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fomc
1,977
Mr. Chairman, might I raise one point on specificity--a very good word; I can't pronounce it. Would there be any advantage in our rephrasing our statement, under either directive, to say "at about current levels," rather than saying "at about 6-1/2 percent" when we're describing the central point of our directive? Line...
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You're pointing to line 67?
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--63-64, where we describe the central point at 6-1/2 percent. Would it be better--I think we have as good a case as we'll ever have for doing it this time, to say "at about current levels."
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I see no difficulty myself. Does anyone see any difficulty in adopting Mr. Mayo's suggestion? There may be a slight advantage. Well, I hear no objection. Lets proceed the Mayo way. Well, let me repeat, we'll be voting on a money market directive, a range for M1 of 1 to 7, a range for M2 of 5 to 9, and a range for the f...
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Mr. Chairman, may I just call the Committee's attention to the proposed revision of the statement on retail sales in light of the new data.
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I think that's entirely appropriate. I move that that change be incorporated.
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Even unread?
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I've read it.
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All right, is anyone in doubt about the change [in the statement on the retail sales data]? All right, that will be made. Are we ready for a vote? Apparently. Mr. Broida would you be good enough to call the roll.
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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 ...
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Our meeting will get under way now. I believe all of you have been informed of the passing of [former Board Chairman] Marriner Eccles, who served us for 12 years or more--I'm not sure of the exact period--at the Federal Reserve Board. I think it would be proper if all of you joined me in standing to pay our respects to...
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Yes, Mr. Chairman. For the Committee's recollection, the Merrill case, of course, involves a demand that is made under the Freedom of Information Act for certain of the Committee's documents derived from two meetings of the Committee in '76. And the lower court decision, from which an appeal has been taken--the issue o...
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What document is this now?
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The attorney in the Civil Division prepared an intraoffice memorandum analyzing the case for and against the certiorari petition, Mr. Chairman. He was not at liberty to tell me exactly what his recommendation was, but he merely came close to saying it wasn't as strongly supportive as the Committee's letter, but he felt...
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All right, thank you, Mr. O'Connell. Are there any questions about the status of the Merrill case? Yes, Mr. Eastburn.
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If the Supreme Court were to accept it, what kind of timetable do you suppose would be involved?
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It's hard to tell, Mr. Eastburn. From the notification of acceptance, we follow certain established procedural time limits for filing of briefs, answering briefs, oral arguments, dates, and so forth. As much as six months could be involved, even on the established calendar.
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Any other questions?
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And if they don't accept it, Tom, that would make it, after the first of January rather promptly, something we would have to do on a current basis?
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Governor, if it is rejected as of that date, it is up to the Court of Appeals to issue a date of mandate effectiveness. But I think it would follow promptly upon the actions of the Supreme Court in the denying of writ, but we would get a date definite, and I would advise the Committee as promptly as possible.
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Mr. Baughman.
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Would you have an opportunity to present views to the Court of Appeals relative to an effective date?
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With respect to the mandate per se, no, we would not. Presumably our petition having been denied by the Supreme Court--that they will not accept the case on appeal--and a sufficient extension having been obtained to enable us to pursue that, we are pretty well bound by whatever mandate the Court of Appeals issues. It i...
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Mr. Guffey?
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Tom, did I understand, if the Solicitor General files with the Supreme Court for a writ, then we have as much as six months before the Court rules whether they will grant the writ and hear the case or deny the writ. Is that correct?
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I stated, President Guffey, as a minimum, my judgment, about six months would be involved. The Supreme Court could respond to our writ promptly within a month. The scheduling of that, the briefing, would be automatic, but scheduling for the oral argument could be months, and so forth. As you know, the Court recesses an...
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But the critical part of the timing, though, is the Solicitor General's decision to file for writ?
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Correct. If he does so, pending the Court's answer of affirmative or not, a status is still in effect, and that is automatic once the petition has been filed. Correct.
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Any other questions? If not, let me say a few words about efforts directed toward legislative relief. Unless the Supreme Court decides to set aside the decision of the Court of Appeals, assuming that the case ever gets to the Supreme Court--that is quite uncertain. First, the Solicitor General has to recommend that the...
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That presumes, however, that you are going to endorse the GAO bill.
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No. No, it presumes that a compromise on the GAO bill may need to be reached. The kind of compromise that I have in mind is the possibility of striking the section dealing with bank examinations. In other words, not allow GAO access to bank examination reports and--
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Well, I guess my question is, question of strategy--you deal with it more than the rest of us, but the question is whether the GAO bill is actually going to get passed. I have not crossed that bridge in my mind.
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Well, that is a fair question. My own guess is that the GAO bill in some form is going to pass. And that, if the section on bank examination reports could be deleted, we could do reasonably well. Now, in saying that, I have no objection at all, needless to say, seeing the whole bill defeated. On the contrary, there is ...
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I'm not totally optimistic that it can be accomplished either, Mr. Chairman. But I would like to see a little more evidence of some real interest [in] the Senate before we start a compromise of it.
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Well, that's fair, that's fair. That's why I have delayed any conversation there, because I like to feel my ground there. In the House, that's different.
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That's already gone. The Senate--I'd like to see what they come back with after their vacation.
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Well, now, we have to be a little careful. Unless I have a conversation with Senator Sasser to begin with rather soon, there is a chance that the bill as it came from the House will be reported out favorably.
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Well, they haven't had a markup session yet.
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Well, I know, but I think I would have to hold my conversation before that. Once you reach the markup stage, well then, the fate is, practically speaking, sealed. You need to have somebody there within the committee, or more than one, to lead the fight for the elimination of the whole thing or for some sort of decent c...
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Couldn't that be done by a person or people not particularly in favor of it--somebody who would take this as an acceptance of GAO?
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Well, I'd love to have someone on the Democratic side as well as on the Republican side. If you are going into a legislative battle, you ought to be armed on both sides if at all possible, and Senator Sasser--having served as chairman of the hearing--will undoubtedly speak with a measure of authority in the committee's...
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I think maybe we are getting too much into strategy right now, but it also opens this opportunity. If the Senate Government Operations Committee would accept such a proposal, it opens the chance that members of the Senate Banking and Currency Committee would feel that their turf has been invaded, and they might start t...
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I'd have to remember more carefully than I do, but I think there is some comment about referring that GAO [bill] to Senate Banking as a courtesy referral before a final passing.
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Well, that I'm not acquainted with--
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I'm pulling something out of memory that I'm not positive about. The reason I was--
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That, I'm not acquainted with. I wish you would look that up immediately, because if that is true, we'd have a better chance in Senate Banking for doing something than we will have in the Government Operations [Committee]. Well, that is all I can say, really, about the steps that have been taken or are presently being ...
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Mr. Chairman?
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Yes, Mr. Balles.
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I had hoped that we wouldn't keep this GAO bill alive because we were using it as a legislative vehicle to help solve the Merrill decision. After my session with you and subsequently with all of the Presidents, the tone that we tried to communicate to our directors on an active campaign is that [it's] possible to get t...
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No, we are not going to do that. I was trying to indicate something I am thinking about, and this is on the assumption that, after as good appraisals as we could make, the chances of defeating the GAO bill [in] the Senate Government Operations Committee are [found to be] negligible, are small.
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Okay.
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I don't think we will have that problem. We'll guard against that. Any other questions? If not, let me call on Governor Partee, who has worked with a [sub]committee of our members on the procedures that might be followed if the court's order becomes effective. Mr. Partee, would you be good enough to make your report no...
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Well, Mr. Chairman, we were asked to consider on an emergency basis this contingency planning, the question of what we would do in the event that we lose the court case or have to suddenly publish the directive. The subcommittee had two meetings since the last meeting of the Committee, and the staff met and drafted a r...
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Well, thank you for a very constructive and also lucid report. I wonder if other members of the [sub]committee, and I know--
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--may well have comments. Governor Gardner and President Volcker and President Eastburn.
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All right, Mr. Gardner, do you have a--
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The only thing that I didn't like was--I think Chuck did that extremely well--but I don't like his idea of characterizing as a small, unimportant addition in the first recommendation.
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No, no, it's just that it has a--I meant to imply that it has a precedent, you see. So that it wouldn't be so unusual to add that back in, since we had something like it earlier.
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I strongly support that as you know. I'm sorry I called you on this, very minor change.
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All right. Mr. Volcker, please.
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I don't think I have anything to add, Mr. Chairman.
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Mr. Eastburn?
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Well, I would like to say something, Mr. Chairman. I support the thrust of the report. I happen to feel that we not only can live with the kind of solution that the report recommends, but we may find that more information may actually improve the functioning of the open market operations. I'd like to [make] a comment, ...
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Mr. O'Connell, suppose that a request is made under the Freedom of Information Act concerning the vote of the Committee, whether it was unanimous or not. And if there were dissents, who dissented. How much time would our staff have in respect to such a request?
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Under the statute, Mr. Chairman, I believe a maximum of 10 days for the initial answer to such a request. The statute calls and contemplates for a period--but that's a maximum period, 10 days. That 10 days contemplates the necessary search of information and compilation of the data. With respect to the subject of your ...
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Well, just to explore, what might be done under the law? Suppose that at the end of 10 days the response is negative. Or to be more accurate, the response is such that, by such and such a date, the exposure will be made--it will not be made within the 10-day period, but somewhat later than that. Suppose that is the res...
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I believe that would be fairly read as a denial of the request for the information sought.
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Well, what would be the consequences of denial?
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Under the Freedom of Information Act, the party petitioning has a right then to seek an appeal of that action; and that would be, under the Committee's appellate procedure, to a designated officer of the Committee, who would review the action below, namely a denial of a timely response, and there's a period of time wit...
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Well, by that time, the 30 days will have run its course.
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You're just about there--
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Then would they have to file an absolutely new one with the next directive?
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I think, were I counsel for the party that had been seeking the original information, I would revert to a lawsuit to get the court to straighten out what we consider to be some rather delaying response on the part of the Committee.
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I think what this discussion has indicated is that, if such a request is forthcoming, we'll have a good month, anyhow, to work out an answer if we don't have an answer earlier. Is that a fair conclusion?
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That, as a matter of fact, for logic, yes, it is, Mr. Chairman.
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Yes, but do you mean the first time, or each time?
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I'd say the first time.
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I'd say the first time and the last time.
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It's the same incident.
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Yes, please.
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I'd like to hear the Committee's feeling a little bit more on why you think the very narrow range of the federal funds rate is desired.
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Well, it's simply, in my view--and each of the Committee members can speak for themselves--that in the context, of, let's say, the publication of the directive tomorrow, the market will have two things to look at. First, it will have the funds rate range that was specified to look at. And secondly, it will have the agg...
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Let me come back to that question on the running side. On the question of intermeeting decision, would that also, counsel, come under this immediate release?
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Yes, it would certainly have to. And in that event, you see, we would have announced, in effect, to the world that the aggregates are running strong enough or weak enough relative our expectations that we are changing our funds rate. But that's an explicit decision we make, and at that time we wouldn't be misleading in...
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Well, except, presumably, the second decision would come at a time when we would have otherwise changed the federal funds rate anyway, and they would have seen it in the market. Now they will see it out of our mouths as well as in the market, which changes it somewhat, but I don't think it changes it from night to day.
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Yes, but what I don't see is the early information on the aggregates ranges, which we are basing the decision on, before it's published in the papers. We may have a set of aggregates figures that we are looking at which strongly go beyond the market perception or beyond our released aggregates guides. And we are taking...
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Where we see that we have the aggregates coming in strong or weak, I don't see anything wrong with that.
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You know, when we depart from the Committee's decision through a telephone meeting--or, typically, what we have done is send out a telegram--we've indicated our reasons. We spell those out in a few sentences, and presumably that procedure will continue to be followed so that our reasons for deviating from the FOMC deci...
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I guess it's a matter of perception as to whether a 1 point range in the federal funds market might give more leeway for the Committee not to have to have these special announcements, as opposed to a narrower range, [which], in at least a few instances, would almost assure that we would have an announcement to make.
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As I understood Mr. Partee, this is a recommendation to be followed over the next few meetings rather than to be followed permanently.
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Yes, and I don't think it should be a fixed rule.
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That might be a later decision, while we are learning how to live under this new rule, and with a view to learning what the market reactions are and with a view to minimizing the disturbance. This is not a recommendation for a new permanent procedure, is that correct?
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I am inclined to think, Phil, that what's going to happen is that market people, like Morgan and the bond houses, will start to focus more than they have and more publicly than they have on the two-month aggregate outlook. And they're spending more time on the weeklies now, but I think they will convert this to a two-m...
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Well, I think that's essentially the way the staff came out, Governor Partee. As you know, we did consider even narrower ranges than 1/2 point, which we felt was unfavorable because it would mean the frequent Committee announcements, frequent, very frequent Committee decisions on the funds rate, and probably kind of ma...
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Gentlemen, the several members of the Committee would like to address questions and make comments, and I'm going to call on Mr. Guffey next, and then Mr. Roos, and then Mr. Winn, and then Mr. Mayo.
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Well, first, I think I tried to make a comment earlier with regard to the dissent. My comment, essentially, was that I would hate to see this Committee deny a request or even hold up a request for a vote, because I think it would look as if we were trying to be obstreperous and not cooperating with that court order--ev...
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I missed the import of your last statement about the reporter calling a member. I'm sorry, would you be good enough to restate that point?
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I am only suggesting that all of the focus and the comments before were with respect to those who would have dissented at a meeting and did dissent at a meeting, but had left out everybody else. Those that voted for the majority, for the consensus view, you can exclude. The situation--a reporter calls up one that voted...
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Yes, but I thought that our rule was not to discuss with reporters what goes on in the meeting. Therefore, if anyone of us received a call like that, we shouldn't respond.
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I think Roger's point is that you might get an unbalanced or not an impartial view of why the majority voted as it did, from one member.
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