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fomc | 1,977 | I'm still debating that in my mind. I think I probably feel a 1/2. But I don't feel very strongly about that. | 28 |
fomc | 1,977 | Well, I thank you, Mr. Volcker. Mr. Winn now, please. | 18 |
fomc | 1,977 | Mr. Chairman, I have been studying the new math here, too, this morning, and I must confess the relationship between the funds rate and ranges we have been given either have no meaning or we are in a strange posture. Because should we pick the 0 to 6 as our range for M1--that's a median point of 3, which as I understan... | 154 |
fomc | 1,977 | Funds rate. | 3 |
fomc | 1,977 | So if we are going to be consistent at all, maybe we shouldn't be, but it seems to me that the relationship between the funds rate we are talking about and the quantities we are talking about are inconsistent with the first presentation we had here this morning. | 51 |
fomc | 1,977 | Well, President Winn, we made the effort, as you noted, to present what we think are consistent-- | 22 |
fomc | 1,977 | I understand. | 3 |
fomc | 1,977 | Whether they turned out to be consistent in the real world-- | 12 |
fomc | 1,977 | I understand. | 3 |
fomc | 1,977 | But we never follow a consistent pattern. | 8 |
fomc | 1,977 | And the reason there are only half-point [funds rate] differentials is because of the short run. Whatever M1 is going to be, we don't think there's hardly anything we can do to prevent it from being that in the short run, and all you can do is affect it a little bit with the variation in the funds rate. | 69 |
fomc | 1,977 | Yes. Well, that's a probably an accurate one. But I wanted to show what our consistency would be--the 0 to 6 with a midpoint of 3 would give you a much higher funds rate direction than we are showing here. My own feeling would be, stay with the B numbers and quantities, spread the fed funds rate range to 5-1/2 to 6-1/2... | 295 |
fomc | 1,977 | A half, did you say? | 7 |
fomc | 1,977 | A half, that's right. And you've still got a differential there of 1/4 point. You don't really have any market impact, except for a psychological impact showing that we're resolved to continue our fighting in this direction. And I'd be prepared to move that first before I'd move the funds rate above 6, because I do thi... | 119 |
fomc | 1,977 | All right, thank you, Mr. Winn. Mr. Guffey now, please. | 19 |
fomc | 1,977 | Thank you, Mr. Chairman. Sir, I think many of the expressions that have already been made around the table with respect to the longer-run performance of this Committee in controlling monetary policy--in the sense that the [growth rates of the] aggregates are continuing to be very high--as Mr. Volcker has expressed [it]... | 512 |
fomc | 1,977 | Thank you, Mr. Guffey. Mr. Balles, please, now. | 18 |
fomc | 1,977 | Mr. Chairman, just going back to the economy for a moment, my own views correspond pretty closely to those of the staff. But I'm not really concerned about a slowdown to, say, 5 percent real growth for the second half of the year following this extraordinary rate of almost 7 percent for the first half because, I think ... | 949 |
fomc | 1,977 | Very good. Thank you, Mr. Balles. Mr. Roos now, please. | 19 |
fomc | 1,977 | Mr. Chairman, I would subscribe almost verbatim to the rationale expressed by John Balles, and specifically I would prefer an M1 range of 0 to 4 percent growth; M2, 4 to 8; and fed funds range, broaden to 5-3/4 to 6-3/4. I think that anyone who views the inflationary trend as just a temporary monetary shock or somethin... | 254 |
fomc | 1,977 | Thank you, Mr. Roos. Mr. Jackson now, please. | 15 |
fomc | 1,977 | I think the issue of rates of growth for our economy for the next six months or year are pretty clear. I think the recent rates of growth we have had are unsustainable. At the same time, I think that, unfortunately, we've overlooked the result that our rates of unemployment are still unacceptable politically or sociall... | 705 |
fomc | 1,977 | Thank you, Mr. Jackson. Mr. Gardner now, please. | 14 |
fomc | 1,977 | We're running late. I will try not to be long. I was not around here when you got your reports of an 18 percent growth in M1. I was quite surprised when I heard about it. And it bothers me because it is an out-of-phase blip. We've spent a lot of time trying to explain our April surge, but we can't find many good reason... | 395 |
fomc | 1,977 | Thank you, Mr. Gardner. We still haven't heard from Mr. Mayo. | 16 |
fomc | 1,977 | Mr. Chairman, first a vote of enthusiastic support for the new concept of transaction M1, M1.5, or whatever we want to give it as a nickname. I would hope that this is the beginning of a serious effort of this Committee to study carefully the implications of a reconstructed [M1] that would indeed lead to a redefinition... | 502 |
fomc | 1,977 | Thank you, Mr. Mayo. Mr. Lilly now, please. | 14 |
fomc | 1,977 | While I was very interested in your new M1, I only wish that you had included in there the nondeposit source of funds, which I think really belong in M1. That's where all the corporate treasurers are squirreling away money today that they have raised from long-term borrowings, and it's overnight money--it's a great dea... | 172 |
fomc | 1,977 | Thank you very much. Mr. Van Nice, please. | 12 |
fomc | 1,977 | Mr. Chairman, I think at this point of the meeting, anything that I would have to say is going to be quite redundant. It's all been said. I came here prepared to report alternative C across the board, both aggregates and the funds rate, so we can give confidence for reasons that have already been stated--namely to get ... | 468 |
fomc | 1,977 | Well, I appreciate, really, what you say about the discount rate, but let me remind you that the discount rate went to 8 percent in 1974 at a time when the prime rate was 12, and the commercial paper rate 12-1/2, and the federal funds rate a little higher than 13. Let me remind you that the 8 percent discount rate was ... | 157 |
fomc | 1,977 | Are you speaking of 12 heads? May we remind you that Chairman Burns didn't lose his head when it went to 8 percent. | 27 |
fomc | 1,977 | Well, the discount rate is a headache. Some central banks have tried to get rid of that headache by adjusting the discount rate mechanically to market interest rates. We debated that, and we have felt on balance that we would be giving up an instrument of policy that is useful at certain times. Gentlemen, we have to re... | 408 |
fomc | 1,977 | May I suggest, Mr. Chairman, that we use the 5-3/4 to 6-1/4 and then the 0 to 5 [for M1], [which has a] slightly lower midpoint [than 0 to 6], which I think would accomplish the two positions. | 63 |
fomc | 1,977 | It is consistent. Well, let me suggest, then, a 0 to 5 range for M1 and a 3 to 8 range for M2, and a 5-3/4 to 6-1/4 range for the federal funds rate. Now as to the directive, I think there is a narrow range [for federal funds, which] logically would suggest a money market directive. On the other hand, if we are willing... | 159 |
fomc | 1,977 | Mr. Chairman, does that mean that, if you go with the monetary aggregates [directive and] you get [M1] growth that is projected to be 2-1/2 [percent] or greater, then you are going to use that other 1/4 percent [of the federal funds rate]? | 64 |
fomc | 1,977 | You see, the difference between the two is that you move much more slowly to utilize the full range with a money market directive than with a monetary aggregates directive. Is that a correct explanation, Mr. Sternlight? | 43 |
fomc | 1,977 | Correct. | 2 |
fomc | 1,977 | With the money market conditions directive, you would be projecting 5 [percent] plus [in the growth of M1] before you would actually start making a move from the 6 [percent federal funds rate] under this prescription. Is that correct? That is the appropriate-- | 56 |
fomc | 1,977 | I think you'd want to be projecting 5 before-- | 11 |
fomc | 1,977 | In other words, [reaching M1 growth] in the upper range before you would start making a move, and that's what I would prefer. If you are going to do it the other way, and that is, if you are projecting say 3 or 3-1/2 you start making a move towards your 6-1/4, I don't think I'd go along... | 80 |
fomc | 1,977 | I think its 3-1/2; [that is], 1-1/2 to 3-1/2 would be a zone of indifference, [and at] 3-1/2 to 5 you would begin to move. | 54 |
fomc | 1,977 | I would think so. | 5 |
fomc | 1,977 | I would appreciate clarification--if you widen the ranges for the Ms by dropping the bottom, are we to consider them again to have symmetric midpoints or asymmetric midpoints? It would make a bit of difference in the rapidity with which we move. | 50 |
fomc | 1,977 | Why not take the symmetrical midpoints? | 8 |
fomc | 1,977 | That's what I think. I would use the money market directive, Mr. Chairman. Because we are taking aggregates that are deliberately low in their range compared with what our staff is projecting. | 37 |
fomc | 1,977 | The logic says--in the box we are in with all this precedence--I think the money market directive expresses the intent of Roger and myself, I guess, even though I don't like its cosmetics. I'd rather have a sluggishly behaved aggregates directive. | 50 |
fomc | 1,977 | Gentlemen, let's have a show of hands. Those who would prefer a money market directive. | 20 |
fomc | 1,977 | Five, Mr. Chairman. | 6 |
fomc | 1,977 | Those who would prefer a monetary aggregates directive. | 9 |
fomc | 1,977 | Six, Mr. Chairman. | 6 |
fomc | 1,977 | Well, gentlemen, if I may, I would suggest we vote on the following: a monetary aggregates directive; an M1 growth range of 0 to 5; an M2 growth range of 3 to 8; and a federal funds rate range of 5-3/4 to 6-1/4, with the understanding that if we get into a high growth rate area, that the Chairman, as I believe he has d... | 102 |
fomc | 1,977 | Do you define this to mean above 5 percent for M1? | 14 |
fomc | 1,977 | Well, I don't want to be that precise, because the figures are never that precise, you see, but I don't think I have been tardy with any frequency at either end. And I don't want to be tied down any more rigidly, or have the Desk tied down to the tenth of a decimal. | 63 |
fomc | 1,977 | I would prefer 6-1/2 [percent for the upper limit of the federal funds rate], Mr. Chairman. My count of the Committee would indicate that there was a majority in favor of that, but I guess you will find that out in a little bit. | 55 |
fomc | 1,977 | Well let me, let me. I don't think really we ought to be getting into the habit of dissenting on minutiae. I don't think it serves a constructive purpose. Let me have a show of hands, that is to say, I thought that the adjustment from 0 to 5 [for M1] was designed to accomplish what 5-3/4 to 6-1/2 [for the federal funds... | 124 |
fomc | 1,977 | I expressed a preference for 5-3/4 to 6-1/2, but I am perfectly satisfied with where we are, Mr. Chairman. | 33 |
fomc | 1,977 | My 6-1/2 was related to the 0 to 6, and I'm willing to go back [to] 6-1/4 at 0 to 5. | 39 |
fomc | 1,977 | So was mine. | 4 |
fomc | 1,977 | Would you want me to test sentiment any further, or--apparently not, so let's call the roll. | 22 |
fomc | 1,977 | Chairman Burns Yes Vice Chairman Volcker Yes Governor Coldwell Yes Governor Gardner Yes President Guffey Yes Governor Jackson Yes Governor Lilly Yes President Mayo Yes President Morris Yes Governor Partee Yes President Roos Yes Governor Wallich Yes Unanimous, Mr. Chairman. | 53 |
fomc | 1,977 | Well now, we will finally break for luncheon, and then we have an--yes, we have to decide--let me find out about members of the Committee. Any of you have to get away very early? Would 2:30 leave us enough room for luncheon, or would you prefer 2:45? | 64 |
fomc | 1,977 | If we say 2:30, we will start at 2:45. | 17 |
fomc | 1,977 | We will reassemble at 2:30 then. [Lunch recess] [Executive session] | 19 |
fomc | 1,977 | Gentlemen, this is a meeting of the Committee in executive session. And we have a Freedom of Information [Act] [FOIA] item which Mr. O'Connell will describe to the Committee. Actually, he has prepared a memorandum which sets forth the facts, I think, quite fully. But I will call on Mr. O'Connell to summarize the questi... | 125 |
fomc | 1,977 | Thank you, Mr. Chairman. The Chairman has put his finger on a very critical point, namely that I believe there is at stake here a policy question that will be discussed by you as members of the Committee. The legal issue can be framed very simply. The memorandum sets forth the occurrence that has brought the matter to ... | 1,198 |
fomc | 1,977 | Thank you, Mr. O'Connell. I think before we start discussing the question, I want to make a few general comments. First of all, you may be interested in knowing that during the markup of the recent Federal Reserve Reform Act by the House Banking Committee, a suggestion was made by Congressman Hannaford to the effect th... | 851 |
fomc | 1,977 | Simply, Mr. Chairman, to the background environment in which this question comes. Is it one of openness and fairness or is it with some ulterior motive, or do you detect any--I guess a reading of the background from which it springs. | 49 |
fomc | 1,977 | Well, there is very little uncertainty about that. The request came originally--Joe, do you want to recite the history of that request, and then what the New York Times fellow did? | 39 |
fomc | 1,977 | The request originally came from the New York financial desk. The editors there thought it would be a good idea to find out what the status of the 1972 minutes was. He had in mind the article [that] appeared in Fortune. So he asked the Washington bureau [of the New York Times]--that simple--to find out what the status ... | 328 |
fomc | 1,977 | Ball is in their court? | 6 |
fomc | 1,977 | Not at the moment. I think that Governor Coldwell's letter has possibly held everything in abeyance. | 22 |
fomc | 1,977 | May I say from a perfectly legal point of view, it is in their court. They could move into court, reading that letter, if they wished, as a denial. I think it was couched so they would defer action, I think, awaiting further word from this Committee. | 57 |
fomc | 1,977 | But if it is a dead issue, if they have no desire to revive it, is there anything that is scheduled to happen, or is it in their court--if they decide not to pursue the matter, will it just die? | 47 |
fomc | 1,977 | Well, if I may, Mr. Chairman, I'd suggest [that] the language of the second denial, or the appeal denial, would constitute a ground for them, reasonably anticipating some further word perhaps from the Committee. It's quite possible it would die if another word was never said. But I think the language of that letter sug... | 76 |
fomc | 1,977 | I'd like to make a comment, Mr. Chairman, since I guess I'm the one who kind of moved this toward the Committee. When this was raised as to a question of denial, I had qualms about denying [release of] a five-year old document. But I didn't [see] that I had the authority to overrule the Committee's decision of a five-y... | 121 |
fomc | 1,977 | That is correct. | 4 |
fomc | 1,977 | And I wonder if you would mind acquainting the rest of the Committee with what Justice said to you. | 21 |
fomc | 1,977 | The reason that we speak to the Justice Department is that there is a regulation under which the Department [of Justice] indicates that it will not defend an agency under a Freedom of Information Act suit unless, prior to [the agency's] taking final action, [the Department] has been consulted with respect to the agency... | 185 |
fomc | 1,977 | Well, this comment from Justice reinforced my hesitancy about a flat denial, and I suggested to the Chairman that we might want to raise this matter with the Committee because, at least interpreting Justice's position, it would seem that they're viewing a flat denial as being somewhat arbitrary in this five-year lag pe... | 62 |
fomc | 1,977 | May I say, Mr. Chairman, that the consequence of an adverse position by the Department doesn't impact on the Committee's legal status to proceed exactly as the letter indicates. It merely means that the Department would not appear as our counsel should a suit be brought, at least if they kept their position as now stat... | 88 |
fomc | 1,977 | But the fact would be well apparent in court that Justice was not there to defend us. | 18 |
fomc | 1,977 | Oh yes. | 3 |
fomc | 1,977 | Tom, when was the five-year rule adopted? | 10 |
fomc | 1,977 | Governor, I'd have to defer perhaps to Mr. Altmann. I'm not sure when this was. | 20 |
fomc | 1,977 | 1970 [maybe]. | 5 |
fomc | 1,977 | It was, I believe, in the early '70s, but I'm not sure of the exact date. | 22 |
fomc | 1,977 | Very close to that anyway. | 6 |
fomc | 1,977 | I don't know the answer. | 6 |
fomc | 1,977 | I can find that out. | 6 |
fomc | 1,977 | Well, we don't need to find out. I mean it's been adopted some years ago. | 18 |
fomc | 1,977 | Some years ago. | 4 |
fomc | 1,977 | Prior to the five-year rule, what was the Board's procedure? | 14 |
fomc | 1,977 | Well, I think what we did was put out a number of them at one time. | 18 |
fomc | 1,977 | That's right. | 3 |
fomc | 1,977 | And it had been a six-year lag, but that made it a five-year lag. And that they've communicated with you sensibly on the various things that could be deleted and so [forth]. | 39 |
fomc | 1,977 | I just would have guessed that it went back still earlier, that maybe it was just a change--six years to five. | 25 |
fomc | 1,977 | I thought so. I would have guessed '67, [because] they could be released to '62, I think. | 25 |
fomc | 1,977 | I would have guessed that it was done before 1970. | 13 |
fomc | 1,977 | Mr. Chairman, just a procedural question. Does this become moot as of January 1, 1978--do we release all of the '72 minutes? | 33 |
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