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fomc | 1,998 | Mr. Chairman, could I raise a quick question? Are we going to return at some point to the question of when this would be released? | 29 |
fomc | 1,998 | Yes. | 2 |
fomc | 1,998 | It's the next item on the agenda. | 8 |
fomc | 1,998 | The wording is on page 14 of the Bluebook: "To promote the Committee's long-run objectives of price stability and sustainable economic growth, the Committee in the immediate future seeks conditions in reserve markets consistent with maintaining the federal funds rate at an average of around 4-3/4 percent. In view of th... | 97 |
fomc | 1,998 | Call the roll. | 4 |
fomc | 1,998 | Chairman Greenspan Yes Vice Chairman McDonough Yes Governor Ferguson Yes Governor Gramlich Yes President Hoenig Yes President Jordan Yes Governor Kelley Yes Governor Meyer Yes President Minehan Yes President Poole Yes Governor Rivlin Yes | 43 |
fomc | 1,998 | We will now go back to the old issue of disclosure policy. A summary of our past discussions and positions on this issue and a proposed solution have been written out and I will proceed to read it. The Committee has had two very productive discussions this year on disclosure issues other than the tilt language, at the ... | 365 |
fomc | 1,998 | Wow! | 2 |
fomc | 1,998 | Instead, I would propose a compromise solution, which we can try out on an experimental basis at least for the time being. That compromise, which I may say was crafted by Don Kohn in a Solomonesque insight, would be for the Committee to continue its current practice of releasing the operating paragraph and minutes afte... | 781 |
fomc | 1,998 | Clarification, Mr. Chairman. I may not have listened carefully enough but I am not clear: Would this be a statement from the Committee and would the statement be reviewed by the Committee at the meeting after which it is to be released? | 48 |
fomc | 1,998 | Yes. At the moment, we now discuss our position with respect to policy in terms of alternatives A, B, or C, and, secondly, with respect to tilt. When it appears appropriate, there would be a third element in the discussion, which would be a statement the Committee might wish to make. And that statement would be cleared... | 74 |
fomc | 1,998 | That process, Mr. Chairman, would be approximately the same one followed when there are policy changes now. That is, you would read to the Committee a draft of the proposed statement and ask for their comments. | 42 |
fomc | 1,998 | That is correct; that would be my intention. President Parry. | 14 |
fomc | 1,998 | Mr. Chairman, I think the compromise proposal you have made makes some sense. To me it is a move in the right direction. As I'm sure you will recall, I have indicated in the past that I would like to see the directive included in the statement released immediately after each meeting. But there is no question that if we... | 154 |
fomc | 1,998 | Governor Meyer. | 3 |
fomc | 1,998 | Mr. Chairman, your proposal is a compromise that I can heartily endorse. Indeed, I think I would argue that it is better than either the status quo or at this point going to the immediate release of the operating paragraph. As you know, I have been an advocate of the immediate release of the operating paragraph in gene... | 283 |
fomc | 1,998 | President Minehan. | 4 |
fomc | 1,998 | I think the compromise makes a lot of sense as a way to try out a simple recitation of the reason why no policy change was made. I have long felt that no policy change is as much a decision as a change in policy is--that there is a policy content to whatever we do at all of our meetings. At times it could be very usefu... | 236 |
fomc | 1,998 | President Broaddus. | 5 |
fomc | 1,998 | Mr. Chairman, I certainly understand the dilemma we face and I agree that we need to have a strong consensus before we make a fundamental change. I suppose this is probably a good step, but I'm not quite as sure or confident of that as other people. I think there is some risk that it could cause confusion in the market... | 200 |
fomc | 1,998 | I think that will be automatic. | 7 |
fomc | 1,998 | Okay. | 2 |
fomc | 1,998 | President Moskow. | 4 |
fomc | 1,998 | Mr. Chairman, I think your suggestion is an excellent one. In preparation for this meeting I did go back and read the transcript of the discussion we had on this issue at the July meeting. It really was an excellent discussion, pointing out the different views that people had on this subject. Since I am one of those wh... | 103 |
fomc | 1,998 | Governor Kelley. | 3 |
fomc | 1,998 | Mr. Chairman, I will go along with this suggestion out of respect for the majority view that I know exists and also your effort to try to resolve the issue. But I do so with considerable trepidation. For one thing, I think it is going to put you particularly as well as the rest of the Committee in the position of havin... | 157 |
fomc | 1,998 | If that happens, this is a mistake. I do not envisage that as what this compromise is. | 20 |
fomc | 1,998 | I believe that the market will come to see our lack of a statement as indicating that there was essentially nothing going on at the meeting and that everything is just rolling along at wherever it was perceived to be before. And I think that is a statement. It will be an implied statement. I also have considerable skep... | 147 |
fomc | 1,998 | Governor Rivlin. | 4 |
fomc | 1,998 | Mr. Chairman, I am quite strongly with the majority and I believe that more communication to the public is better than less. I view this as a step in the right direction. I would like to know how we nominate Don Kohn for the Nobel Peace Prize. [Laughter] | 57 |
fomc | 1,998 | The war is not over yet! President Hoenig. | 11 |
fomc | 1,998 | Mr. Chairman, it is a good suggestion and I am in favor of it. I think we should learn from it and then decide if we need to do anything differently sometime in the future. But I'm very comfortable with it now. | 47 |
fomc | 1,998 | Governor Ferguson. | 3 |
fomc | 1,998 | Mr. Chairman, I support your suggestion. I think we have discovered that the markets tend to work better when there is more information as opposed to less. I think that the Committee can in fact draft the kinds of statements that are necessary and that this will be, as you observed, an important learning experience for... | 64 |
fomc | 1,998 | Vice Chairman. | 3 |
fomc | 1,998 | Mr. Chairman, I believe this is a step in a good direction also and I have confidence in the Committee. Actually, maybe I have even more confidence in the Committee's counselor. In my misspent youth I was a student of the Old Testament. The wisest man in the Old Testament was not Solomon but an advisor of David called ... | 104 |
fomc | 1,998 | It will just go to his head. | 8 |
fomc | 1,998 | There is a burning bush on the table. | 9 |
fomc | 1,998 | I think he'd prefer the Peace Prize of the month! How can he improve on that? When you get to the top, you can't go any higher. | 31 |
fomc | 1,998 | He can help us by proving that Governor Kelley is wrong. | 12 |
fomc | 1,998 | That would be a good way. | 7 |
fomc | 1,998 | You do not have to sacrifice a baby in this process. | 12 |
fomc | 1,998 | President Jordan. | 3 |
fomc | 1,998 | I support the proposal. | 5 |
fomc | 1,998 | President Boehne. | 5 |
fomc | 1,998 | I believe Don Kohn deserves to be complimented, but I don't think I'd go as far as others have! [Laughter] I think it is a learning step. It is a good compromise. I hope that we all keep open minds and indeed do learn from it. At some appropriate time we can then weigh the evidence and decide what we want to do. It may... | 107 |
fomc | 1,998 | Do you want to speak again, Jack? | 9 |
fomc | 1,998 | Yes, please, if I may. Mr. Chairman, I support the compromise primarily because it represents more transparency and more information. I also want to identify with Al Broaddus's comments. This is not going to be without risk and agony, going back to our earlier discussion. I would hope that the small majority that favor... | 99 |
fomc | 1,998 | President McTeer. | 5 |
fomc | 1,998 | I support your recommendation. | 5 |
fomc | 1,998 | President Stern. | 3 |
fomc | 1,998 | I think the suggested approach is an excellent one. It gives us the opportunity to provide more information in a timely way when appropriate, and we can learn from that experience. | 34 |
fomc | 1,998 | President Poole. | 4 |
fomc | 1,998 | Yes, I also support the proposal. | 8 |
fomc | 1,998 | Governor Gramlich. | 4 |
fomc | 1,998 | I support it. I would like to compliment some combination of you and Don Kohn. I believe Mike Kelley raised some good, sobering thoughts, but I think the way to deal with his concern is to use this new tilt announcement procedure only in rare circumstances. In my view that is how it should be done. | 64 |
fomc | 1,998 | Okay, we will adopt that policy. It does not require a nd rd vote at this point. We can adjourn to lunch. The next meeting is February 2 and 3 | 41 |
fomc | 1,999 | Good afternoon, everyone. Before we get started, I would like to welcome Bob Rasche, the new Director of Research at the St. Louis Bank. Also, it has been brought to my attention that today is Bill Conrad's fortieth anniversary of service at the Chicago Bank. [Applause] It is a rare event when somebody can tolerate the... | 124 |
fomc | 1,999 | Thank you. It is not clear by what authority you were making those announcements! [Laughter] I would like to open the floor for nominations for Chairman of the FOMC. Governor Kelley. | 40 |
fomc | 1,999 | After long and careful consideration, I nominate Alan Greenspan. | 12 |
fomc | 1,999 | Is there a second? SEVERAL. Second. | 11 |
fomc | 1,999 | Any discussion at this point? | 6 |
fomc | 1,999 | I would like to hear Governor Kelley's long and careful reasoning! | 14 |
fomc | 1,999 | That's confidential! | 3 |
fomc | 1,999 | All in favor say "aye." SEVERAL. Aye. | 14 |
fomc | 1,999 | Opposed? I believe we have a Chairman. | 10 |
fomc | 1,999 | I thank you, everyone. | 6 |
fomc | 1,999 | Since I still have the gavel, I will entertain nominations for Vice Chair of the FOMC. | 21 |
fomc | 1,999 | I nominate President McDonough of the New York Fed. | 12 |
fomc | 1,999 | Good idea. SEVERAL. Second. | 9 |
fomc | 1,999 | Any further nominations? All in favor say "aye." SEVERAL. Aye. | 18 |
fomc | 1,999 | Opposed? We have a Vice Chair. | 9 |
fomc | 1,999 | Thank you all. | 4 |
fomc | 1,999 | Democracy works again. I would like to ask Normand Bernard to read the list of potential staff officers. | 22 |
fomc | 1,999 | Secretary and Economist, Donald Kohn; Deputy Secretary, Normand Bernard; Assistant Secretaries, Lynn Fox and Gary Gillum; General Counsel, Virgil Mattingly; Deputy General Counsel, Tom Baxter; Economists, Michael Prell and Karen Johnson; Associate Economists from the Board: Lewis Alexander, Peter Hooper, David Lindsey,... | 135 |
fomc | 1,999 | Would somebody like to move that list? | 8 |
fomc | 1,999 | So move. | 3 |
fomc | 1,999 | Is there a second? SEVERAL. Second. | 11 |
fomc | 1,999 | All in favor say "aye." SEVERAL. Aye. | 14 |
fomc | 1,999 | The ayes have it. The next item on the agenda is the selection of a Federal Reserve Bank to execute transactions for the System Open Market Account. That, of course, has traditionally been the New York Bank, and unless I hear objections, I will presume that the Committee has again authorized the same Bank. Next is the ... | 95 |
fomc | 1,999 | It is indeed. | 4 |
fomc | 1,999 | If there are no objections except mine, [laughter] I will assume that the Committee is again authorizing our incumbent, Peter Fisher. We have an examination report on the System Open Market Account. Are there any questions on that report? If not, I will assume that it is acceptable without objection. Next we have a rev... | 101 |
fomc | 1,999 | Yes, let me mention a few points, if I may. The Committee reviews the Authorization for Domestic Open Market Operations at the first meeting each year. I have proposed an amendment to the Authorization for the Committee to consider. You have a rather lengthy memo from me on the subject. There are a few points I would l... | 840 |
fomc | 1,999 | Peter, thank you for the memorandum. It was very detailed and complete. In a sense, the memorandum presents this as an operational issue, but it seems to me that this proposal is closely related to broader issues about how we manage our portfolio and where along the maturity curve we operate and so forth. There is some... | 339 |
fomc | 1,999 | It certainly was not my intent that any aspect of the program would suggest anything about the maturity structure of the portfolio; and if the memo suggests that, I want to correct that misimpression. In fact, the demand for borrowing comes as much from the bill sector as the coupon sector. So, I really think this prop... | 307 |
fomc | 1,999 | I think the proposals in the memorandum are an improvement over present procedures. There's no question about that. I am really asking the basic question of whether we need to engage in this activity at all. According to market analysts, the market is rather liquid and deep. Do we really need to do this? | 60 |
fomc | 1,999 | The short end of the market currently is not very deep, though I know we all come with habits of mind about "relative to what." In fact, the bill market is as tight as a drum, and the Treasury supports the proposed change. As I have noted a couple of times, we have a bit of "after you, Alphonse" on whose proposal this ... | 316 |
fomc | 1,999 | I think one could also argue that an entity that holds a huge portfolio of Treasury securities and is not allowing them to be lent on the market in itself creates potential distortions. We are a very large part of the market. Certainly, the Federal Reserve has been concerned about price distortions in the Treasury secu... | 151 |
fomc | 1,999 | President Poole. | 4 |
fomc | 1,999 | I don't have any objection to the proposed program, but I might understand it better if the following were explained: What difference would we see in the marketplace if we did no lending at all versus lending as outlined under this proposal? Tell me what I would look for with and without the lending. | 58 |
fomc | 1,999 | May I add to that question? You mentioned in your memo, Peter, that at a time of market crisis it had proved helpful in the past to raise the lending limits above those that were in place. It would help me to understand this issue if you explained that. | 54 |
fomc | 1,999 | At the extreme, one is worried about--I hope I can get all of my signs right--the problem that arises when the specials price approaches zero. That occurs when a security is so scarce that to get me to lend the security to you, you have to give me the cash collateral for free. At the Desk, we lend bonds against other b... | 784 |
fomc | 1,999 | Peter, I certainly am not trying to give you a hard time. I understand the kind of pressure you are under, dealing with these people day in and day out, and I know you feel you have certain obligations. The difference is that we are the central bank, and there are sensitivities that I hope we will be very aware of. The... | 110 |
fomc | 1,999 | But, Al, you do think this proposal is preferable to what we do now? | 17 |
fomc | 1,999 | Yes, absolutely. I was raising a broader question. | 11 |
fomc | 1,999 | Further questions for Peter? Would somebody like to move the Treasury securities lending authority he is requesting? | 19 |
fomc | 1,999 | I move the authority that is requested, Mr. Chairman. | 12 |
fomc | 1,999 | Without objection, so ordered. The next item on the agenda is the review of the Foreign Currency Authorization, the Foreign Currency Directive, and the Procedural Instructions with respect to Foreign Currency Operations. Are there questions for Peter on the memorandum, which I assume all of you have read? If not, would... | 75 |
fomc | 1,999 | Move approval. | 3 |
fomc | 1,999 | Without objection. Finally, before we get to the main substance of the meeting, you have received a memorandum from Don Kohn on proposed changes to the Program for Security of FOMC Information. Are there any questions for Don? | 46 |
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