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fomc | 1,977 | Well, that's a possibility. Yes, Governor Gardner. | 11 |
fomc | 1,977 | Gentlemen, the core of this discussion is whether or not our instructions to the Desk should be immediately released for the next 30 day of its activities. Do we need any more evidence that the policies of this [Committee] over the last 30 years have been appropriate? The last three weeks clearly indicated the impact o... | 294 |
fomc | 1,977 | I would endorse that completely, unless of course, members of the Committee have changed their minds, and I doubt if that is the case. But if that should be case, we'll learn about that within a very few minutes. Mr. Coldwell. | 50 |
fomc | 1,977 | Mr. Chairman, I don't have any problems with Governor Gardner's idea that we go ahead with appeal on this. But I do think it might be well for the Committee to take a look at what Governor Wallich suggested, however. If Tom's appraisal of this matter bears any relation to where we come out, we may find ourselves [with]... | 100 |
fomc | 1,977 | That seems to me the most likely single course of events. | 12 |
fomc | 1,977 | No, I would not say that. I think the chances are that we'll get a 30-day stay, but in case we don't, I don't see there's anything to discuss. If we don't, we have to observe the law as laid down by the Court of Appeals. | 55 |
fomc | 1,977 | Mr. Chairman, I do think that there are two possibilities, as I see it, [forcing] early release. One is that the Solicitor General will not take the case, and the other is that the Supreme Court won't take the case, which they often do not. | 56 |
fomc | 1,977 | No, but we won't know that immediately. | 9 |
fomc | 1,977 | No, but it would be--apparently they do it within the 30-day period. Is that correct, Tom? | 25 |
fomc | 1,977 | To the best of my knowledge. | 7 |
fomc | 1,977 | So it would mean that, sometime between December 1 and January 1, we might have another possible report date, and it seems to me that, just as a matter of defensive strategy, we might want to eliminate reference to a funds rate range in the current directive. | 55 |
fomc | 1,977 | We should examine, I think, how we could live under this. What are the techniques by which we could do this? | 25 |
fomc | 1,977 | I think we need a staff study-- | 8 |
fomc | 1,977 | --recommend that we do-- | 6 |
fomc | 1,977 | --and it might also be desirable to change this one. Since this one might be-- | 18 |
fomc | 1,977 | Well, it might be, and there are other defensive devices, but I think what we ought to decide at this meeting is, I think we ought to accept--that's my strong recommendation to the Committee--what Tom O'Connell has suggested. And then depending on how events unfold, we ought to discuss--that is, if they go favorably, w... | 127 |
fomc | 1,977 | Second. | 2 |
fomc | 1,977 | Shouldn't there be some contingency planning in the interim here as to--? | 15 |
fomc | 1,977 | Yes, but let's not do it at this table. | 11 |
fomc | 1,977 | Mr. Chairman, it seems to me that there are two parts here. I'm emphatically supportive of what Steve has said on the procedure on the legal side. I think we have an obligation to ourselves, if to no one else, in that regard. But I'm sensitive to Henry's point, too. But it seems to me this is a proper [project], of how... | 111 |
fomc | 1,977 | I'm a little concerned about that. I'm a little concerned about that. Changing the rules of the game-- | 21 |
fomc | 1,977 | No, I don't mean that, Mr. Chairman. What I mean is, the selection of a money market directive versus a monetary aggregates directive to me has some significance here with reference to this point of release on December 1. Whether we determine a midpoint in the directive or just state a range has significance, if we're ... | 89 |
fomc | 1,977 | Well, I do think that staying within our rules and avoiding excessive specificity would certainly be wise. | 19 |
fomc | 1,977 | That's what I mean. | 5 |
fomc | 1,977 | I take it that was what you had in mind. | 11 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | And I think that is certainly a very reasonable and wise precaution. | 13 |
fomc | 1,977 | But I would let that appear in our discussion of the directive today rather than having it necessarily done as part of the discussion as to whether we appeal or not. | 32 |
fomc | 1,977 | I think, Bob, even if you had the monetary aggregates formulation, that it would still specify the funds rate range. | 24 |
fomc | 1,977 | Oh, it will--a range. | 8 |
fomc | 1,977 | What you could very well do is--now this would be some change in procedure. You could instruct the Manager--the last phrase of the directive could read, "The operational objective for the federal funds rate shall be modified in an orderly fashion from the prevailing rate of about 6-1/2 per cent." | 63 |
fomc | 1,977 | Sure. | 2 |
fomc | 1,977 | I think that's quite possible. | 6 |
fomc | 1,977 | And there could be, you know, the Manager has-- | 12 |
fomc | 1,977 | That's what I have in mind, Chuck, exactly. | 11 |
fomc | 1,977 | Well, that isn't the way it's stated. Now it has a range-- | 15 |
fomc | 1,977 | You mean omit the range. | 6 |
fomc | 1,977 | No. | 2 |
fomc | 1,977 | Well, omit the funds rate range, yes. | 10 |
fomc | 1,977 | Or you could omit the funds range. | 8 |
fomc | 1,977 | [Unintelligible.] | 6 |
fomc | 1,977 | Yes, you could, approximately. | 7 |
fomc | 1,977 | The market has a range in mind that, you know, we've been on a 1/2 percent range of late, and they'll assume that that continues. | 32 |
fomc | 1,977 | Gentlemen, I don't think we ought to do that. Or, if we do it, let's do it only after very thorough reflection. I don't like playing games with the law. Now, I think we ought to stay within our procedure. I think we ought to avoid as much specificity as we can, such as defining the midpoints, etcetera, the thought that... | 169 |
fomc | 1,977 | Mr. Chairman, if we [chose not to pursue] an appeal to the Supreme Court, but then immediately responded to this mandate by that slight change in our directive, it seems to me we wouldn't be playing games with the law. We would be-- | 52 |
fomc | 1,977 | If I were a congressman, I would whip you over the coals on the basis of such evidence. | 22 |
fomc | 1,977 | I don't think you would call that a slight change in the directive, Henry. I think that is a very major change. | 25 |
fomc | 1,977 | But this is a very reasonable thing to do. We respond to the court without going to a last ditch fight, so we are cooperative, and we do what we would probably have to do under the new mandate, namely, write the directive that doesn't give insiders a special advantage. | 56 |
fomc | 1,977 | There is another thought that I have, but I'm not ready to put it forward, and that is, I want to explore the precise, well [unintelligible] explore the implications, and that is, we could instead of issuing a directive to the New York Desk, we could make a suggestion to the New York Desk. And in actual practice, it is... | 120 |
fomc | 1,977 | I'm not really concerned about--this is a 15-day period we've got. Well, it's going to be 15 days from this event before this directive will be released, if we lose. I don't think that that is a terrible state of affairs. But what I'm concerned about is that, on the first of December, we have contingency plans, [and] t... | 117 |
fomc | 1,977 | No, that was not my suggestion. My suggestion was first a negative one, that we not try to decide at this table this morning. Second, that contingency plans get under way immediately, and that we communicate with one another. | 46 |
fomc | 1,977 | That's fine, Mr. Chairman, but with the one exception that you are going to write a directive out of today's meeting. | 25 |
fomc | 1,977 | Today's meeting. | 3 |
fomc | 1,977 | That's the one that would have to be released if we lost everything. | 14 |
fomc | 1,977 | All right. I say, number one, that we ought to proceed in a normal fashion but be aware, fully aware, of Mr. Mayo's word of warning. | 34 |
fomc | 1,977 | But I think, Mr. Chairman, that everyone's right that, since it will be 15 days, that this can't have much market effect. That is, whatever formulation that we have, what I was thinking of more, I must admit, is that we're going to lose this. Now I hate to be that negative, but I think there's a high probability that w... | 175 |
fomc | 1,977 | Chuck, wouldn't the market, wouldn't observers generally very quickly note the fact that we had changed the content of the directive, and [so] we might well be subject to an accusation of deviousness--we have changed our procedures so as not to disclose as much as we had probably decided internally. I can see a bad rea... | 69 |
fomc | 1,977 | Well, I think you may be right. But on the other hand, I think the Committee has the freedom to change its directive. | 27 |
fomc | 1,977 | It seems to me it has. We've changed it many times. | 13 |
fomc | 1,977 | And if you say, you know, if they were expecting the aggregates within a particular range, and you're starting off on a funds rate, and the Manager ought to shade--moving above that rate or below that rate depending on how those aggregates come up--well, that's not too harmful. | 58 |
fomc | 1,977 | Well, I think what is being suggested here is very dangerous. We could be inviting a condemnation by members of the Congress, and some of them are very quick to jump. And worse than that, we could be inviting condemnation by the court, and that's far more serious than condemnation by Henry Reuss or another such charact... | 65 |
fomc | 1,977 | Mr. Chairman, let me make my point a little clearer here. I really don't subscribe to the idea of getting rid of the ranges. I think that would cause great attention right away. But we have used subtleties of words in widening of ranges in a statement of asymmetrical midpoints and zones of indifference so many times, I... | 178 |
fomc | 1,977 | Perhaps in the interest of speeding this--now my inclination is very similar to yours in changing the directive. It seems to me, in any event, the kind of subtleties that Mr. Mayo is talking about, we can only determine in the light of what substantive decision we make here today-- | 60 |
fomc | 1,977 | Right. | 2 |
fomc | 1,977 | --and I propose that this be deferred until we arrive at our decision and look and see how we want to word the directive. | 26 |
fomc | 1,977 | Well, I think this more basic [than] that. I'm surprised to hear that we seem to be so married to this particular directive that, if circumstances change entirely, namely, we tip off the market where previously we had relied on not tipping them off, we are compelled to continue doing just what we did. It seems to me, w... | 101 |
fomc | 1,977 | But the particular circumstance here is a decision by the Court of Appeals, and I don't think we ought to put ourselves in the position of being charged [with] circumventing the law and playing games with the law. I can't think of anything that could be more damaging to our future. | 57 |
fomc | 1,977 | Mr. Chairman, may I ask Tom a very firm question on this? What is the court's attitude with respect to the spirit and the letter of this question? Because I think that's pertinent to this issue here. | 43 |
fomc | 1,977 | The court gave, I think, a creditable review of the historical import [of] the Freedom of Information Act, President Eastburn, [and] found that the Committee's position--that the exemption 5 language covered the document in question here--to be without merit. It cast aside our position that the legislative history indi... | 204 |
fomc | 1,977 | How strictly would the court hold us to sticking to our present procedures? | 14 |
fomc | 1,977 | That issue wasn't in any sense either expressly or implicitly addressed in this opinion. My judgment is, the implicit change as suggested by President Mayo, that is, that the Committee's use of language to reflect its actions taken--somewhat changing the previous format of that language--would not contravene any sense ... | 88 |
fomc | 1,977 | All right, thank you. Mr. Kimbrel, we haven't heard from you, and then we'll hear from Mr. Willes, and then Mr. Roos. | 35 |
fomc | 1,977 | Mr. Chairman, I would very strongly also follow the recommendations of Mr. O'Connell. It seems to me that we might very well anticipate many, many things that can come along, but I rather think that it would be wise to take these in a logical order; and to attempt this, we still are able to get together to discuss thes... | 102 |
fomc | 1,977 | All right, thank you, Mr. Kimbrel. Mr. Willes now, please. | 20 |
fomc | 1,977 | Mr. Chairman, when this whole business started I was a very strong supporter of the System point of view. But experiences of the last couple of years, especially as I see what uncertainty does to the way people make decisions, kind of makes me wonder if there's anybody besides me who would like to reconsider our basic ... | 166 |
fomc | 1,977 | Well, we'll have a show of hands. Is Mr. Willes out in left field or not? Those who think he is will raise their hands. | 31 |
fomc | 1,977 | He's moving in that direction. | 6 |
fomc | 1,977 | He's left of center field. He's still in the ball park, let me put it that way. | 20 |
fomc | 1,977 | More seriously, how many would support Mr. Willes's position. | 14 |
fomc | 1,977 | Well, with modifications in the directive. | 8 |
fomc | 1,977 | I think there is a directive that we could put out-- | 12 |
fomc | 1,977 | How many would support Mr. Willes's position? Well, it's not a majority, so we'll put that aside without further discussion. Now, Mr. Roos, you-- | 36 |
fomc | 1,977 | Mr. Chairman, I agree totally with the position that you've stated, appealing it, and doing everything we can with Congress. But in considering contingencies, is it not possible for us to review, in line with what Mark Willes says, whether our strategy should be based automatically on an assumption that we're doing the... | 197 |
fomc | 1,977 | Well, we could discuss that at length. I think your suggestion is one--I see no reason why we shouldn't follow it up, but I think that is only a small part of the story, and in my universe, the less important part. But I see no reason why your suggestion shouldn't be followed up by the staff in the course of our planni... | 93 |
fomc | 1,977 | Mr. Chairman, along the lines of what Mr. Mayo suggested a while ago, I would think as a practical modus operandi in the interim that, when in doubt, we would tend to lean more towards an aggregates directive than a money market directive. For example, in today's meeting, I think a money market directive is appropriate... | 186 |
fomc | 1,977 | Yes. I understand your first. The second troubles me, not because I have any intellectual difficulty with it, but rather because I don't think we ought to change our procedure without thorough discussion, and I doubt that we'll be ready to-- | 47 |
fomc | 1,977 | I didn't mean to suggest that we do it now. I just mean over the future. I think it does strengthen the argument. | 26 |
fomc | 1,977 | Well, even your first point bothers me, Bob, because if you change to a money market directive because you have a lack of confidence in what the short-run aggregates numbers are telling us, and then you say well, since this court decision, we'd better go back to the aggregates directive, you really are going against so... | 76 |
fomc | 1,977 | Gentlemen, you know, really, let's make the least favorable assumption, namely, that we have to issue a directive on December 1. We have 15 days, which is something quite different from issuing the directive immediately. If not, it's not a clean case. That's the least fortunate assumption, but it's not a maximum misfor... | 176 |
fomc | 1,977 | Mr. Chairman, a question to Mr. O'Connell. I, of course read the court's statement strictly as a layman, but it seems to me they have said, if you want relief, it must be through the legislative channel. I found no reference there to the appeal process. They apparently felt they were rendering a final judgment on an in... | 99 |
fomc | 1,977 | Well, why not follow both routes, which is the present plan suggested by Mr. O'Connell? | 21 |
fomc | 1,977 | Well, why does not that [suggestion by the court] open to us an avenue of request to [the court] and give us adequate time to pursue the legislative process as compared with the time which apparently is built into the legal proceedings, if we choose to go through the legal appeal process and question their legal judgme... | 65 |
fomc | 1,977 | President Baughman, the language in the Court of Appeals, I think, should be read much like in a parental circumstance, where mother says, "Ask your father." It doesn't necessarily mean that mother anticipates father's going to give any different answer or relief, but it's a way of mother being finished with the proble... | 220 |
fomc | 1,977 | But it is a foregone conclusion that they will blindly follow rules and not consider other things. | 19 |
fomc | 1,977 | No sir. Nor is their opinion to be read as a statement on their part that they know that they were absolutely right and that we won't pursue a petition to the Supreme Court, as I think we should. | 42 |
fomc | 1,977 | All right, Mr. Baughman. Mr. Guffey, we haven't heard from you yet. | 22 |
fomc | 1,977 | Yes, Mr. Chairman, it seems to me that we have really only one issue that we should decide here this morning, and it's one that Tom has presented--that is, whether we appeal or not. And to pick up on what Steve Gardner's already very well stated, I think we have an obligation to do it. There isn't, I think, anything th... | 360 |
fomc | 1,977 | Well, I think that's a very, very reasonable suggestion. Any other positions you may have? Very well, Mr. Partee, your committee's charged with the responsibility promptly. Thank you very much, Mr. Guffey. Mr. Morris now, please. | 54 |
fomc | 1,977 | Mr. Chairman, I just want to say I support your position entirely. I'm very much concerned about changing the directive [in a way] that would eliminate the funds range, because this would require that this Committee no longer have an interest rate policy, that we have given the Manager carte blanche to move rates as he... | 132 |
fomc | 1,977 | Well, I agree with you. As a matter of fact, it can go into the opposite direction [of] what we intended to do. We'll have to see. Offhand, I can't think of a solution. | 44 |
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