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fomc | 1,977 | Exactly. Whether it's a majority or a dissenting member, I just wanted to [be] clear [on] that. | 25 |
fomc | 1,977 | Well, I think that's something to watch if we--certainly, I hope, no matter what happens, we are not going to get on a new course and start talking about what goes on at these meetings. | 43 |
fomc | 1,977 | My only concern was, Mr. Chairman-- | 9 |
fomc | 1,977 | Therefore, the possibility of a distorted impression should never arise if we don't talk about it--there will be no possibility of a distorted impression. And I think that's been our practice all along. | 38 |
fomc | 1,977 | But you could have a reporter ask a majority opinionated member why did you vote for this. Which is the same thing Chuck was saying--why did the dissenter vote for this, or against this. | 41 |
fomc | 1,977 | Well, I think that whole question has to be reexamined, and what the specific answer may be at the moment, I'm not sure, but I am sure of one thing. And that is we have to work out a procedure whereby the amount of talking we do and the kind, the amount, of talking that we do in response to reporters' inquiries will be... | 98 |
fomc | 1,977 | I'd like to follow up, if I may, with the most current discussion, and that is, I think, Chuck, you mentioned that there would be two figures published--that is, the range for the federal funds and then the aggregates ranges. But there is one other figure that seems to me to be important if we follow the procedures tha... | 97 |
fomc | 1,977 | You mean the current rate. | 6 |
fomc | 1,977 | The current rate, and the question is whether that is a quantified 6-1/2, for example, or whether you use the language that we used in [the] past month's directive. That seems to be the more important issue than perhaps the breadth of the federal funds range, in the sense that you're establishing--when you start moving... | 260 |
fomc | 1,977 | Well, the answer may be found in saying less, rather than saying more. For example, if, say, the range is 6-1/4 to 6-3/4, and if we want the asymmetrical midpoint, it is not at all clear to me that that is something that has to be made a part of the directive. | 72 |
fomc | 1,977 | Well, I think that is a very important question. Because, if we are to follow the court's decision, and if we have actually taken a vote that we want asymmetrical, I would judge that the counsel would [say] that that probably would have to be published. | 56 |
fomc | 1,977 | If we actually took the vote, yes. But we could have a general discussion which would serve as a guide to the Desk without taking a vote, and I think we've frequently done just that. | 39 |
fomc | 1,977 | I don't know why we couldn't say, Roger--now our current construction says that we think the ranges for the aggregates that we have specified are consistent with a funds rate of about [X]. And I don't see why we couldn't say about 6-1/2 percent. But the Manager may move between 6-3/8 and 6-7/8 if the aggregates seem to... | 119 |
fomc | 1,977 | If that is something that we want to put into the directive. We may not want to put it in the directive. | 24 |
fomc | 1,977 | We have, in the past, up until last month, I believe. It is my point that that has been a published figure. It is a figure to stand-- | 34 |
fomc | 1,977 | We may want to change the midpoint at the time the directive is put out. And the same range, we might say we think it's consistent with the funds rate of about 6-5/8 rather than 6-1/2, and then a range from 6-3/8 to 6-7/8. | 68 |
fomc | 1,977 | Your problem might be a 6-1/2 to 7 percent. | 16 |
fomc | 1,977 | Well, that would be a problem because you get nothing on the downside. | 15 |
fomc | 1,977 | Well, yes, the range of 1/2 percentage point, I think, is likely to work quite well when you have a gradual evolution of interest rates. But now, take an extreme case and suppose that the decision were to move to a range of 6-3/4 to 7-1/4; then the purpose that you seek of preventing a jolt, or minimizing the probabili... | 92 |
fomc | 1,977 | In that case, I guess I'd have to say, Mr. Chairman, we should violate the rule of a 1/2 point in order to keep 6-1/2 percent in the directive. | 42 |
fomc | 1,977 | Well, if you do violate that rule, that is precisely the time you're going to get a whopping market response. | 23 |
fomc | 1,977 | I guess you ought to be pretty sure you want it. | 12 |
fomc | 1,977 | You're going to get it anyway. | 7 |
fomc | 1,977 | Except you'll be telling the market a lot more than if you always had a 1 point spread. You'd be giving the market a lot more information when you move from a half point to a full point spread. | 43 |
fomc | 1,977 | Well, one way of dealing with a kind of abrupt change that I spoke of would be to divide that change, to carry out that change in two sets. One decision being made at the time of the FOMC, and a further move that completes the change a couple of weeks later, let's say, in a special meeting or telephone conference. | 70 |
fomc | 1,977 | But this has-- | 4 |
fomc | 1,977 | That's what I thought. In cases like that, you would move deliberately as expectations were borne out. | 20 |
fomc | 1,977 | Well, let's move on to questions now. Next to Mr. Roos, please. | 18 |
fomc | 1,977 | Mr. Chairman, I have a question, and then I'd like to briefly comment. I'd like to direct this to Governor Partee. Just who would be harmed or what are the damaging consequences, damaging to whom, if the market were to move rather abruptly 1/2 point up, and what is the advantage of our not--if I understood Frank Morris... | 175 |
fomc | 1,977 | I think any of us could speak to this, and I hope they will. I guess my view is, Larry, that it's all right to have the 1/2 point to 3/4 point move in the market if that is the deliberate policy of the Federal Reserve because of a clear, perceived danger that it's working against. But I wouldn't want to have that kind ... | 258 |
fomc | 1,977 | You know, Mr. Chairman, I see one salutary effect of this Merrill decision, and that is that it is forcing us--at least for the first time since I've been on this group or at least [since I have] been able to understand a little of what we're doing--I think it's forcing us to actually consider some fundamental policy q... | 233 |
fomc | 1,977 | The intention was to put weight on what the Committee thinks is important now. That is, we did consider whether we should suggest a revolutionary change in procedure to the Committee--for example, run on nonborrowed reserves, which was an experiment we had some time ago. We could have considered, though we didn't expli... | 152 |
fomc | 1,977 | I think you've done it very well. Let me try an answer to your question, please, Larry. Our present federal funds rate range is 6-1/4 to 6-3/4. Now let's assume, just for purposes of analysis, a modest move in an upward direction, a range of 6-1/2 to 7 percent. We make that decision today, we publicize it today. All ri... | 288 |
fomc | 1,977 | If the aggregates, sir, were to overshoot in a manner that concerned us, would we be prepared to adjust the interest rate? | 27 |
fomc | 1,977 | We'd be just as prepared to do that under the new set of rules as we have been hitherto, because no change in policy has been recommended by the Partee [sub]committee. All that the Partee [sub]committee is trying to do is to take the kind of thinking that exists within the Committee and enable us to adjust to the Merri... | 88 |
fomc | 1,977 | I think there's a question of the interpretation here, as to whether the market would react stronger with a half point or a full point. And that, no one can tell until we try it. | 39 |
fomc | 1,977 | Then perhaps you could start off with a half, and then you can try 3/4 and see what happens, and try a [full] point and see what happened. But I guess our recommendation is the conservative recommendation--you start thinking small rather than start thinking big. | 56 |
fomc | 1,977 | Well, it's two things. You are thinking small on analytic grounds, and you're thinking in terms of a small range, because that's where we've been recently. | 31 |
fomc | 1,977 | That's right. | 3 |
fomc | 1,977 | Mr. Winn, please. | 6 |
fomc | 1,977 | I guess my comments are in the same direction, Mr. Chairman. But it seems to me that, with the small range, when we're forced to move it, since we tend to be reluctant to move until we are sure of the aggregates, that you're going to get your next adjustment instantaneously. And if you want to try to smooth that as a s... | 189 |
fomc | 1,977 | I might add, in consideration of that, presumably the Committee at that point is willing to see the rate effect. We were most concerned with the undesired rate movement. That is, you had a rapid rate increase and there, in order to moderate that, you would be putting out excess reserves. But if, in a consideration betw... | 85 |
fomc | 1,977 | Well, wouldn't you get it almost all at once this time? | 13 |
fomc | 1,977 | Oh, I assume so. If you raise the funds rate 1/4 point, you get about a 1/4 point reaction, but that's not outside of the normal mode. | 38 |
fomc | 1,977 | But just because it went that route of another publicized Committee decision, you could possibly get a bit more of a rate effect because you had to do it that way. | 34 |
fomc | 1,977 | I think there's just no getting around that; that's what's going to happen. That is, when you move and you say you are moving, you're going to get more of a prompt adjustment than you do now, and so you have to be pretty certain of your ground. | 54 |
fomc | 1,977 | Well, just a factual point. We have had a 1/2 percent[age point tolerance range in the] federal funds rate since May, and the federal funds rate has moved during that period by approximately 120 basis points. And possibly the reference point here should be the April figure rather than the May figure, in which case it w... | 102 |
fomc | 1,977 | Mr. Chairman, could you add to that analysis how many [times] we've had special intermeetings? | 22 |
fomc | 1,977 | Only once, I think--how many-- | 9 |
fomc | 1,977 | Since the May meeting, there was one in August, following the August meeting. | 16 |
fomc | 1,977 | There were a couple of them back in April. | 10 |
fomc | 1,977 | There was one in April. | 6 |
fomc | 1,977 | There was one on May 6, and one on August 5. Those were the only two-- | 21 |
fomc | 1,977 | Well, prior to May of this year we had a range of 3/4 percent except for one month, when we had a range of 1 percent. But I want to repeat what I think is an important part of Mr. Partee's report. Mr. Partee did not recommend that we adopt a federal funds rate [with a] 1/2 percentage point [range]. What he recommended ... | 98 |
fomc | 1,977 | Yes. | 2 |
fomc | 1,977 | We do it in recognition [that there] may have to be more frequent adjustments. | 17 |
fomc | 1,977 | More frequent adjustment between meetings and a recognition of perhaps the desirability of widening the range depending on what we learn about the market behavior. Mr. Mayo, please. | 33 |
fomc | 1,977 | Well, just continuing on the same theme, I think this is an excellent report, and my only question is, I guess like Phil Coldwell's, to put it a little different way, I think there is perhaps a slight violation, in the 1/2 point recommendation, [of] the basic principle that the Chairman enunciated quite well, that the ... | 185 |
fomc | 1,977 | Well, I-- | 4 |
fomc | 1,977 | Ordinarily-- | 3 |
fomc | 1,977 | Ordinarily, yes, you have all the escape you need. I just come back to the Chairman's recitation of what we have been doing over the past year, we've had a 1, and a 3/4, and some halves, all of which have been justified in our minds at the time we did it. I don't see any reason to decide today that we are going to depa... | 110 |
fomc | 1,977 | Well, I don't feel that way. I feel that this recommendation is an important recommendation. I think this discussion is very helpful. Nevertheless, I would accept your conclusion that we need not decide today to observe a federal funds rate range of 1/2 percentage point over the next six months. I don't think we need t... | 152 |
fomc | 1,977 | It just requires careful thought-- | 6 |
fomc | 1,977 | Sure. Well, that's really all we are saying. | 11 |
fomc | 1,977 | --when you adopt a broader range. | 8 |
fomc | 1,977 | We are starting from a half, and it's logical to consider that [as being] home base as we feel our way here. And we will be feeling our way. I had one question which was raised by the speculation earlier. Well, suppose the aggregates are coming in stronger, and we decided we do have to make a move. This may seem like a... | 158 |
fomc | 1,977 | Well, I would ask you to articulate exactly the document you are talking about. | 16 |
fomc | 1,977 | These are reports from all of the member [commercial] banks that Steve Axilrod gets in, and so forth. To what extent is this privileged? | 31 |
fomc | 1,977 | I think the answer is easy. We publish dependable information when we have it. | 16 |
fomc | 1,977 | Oh, you are making judgments on undependable information? | 12 |
fomc | 1,977 | Yes, we are, as every statistical agency does. | 11 |
fomc | 1,977 | Didn't you ever know that? | 6 |
fomc | 1,977 | I am trying to state, be a devil's advocate here, to be sure that we understand our degree of protection. | 24 |
fomc | 1,977 | Just to put it pointedly, do we have to publish our projections? Which we haven't. | 19 |
fomc | 1,977 | That's about it. Well, the preliminary information is supposed to be information as against forecast. There's a line here, today is the line. Are we protected? I hope your answer is yes. I think I'll be sorry I raised the question if it isn't. | 52 |
fomc | 1,977 | Well, I don't know how. If I may, Mr. Chairman--the requirements in the demands in the Freedom of Information Act, Mr. Mayo, relate to records of an agency. That's the broad concept of that statute. And to the extent that an agency is in possession of what I will refer to as intra-agency information, recommendations, m... | 174 |
fomc | 1,977 | Okay, thank you. | 5 |
fomc | 1,977 | All right. Mr. Wallich, please. | 10 |
fomc | 1,977 | I have two points, Mr. Chairman. One goes somewhat in the direction of what Mr. Roos said. I think we ought to test our procedures here by how well they will allow us to control the aggregates as well as by how well they will allow us to stave off undesired effects in the money market. Now, it is certainly true that ch... | 305 |
fomc | 1,977 | I think we've had not very frequent--but it hasn't been necessary very frequently--special recommendations made to the Committee in line with the evidence as it turns up, as the aggregates develop, with the recommendation to move beyond the Committee's recommendation. We have done it twice this year; we've done it, I t... | 63 |
fomc | 1,977 | Earlier, Mr. Chairman, they were very much more frequent, in '73, '74, and '75. If I can remember the count I made, it was eight, nine, and six intermeeting telegrams to change the funds rate range. In the last two years, there were only two each. I think that's a consequence of the movement of the aggregates rather th... | 82 |
fomc | 1,977 | Well, we can, if we steel ourselves, make these frequent changes. The fact that, of late, we have had 1/2 point spreads and the aggregates have run high are not, I think, completely unrelated, although there have been other reasons that have contributed. So we certainly have to bear in mind that we may have to move the... | 170 |
fomc | 1,977 | Governor, I read the court's decision as taking the Committee procedure and format as it was found and as described in pleadings that reached the Court of Appeals. I see nothing in that opinion that prohibits this Committee from exercising its own discretion in the format that it adopts. The allusion that I believe you... | 114 |
fomc | 1,977 | Well, that is, I think any suggestion for a new type of directive will be reviewed by the Partee [sub]committee. | 27 |
fomc | 1,977 | That's what I had in mind; we are not precluded from-- | 14 |
fomc | 1,977 | In my judgment we are not. | 7 |
fomc | 1,977 | I think we would want to have an explanation when we [make] a significant change in the directive if we were on a publications schedule-- | 28 |
fomc | 1,977 | Could the explanation be that, because of the conditions created by the immediate announcement, we now face a market problem that we want to cope with by changing our procedure, changing the directive. | 37 |
fomc | 1,977 | The Committee's explanation, Governor, I counsel only, should not confront any mandate of the Court of Appeals. You have already read, the court has said actions taken by the Committee as reflected in adoption by the Committee should be promptly published. It does not say that you may not change the mode of your arriva... | 97 |
fomc | 1,977 | All right, let's turn to Mr. Balles now, please. | 14 |
fomc | 1,977 | Mr. Chairman, I was impressed by the thoroughness of the [Partee sub]committee's search for alternative solutions to the Merrill problem, and if the case goes against us, which we hope it won't, I think we are all going to learn a great deal. And I doubt if we are going to find another final answer to all these problem... | 454 |
fomc | 1,977 | Which is committee number one, is that the Mitchell committee? | 12 |
fomc | 1,977 | No, this is the Holland committee--was Holland. | 11 |
fomc | 1,977 | Well, that was really committee number three. | 9 |
fomc | 1,977 | Committee number one of my experience, Chuck. That really was committee number three, and it was Holland, Morris, Wallich, and Balles, I guess. | 33 |
fomc | 1,977 | I think it was before Governor Wallich came on the Board. | 13 |
fomc | 1,977 | Dane, for awhile; Wallich. Okay, there was a time when that committee, I believe, was unanimous in the spring of 1975 in recommending two things: getting rid of RPs [repurchase agreements] and proposing nonborrowed reserves. Well, when it finally came full circle and we decided to conduct an experiment, I was very sati... | 794 |
fomc | 1,977 | You know, I follow everything you say with a great deal of sympathy until you get into the political part of the argument. If we had a reserve target, and if in the process of applying it, interest rates moved up, believe me, the Congress would respond in just the way it has been doing. And there may well be great adva... | 88 |
fomc | 1,977 | Mr. Chairman, I have one other-- | 9 |
fomc | 1,977 | Could be. It's a judgment, and my judgment is the other way. | 15 |
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