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fomc | 1,995 | We are reading from the same page as last time. | 11 |
fomc | 1,995 | It's on page 15 of the Bluebook: "In the implementation of policy for the immediate future the Committee seeks to maintain the existing degree of pressure of reserve positions. In the context of the Committee's long-run objectives for price stability and sustainable economic growth, and giving careful considerable to e... | 113 |
fomc | 1,995 | Call the roll. | 4 |
fomc | 1,995 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Blinder Yes President Hoenig Yes Governor Kelley Yes Governor Lindsey Yes President Melzer Yes President Minehan Yes President Moskow Yes Governor Phillips Yes Governor Yellen Yes | 44 |
fomc | 1,995 | The next item on the agenda is Senator Connie Mack's bill, the Economic Growth and Price Stability Act of 1995. When I reported to the Senate Banking Committee last week, I was not asked very specifically whether I supported the bill as such. I repeated the statements I had made previously, namely that I thought the pr... | 406 |
fomc | 1,995 | Mr. Chairman, I believe that the Mack bill has much to recommend it. The bill would clarify our goals and place the primary emphasis on price stability. I also like the fact that it requires a numerical goal, which would add to the public's understanding of monetary policy and hopefully enhance our credibility over tim... | 141 |
fomc | 1,995 | President Broaddus. | 5 |
fomc | 1,995 | I have expressed my belief that we need something like this so often that I am sure you don't want to hear it all again, and I won't repeat my views in any detail today. Briefly, I like this bill very much. I like it both in general and with respect to its particulars, many of which Bob Parry just covered. It certainly... | 396 |
fomc | 1,995 | Governor Yellen. | 4 |
fomc | 1,995 | Let me begin by saying that there is a great deal about this bill that I can endorse. I think the focus on price stability as the single appropriate long-term goal of the FOMC is correct. I endorse the repeal of the Humphrey-Hawkins Act. I think those numerical target reporting requirements are unrealistic and counterp... | 847 |
fomc | 1,995 | President Melzer. | 4 |
fomc | 1,995 | Alan, in the ten years that I have been directly involved in this process, this has to be the most significant potential institutional development that I have seen come forward. Needless to say, from what I have said in the past this bill is something that I would strongly support. I think price stability is the approp... | 818 |
fomc | 1,995 | President Boehne. | 5 |
fomc | 1,995 | In many ways the Mack bill conforms to how we have carried out policy in recent years. So, I see it as legislation that is catching up with the experience and the progress. There are some advantages to the bill. I think it is useful to formally make price stability the primary objective over the long run. The proper wa... | 379 |
fomc | 1,995 | Governor Blinder. | 4 |
fomc | 1,995 | This bill came out of the hopper vastly better than I and many other people expected. Nonetheless, I find I can't support it as it is. Let me explain why very briefly because in some sense I can say, "Please read Governor Yellen's remarks into the record a second time." She got to go first, so I'll be very short. I, to... | 585 |
fomc | 1,995 | President Stern. | 3 |
fomc | 1,995 | In general, I am in favor of this legislation. I think it is the right direction to move for the reasons that a number of people, including Ed Boehne, cited. This will get us toward our largest contribution to economic prosperity over time. Having said that, I would agree--this may seem unusual--with both Tom and Alan.... | 204 |
fomc | 1,995 | Governor Kelley. | 3 |
fomc | 1,995 | Mr. Chairman, I am pretty much where Gary Stern was but maybe in terms that are a little different. I certainly support the thrust of this bill unequivocally in that it gives primacy to price stability as a means toward a larger end. But I am not totally comfortable with virtually any hard-wired legislation that I can ... | 247 |
fomc | 1,995 | President Hoenig. | 4 |
fomc | 1,995 | Mr. Chairman, I support the thrust of this bill and most of the specifics. I agree with the premise on which this bill is based, and that is that by promoting long-term price stability monetary policy supports long-term economic stability as well. So, given that premise and given that belief, I support the bill. I also... | 178 |
fomc | 1,995 | President Minehan. | 4 |
fomc | 1,995 | Well, like everyone else I think that the idea that price stability ought to be the long-term goal of the central bank is completely consistent with the contributions a central bank can make to economic growth over the longer run. But the autopilot aspects of this legislation really worry me. It may be that some of the... | 279 |
fomc | 1,995 | President Forrestal. | 4 |
fomc | 1,995 | Mr. Chairman, I have felt for a long time that Humphrey-Hawkins was outdated and needed to be revised, and I expressed that opinion in this Committee several times. I think this bill is a vast improvement over Humphrey-Hawkins, but I have some of the same concerns that were expressed by a number of people, notably Gove... | 266 |
fomc | 1,995 | President Moskow. | 4 |
fomc | 1,995 | Mr. Chairman, we currently seem to have the luxury of a great deal of flexibility because the goals established for the Committee are ambiguous and in some cases contradictory. But I think we are moving past that point. Once this issue is raised to the level of a serious discussion with hearings and so on, we are going... | 369 |
fomc | 1,995 | President Jordan. | 3 |
fomc | 1,995 | I am not sure this issue is ready for prime time. Certainly, the intent of Senator Mack and his co-sponsors is the very desirable goal of clarifying the role of economic policy and especially the role of monetary policy. But it is not obvious to me that that is going to be the outcome of the hearings process. Two years... | 498 |
fomc | 1,995 | Governor Blinder and then Don Winn. | 8 |
fomc | 1,995 | To clarify what I said, if you read the fine print, there is a section in the bill that calls for the repeal of outmoded or obsolete provisions, or something like that. One of them is Section 2 of the Employment Act. That's why I said what I said. | 58 |
fomc | 1,995 | I spoke with one of Senator Mack's staff yesterday afternoon with respect to the hearings schedule, asking what the likelihood was. I got no specific answer to that question. But in the course of the conversation, I did bring up this issue with him as to what their intent was in terms of the Employment Act of 1946. Had... | 367 |
fomc | 1,995 | President McTeer. | 5 |
fomc | 1,995 | I support the Mack Bill. | 6 |
fomc | 1,995 | Vice Chairman McDonough. | 6 |
fomc | 1,995 | Mr. Chairman, I think the single most important thing about the bill as proposed is probably that it repeals Humphrey-Hawkins. I, like Governor Kelley, am very opposed to having statutes on the books that we are supposed to be following and that we cannot follow. I think that maintaining such legislation creates someth... | 640 |
fomc | 1,995 | Governor Phillips. | 3 |
fomc | 1,995 | I generally support the thrust of the bill. I think that it is useful to clear out some of the clutter in the current Humphrey-Hawkins Act. One of the major positives of the bill is the clear focus on price stability and the purchasing power of our currency. But I, too, would like to see a recognition that this focus i... | 240 |
fomc | 1,995 | Governor Lindsey. | 3 |
fomc | 1,995 | Everyone here dislikes Humphrey-Hawkins--good riddance--and we basically like long-term price stability. What we also don't like is having legislation defining what we should do. Frankly, I think the crux of the issue comes back to that. We could wish that the Congress of the United States, which created this instituti... | 446 |
fomc | 1,995 | Okay. Don Winn, did you want to say anything further on this that you haven't communicated already? | 20 |
fomc | 1,995 | You made the point earlier that in terms of support for this legislation it appears that all of the majority members of the Senate Banking Committee and the JEC seem to have lined up behind this bill. A committee staffer told me that after yesterday they also have as sponsors the Chairman of the Senate Finance Committe... | 158 |
fomc | 1,995 | Have you had any input from the Administration recently? | 10 |
fomc | 1,995 | We have not heard anything. | 6 |
fomc | 1,995 | I don't think you will unless it looks as though it is a bill that has legs. | 18 |
fomc | 1,995 | There clearly will be opposition from some important Senators on the Democratic side. Senator Sarbanes probably will not be supportive of this legislation. | 27 |
fomc | 1,995 | Mr. Chairman, I think that Governor Lindsey raised an important point in his last comments on the issue of flexibility. When Don Winn and I have talked to Hill staffers and asked them about this issue, one of the major points they make is that the Fed is defining price stability and defining the conditions under which ... | 227 |
fomc | 1,995 | That is the concern that I had. If you read the language in that paragraph absent the comments of the Congressional staffers, you do get the sense that we have this one-time transition period during which we could take these factors into account. After that, it is like a cruising 747; we don't touch the controls. Isn't... | 118 |
fomc | 1,995 | I think that may be spelled out in the report language. A bill has to be short and understandable. | 21 |
fomc | 1,995 | I am not suggesting that this one is not understandable in terms of its long-run intent. | 18 |
fomc | 1,995 | I don't think clarifying it in the legislation is the way to go. The ambiguity is best left to the report language. | 25 |
fomc | 1,995 | Ambiguity is necessary for flexibility. | 8 |
fomc | 1,995 | That's true, but this bill seems to have less ambiguity in the sense of that paragraph really referring to the transition period. | 24 |
fomc | 1,995 | I must say that I didn't read it that way. I read it that we had flexibility during the transition and that we had flexibility thereafter. | 28 |
fomc | 1,995 | I agree. | 3 |
fomc | 1,995 | If flexibility is the objective, then ultimate flexibility would be not to have any legislation at all. | 19 |
fomc | 1,995 | That will never happen! | 5 |
fomc | 1,995 | It is getting quite late. [Laughter] Why don't we adjourn this meeting? If you want to have an informal discussion later today on these issues after Don Winn brings us up to date on overall legislative developments, we can do that. I think this has been a very useful presentation by all of you. It clearly suggests to m... | 143 |
fomc | 1,995 | The ides of November. [Laughter] | 11 |
fomc | 1,995 | Good morning, everyone. Regrettably, this is Bob Forrestal's last outing. I would be inclined to give him five or six votes for this meeting, but I don't think that authorization is statutorily available. But spiritually we would like to do so. We'll be saying more to Bob at lunch, and we look forward to seeing him the... | 93 |
fomc | 1,995 | So move. | 3 |
fomc | 1,995 | Second. | 2 |
fomc | 1,995 | Without objection. Peter Fisher, you have the floor for a while. | 14 |
fomc | 1,995 | Thank you. As you can see on the agenda and also on an outline of my remarks that has been circulated with some attached charts, I am going to take up four topics separately. I will be asking for the Committee's questions and relevant vote at the end of each of the first three topics so that we can get through this rat... | 100 |
fomc | 1,995 | Questions for Peter? I guess your report sounded pretty complete as anticipated. Why don't you go on? | 20 |
fomc | 1,995 | The Committee needs to ratify the Mexican swap renewal. | 11 |
fomc | 1,995 | The Mexicans paid down part of their swap line drawings, and I rolled over the remaining portion on October 30 for the third time. I am requesting Committee ratification. | 35 |
fomc | 1,995 | The Committee will remember that we will be covered either by Mexico or the U.S. Treasury--by February, I believe. | 25 |
fomc | 1,995 | Yes, at the end of January. | 8 |
fomc | 1,995 | So, this is a relatively safe activity unless, of course, you know who or what doesn't pay! [Laughter] | 25 |
fomc | 1,995 | So move. | 3 |
fomc | 1,995 | It has been moved. Is it seconded? | 10 |
fomc | 1,995 | Second. | 2 |
fomc | 1,995 | All in favor say "aye." SEVERAL. "Aye." | 15 |
fomc | 1,995 | The "ayes" have it. Peter, continue. | 11 |
fomc | 1,995 | Thank you. [Statement continued--see Appendix.] | 10 |
fomc | 1,995 | Questions for Peter? | 4 |
fomc | 1,995 | I just want to get something clear. Do any of these reciprocal arrangements with other central banks potentially involve warehousing funds for the Treasury, should the Treasury want to engage in foreign exchange transactions? | 38 |
fomc | 1,995 | No, I don't see how. At the very bottom of the list of our swap lines that I have given you, you can see that the Treasury has two swap lines of its own with Mexico and the Bundesbank. | 44 |
fomc | 1,995 | They are separate. | 4 |
fomc | 1,995 | They are entirely separate. So, I cannot see any way that a drawing on the System swap lines would have any necessary connection with System warehousing for the Treasury. | 33 |
fomc | 1,995 | Further questions for Peter? If not, is there a motion to renew the swap agreements that mature in December? | 22 |
fomc | 1,995 | So move. | 3 |
fomc | 1,995 | Second? | 2 |
fomc | 1,995 | Second. | 2 |
fomc | 1,995 | All in favor say "aye." SEVERAL. "Aye." | 15 |
fomc | 1,995 | The "ayes" have it. | 7 |
fomc | 1,995 | Thank you. Before turning to my report on the domestic markets and operations, I would like to give the Committee a bit more background on the Desk's cooperation with the Japanese monetary authorities in managing the liquidity of their portfolio of U.S. government securities as part of their broader effort to aid the d... | 72 |
fomc | 1,995 | What is the market saying now, if anything, about a possible spike in the funds rate at year-end? | 22 |
fomc | 1,995 | A spike in year-end rates is always there. I don't think it's out of line with-- | 19 |
fomc | 1,995 | The market has built in a spike of about 1 or 2 percentage points as best we can guess. We have to make an assumption about what the market is thinking the federal funds rate will be and then subtract that to estimate the spike. | 49 |
fomc | 1,995 | But it's entirely in line with the normal end-of-year pressures. | 13 |
fomc | 1,995 | Yes. If anything it may be a little less. | 11 |
fomc | 1,995 | So, you can't really disassociate our actions from the spike. | 13 |
fomc | 1,995 | Right. It's a highly conditional forecast. But, if anything, it appears that the markets are expecting slightly less of a spike at year-end this year than they have at this point in recent years. | 40 |
fomc | 1,995 | But the problem there, just to go into detail, is that we have to look at the futures contract for December, take account of the limited probability of a Committee action to ease in December, and then look at the December contracts. The market normally does some smoothing in its pricing of the futures contracts. If the... | 108 |
fomc | 1,995 | I assume that to a large extent the Japanese have been a factor in the year-end spike over the years. Does that propensity exist in other currencies where the Japanese are heavily involved? | 36 |
fomc | 1,995 | Yes. | 2 |
fomc | 1,995 | In some degree, it has occurred in the yen market itself. That is one of the phenomena. | 20 |
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