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fomc | 1,979 | Yes. It's a change in the Authorization for Foreign Currency Operations. | 13 |
fomc | 1,979 | Votes are made public? | 5 |
fomc | 1,979 | It can be held until the Policy Record [is released], which will be three days after the next meeting. | 22 |
fomc | 1,979 | But the votes are made public? | 7 |
fomc | 1,979 | Yes, it's a change in the foreign currency authorization. | 11 |
fomc | 1,979 | But it wouldn't just say that the Committee approved this. It would say [the vote was] 9 to 3, or whatever it might be. | 31 |
fomc | 1,979 | Well, we have never done it that way. We've always listed the votes by name. | 18 |
fomc | 1,979 | On every one? | 4 |
fomc | 1,979 | On every change in the [authorizations and directives]. | 11 |
fomc | 1,979 | Paul, could I ask one more question? I'm a little bothered, Scott, about the last sentence in your memo. That sentence indicates that the State Department and Treasury officials involved in the discussions expressed the view that while they would not urge the Federal Reserve to agree to the increase for the sake of fur... | 97 |
fomc | 1,979 | Paul was the one who held the discussions. I was interpreting his-- | 14 |
fomc | 1,979 | I held the discussions. | 5 |
fomc | 1,979 | But there's no urgency? | 5 |
fomc | 1,979 | Well, on balance, yes, they'd like us to do it. I think that's clear. They have these other negotiations going forward and they think this would be constructive. That is clearly [their view]. How important it is in connection with those other issues is another question, which I can't really evaluate. | 61 |
fomc | 1,979 | Would we gain or loose anything of substance by having the Treasury provide a statement of support? | 18 |
fomc | 1,979 | I would think our problem is the reverse. I'm just speaking personally. There's no question that they like the idea, but I don't want to get either State or Treasury too involved in saying anything about it for the very reasons that Henry and to some extent you were suggesting. | 54 |
fomc | 1,979 | Yes, that's why I asked do we gain or lose. | 12 |
fomc | 1,979 | It seems to me, Paul, that this last sentence is a delightful art form that preserves our independence, while achieving an objective. | 26 |
fomc | 1,979 | That's precisely what we're trying to do here. | 9 |
fomc | 1,979 | Mr. Chairman, just to clarify one point. Under normal procedures we would make an announcement of the increase right away, or within a couple of days, once it is worked out with the Mexicans. That announcement would say nothing about the vote. The vote would come out in the Policy Record, which would be published in mi... | 89 |
fomc | 1,979 | Mr. Chairman, I wonder if the attitude of the group would differ if the economic outlook for Mexico worsened rather than brightened--if the oil reserves proved to be a little less than now [thought]. | 42 |
fomc | 1,979 | I think we have to look at that because I do believe it gives them a leg up. All I can say is that I have looked at that and I think this is manageable in that context. That isn't to say that I cannot imagine a situation where Mexico would draw part of the line sometime but I don't think there's any immediate prospect ... | 70 |
fomc | 1,979 | If I may, I would say that if Mexico got into trouble, we should be ready to help them and for a larger amount than this swap. I say that not only for the reasons that have always existed but because banks are now more deeply involved. But I would prefer to see that done on its merits rather than on a previous decision... | 72 |
fomc | 1,979 | You say on its merits. Speaking for myself, that is in my mind. I came to the conclusion that you've come to and I think that is not irrelevant in considering this. If we never had any intention or would basically be unsympathetic toward Mexico ever using the line, I think it would be a mistake to approve this. But if ... | 105 |
fomc | 1,979 | If this discussion got out, I suspect we'd get applications from such countries as | 15 |
fomc | 1,979 | May I speak to this question of precedent? We've had discussions with these other central banks over the years and told them "no," and we can tell them no again. Mexico is a different country from these others. We do have criteria in the files from 1967 and we published in the Federal Reserve Bulletin at that time the ... | 199 |
fomc | 1,979 | Not many of those Latin American countries have a convertible currency. | 12 |
fomc | 1,979 | That's right. | 3 |
fomc | 1,979 | Well, are we ready to vote? I take it we have to have a full-scale vote, Mr. Secretary? | 24 |
fomc | 1,979 | Well, it requires a vote. It isn't necessarily a roll call vote, but if there are any dissents we would record that. | 27 |
fomc | 1,979 | Might I ask, Mr. Chairman, given the pros and cons of all of this and what we've heard: Would you care to tell us what your recommendation is on balance? | 36 |
fomc | 1,979 | Well, my recommendation is to do it. | 9 |
fomc | 1,979 | All right. Thank you. | 6 |
fomc | 1,979 | Well, [because] of the publicity, I think it would be preferable not to have a split vote on this, so I would vote for it, too. | 33 |
fomc | 1,979 | So would I. | 4 |
fomc | 1,979 | Do you want to call the roll on this? | 10 |
fomc | 1,979 | Chairman Volcker Yes President Balles Yes President Black Yes Governor Coldwell Yes President Kimbrel Yes President Mayo Yes Governor Partee Yes Governor Rice Yes Governor Schultz Yes Governor Teeters Yes Governor Wallich Yes First Vice President Timlen Yes Unanimous. | 52 |
fomc | 1,979 | Mr. Sternlight. | 5 |
fomc | 1,979 | Thank you, Mr. Chairman. I would just like to say first that I appreciate very much the Committee's earlier action and expression of confidence. [Statement--see Appendix.] | 35 |
fomc | 1,979 | Questions? | 2 |
fomc | 1,979 | Peter, what is the dealers' inventory position now? | 11 |
fomc | 1,979 | In issues over one year, as of Friday which is my last figure, they had about a $460 million net long position. No doubt it is lower now because we did some sizable buying of coupon issues yesterday. We bought almost a billion dollars of coupon issues yesterday, some of which would have come from the dealers' inventori... | 90 |
fomc | 1,979 | I didn't mean a particular date, Peter; I meant a time frame of, say, over the last 3 or 4 weeks. Have they been holding about a plus or an even position? | 40 |
fomc | 1,979 | Well, that goes up and down as the market gears up for a Treasury refunding and then takes on those securities. Typically [dealers] have wanted to be moderately short in their positions because they had that kind of view of the market. They had gotten into a deeper short position as this Treasury quarterly refunding ap... | 104 |
fomc | 1,979 | You see no discernable change in their attitude toward keeping either a balanced or a short position? | 19 |
fomc | 1,979 | They seem to want to be in about a balanced or slight short position. | 15 |
fomc | 1,979 | If there is no other comment, we have to ratify [the domestic transactions]. | 17 |
fomc | 1,979 | Going back to this earlier statement that the average age of our portfolio is now 4.3 years. | 21 |
fomc | 1,979 | I didn't give that precise a figure. | 8 |
fomc | 1,979 | It was 4 to 6 years. | 9 |
fomc | 1,979 | That 4 to 6 years came in the examination report. That is well in excess of the average age of the total public debt, isn't it? So, we are a substantial factor in helping the Treasury to lengthen the debt unless what they report is only the publicly held debt. | 58 |
fomc | 1,979 | They report it both ways. They give the average length including Fed holdings and government accounts and excluding them. They have achieved a significant lengthening on either basis. I wouldn't say that our behavior has been a major factor in enabling them to lengthen the average. | 52 |
fomc | 1,979 | I think they normally use the publicly held debt as an estimate. | 13 |
fomc | 1,979 | I may not remember [correctly], but I thought that publicly held debt was getting up in the 4-year area. | 25 |
fomc | 1,979 | It might be up to around 4 years or so. I think our average length might be slightly longer. We have been conscious of that and for that reason on the recent quarterly rollovers we have steered a somewhat greater proportion of our rollovers into the shorter options. | 55 |
fomc | 1,979 | Thank you. | 3 |
fomc | 1,979 | [We need to] ratify the transactions. Without objection. Mr. Zeisel. | 18 |
fomc | 1,979 | Thank you, Mr. Chairman. [Statement--see Appendix.] | 13 |
fomc | 1,979 | I don't know whether you made explicit your assumptions. [You have assumed] no changes in fiscal policy? | 21 |
fomc | 1,979 | No change in fiscal policy other than the automatic adjustments. | 11 |
fomc | 1,979 | Right. [And you've assumed] the present targets on monetary policy. | 14 |
fomc | 1,979 | And the present targets on monetary policy. | 8 |
fomc | 1,979 | I would appreciate it if you would confine yourselves at this point to questions and be as brief as possible. We will come back and have comments on the economic situation. John Balles. | 38 |
fomc | 1,979 | I really wanted to follow up on the question you just raised, Mr. Chairman. Jerry, have you had a chance to do any calculating on what the automatic changes in fiscal policy might produce--that is, the revenue losses built into your economic model and the expenditure [increases]. I think it's important to all of us. I ... | 101 |
fomc | 1,979 | Right. [Given] the contraction that we've projected--which affects unemployment benefits most importantly in an automatic way but social security benefits to some minor degree and food stamps and so on--the total impact is about $1-3/4 billion automatically on transfer payments. The receipts are adjusted down by about ... | 86 |
fomc | 1,979 | Is that for calendar 1980 or what, Jerry? | 12 |
fomc | 1,979 | That is for fiscal year 1980. | 9 |
fomc | 1,979 | It would be much more than that I would think in its economic effect, because your figures would reflect the collections on corporate taxes and they would still be running pretty high. | 34 |
fomc | 1,979 | Yes, that's right. | 5 |
fomc | 1,979 | If corporate profits fall off next year, then we are going to have a much bigger effect than $3 billion, I would think, by fiscal 1981. | 33 |
fomc | 1,979 | The projected deficit goes up $10 billion next year, Jerry, and I don't think it would go up if we didn't have a recession. | 28 |
fomc | 1,979 | President Balles, it's a measure of the fiscal policy effects that's conventionally [used]. People look at the high employment surplus to standardize for the level of activity. And on that projection--granted the measurement differences among people--the change from, say, the 2nd quarter of '79 to the 4th quarter of '8... | 119 |
fomc | 1,979 | Governor Coldwell. | 4 |
fomc | 1,979 | Jerry, could we probe just a minute? In your comment on the unemployment rate, I heard you say that you are forecasting a loss of jobs in the industrial sector. What do you have in the way of advance indicators of employment changes so you could say to us, for example, that the demographics are there to provide X amoun... | 122 |
fomc | 1,979 | Well, obviously the growth in the labor force is a significant element in our projection procedure. We don't have any concrete evidence from current economic series indicating layoffs of any substantial magnitude beyond the employment figures that I referred to--that is, the cut in manufacturing employment by about 130... | 63 |
fomc | 1,979 | You do have some [accession] rate figures? | 11 |
fomc | 1,979 | We have those and they don't show any really dramatic changes. Our assumption is that labor force growth will be quite moderate in the coming year--around 1-1/2 percent, which is about half the rate it was in 1978. Characteristically the participation of women has not suffered particularly during recent recessions. Tha... | 170 |
fomc | 1,979 | On the question of the participation of women, isn't it possible that we may get a more comparable reaction [to that of] men now that the level of participation is [sharply] higher. | 40 |
fomc | 1,979 | You mean that they would tend to stay or continue-- | 11 |
fomc | 1,979 | Well, that we won't have this division [unintelligible] further increases in participation rates at the time when labor demands weaken. | 27 |
fomc | 1,979 | Basically, the participation rate of the adult men, let's say those age 25 to 54--what we generally call the core of the adult male labor force--tends to remain pretty stable, and we would expect it to remain stable. There's a certain degree of discouragement reflected in those who are more marginal members of the labo... | 230 |
fomc | 1,979 | [You have] looked over this range of information, which you obviously thought greatly about. And yet in each of the last 3 months I think you have expressed some surprise that the unemployment rate has not started to move up. Do you now view that as an immediate possibility? | 56 |
fomc | 1,979 | I certainly hope so, in a sense. My social conscience is at war with my economic view of [the situation]. The lack of a rise in unemployment, which is the other side of the coin of a cut in employment, is reflected in the enormous deterioration of productivity in the last couple of quarters. Obviously, if one believes ... | 136 |
fomc | 1,979 | Unless [employers] thought they were going to need that labor in the near term. | 19 |
fomc | 1,979 | That's correct. But when they look at their books and see what happened to profits in Q1 and Q2--and probably will happen to profits in Q3--given the employment levels that currently exist in the face of declining output, I think those [numbers] are going to be persuasive arguments to them to cut back on employment. | 67 |
fomc | 1,979 | But this is not an unusual pattern at this stage of the cycle. | 14 |
fomc | 1,979 | It's a bit worse than average but you are quite right, Governor Teeters, that the pattern is not unusual. | 23 |
fomc | 1,979 | It seems to me that it's quite similar to the first half of '74; we had a [comparable] phenomenon at about the same time [of the cycle]. | 34 |
fomc | 1,979 | That's correct. This one seems to be a little worse; the decline in productivity is a bit more dramatic. | 22 |
fomc | 1,979 | Governor Wallich. | 4 |
fomc | 1,979 | Looking at your projections, am I right in thinking that net exports and the change in business inventories are the two really dynamic factors and that they roughly offset each other with a swing of about $30 billion at a maximum? My question is about the degree of confidence with which you hold these [projected] sizab... | 64 |
fomc | 1,979 | I think you are quite right, in the sense that they not only offset one another in some respect but also that the degree of confidence we hold in our forecasts [of those two measures] is very similar. However, that degree of confidence is extremely low. | 52 |
fomc | 1,979 | With some of these elements, [such as] consumption, I think you probably have a very narrow confidence interval. | 23 |
fomc | 1,979 | I'll speak first about inventories and I will let Mr. Truman attack the problems of projecting net exports. Quite frankly, our projections of inventories are determined largely by business behavior in regard to their management of stocks in recent years. Businessmen have tended to be quite conservative; they have tende... | 229 |
fomc | 1,979 | We would like to believe that the net export projection is slightly more firmly held than the inventory projection. The facts may not be so right. It is true in the net exports area that we are now dealing with a $600 billion total--and it's made up of factors which move in very different directions and have different ... | 383 |
fomc | 1,979 | I have three names on my list. I hope the questions will be brief and that there won't be any more than three names. I might just say--I can't restrain myself from saying--that these two uncertainties may be mutually related if merchandise trade does so well because the economy is in a recession that is generated by th... | 90 |
fomc | 1,979 | Do you have any estimates of the burden of consumer debt service--taking into account mortgage debt plus other debt--now and how it would compare to 1974? | 33 |
fomc | 1,979 | I refer you to an exhaustive article in the Quarterly Review of the Federal Reserve Bank of New York. | 20 |
fomc | 1,979 | The level is fairly high and the burden is a bit higher than it was back then. [Mike], do you have those figures? | 27 |
fomc | 1,979 | The repayment to income ratio is 23 percent roughly--at the record level. | 16 |
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