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fomc | 1,979 | The 2 billion is news to me. | 9 |
fomc | 1,979 | It's news to the Bundesbank, too. So I think that is left to be discussed. But in general the Germans are agreeable to the United States--the Treasury or the Fed--building up a certain amount of balances. | 45 |
fomc | 1,979 | Are there similar agreements with the Japanese? | 8 |
fomc | 1,979 | No, we're going to come to that in a second. | 12 |
fomc | 1,979 | Well, Chuck, there are policy issues. And there is also a question of buying [marks] without any place to invest them, which isn't very attractive. So we need a little cooperation because having the Treasury holding sterile balances of marks is not attractive. | 51 |
fomc | 1,979 | Now we have reinvestment facilities for-- | 9 |
fomc | 1,979 | They can deny [us the use of] these investment facilities. | 13 |
fomc | 1,979 | We could invest in the Euro market. | 8 |
fomc | 1,979 | Yes, but that creates all kinds of [complications]. We've already agreed not to [do] that, so it's more complicated. There is no problem on the 4.1 billion, which just brings the Treasury back to where it was on November 1. The policy memo presented sets forth the recommendation of our task group that we authorize the ... | 153 |
fomc | 1,979 | I think the Bundesbank has said that they have no problems if it's a small amount. | 18 |
fomc | 1,979 | But we haven't crossed that bridge in terms of [understandings with1 us. The Japanese government, both their ministry of finance and their central bank, have been urging that we go into joint intervention with them to show a force in the marketplace. The Treasury has been urging this upon us. We have been consulting wi... | 433 |
fomc | 1,979 | I think the idea of the joint intervention probably would be impressive to the market. I start with that. As far as the operational side is concerned, if we can really work out a flexible system where we keep to the right proportions but not day by day, I think we can do it. But, Gretchen, you may have more operational... | 125 |
fomc | 1,979 | Gretchen, any particular comment? | 8 |
fomc | 1,979 | I just wanted to say that on a day-by-day basis we are going to need operating flexibility because these formulae are very difficult to maintain in an ongoing operation. | 33 |
fomc | 1,979 | Also with respect to the Treasury's share there would need to be flexibility. | 15 |
fomc | 1,979 | Yes, Henry, I'm afraid we do need that. We've come into a tremendous amount of paperwork problems, particularly when the proportions are so tight as 10 percent and 20 percent. | 37 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | Now, there are two questions before the Committee. I'm told by our Secretary that on the first one what we need is an understanding that the policy set forth in this memo is acceptable. We have not before had formal votes and Mr. Altmann's recommendation is that we not have a formal vote but have an understanding that ... | 106 |
fomc | 1,979 | We have an authorization for $8 billion; this is a policy decision we would follow if the Committee agrees. The second issue is whether we should enter into an understanding with the Bank of Japan on this joint program and announce that we would be operating for our own account--the Treasury and the Fed--in coordinatio... | 84 |
fomc | 1,979 | Can't we separate these two issues? | 7 |
fomc | 1,979 | Surely. As I said, we're going to have two issues-- | 14 |
fomc | 1,979 | Well, my point is perhaps a little different from what you're thinking. I might be prepared to undertake a joint operation with the Japanese. But that's separate from the question of how much open position we can have in currencies, absent the special arrangements such as that. | 52 |
fomc | 1,979 | Sure, we can decide not to have the-- | 10 |
fomc | 1,979 | We could stay with the $500 million [limit] on one [currency] and then have an additional $1 billion approved in a special arrangement. I just want to indicate that that's the way I probably would come out. I didn't want to-- | 50 |
fomc | 1,979 | Yes, Paul. | 4 |
fomc | 1,979 | I'm not sure it is going to help chuck, but it may help me. I have no problems with the first understanding, but I want to make explicit what seems to me implicit here. And that is that the balances we acquire we don't acquire for the sake of acquiring balances but mostly as the by-product of what we want to do in inte... | 70 |
fomc | 1,979 | That's the only reason to acquire them--to counter the appreciatiation and work on both sides of the market. | 23 |
fomc | 1,979 | Whatever [side] it happens to be. | 9 |
fomc | 1,979 | May I ask a question? Does the 10 percent refer to total United States participation--Treasury and Federal Reserve--or is it 10 percent for [each]? | 34 |
fomc | 1,979 | As I understand it-- | 5 |
fomc | 1,979 | Both. U.S. intervention would be a maximum of $1.2 billion. If the Committee wants to do a billion dollars, the Treasury is merely indicating [a willingness to do $200 million]. Why does the Treasury want to go in for such a small amount? Is it because they already have a large-- | 64 |
fomc | 1,979 | They have large amounts of yen already. | 8 |
fomc | 1,979 | They got them through the sale of SDRs and through the IMF drawings. So it isn't that they're declining to hold yen balances; they really are showing good faith. They already have yen balances and that's why they would do a smaller amount at this point. Phil. | 53 |
fomc | 1,979 | M r . Chairman, I'm agreeable to the Committee approach [outlinedl in this memo. I would be much less happy with the Japanese approach because I'm not at all convinced that the Japanese yen is undervalued and I'm not at all sure I want to jump into a joint intervention for the purpose of improving the Japanese yen posi... | 66 |
fomc | 1,979 | Well, why don't we separate the issues? First let's see what the sentiment of the Committee is regarding the recommendation on the agenda. I think the best thing is just to get a vote on it. MR. ALTMA". A vote? | 48 |
fomc | 1,979 | I mean a count on whether we agree on the policy, not a vote. | 16 |
fomc | 1,979 | This is on going to $ 2 billion [on outright holdings] and with these limits [on individual currencies]? | 23 |
fomc | 1,979 | Chuck, if you want to Suggest a modification You may. | 12 |
fomc | 1,979 | Well, my preference would be $500 million. I think there's a great deal of exposure involved here. I believe the dollar may be considerably undervalued and that there could be a very considerable appreciation of the dollar over the next year, and I wouldn't like to see us lose this much money. I also have a feeling tha... | 104 |
fomc | 1,979 | I'm laughing because all during the year up until November 1 we said it was up to the foreigners to straighten out the dollar. | 26 |
fomc | 1,979 | Well, that's right. It finally went so far that I agreed to it. I think a country has its reservation points. And it seems to me that it ought to be the concern of the country as to what that reservation point [is when its currency is] on the decline. | 57 |
fomc | 1,979 | Chuck, I didn't mean you had that atttitude; I meant that as a nation we were taking that attitude. | 24 |
fomc | 1,979 | Well, I had that attitude, too. I was very much opposed to it until [the dollar's weakness] went so far that I knew it was oversold. | 34 |
fomc | 1,979 | Let's run down [the list] and ask the members if they are for the policy and if so, if they have a preference for the $1 billion or the $500 million limit per currency. | 40 |
fomc | 1,979 | [I would agree] with the memo. | 8 |
fomc | 1,979 | The maximum is $2 billion in any case, but the question is whether you want a maximum of $1 billion per currency or $ 5 0 0 million. | 35 |
fomc | 1,979 | I meant I wanted the $ 5 0 0 million in the aggregate. | 17 |
fomc | 1,979 | In the aggregate? Oh, I misunderstood you. well, then we'll have to ask again. | 19 |
fomc | 1,979 | That's what we have now. | 6 |
fomc | 1,979 | Yes, we already have that. In other words, you would not want to expand it to $2 billion. Then the question is: Do you like the proposal in the memo? Paul. | 39 |
fomc | 1,979 | Yes, it is reasonable. MR. AL"N. President Balles. | 15 |
fomc | 1,979 | I share Chuck's view. I have real reservations about going up to $2 billion, based on a very skeptical attitude regarding decisions on what constitutes excessive movements one way or another vis-a-vis what the market is saying. I'd keep it where it is. | 51 |
fomc | 1,979 | Okay. MR. ALTMA". President Black. | 10 |
fomc | 1,979 | Mr. Chairman, I'd rather cut it in half. I worry about the Constitutional issues on this since the executive branch of the government clearly has the responsibility in the foreign area. And I worry about the point that Chuck raised about criticism we would get from taking any losses on this. | 56 |
fomc | 1,979 | May I come back with an argument? | 8 |
fomc | 1,979 | Well, it's not necessary. The Treasury is with us on this; we're working with the Treasury. MR. ALTMA". Governor Coldwell. | 29 |
fomc | 1,979 | I'd be willing to go with the billion dollars. And I guess I could be talked into the half billion dollar limit on individual currencies. | 27 |
fomc | 1,979 | In other words, you are going with the Black proposal. Anybody for the White proposal? MR. ALTMA". President Kimbrel. | 28 |
fomc | 1,979 | Yes. MR. ALTMA". President Mayo. | 10 |
fomc | 1,979 | Yes. MR. ALTMA". Governor Partee. | 11 |
fomc | 1,979 | No, I would remain with $500 million. MR. ALTMA". Governor Teeters. | 19 |
fomc | 1,979 | I would go with this proposal. | 7 |
fomc | 1,979 | Governor Wallich. | 4 |
fomc | 1,979 | I would remind you that we didn't flinch when were short $6 billion but here suddenly, when we're gong to be long, $500 million gives us pause. I go with the [proposal in the1 memo. | 44 |
fomc | 1,979 | We have 5 votes in favor and there are 10 members. That makes it very neat, doesn't it? They're not really votes but sentiments. I have a swing "vote"but I really don't think this sort of policy ought to be followed unless we're fairly uniform. Could we all agree on doing $1 billion with a $500 million limit at least t... | 115 |
fomc | 1,979 | That's a $1 billion total limit? | 8 |
fomc | 1,979 | Yes, for the total limit and $500 million per currency, except that which is approved outside of this. [Hearing no objection] let's turn now to Japan and take that as a discrete item. Apart from the authority we just granted, would it be your sentiment to enter into the program with Japan? Go down the list again. MR. A... | 78 |
fomc | 1,979 | Yes, I would like to give that authority but we [now] have the limit so small. | 20 |
fomc | 1,979 | This would be a separate understanding. | 7 |
fomc | 1,979 | This is separate from the $1 billion? | 9 |
fomc | 1,979 | This would mean [only] as to Japanese yen. we would go to $1 billion and be outside the authority, but no other yen would be held. We wouldn't add the $1 billion here and the $500 million and have [$1.5 billion]. This would be the sole authority for the yen. | 63 |
fomc | 1,979 | We are making an exception to the policy just adopted. | 11 |
fomc | 1,979 | This would be for yen [only]; and no yen would be held under the other policy. | 19 |
fomc | 1,979 | I think that's a good way. | 7 |
fomc | 1,979 | This would also be an exception to the total. MR. ALTMA". The current balances? | 19 |
fomc | 1,979 | Including the present balances. | 5 |
fomc | 1,979 | It would also be an exception to the total. That is, if the Manager had a billion dollars in yen he could still have $500 million in DM. | 32 |
fomc | 1,979 | The first policy we just approved would no longer include yen. We'll pull yen out of that and approve a specific-- | 23 |
fomc | 1,979 | What are the amounts involved for Japan, Mr. Chairman? | 12 |
fomc | 1,979 | A maximum of $1 billion of balances [held by] the Federal Reserve. | 16 |
fomc | 1,979 | Of which we have roughly $200 million. | 9 |
fomc | 1,979 | It's $187 million, or about $200 million now. | 12 |
fomc | 1,979 | So $800 million more-- | 6 |
fomc | 1,979 | It's $800 million. | 5 |
fomc | 1,979 | And a couple of hundred million for the Treasury, so it's about $1.2 billion | 18 |
fomc | 1,979 | In the program we described. Paul | 7 |
fomc | 1,979 | Yes. | 2 |
fomc | 1,979 | President Balles. | 4 |
fomc | 1,979 | Yes. MR. ALTMA". President Black. | 10 |
fomc | 1,979 | I'd rather not go this far. | 7 |
fomc | 1,979 | Governor Coldwell. | 4 |
fomc | 1,979 | NO. MR. ALTMA". President Kimbrel. | 12 |
fomc | 1,979 | Yes. MR. ALTMA". President Mayo. | 10 |
fomc | 1,979 | Yes. MR. ALTMA". Governor Partee | 10 |
fomc | 1,979 | This would be in concert with the Japanese? They would be in, doing 10 times what we're doing? | 22 |
fomc | 1,979 | Ten times what this nation is doing--a combination of the Treasury [and the Federal Reserve]. | 19 |
fomc | 1,979 | That's your biggest exposure, Chuck. | 7 |
fomc | 1,979 | Well, I know. On the other hand they've had quite a decline in their currency. So, yes. MR. ALTMA". Governor Teeters. | 31 |
fomc | 1,979 | I have one question. Does this give us any idea at what level we're going to support the yen? Are we going down to the two hundred-- | 30 |
fomc | 1,979 | That I don't know. But certainly the Japanese feel that the yen has depreciated far too much. It's back toward the 2 0 0 level. Whether 2 0 0 is the [right] level I think one has to judge from what happens in the market. | 58 |
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