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fomc | 1,979 | Mr. Chairman, it would be the currencies that the Desk is now authorized to hold, i.e. the currencies of our swap partners. | 28 |
fomc | 1,979 | They are all listed here. It's a limited list of about 10 or 12-- | 18 |
fomc | 1,979 | It's [14]. | 4 |
fomc | 1,979 | They include the Austrian shilling, the Belgian franc, the Canadian dollar-- | 15 |
fomc | 1,979 | I'm not saying we'd hold them all but-- | 9 |
fomc | 1,979 | No, no. But this is the list: Austrian schillings, Belgian francs, Canadian dollars, Danish kroner, British [pounds] sterling, French francs, German marks, Italian lire, Japanese yen, Mexican pesos, Netherlands guilders, Norwegian kroner, Swedish kronor, and Swiss francs. | 60 |
fomc | 1,979 | These are our swap partners. | 6 |
fomc | 1,979 | Yes. That's the list. We could do anything else we want. I think the point of limiting it to a billion dollars in any one currency is a wise one. And I [agree] that even if we want to do this, we would be very wise to have consulted with the Hill and with the Administration before we [proceed]. I think those are very g... | 77 |
fomc | 1,979 | Let me say something about that. It may not fit the market situation; it may make no sense, for instance, to accumulate yen. | 28 |
fomc | 1,979 | I was assuming we'd accumulate marks. | 7 |
fomc | 1,979 | We would probably, predominantly. That is the big intervention currency. I see your point of limiting risk but I think it would be better to limit risk by limiting the overall amount and then leave it to the Manager [to decide] what is useful in these relatively small amounts. I'd prefer that rather than have the Desk ... | 94 |
fomc | 1,979 | Well, can't we work around that through BIS and some other procedures to get hold of-- | 18 |
fomc | 1,979 | We could limit it to $1 billion without prior permission from the Committee. | 15 |
fomc | 1,979 | Well, I just think we have a possible exchange loss and we would be putting on some reserve currency pressure and ought to be very careful about that. | 30 |
fomc | 1,979 | John Balles. | 4 |
fomc | 1,979 | On balance, without going through all the arguments, I have to join Chuck in opposing this. I think the disadvantages outweigh the advantages. I'm really concerned about the point of departure being one which could fairly easily get us away from countering disorderly conditions and into imposing an official view of wha... | 80 |
fomc | 1,979 | Bob, did you want t o comment? | 9 |
fomc | 1,979 | I find myself supportive of it, Mr. Chairman. It seems to me that it does give us another tool. And I certainly trust this Committee and even more I trust the Manager that in the intermeeting periods the spirit of this would not be violated. | 51 |
fomc | 1,979 | We lose Managers if the spirit gets violated! | 9 |
fomc | 1,979 | I agree with John that I don't want to see this used as a super intervention tool or--well, he didn't say this--as a way to throw our weight around or something like that. But I think it can be quite supportive of additional flexibility in monetary policy in a broad sense. Like Phil, I think we have to be very careful ... | 116 |
fomc | 1,979 | Thank you. Ernie Baughman. | 9 |
fomc | 1,979 | Mr. Chairman, I don't have a voice in this matter today, but if I did it would be on the negative side. It seems to me the potential disadvantages tend to outweigh prospective advantages. | 39 |
fomc | 1,979 | Thank you. Chuck. | 5 |
fomc | 1,979 | I just want to make one additional comment on another aspect that perhaps Committee members haven't thought of. I have agreed to talk to the farmers who circled the building a few weeks ago and who want to borrow from the Federal Reserve at a low rate. I will tell them that we can't use Federal Reserve credit for that ... | 172 |
fomc | 1,979 | I thought we were doing it so the crops would sell better abroad and maybe get more money on the farm. That's what I thought we were doing. That's what Henry has been teaching me. | 38 |
fomc | 1,979 | It's pretty hard to do that with the agricultural bloc they have in Europe. | 15 |
fomc | 1,979 | It's still our biggest export. MR. HOLMES(?). Well, I would not view this as supporting the mark or other currencies at a low rate but as maintaining an appropriate rate for the dollar if we can agree that there is such a thing. | 50 |
fomc | 1,979 | Oh, so it isn't disorderly conditions. It's an appropriate rate for the dollar. | 17 |
fomc | 1,979 | I think [it's helpful] if we can accomplish an appropriate rate for the dollar. For example, suppose this afternoon the mark goes to 2 - l / 2 marks per dollar. Is that good for the United States? I'm taking an exaggerated-- | 51 |
fomc | 1,979 | I have exactly three minutes to wind up this meeting so we can get across the street for lunch. I hope we will have time for discussion, particularly of the monetary improvement program, at lunch. | 39 |
fomc | 1,979 | May I make just one comment? There is no government or central bank in the world that doesn't have this power. We are the only one; we have gold. | 33 |
fomc | 1,979 | Let's quickly check [vial a tentative vote on this proposition to indicate an agreement in principle--not on the details. If there is a sentiment in favor holding up to $2 billion, let's come back at another meeting with the details worked out and some specific proposals. We don't need to work on that proposal if there... | 81 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | John Balles. | 4 |
fomc | 1,979 | No. | 2 |
fomc | 1,979 | Bob Black | 2 |
fomc | 1,979 | Yes, Mr. Chairman, up to that [ $ 2 billion] point. | 17 |
fomc | 1,979 | Phil Coldwell. | 4 |
fomc | 1,979 | With the intervention limits and limits per currency. | 9 |
fomc | 1,979 | If those details came in to your satisfaction. Bones. | 11 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | No. | 2 |
fomc | 1,979 | Yes | 1 |
fomc | 1,979 | Yes | 1 |
fomc | 1,979 | And I think I would favor it. That means we have 8 to 2 [in favor]. And we can have a unanimous vote if we can get John and Chuck to straighten up and fly right! How about those who are not voting members? I'd just be curious because I would like to know what the general feeling is. Ernie? | 70 |
fomc | 1,979 | I'm negative. | 3 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | NO. | 2 |
fomc | 1,979 | No. | 2 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | And we have First Vice Presidents McIntosh and Smoot. | 13 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Yes | 1 |
fomc | 1,979 | I think there is a sentiment, then, to come back with a specific proposal, Steve and A l a n . Thank you very much. Unless there is further business we will confirm our meeting on May 22 when the fever will have broken, everything will be cool and you will vote unanimously for sound monetary policy! | 64 |
fomc | 1,979 | Good morning, ladies and gentlemen. Welcome to our FOMC meeting. Initially I would like to inform YOU--I think everyone knows this--of the passing of Angus Powell last Saturday. He Certainly was a dedicated [Reserve Bank] Chairman and was courageous during his years of illness. And we certainly shall miss him. Second, ... | 1,005 |
fomc | 1,979 | In proper interbank rivalry, Mr. Chairman, I am deeply hurt that you didn't bring the T-shirt that we gave you. | 26 |
fomc | 1,979 | Oh, yes, I must bring in the T-shirt. But I haven't got it because immediately when I brought it home my wife confiscated it. And she said she wanted one from every Federal Reserve Bank so she could have 1 through 12, or A through L or whatever it is. Is it L or K? What's San Francisco? It's L. I thought I was right th... | 89 |
fomc | 1,979 | I must add for the benefit of everyone else that this T-shirt is being offered to member banks for $ 2 . 0 0 and to nonmembers for $10.00. It's part of our improvement of service! | 46 |
fomc | 1,979 | That's a reversal of policy. We have been r u i n g the Fed for a long time offering things to nonmembers for $ 2 . 0 0 and to members for $10.00. | 43 |
fomc | 1,979 | Mr. Chairman, most of us don't have as much fat in our budgets as Chicago does to buy these T-shirts! | 24 |
fomc | 1,979 | Mr. Black, I shouldn't admit this, but the T-shirt was issued by our credit union, which is independent. | 24 |
fomc | 1,979 | Well, let's move on to our meeting. Our first action is to approve the minutes of the meeting of April 1 7 . These have been circulated. Are there any changes or corrections? Hearing none, we will record those as approved. Second is a report on foreign currency operations since the last meeting, and Gretchen Greene is ... | 75 |
fomc | 1,979 | [Statement--seeAppendix.] | 7 |
fomc | 1,979 | Thank you, Gretchen. Any questions? Yes, Dave. | 13 |
fomc | 1,979 | Take Henry's question first, because I have a question for Ted Truman. | 15 |
fomc | 1,979 | Gretchen, when you operate as agent for the Bank of Japan, can you tell anything from the way the orders are given and what rate indications are given about how forceful they want to be in defending the yen? | 45 |
fomc | 1,979 | Not completely because their instruction is based on their close in Toyko. And how that relates to rates in New York depends very much on what has happened between the time of the close in Toyko and our opening in New York. In general I would say their instruction has been to limit the further weakening of the yen in N... | 84 |
fomc | 1,979 | Dave. | 2 |
fomc | 1,979 | This question comes out of the Greenbook Supplement, so I would like to ask Ted if I may. With the improvement of the balance of payments position, why don't you expect a better performance of the dollar? | 42 |
fomc | 1,979 | The improved balance of payments position does give us encouragement, as Gretchen has pointed out. But our feeling is that we probably have some ways to go. The United States current account position still is in deficit in a world where Japan, Germany, and Switzerland still have--[though it's1 less substantial--a surpl... | 281 |
fomc | 1,979 | Chuck. | 2 |
fomc | 1,979 | Gretchen, I've been interested in the strength of the gold price during this same interval when the dollar has been strong. What do you hear about that or what is your view on the movement in the gold price? | 44 |
fomc | 1,979 | Well, there is a variety of factors: demand, supply, and psychological. On the supply side, of course, is the fact that the Treasury has announced a halving of its [gold] auction [amounts] and the IMF has announced a modest scale-back in the amount it will auction. There appears to be some lesser willingness on the par... | 198 |
fomc | 1,979 | It could also be consistent with your comment that it's not so much that people have improved their opinion of the outlook in the United States but that the outlook has deteriorated everywhere else. So all currencies are looking almost equally bad, which leaves gold as the alternative. | 52 |
fomc | 1,979 | Well, the demand for gold is quite strong, interestingly enough, in Zurich and in Paris, too. | 22 |
fomc | 1,979 | Zurich and Paris? | 5 |
fomc | 1,979 | Where in fact the price of the local currency has gone up much more [than the dollar]. | 19 |
fomc | 1,979 | Phil. | 2 |
fomc | 1,979 | Gretchen, what is the level of our yen balance at the moment? | 16 |
fomc | 1,979 | It's just under $200 million, about $195 mil 1ion. | 15 |
fomc | 1,979 | Are we participating in yen intervention? | 7 |
fomc | 1,979 | We haven't in recent weeks. We have not for some time. We have not purchased any yen since the last FOMC meeting. | 27 |
fomc | 1,979 | [Our earlier purchases amounted to] $185 million [equivalent], as I recall. Of course, [their dollar value] changes with the value of the yen, doesn't it? So I'm not sure [what it is] from day to day. Our next order of business is to ratify the transactions in foreign currency operations since the last meeting. I suppo... | 142 |
fomc | 1,979 | [Statement--seeAppendix.] | 7 |
fomc | 1,979 | Thank you very much, Peter. Questions or comments? Henry. | 13 |
fomc | 1,979 | Peter, you mentioned that prior to the Treasury financing there was a change in the funds rate [objective] and you moved expeditiously so that the market would be apprized of that. How important do you regard it generally, other than in circumstances associated with a Treasury financing, that the market be apprized of ... | 69 |
fomc | 1,979 | Well, the System has its objective and I think we want that objective to be apparent to the market. We felt at the time that it was particularly important that the message get through clearly and quickly or it might otherwise have [been an issue as the Treasury auction] approached. Sometimes it's convenient to let the ... | 204 |
fomc | 1,979 | Well, Peter, thank you very much. Excuse me, Phil, [did you have a question]? | 22 |
fomc | 1,979 | Peter, in your visits with the dealers what is your reading now of the dealer market? Are they becoming pessimistic about developments in the economy and market prospects? | 32 |
fomc | 1,979 | I'd say they've become more conscious of the flattening or softening in the economy at least for the near term. Whereas a few weeks ago there was a fair amount of sentiment that rates were likely to push higher in the near term, I'd say that is not the expectation at the moment. At least there is a feeling that for the... | 160 |
fomc | 1,979 | I haven't looked over [the data] but have they followed that questioning judgment in terms of their portfolios? | 21 |
fomc | 1,979 | They have. There had been a tendency to keep their inventories of securities very low or modestly short until the time of this last refunding. In that refunding they took on a substantial supply of the 10-year and 30-year issues. As I mentioned, the distribution of those issues was quite slow, although it would appear ... | 124 |
fomc | 1,979 | Have they been building their long positions? | 8 |
fomc | 1,979 | In the longer area there is a net long position, which was not true a month ago. What they did was to take on a long position--this is in the over 5-year area--with the refunding and it has been whittled down some. But they still have a net long position. | 63 |
fomc | 1,979 | Would they have a negative carry on that, Peter? | 11 |
fomc | 1,979 | Just about even at this point, I would think, or maybe slightly negative. | 16 |
fomc | 1,979 | Peter, could I ask you a question about the discount rate? Is the market now in a mood to make a distinction between a technical adjustment of, say, 1/4 point and not confuse that with a signal for tighter money? | 48 |
fomc | 1,979 | It might well be because I think there is an appreciation [of the current situation] among market players. Even though they don't see the grounds for a general push to higher rates, they are conscious of the growth in the volume of borrowing, and they are aware that borrowing has gotten up to the level that on some pas... | 81 |
fomc | 1,979 | Thank you. Our next action is to ratify the transactions on the domestic side since the previous meeting. You have the reports. Are there any comments or questions? If there is no dissent, we will record the transactions as approved. I asked Murray Altmann at the last meeting to give me a rundown on how we've been doin... | 262 |
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