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fomc | 1,977 | May I ask you a question, Mr. Chairman, about that midpoint--how the Desk is to determine that. I'm not sure what that means. | 30 |
fomc | 1,977 | Well, Mr. Holmes, you're on the spot. | 11 |
fomc | 1,977 | Well, I'll [try to] interpret it, Mr. Chairman: If we could go a bit above 4-5/8 without causing any damage to the interest rates, or only a very little, that would be the preference of the Committee. Now, is that right? That would be my interpretation--I'm not sure it's right. | 69 |
fomc | 1,977 | Any quarrels with Mr. Holmes? | 8 |
fomc | 1,977 | When you say a very little damage, you mean some small rise? | 14 |
fomc | 1,977 | 5 to 8 basis points on the bill rate--we're getting awfully precise on that. | 20 |
fomc | 1,977 | I just wanted you to define damage. | 8 |
fomc | 1,977 | I think that the [proposal would be for a] range of 4-1/4 to 5, with the Desk to interpret the discussion that has taken place in this room, the Desk being managed by men of high intelligence and great integrity. I don't think we ought to go beyond that--give them just the illusion of a little flexibility and a little ... | 92 |
fomc | 1,977 | Chairman Burns Yes Vice Chairman Volcker Yes President Balles No President Black Yes Governor Coldwell Yes Governor Gardner Yes Governor Jackson Yes President Kimbrel Yes Governor Lilly Yes Governor Partee Yes Governor Wallich Yes President Winn Yes Eleven to one. | 49 |
fomc | 1,977 | Well, I think we've done all that we can. | 11 |
fomc | 1,977 | Good morning gentlemen. I was just about to apologize for being late, and I am sorry, but I had a breakfast meeting and I couldn't get away on time. But a colleague of ours suggested that this might be a 10-minute meeting, and in view of his wise pronouncement, I am not going to apologize. But I am sorry to be late. As... | 499 |
fomc | 1,977 | Mr. Chairman, the members of the Committee have, I believe, received [in] advance [of] the meeting [the] memorandum of law setting forth, as the Chairman has indicated, the conclusion that I have reached on researching this issue. And accompanying that memorandum was a proposed statement of policy that I have recommend... | 1,344 |
fomc | 1,977 | Mr. Chairman, does the emphasis that we're placing on this argument on whether or not members of the FOMC are appointed by the President, confirmed by the Senate, does that strengthen Mr. Reuss's position on the appointment of Reserve Bank Presidents, and will that stimulate further efforts on his part, based on this G... | 94 |
fomc | 1,977 | Let me make an introductory comment and then turn the legal question over to Mr. O'Connell. All that we intend to release to the public is the statement of policy described as attachment B rather than the lengthy legal opinion that has been developed by Tom O'Connell. I think the legal opinion is a document to this Com... | 83 |
fomc | 1,977 | Mr. Roos, as you well know, it's difficult to respond to what will trigger Mr. Reuss into further action. The Reuss suit is now on appeal, and I should advise the Committee that, at this time, the burden is on Mr. Reuss's counsel to file his brief in support of his appeal. As of last night he had not filed the brief, s... | 183 |
fomc | 1,977 | Yes, Mr. Black. | 6 |
fomc | 1,977 | Tom, is it possible we might do that all the time, not issuing our statement of position but the other actions which we worked on under the Government in the Sunshine Act? | 35 |
fomc | 1,977 | I am sorry, Bob, I didn't hear the last part--excuse me. | 17 |
fomc | 1,977 | I was just saying is it possible that it would be better if we did not adopt the first part of the recommendation, issuing a statement that we don't think we [are] covered, [unintelligible] merely acting as if we were. | 50 |
fomc | 1,977 | I have an opinion on that President Black. To the contrary, I believe that our position is far better secured by the issuance of a statement of policy of the nature I have recommended--similar to the action by the [Federal Reserve] Board several years ago, when we issued a statement of policy with respect to the System... | 255 |
fomc | 1,977 | There is an additional comment. We've been advised by two of the men whom I mentioned--very influential, greatly involved in this legislation--to put out such a statement of policy. | 36 |
fomc | 1,977 | Tom, isn't it true that we cannot pretend that we are covered by the Sunshine Act because a part of what you have to do is public [announcement of] regulations [regarding our operations under the Sunshine Act], if in fact you are covered by the Sunshine Act? We have already gone past the [deadline] date on that. | 67 |
fomc | 1,977 | Well, Governor, your point is well taken. Sitting now at the [15th] of the month, if we were to issue today a proposed regulation covering the Committee [under the Sunshine Act] and allowed 30 days [for comment], as required by law, we are then at March 14, two days subsequent to the release date. Better late than neve... | 381 |
fomc | 1,977 | There are two supplementary observations that I would make. One is that the point that Tom has just made was made--Tom accompanied me to the meetings--with the legislators, and Tom developed this legal point in great detail, and the members of the Congress with whom we met were very much impressed by it. That is point ... | 174 |
fomc | 1,977 | Mr. Chairman, may I add to a point that I wanted to make? As a result of one of the visits the Chairman made to the Hill, a member of the Senator's staff, at the Senator's suggestion, referred the sole issue of law to the congressional library's law division, and without reference from us but from the Senator's office.... | 148 |
fomc | 1,977 | Mr. Chairman, you mentioned today in a memo about the National Security Council, are there other agencies which come under this-- | 25 |
fomc | 1,977 | May I respond to that? President Eastburn, [subject to] judicial [determination] or a declaration one way or the other, the Joint Chiefs of Staff [have a statutory] position on the National Security Council, the Loan Guarantee Board probably would be an example, the [unintelligible] President's advisors, apparently do ... | 112 |
fomc | 1,977 | Any other questions? Well, if not, the recommendation by our counsel is before the Committee, and I think we need to vote on it formally. Is there a motion to approve? The motion has been made and seconded. Is there any objection? | 51 |
fomc | 1,977 | I would like to comment. I think it has been very thoughtfully researched, and I think all of us recognize that. And I guess, even with that, in reading [the memorandum], I was not overly impressed with taking that move. But I think your visits with the other people have convinced me that maybe this is well and wise. | 68 |
fomc | 1,977 | Well, I have not been either, and I kept on pressing Tom O'Connell on the point: Well, why not say that we are covered, since actually we are observing, we can live under, the Sunshine [law]? We've gone beyond the Sunshine law because the Sunshine law would be satisfied if we merely kept detailed minutes. We not only k... | 230 |
fomc | 1,977 | Yes, Mr. Chairman, I do. And very briefly, Mr. Chairman, the memorandum deals with the provision in the Committee's regulations with respect to the availability of information which at present [is] exempt from release under the Freedom of Information Act--memoranda and materials to the Committee that are authorized by ... | 495 |
fomc | 1,977 | Are there any questions? Does this require us to [unintelligible] the Committee's actions? | 21 |
fomc | 1,977 | I move that we adopt the proposal. | 8 |
fomc | 1,977 | Seconded. | 3 |
fomc | 1,977 | Any questions? All right, we will consider Mr. O'Connell's interpretation and recommendation [to be] adopted. [End of executive session] We now need to act on the minutes of the January meeting. Is there a motion to approve? A motion has been made and probably very most inaudibly seconded. I hear no objections, and the... | 91 |
fomc | 1,977 | [Secretary's note: This statement was not found in Committee records.] | 14 |
fomc | 1,977 | Thank you, Mr. Holmes. Are there any questions? | 12 |
fomc | 1,977 | Are you able to buy your Swiss franc repayment in francs out of the market primarily, or are you drawing it from the Swiss? | 26 |
fomc | 1,977 | We are buying directly from the Swiss primarily. We have had occasion to buy Swiss francs from some of our correspondents who have been sellers. So we buy them directly at market rate. We have never really gone into the market. Really, it hasn't quite been that good. We hope to, over time. | 62 |
fomc | 1,977 | Does the market know this? | 6 |
fomc | 1,977 | We see no impact of any of this on the market. I think the market has assumed, and rightly so, that we are buying mainly directly from the Swiss National Bank. | 35 |
fomc | 1,977 | All press releases we have had have indicated that it would be done directly [with the Swiss authorities] to avoid any market impact. | 26 |
fomc | 1,977 | Well, we haven't made a commitment to that effect, have we? | 14 |
fomc | 1,977 | No. It is one of three options. And to some degree we are buying German marks and French francs in the market, which we then supply to the Swiss when they need them. And the other options. | 42 |
fomc | 1,977 | Any other questions? All right, a motion to confirm the transactions of the foreign desk is now in order. Motion is made and seconded. Any dissents? Very well, do you have any recommendations, Mr. Holmes? | 46 |
fomc | 1,977 | Mr. Chairman, for once we have no swaps maturing in the period ahead, and so I have no recommendations to make to the Committee. | 29 |
fomc | 1,977 | Well, no one will object to that. We will now ask for consideration of the economic outlook. Mr. Zeisel, will you be good enough to report to the Committee. | 36 |
fomc | 1,977 | [Secretary's note: This statement was not found in Committee records.] | 14 |
fomc | 1,977 | Thank you, Mr. Zeisel, for your report, and we'd now like to hear from members of the Committee. I think it would be particularly helpful to have any views on the economic outlook that diverge from the staff opinion expressed by Mr. Zeisel | 52 |
fomc | 1,977 | In trying to prognosticate what lies ahead, I guess I generally tend to think in terms of probabilities, Jerry, and I come out thinking that what the staff has done this time has a pretty high probability of happening. I am right with you this time, more closely than I have ever been. What I am wondering about is anoth... | 137 |
fomc | 1,977 | We've taken the optimistic tack, assuming that the caution that businessmen have evinced in their treatment of inventories over the last several quarters will continue, and they will not be panicked into a rapid increase in inventory investment during the second and third quarters when we get these temporary surges. Af... | 148 |
fomc | 1,977 | What was that? | 4 |
fomc | 1,977 | One in three, possibly. | 6 |
fomc | 1,977 | I guess that's even higher than I would have put it. That is real interesting. | 17 |
fomc | 1,977 | What is a normative figure on inventory accumulation now? Do you sort of assume close to 1 percent of GNP would be a normal figure? | 29 |
fomc | 1,977 | Well, the postwar average, as you know, was about 0.9 [percent], and our assumption more recently has been somewhat under that. And we have averaged somewhat under that for this period. We rise to above that rate toward the end of the projection period. | 56 |
fomc | 1,977 | For next year. The whole of this year is well below that. | 14 |
fomc | 1,977 | I would add only this comment. I would expect that, before this year is over, we'll run through an inventory cycle, induced in part by weather developments, induced in part by the Administration's fiscal package with its emphasis on the so-called rebate. And therefore I believe that all of us should pay far closer atte... | 88 |
fomc | 1,977 | Mr. Chairman, a number of somewhat disconnected comments. First off, it seems to me that a reading of the Redbook this time [was] rather interesting. Notwithstanding the great number of very unusual and generally adverse developments around the country, [in] almost every district there is a very strong flavor of optimi... | 206 |
fomc | 1,977 | That's what I always hear from bankers--they won't make mistakes in the future. | 16 |
fomc | 1,977 | Are you speaking of commercial bankers or central bankers? | 10 |
fomc | 1,977 | Well, I was thinking of commercial bankers. I have no difficulty with your generalization. | 18 |
fomc | 1,977 | We're in a very strong economic environment in the Southwest, which of course traces largely to the oil and gas business and, I suppose, in part to weather. There were reports from all members of our board of directors, who have had a wide range of contacts during the past month, that they can recall no time when they ... | 335 |
fomc | 1,977 | Did he say why? | 5 |
fomc | 1,977 | Because the loan demand is not that strong, and the availability of funds is continuing to improve. | 19 |
fomc | 1,977 | Thank you, Mr. Baughman. Mr. Kimbrel now, please. | 18 |
fomc | 1,977 | Mr. Zeisel, you refer to minimum likelihood of the labor force negotiations this year, I wonder if your projections have accorded any dimensions to the possibility [of an] increase [in] the minimum wage. | 43 |
fomc | 1,977 | Yes, we have incorporated the minimum wage increase that occurred January 1st into our projection of the-- | 21 |
fomc | 1,977 | I really had in mind any further increase though. | 10 |
fomc | 1,977 | No, that is all we have incorporated. Anything else that may occur, of course, would add to the pressure. This increase in the minimum wage, to $2.30, affected--our guess is--about 2 million people, to some extent in residential construction and to some extent in trade and services. It is hard to know how much of an ef... | 109 |
fomc | 1,977 | I am surprised by your reference to construction. | 9 |
fomc | 1,977 | Apparently there are, in some parts of the country, relatively low wage construction people. I don't think that's the major group. | 25 |
fomc | 1,977 | Where wages of some construction workers are or have been below the present minimum of $2.30? | 20 |
fomc | 1,977 | So I have been told. | 6 |
fomc | 1,977 | That is interesting. I didn't realize that. | 9 |
fomc | 1,977 | A lot of non-unions. | 7 |
fomc | 1,977 | Even so, it isn't--any facts that you may be able to present on that, I for one would like very much to see [them]. That surprises me. Any other questions, Mr. Kimbrel? Thank you. Mr. Winn now, please. | 54 |
fomc | 1,977 | Mr. Zeisel, in trying to assess the impact of the proposed universal welfare payments, to what extent have you adjusted the prospects in terms of the '75 experience, where the '75 payments came in a period following some declines in consumer credit outstanding? This will come [when] consumer credit outstanding has been... | 96 |
fomc | 1,977 | You are perfectly right. There were a number of factors operating in '75 that are not exactly similar to that here, and we may very well get a somewhat larger total effect from the rebate. However, I must say, we've used '75 as a base for making our estimates of the impact of 1977 rebates, with a few judgmental adjustm... | 76 |
fomc | 1,977 | You thought, Willis, that more will be used to begin to repay debts? | 16 |
fomc | 1,977 | Yes, and utility bills. You don't have any penalty now, interest rate or anything else, on utility bills, so they can accumulate without being cut off. No interest payments, and some of those are climbing. The credit situation is not so good, so you may not get the multiplier effect that you got before. | 64 |
fomc | 1,977 | We didn't get much of a multiplier effect last time. | 11 |
fomc | 1,977 | No, but look at what happened to consumer credit as a result of '75; it really spurted, and then combined with these payments-- | 30 |
fomc | 1,977 | Well, car sales went up. That's why you've got consumer credit. | 14 |
fomc | 1,977 | That's right. And that may not happen. | 9 |
fomc | 1,977 | All right. Mr. Morris, please. | 9 |
fomc | 1,977 | Mr. Chairman, I think there is a need for the Committee to make policy in a longer-term time frame than we've been accustomed to. I thought I would ask if the staff has a concept of what the optimum growth path ought to be for the economy over the next few years, and if so, how does the projection for '77 relate to tha... | 74 |
fomc | 1,977 | Well the projection for '77 that we have is approximately a 6 percent rate of real GNP growth; that is the average of the four quarters, which would accomplish a moderate reduction in the unemployment rate--we anticipate getting down to 7 percent, or that general magnitude, by the fourth quarter. I think one has to mak... | 222 |
fomc | 1,977 | Mr. Zeisel, am I right in thinking that the staff, in considering the longer-run trend of the economy, is now thinking of a rate of growth, over the long term, of 3-1/2 percent for real GNP for a year, in contrast to the figure that has become standard in the literature--4 percent? | 70 |
fomc | 1,977 | That's correct. | 3 |
fomc | 1,977 | Recognizing the flattening out of the trend of productivity-- | 12 |
fomc | 1,977 | Productivity has weakened. and that has reduced the trend, correct. | 14 |
fomc | 1,977 | --so, without being able to specify the details, a 6 percent rate of growth this year, let us say, merging into a 3-1/2 percent figure over the longer run, assuming a reasonable development of the economy. Is that the correct statement? | 55 |
fomc | 1,977 | That is right. | 4 |
fomc | 1,977 | It would take a number of years at 6 percent-- | 12 |
fomc | 1,977 | --to accomplish that--well, that is to say, 6 percent growth or something higher than 3-1/2 percent. | 28 |
fomc | 1,977 | Literally looked at, the unemployment rate drops to 7.1 in its projection over the year; with 6 percent growth, [unemployment drops] from 7.9 to 7.1. That is an 8/10 [percentage point] reduction. So it would take another couple of years to get down. | 68 |
fomc | 1,977 | I think a kind of interesting development in the New England academic scene--we have Otto Eckstein, for example, coming out now with the concept that we really had not better plan for a rate of growth on the average over the next four or five years in excess of 5 percent--5 percent is really the outside limit, and the ... | 83 |
fomc | 1,977 | It's an undesirable growth rate? | 6 |
fomc | 1,977 | It's undesirable, right. | 5 |
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