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fomc | 1,978 | The latest survey of-- | 5 |
fomc | 1,978 | Plant and equipment spending. | 5 |
fomc | 1,978 | Oh, yes. | 4 |
fomc | 1,978 | I had a group from the ten largest corporations in our area in for lunch yesterday and they expressed more caution than they have over the last nine months. It may be that we just have a very funny view of the world, and I wouldn't rule that out at all, but if you look at the chart for growth in real GNP it shows what ... | 311 |
fomc | 1,978 | Thank you, Mr. Willes. Mr. Mayo, please. | 14 |
fomc | 1,978 | First on the answer to Mark's question, isn't the staff's answer contained, Jim, in your memo of January 13 where you give the assumptions of 5-1/4 percent M1 [growth] and then 4 percent and 6-1/2 percent on each side? Isn't the 5-1/4 percent line consistent with these charts? | 75 |
fomc | 1,978 | Yes, it is. | 5 |
fomc | 1,978 | So, there are figures down here-- | 8 |
fomc | 1,978 | It is also in Part 1 of the Greenbook. We are projecting an increase averaging close to 6-1/2 percent over the next six quarters. | 33 |
fomc | 1,978 | My other comment is really in the form of a question [to] you, Mr. Chairman. There is an assumption through all the staff [materials] here, in the presentation we have just heard and the Bluebook, that indeed there will be a 1/2 percent increase in interest rate ceilings on time deposits. Would you or any other member ... | 109 |
fomc | 1,978 | May I first explain, Mr. Chairman, why we felt it necessary to make that assumption? If we had not made that assumption, we believe the growth in time deposits at banks and thrift institutions would have been so low as to carry M2 and M3 to or below the ranges currently in place. Therefore, we felt in order to have a s... | 143 |
fomc | 1,978 | I understand completely the reason for the assumption. I was just wondering if anyone would care to comment on the likelihood of action that would validate the assumption. | 30 |
fomc | 1,978 | Well, let me say just a word about it. I think it is a very reasonable assumption as far as the Federal Reserve Board is concerned. As far as other agencies of the government are concerned, perhaps Mr. Gardner and Mr. Partee who have been active in the [interagency] coordinating committee will have an opinion on that. | 68 |
fomc | 1,978 | I think it's a little hard to speculate. I don't know what Steve would say but the key role here will be played by the Home Loan Bank Board since we have to maintain a 1/4 point differential against the Home Loan Bank Board. That means they have the veto power on an increase in rates. If inflows are sufficiently poor o... | 153 |
fomc | 1,978 | Mr. Gardner, do you want to supplement what Mr. Partee just said? | 17 |
fomc | 1,978 | Only to say that I don't disagree with his presumption that it indeed has a possibility of being enacted; it's not an ethereal sort of idea at all. The Home Loan Bank Board has [seen] the liquidity positions of the savings institutions declining, and it has been speaking about that for months. I believe, [based on thos... | 84 |
fomc | 1,978 | Has an increase in the ceiling rate been discussed within the coordinating committee? | 14 |
fomc | 1,978 | Not to my knowledge. Not an increase. We have in effect just touched on disintermediation in their comments about their studies of the liquidity conditions of the institutions and the amount of Home Loan Bank Board borrowings that they are using. I think, Chuck, I would fully agree with you. It's certainly not out of t... | 89 |
fomc | 1,978 | I would make a very definite recommendation to Messrs. Gardner and Partee that conversation on that subject get under way immediately. It will take those fellows at the Home Loan Bank Board at least a half year to make up their minds. And by June or July we are likely to need something like that. | 61 |
fomc | 1,978 | I believe the staff assumption is that the increase [will occur] March 1. | 17 |
fomc | 1,978 | Well, that means we're already three months late. | 10 |
fomc | 1,978 | They are also assuming a full half point, which may or may not be-- | 16 |
fomc | 1,978 | Oh, I think for some category it would be a half point. A quarter point seems so small relative to the problem. But it might not be across the board; it might just be for a particular category. | 43 |
fomc | 1,978 | Chuck, what would the Home Loan Bank Board's basic objection be? | 14 |
fomc | 1,978 | Cost to the S&Ls. They probably would argue that the cost of raising the rate in terms of the drain on funds otherwise available to go into reserves would exceed the cost to the S&Ls of having some outflow of funds. That has to assume a willingness to let the home builders go, but in the last tight money period they le... | 75 |
fomc | 1,978 | Thank you. | 3 |
fomc | 1,978 | Mr. Chairman, on this point, it seems to me that it's a better strategy to move early on this sort of thing than it is to wait until it becomes a pressing issue and gets widespread publicity and you get a general acceptance of a point of view and a general trend started. Then it seems to me that it's probably impossibl... | 129 |
fomc | 1,978 | Are the staffs talking about this subject? | 8 |
fomc | 1,978 | Our staff is undertaking contingency plans internally, but I'm not aware of any staff discussions among the agencies at this point. | 23 |
fomc | 1,978 | The Home Loan Bank Board has just lost their economic staff. I don't know whom we'd talk to over there. | 22 |
fomc | 1,978 | I would urge very strongly [that you start]; it takes time to prepare the mind. I think staff conversation ought to get under way and the coordinating committee discussions ought to get under way. It takes time for these thought processes to mature, particularly on the part of an agency such as the Federal Home Loan Ba... | 91 |
fomc | 1,978 | No, I would merely say that I think the projection is a reasonable one. I would not quarrel with it. Come to think of it, though, I should put in a footnote to my remarks last month on agriculture. Our latest survey on land transactions in the Seventh District, which is always thinner for the fourth quarter than for th... | 117 |
fomc | 1,978 | Thank you, Mr. Mayo. Mr. Kimbrel now, please. | 16 |
fomc | 1,978 | Mr. Chairman, I think we too are hearing, as President Willes suggested, more comments about inflationary expectations. The business community seems to be worrying. Maybe it's the uncertainty that exists, but we seem to be hearing more of that. I think net we would come out close to what the staff has projected [though... | 163 |
fomc | 1,978 | Well, on average we expect roughly the same magnitudes as last year, or somewhat larger actually, with the bulk of the increase occurring in March. But this is a projected pattern at this point and we really prefer to have some experience as January and February develop. We are expecting [refunds to be] a little bit gr... | 122 |
fomc | 1,978 | All right. Thank you, Mr. Kimbrel. Mr. Eastburn now, please. | 20 |
fomc | 1,978 | Thank you, Mr. Chairman. Well, I would have some sympathy for the view that Governor Coldwell expressed about the longer-run outlook and the possibility of recessionary developments next year. This is supported by the views that I get in Philadelphia which, of course, are biased by the very slow activity that we have t... | 248 |
fomc | 1,978 | That's an important element in our thinking. It's one of the reasons that we believe the same mortgage rate this time around would have less impact on curtailing demand for mortgages than in the past. From the past performance of prices in that sector, I think it is quite clear that consumers are willing to take on add... | 133 |
fomc | 1,978 | Gentlemen, I think that we can't conclude our economic discussion quickly and we shouldn't try. So I suggest we take a coffee break now. When we return, we will have a short executive session and then resume our discussion of the economy and I shall call on Messrs. Balles, Morris, and Wallich in that sequence. Now, let... | 75 |
fomc | 1,978 | Gentlemen, we will turn to consideration of a couple of items that can best be taken up in Executive Session. First, we will have a report from our General Counsel, Mr. O'Connell, on the Merrill case. Tom, would you be good enough to report to the Committee? | 60 |
fomc | 1,978 | Yes, Mr. Chairman. I believe there have been distributed to the members of the Committee, Mr. Chairman, some information sheets that were transmitted to the Solicitor General on this matter. Very briefly, the Solicitor General has until February 8 as a terminal date to make his decision as to whether to seek certiorari... | 356 |
fomc | 1,978 | Well, I think I can speak a little more affirmatively on that. I've had a conversation with the Solicitor General on the subject of procedure, having first made delicate inquiries as to the propriety of talking with the Solicitor General on the issue. After receiving absolute assurance that it was entirely proper to ta... | 110 |
fomc | 1,978 | May I add, Mr. Chairman, as the Committee is also advised by materials in front of it, that action has been undertaken from the Board here to urge legislative relief of a nature suggested by the Court of Appeals in its opinion--namely, that there be an amendment to the Federal Reserve Act that would direct the withhold... | 149 |
fomc | 1,978 | Well, that letter followed a personal meeting with the Senator. I've had a similar meeting with Mr. Reuss. And copies of the letter and the accompanying memoranda sent to Mr. Proxmire will be sent to Senator Brook, Senator Power, Senator MacIntire, and likewise to the Chairman of the House Banking Committee, Mr. Reuss,... | 366 |
fomc | 1,978 | Tell us how you do that! | 7 |
fomc | 1,978 | I'll tell you how I do that but I won't take the time right now. Let me make some assumptions which appear to me to be reasonable but, of course, there is no way of telling whether or not they will turn out to be valid. The first assumption is that Mr. Miller will assume office on February 1. My next assumption is that... | 723 |
fomc | 1,978 | Therefore, I may have the opportunity of saying goodbye and I may also have the opportunity of hearing goodbye. Gentlemen, I think that we will discuss long-run ranges. In the meantime, a letter may or may not arrive before we conclude. If a letter does not arrive, then my recommendation is that we seek a consensus, no... | 203 |
fomc | 1,978 | Do we now have the option, Mr. Chairman, even if the letter arrives, of replying to the letter and saying that in view of this note [indicating] that he's going to be inviting Mr. Miller [to testify] after the next meeting that we didn't want to make the decision [today on the longer-run ranges]? | 67 |
fomc | 1,978 | We have that option. But whether it--well, that raises a subtle question that I'm not going to express. But it does raise subtle questions for the Committee to decide. This time I'm going to be the traditional Chairman who will keep the peace and if he has any views, he will communicate them only to his own conscience ... | 74 |
fomc | 1,978 | Mr. Chairman, Paul Nelson--and forgive me for not putting it in the note--did indicate that there will not be a letter asking for the written views of the FOMC. This forthcoming request for Miller to testify is in lieu of the earlier thing that he was pushing. | 57 |
fomc | 1,978 | Oh. Well, that clears up the matter. Then my suggestion would be that we defer consideration of the longer-range targets until the next meeting of the FOMC. | 34 |
fomc | 1,978 | Seconded. | 3 |
fomc | 1,978 | I think that's pretty clear. What do you think? | 11 |
fomc | 1,978 | Normally, we would take it up at this meeting. | 11 |
fomc | 1,978 | Yes, but-- | 4 |
fomc | 1,978 | We are getting off our schedule in considering it. There are some implications to that. Still, given the request for Miller's testimony after the next meeting, on balance I prefer to wait. | 38 |
fomc | 1,978 | [We] can do it in April again. | 10 |
fomc | 1,978 | We could have a two-month interval or a three-month interval from that point on. | 17 |
fomc | 1,978 | Well, I feel that in view of the imminence of a decision of some kind on Merrill, it might be very wise to put it off at this point. We'll know whether the Solicitor General is going to take the appeal to the Supreme Court. | 51 |
fomc | 1,978 | That helps there. | 4 |
fomc | 1,978 | That helps on that. | 5 |
fomc | 1,978 | Is there anything specific in the law with respect to the timing of the appearances [of the Chairman before the Congressional Committees]? | 25 |
fomc | 1,978 | I don't believe so. I think the law is very flexible on that. As a matter of fact, as our lawyers read the law--I might test [unintelligible] of the legal profession as I join them now and then--the semi-annual hearings can even be held simultaneously, [or rather in] the morning before the Senate and the afternoon befo... | 206 |
fomc | 1,978 | [My] staff will now leave, Mr. Chairman. | 12 |
fomc | 1,978 | Yes, I think we are ready to resume our regular meeting. | 13 |
fomc | 1,978 | There is a button here that I press [to call in the other staff members], Mr. Chairman, and I have no evidence that it works. | 30 |
fomc | 1,978 | Mr. Chairman, is there any problem in terms of communication to the world and the press as to why we are postponing [the decision on the long-run ranges] for a month? [I wouldn't want] our friends throughout the world to say that it's our inability or our confusion [that led to the postponement]. In other words, is the... | 79 |
fomc | 1,978 | I doubt it. I think it's simply that the hearing has been postponed and, therefore, [it is proper] to do it. | 27 |
fomc | 1,978 | Will that hearing postponement be made public? | 9 |
fomc | 1,978 | I think it will be made public by the House Banking Committee. Depending on what they do, we may or may not want to put out a very simple brief statement. I think you'd better talk this over, Joe, with Ken. It may be desirable for us to put out a very simple factual statement on the assumption that what the House Banki... | 139 |
fomc | 1,978 | Well, I would just like to make a few comments, Mr. Chairman, about the Board's staff forecast, which I find a very plausible one. It is somewhat more optimistic with regard to the second half of this year and going into '79 than that held by my own staff and in that regard I share some of the views previously expresse... | 283 |
fomc | 1,978 | Thank you, Mr. Balles. Mr. Morris now, please. | 15 |
fomc | 1,978 | Mr. Chairman, we had a rather interesting discussion among my board members as to why we are getting such a sluggish upturn in capital investment in this recovery. One of my business directors by the name of Miller raised this proposition, which he feels [is true based on] his own firm and from talking to people and bu... | 217 |
fomc | 1,978 | Well, yes. I was going to state it a different way. I think what is occurring is that plants are being recycled; [we're seeing] new equipment and rearrangements within plants but we're not getting new plants. You have an increase in capacity as well as an increase in productivity of some kind, but you also have a dimin... | 163 |
fomc | 1,978 | Thank you, Mr. Morris and Mr. Lilly. Anything else, Mr. Morris? | 18 |
fomc | 1,978 | No. | 2 |
fomc | 1,978 | Mr. Wallich now, please. | 8 |
fomc | 1,978 | I don't find the staff's forecast unpersuasive. It's not far from the range of other forecasts. I am puzzled about how the story is going to unfold eventually. We are now in a very long-lived expansion. Nothing has happened that would lead one to think that it would end with a bang, so if it ends, it will be with a whi... | 304 |
fomc | 1,978 | Thank you, Mr. Wallich. Mr. Winn, please. | 14 |
fomc | 1,978 | Mr. Chairman, I have several comments. First, I'd like to urge us not to get trapped in the traditional kinds of statistical reporting--particularly in the housing area, which has been quite crucial to developments to date, with home modernization and repair still representing a rising and major portion of the total. T... | 418 |
fomc | 1,978 | Well, I want to pause at this point. I want a show of hands, particularly on the part of our Bank Presidents. How many of you have sensed or experienced a similar development in your own region among the businessmen whom you see and have contact with? [Pause] How many have sensed the opposite? | 62 |
fomc | 1,978 | To a very minor degree. | 6 |
fomc | 1,978 | To a very minor degree or no change. | 9 |
fomc | 1,978 | I would say not to a minor degree. We have seen spectacular retail sales for this [period]. | 20 |
fomc | 1,978 | Yes, but you come from a foreign country! | 10 |
fomc | 1,978 | Do you use the peso down there? | 8 |
fomc | 1,978 | I hear it referred to periodically! | 7 |
fomc | 1,978 | My reading of this, for what it's worth, Mr. Chairman, is that I had not recognized some of the ebullience that has been expressed earlier around this table about capital spending; it was not reflected in my business contacts by and large. I have not noticed any distinct change but, if anything, I think there is some s... | 124 |
fomc | 1,978 | I'd agree with that, Paul. I was comparing December to January. | 14 |
fomc | 1,978 | December and January, I find difficult-- | 8 |
fomc | 1,978 | In terms of the attitudes of the businessmen in our District, they have been concerned for the past year about our ability and the economy's ability to come to grips with inflation. That is unquestionably their number one concern. Whereas their sentiment has not changed, those who have followed carefully developments i... | 193 |
fomc | 1,978 | All right, thank you. Mr. Partee now, please. | 14 |
fomc | 1,978 | Well, Mr. Chairman, I must admit that I am happy that we don't have to focus on the longer-range targets--if I may use the term--at this time, because I have some qualms about the economic situation that may be somewhat resolved in a month. On the other hand, they may not be. But within a month we'll have the specific ... | 703 |
fomc | 1,978 | $34 billion. | 4 |
fomc | 1,978 | $34 billion. If I were a savings and loan, and I had this many commitments outstanding and I suddenly became more concerned about my cash flow, my reaction would be to stop making new commitments. And that could have quite a pronounced effect, it would appear. I'm a little concerned. I'm just not sure how this housing ... | 581 |
fomc | 1,978 | Thank you, Mr. Partee. Mr. Volcker now, please. | 16 |
fomc | 1,978 | Well, when I listened to the staff, Mr. Chairman, I was going to make a very brief comment--and I'll still keep it brief--that the overall pattern of the projection is reasonable to me. And maybe that's enough. [As for] modifications, when I heard Mr. Coldwell right off the bat, his modifications were in the direction ... | 346 |
fomc | 1,978 | Thank you, Mr. Volcker. Mr. Gardner now, please. | 15 |
fomc | 1,978 | Well, I don't want to revisit all of the discussion. I have accepted the staff's forecast and I feel reasonably comfortable with it. We've been through a long recovery, excessively long, and we've looked for ghosts almost at every meeting since it started. I have my own personal theory that in time--although there are ... | 357 |
fomc | 1,978 | Thank you, Mr. Gardner. Mr. Lilly, please. | 13 |
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