | 12 |
fomc | 1,978 | Well, I think the Treasury depends on a vital, healthy government securities industry for the underwriting of its debt. I think market participants depend on a healthy industry just because many seek to make liquidity adjustments in the government securities market. We are dependent on it in the execution of monetary p... | 78 |
fomc | 1,978 | Phil. | 2 |
fomc | 1,978 | Peter, were the losses you're talking about concentrated in a few firms or is there a wide dispersion between profit and loss? | 24 |
fomc | 1,978 | Well, as I mentioned, there was wide dispersion in the '77 losses. In this past year, maybe about half of the firms have had losses. And some of the losses were quite substantial--enough to give, on balance, a loss for the industry as a whole. | 57 |
fomc | 1,978 | But there is still interest in becoming a dealer bank? | 11 |
fomc | 1,978 | Less than earlier, although there are still firms that seek to get in, not because they expect to come in and make a lot of money in the government securities but because they see it as necessary to round out their activity. A large corporate underwriting firm may see this as a desirable adjunct to its business in the ... | 65 |
fomc | 1,978 | Peter, many years ago there was some effort made to suggest that the Treasury should sell its securities on a commission basis and go like the stock market on the turnover in the secondary market. I haven't heard anything about this for years. Is that dead or does what you are describing here give any impetus to that d... | 63 |
fomc | 1,978 | Well, every once in a while one or another dealer comes up with the suggestion. I wouldn't say the Treasury might have to give it renewed consideration. | 30 |
fomc | 1,978 | Are any of the dealers that have a very broad base in other parts of the securities market using the government operation as a loss leader in any way? | 30 |
fomc | 1,978 | I think one could say that to some extent, yes. I think that's part of this desire to enter an industry where the profit experience has been poor recently. They still want to get in just [for the] prestige factor because they see it as a desirable way to peddle their corporate securities. | 61 |
fomc | 1,978 | Thank you, Peter. We need an action to ratify the transactions since the previous meeting. [A report] has been circulated. Are there any comments? Are there any objections? Hearing none we'll record that as approved and move to item 4 on the agenda, which is the staff report on economic situation by Jim Kichline. | 68 |
fomc | 1,978 | [Statement--see Appendix.] | 6 |
fomc | 1,978 | Normally I would say thank you. In this case I'm not sure I can say that. | 18 |
fomc | 1,978 | What part of Las Vegas did you come from? | 10 |
fomc | 1,978 | I think with these odds, Jim, we'll call you Jimmy the what. Well, anyway I'll thank you. Before we start our discussion of this, Steve, would you give us your comments on how you see these relationships? | 45 |
fomc | 1,978 | Thank you, Mr. Chairman. [Secretary's note: This statement was not found in Committee records.] | 21 |
fomc | 1,978 | Again, can one say thanks for that clear-cut definition of policy? Thank you for outlining the choices. Before we start the go-around, are there any particular points that need clarifying? If there are technical questions that could be handled elsewhere, that might be better. But if there are any things that should be ... | 70 |
fomc | 1,978 | This is sort of a belated question back to Scott Pardee. You referred to the lecture that you got from the Bundesbank this morning, Scott. | 31 |
fomc | 1,978 | That was after he lectured them. | 8 |
fomc | 1,978 | What do you think they mean by a credible anti-inflation policy? | 15 |
fomc | 1,978 | He said higher interest rates. He said it three times. And I said, "We've got higher interest rates." So we got into jawboning back and forth. Let me get back to fiscal policy, the whole range of things that we've been discussing over the month. The problem is simply that the numbers haven't come through to support all... | 149 |
fomc | 1,978 | You said Merry Christmas. | 5 |
fomc | 1,978 | That's later this week. | 5 |
fomc | 1,978 | Yes, Bones. | 4 |
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