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fomc
1,994
Yes, but I really think that there is an urgency.
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Bob Forrestal.
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Mr. Chairman, I understand your rationale. I'd just like to express a couple of concerns, and you've hit on them already. One is with respect to the process and the other is substance. It strikes me that this is a very major change in the way we are operating and we haven't had very much time to reflect on this. As Bob...
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President Jordan.
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I thought your Congressional testimony last Monday was well constructed and made the points that you needed to make in the right way. I was initially quite discouraged with the wire service stories as they came out, which seemed totally to miss the point you were trying to convey. But then the stories that came out in ...
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That was actually the closing paragraph in my testimony. Tom Hoenig.
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Mr. Chairman, I understand the sensitivity of this. I have a hard time understanding how this would not be precedential. If we say it is desirable to announce this time because it makes sense and we've got this issue of a Friday and so forth, I think it will be difficult from a credibility point of view to argue agains...
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fomc
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Well, I certainly agree that there is a risk involved, but I disagree that we can be forced to do it for other than legislative reasons.
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fomc
1,994
Well, we may not be forced but I think the credibility of our position will be compromised.
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We're saying there are different types of changes. For example, in 1979 there was a major change. Chairman Volcker and his staff went out and had a big press conference. There are certain individual events where periodically the Federal Reserve has made special statements; I'm merely stipulating that this is one of the...
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fomc
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I'm uneasy about that, but I understand what you're saying.
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Look, I'm not naive enough to believe that it doesn't create precedential issues when we do things that are different. But I think the question is can we control it, and in my judgment we can. Tom Melzer.
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On the precedent point, Alan, I would just say that another point to consider here is the Treasury funding next week.
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Yes.
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If we wanted another rationale, namely that there be no confusion in the marketplace, that might be another.
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Yes, I think that is one of the possible points for discussion. Joan wants to think about that.
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fomc
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Okay. Well, there is at least one audience out there that wouldn't like to hear that. I think there is a risk of a headline along the lines of "In an unprecedented move, the Fed announced..., saying it wasn't setting a precedent." But where I come out is that in the climate we're in and in view of this inflection point...
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fomc
1,994
Let me read what Don Kohn handed me before. "The Federal Reserve announced today a slight increase in the degree of pressure on reserve positions."
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Yes.
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Then he went on and said, "This action is expected to be associated with a small increase in short-term money market rates."
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fomc
1,994
I think that's all right. I don't think we should be giving a target range, though.
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fomc
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You mean the actual number?
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fomc
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Yes.
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fomc
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No, that is not our intent.
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That has been advocated at times in other discussions here. Also, if we're announcing a decision--and this would be a legal question--are we obligated to say anything about the vote, for example? I'm not sure. Again, I'd prefer just to say what the action was. It's a decision of the Committee, but if we get into disclo...
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fomc
1,994
Look, the main issue here is that, as far as I'm concerned, I would like us to stand up and be counted. We are the central bank and we are making a major move.
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fomc
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Right, I agree.
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And to do it in an ambiguous manner I think is unbecoming of this institution.
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No, I didn't mean to suggest otherwise. I agree we should do that, but the point I was raising is that there may be a legal question. If we have announced a decision, does it follow that we have to disclose the vote?
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I don't see why. Is Virgil Mattingly here?
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No, there's no legal question. The Chairman before in Humphrey-Hawkins testimony has said something about policy and what the Committee has done without announcing a vote.
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That's correct, isn't it? Were we to come out and make a statement that the Committee made a decision, are we obligated to stipulate what the vote is?
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If somebody asked, you would have to tell them. In other words, it would be subject to disclosure.
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Why?
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The Freedom of Information Act. The legal issue is: Why is it confidential? What's confidential about the vote?
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It's confidential now.
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Yes, but if you disclose the action--
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Then you'd have to disclose the vote?
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fomc
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You know, there is an interesting difference here. The difference is that if we are asked after the action has been disclosed. That's--
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Very different.
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fomc
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Well, you may be right; there may be a legal question of disclosure. So long as we don't disclose it and do so only in response to a question--
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Of course, we might not get asked.
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fomc
1,994
Oh, believe me, you will get asked! [Laughter]
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Alan, the reason I'm bringing it up--and this is more relevant to the discussion we're going to have down the road--is that if we go this way, the effect of that is to place the minority rather than the majority in the limelight in terms of who the press might be interested in talking to, which might not be optimal. Ju...
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fomc
1,994
I don't see any reason why we shouldn't be able to get to it. We should have enough reaction at the next meeting from the 1988 transcripts that we should know.
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fomc
1,994
The mini-series will be out!
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fomc
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Committees could do mortal damage to press releases, but I really wonder if we want to use the term "small increase" rather than just "increase."
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I would stay with small.
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fomc
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We're not writing a press release.
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We're not writing a press release and if we don't say "small," people will think we've made the announcement because it's a 1/2 point or 3/4 point increase or something like that.
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1,994
It sounds like we've made a policy decision already!
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I think that's a little premature.
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Can I make the following request? I'm not asking the Committee to make a statement. I'm asking the Committee to give me the authority to make the statement so that in effect it's one step removed. As announcements go, it's very short.
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I was going to take a word out!
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President Boehne.
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I'm supportive of what you want to do. I think this is one of those special times, and I think we have to be careful that we don't become captive to our own procedures when we are called upon to do something. There is a precedent for our making these kinds of announcements for special occasions. They don't happen very ...
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Susan.
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I actually had two questions. When are the 1988 transcripts to be released?
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Donald Kohn.
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We've done a few of them; Norm, where are we? Let's toss the ball back down there.
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I feel like I'm in a tennis match here!
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fomc
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We have about three of them just about done.
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Really?
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Yes.
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The last three of 1988?
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No.
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The first two and the last one. Work on November has been started.
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When do you guess 1988 will be completed?
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The third week of February.
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Then they have to go through an international and legal redaction process. But I think it's reasonable to--
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Our next meeting is March when?
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The 22nd.
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Yes, I think we need two to three weeks of response time.
14
fomc
1,994
Right. What if we put out part of the year?
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The first six months?
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fomc
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You know we could put out--you see, the problem is that in the middle of 1988 there are garbled transcripts; The taping system broke down.
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fomc
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Why is it that life can never be simple?
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fomc
1,994
There are 18 minutes of tape missing!
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So it's not next week that these are coming out?
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No.
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It's probably going to be at least a month or so?
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Maybe; probably about a month. If it's more than a month, I think we may want to reconsider getting out whatever we've completed because we can certainly do the last three meetings in 1988. That's the most recent. In fact, in a sense that's where our obligation is; the most recent is really the most important in that r...
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That would be the end of 1987.
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Yes.
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A point of clarification related to what Ed Boehne said: It seems to me that it would be beneficial if your statement were made on behalf of the FOMC. Is that what you were thinking? It didn't sound that way to me.
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fomc
1,994
I would not do that. I don't think that's a good idea.
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1,994
You don't?
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"Chairman Greenspan said today."
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fomc
1,994
Yes, that's exactly right.
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1,994
Now, if we decide to do it on a permanent basis, then it's a Committee issue. But marginally it's of a less precedential nature if I do it.
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If it doesn't work, the Committee could fire the Chairman!
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That's right.
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1,994
Well, maybe we ought to bring that issue up before that vote! [Laughter]
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I wanted to ask Joan, or Bill from your former capacity, what do you think the market reaction would be?
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fomc
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Well, it certainly would remove any ambiguity about the move. [Laughter] People don't have to guess about the size of the move and that kind of thing; I guess if there's a pro, that's the positive outcome. In terms of setting a precedent, I think it very much depends on the wording that's used.
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Is this going to be helpful, do you think, or not helpful in terms of the market absorbing what is occurring?
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I think that it can't be harmful.
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Another word for "minimal."
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fomc
1,994
No, it tells everybody what's happening and it leaves no room for ambiguity, and if it's phrased the way you are suggesting, it's not setting a stage for people to have expectations of an announcement every time there is a policy change going forward.
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fomc
1,994
Mr. Chairman, I agree with you completely. I think that it's right for you to make the statement because you have the authority. The Committee is not establishing a precedent; we always can fire you. And you are making the judgment that this is an instance where you want to speak. In fact, I would go so far as to sugge...
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