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fomc | 1,999 | Governor Kelley. | 3 |
fomc | 1,999 | Mr. Chairman, I am sympathetic with much of what has been said around the table, particularly President McTeer's views and those of Governor Meyer and President Minehan. But I really do believe that Ed Boehne has it right, that we just cannot do this by Committee. I hope you can find some ways to make some changes in t... | 106 |
fomc | 1,999 | Governor Ferguson. | 3 |
fomc | 1,999 | Let me associate myself with Mike Kelley's and Ed Boehne's comments. As you all know, I've been working hard with many of you to think about how we can best do this. [Laughter] | 44 |
fomc | 1,999 | This is not how to do it! | 8 |
fomc | 1,999 | And this is not how to do it! In a more substantive way, I've read this four or five times as people have commented on it, and without question there are words that one could change. The reality is that if we all try to change those words, we'd end up with gobbledygook. What we have now is a message that is clear. We m... | 225 |
fomc | 1,999 | President Moskow. | 4 |
fomc | 1,999 | Mr. Chairman, I understand the difficulty of trying to do something as a committee, and ultimately I think we do have to defer to you on the language of this. But I do find the first sentence of the third paragraph troublesome. I think we could delete the sentence and just modify the following sentence about the direct... | 72 |
fomc | 1,999 | President Stern. | 3 |
fomc | 1,999 | I really agree with Ed Boehne's point, but I can't resist! [Laughter] | 20 |
fomc | 1,999 | That's the problem! | 4 |
fomc | 1,999 | So, let me make a couple of constructive suggestions. One is with regard to that reference to the pool of workers in the second paragraph. I would just drop that sentence. Whether we've said it before or not, I don't think really matters; I don't know why we'd want to raise it again. My only other comment is on the nex... | 105 |
fomc | 1,999 | Let's continue to go around. I have some suggestions on how to resolve this issue. | 17 |
fomc | 1,999 | I yield. What's your suggestion? [Laughter] | 11 |
fomc | 1,999 | First, let me just say that I think the second paragraph is essential because it's trying to convey a recognition that on the one hand the economy is showing at least some signs of slowing but that on the other hand the pool of available workers is being drawn down. And that is the measure of the gap between supply and... | 78 |
fomc | 1,999 | Mr. Chairman, may I? [Laughter] My objection has more to do with saying that the trend must be contained. If we just referred to it as an unsustainable trend, I think it would serve your purpose and be a little milder. | 52 |
fomc | 1,999 | Well, an unsustainable trend is contained. | 9 |
fomc | 1,999 | The sentence as it is now implies that we're going to stop this decline in the pool of available workers. | 21 |
fomc | 1,999 | Oh no, the market is. Market forces-- | 10 |
fomc | 1,999 | Well, it's not the market that is issuing this press release. | 13 |
fomc | 1,999 | This is an argument that the Chairman has made very consistently and I happen to think he's right. | 19 |
fomc | 1,999 | I do, too. And we know it's going to come to an end. The process has limits. | 21 |
fomc | 1,999 | It's not so important whether we think he's right or not, but he is the Chairman of the Committee. And if something like this weren't in the statement, I think Lynn Fox would get 85 phone calls in the first hour asking about the available pool of workers. Don't we worry about that anymore? I think we have to have this ... | 79 |
fomc | 1,999 | Well, I'm not worried about any comparison with my speeches. Does anyone else want to comment before I make this great recommendation? I think there's a legitimate question about the third paragraph because it's a substantive issue. The rest of the comments, I think, were more analytical. The alternative is to go back ... | 159 |
fomc | 1,999 | It would be better if you take out the "markedly." | 13 |
fomc | 1,999 | You better get rid of that. | 7 |
fomc | 1,999 | Take the "markedly" out. | 8 |
fomc | 1,999 | No, it's the real interest rate issue that I think is relevant. Listening to our discussion, that strikes me as an adequate solution to the problem. So why don't we do that? | 37 |
fomc | 1,999 | Mr. Chairman, could I make a minor suggestion? | 11 |
fomc | 1,999 | Certainly. | 2 |
fomc | 1,999 | You referred to the firming of conditions in our financial markets "over recent months," and there's been much discussion about the slight easing recently. So if you changed that to "over the course of the year" or something like that, the wording might accord better with the facts. | 56 |
fomc | 1,999 | I think that's a reasonable suggestion. Okay, why don't we substitute that rewording for the third paragraph? Is that satisfactory to everybody? Not really! Let me put it this way. By definition it can't be satisfactory to everybody, but we shouldn't care. [Laughter] | 56 |
fomc | 1,999 | We shouldn't have these drafts floating around. I suppose we ought to turn them back in. | 18 |
fomc | 1,999 | Throw them in the middle of the table! | 9 |
fomc | 1,999 | Pass them to me. | 5 |
fomc | 1,999 | The Board of Governors is going to take a short recess and vote on a discount rate change. Luncheon is available. When we're finished we'll come back into session. The FOMC meeting will continue because Roger Ferguson has distributed a memo on disclosure issues for us to consider. We're obviously not going to complete ... | 134 |
fomc | 1,999 | If you don't mind, why don't we get going even though we still have some food to eat. Let me start by saying that what we would like to discuss in this part of the meeting is the reaction of the entire Committee to the November 10th memo that came from me. I signed that memo on behalf of the whole Working Group on the ... | 1,541 |
fomc | 1,999 | You know what I think would be useful? You have seven members on the Working Group? | 18 |
fomc | 1,999 | Yes, we have seven. | 6 |
fomc | 1,999 | Since you've all thought about this, it might be helpful to hear from the individual members about the reasons why they came to the views that they did. | 30 |
fomc | 1,999 | I think that's absolutely fine. Why don't we start with the one who is closest to me, Mike Kelley, and then we'll go around the table to the others. | 33 |
fomc | 1,999 | I would welcome an opportunity to review a little further the language that was suggested about the Chairman's latitude to act between meetings. I have no problem with the substance of it, but I would like to work with the language a bit more. Concerning the wording in the announcement that Roger referred to at the end... | 167 |
fomc | 1,999 | Okay. Larry Meyer. | 5 |
fomc | 1,999 | I am not particularly wedded to the language in either of the options. But I strongly prefer the spirit of the second option, which focuses on the policy implications, and here is the reason. What is the tilt about? What is the market trying to learn about? Does the market say "You are our favorite forecasters and we w... | 609 |
fomc | 1,999 | Or balanced. | 3 |
fomc | 1,999 | Or balanced. I think that's a relatively minor point. But what I didn't like about the language was that it focused on the likelihood of a particular policy move. That is perhaps a little stronger than the language we have been using. Instead of saying that in the future we're more likely to tighten, now we simply say ... | 193 |
fomc | 1,999 | Bill Poole. | 4 |
fomc | 1,999 | I agree with Larry. I think the focal point of the decisionmaking is the interest rate decision, the federal funds rate decision. There will be many different views at any one time about why we converge on that particular decision, and trying to explain the different nuances is not going to be helpful. However this com... | 179 |
fomc | 1,999 | Mike Moskow. | 4 |
fomc | 1,999 | I was with the majority on this one. I liked alternative I. The problem I had with alternative II, which is close to where we are today, is that phrase "possible need for an adjustment in the stance of policy." It just gives the impression that it is more likely that we're going to be making an adjustment in policy--th... | 136 |
fomc | 1,999 | Bob Parry. | 4 |
fomc | 1,999 | I favored alternative II. [Laughter] | 9 |
fomc | 1,999 | As you can see, this was a well-managed group! | 12 |
fomc | 1,999 | And it was for many of the reasons that were mentioned by Larry and Bill. I saw it as the alternative that would be consistent with the fewest additional sentences of explanation, which I viewed as a great virtue. And based on our experience today, I see that as a really big virtue for which to aim. Moreover, it seemed... | 109 |
fomc | 1,999 | Ned Gramlich. | 5 |
fomc | 1,999 | You all are getting the impression that this was a very divisive group. I would note to start with that we did all agree on each of the first nine points. [Laughter] On the point where we had trouble, I'm with the majority. I favor alternative I. I think the point about keeping the finger a little farther from the trig... | 228 |
fomc | 1,999 | I was more comfortable with alternative I as well for the reasons that Ned Gramlich has articulated. I think there is a distinction between talking about potential unfolding macroeconomic developments and trying to link that too tightly to a certainty about them and, therefore, the policy reaction. The experience we've... | 227 |
fomc | 1,999 | Could I ask a question? | 6 |
fomc | 1,999 | Yes. | 2 |
fomc | 1,999 | I'm confused on a point of fact. Is the proposal that, when we finally decide on the words, there will be three available statements, and at the end of each meeting we will choose either to use the statement that the risks are balanced or that there is a likelihood of economic weakness or heightened inflation pressures... | 85 |
fomc | 1,999 | I think the proposal on the table is that one of those three statements will definitely be made after each meeting. There may be a bit of additional prose if we feel there should be more explanation as to why we voted in a certain way. But in terms of how we view the future, the intention of this working group was that... | 217 |
fomc | 1,999 | Bill, I'm not a member of the Working Group and I wasn't in on the deliberations, but I have the suspicion that one can figure out how all this happened. None of us likes the words "symmetry" or "asymmetry" so, therefore, people start to think about what can we do in lieu of it. And we end up with symmetry/asymmetry, [... | 216 |
fomc | 1,999 | I agree. | 3 |
fomc | 1,999 | I would be a little concerned about that because in a crazy way our experience over the last number of years is that we seemingly have understood what was going on in the economy. We may not have understood it as well as we would have liked, but we didn't make any major blunders in policy. We really were never far behi... | 207 |
fomc | 1,999 | Are there any other perspectives from those on the Working Group? I guess we will do this in the usual way, with a go-around. Jerry Jordan. | 31 |
fomc | 1,999 | As we saw in our actual deliberations earlier today, we need to take into consideration the risk that later on down the road with new information we will find out that we had the stance of policy calibrated wrong. Even if we take an action with the expectation of the risks being balanced in some way, the costs of chang... | 229 |
fomc | 1,999 | Al Broaddus. | 5 |
fomc | 1,999 | Roger, let me first say that I compliment your Working Group. You took on a tough set of issues and dealt with them I think very forthrightly and got all of the significant issues on the table. Let me make just a couple of comments about the points of consensus. Generally I'm comfortable to one degree or another with a... | 800 |
fomc | 1,999 | You are an optimistic man! Cathy Minehan. | 10 |
fomc | 1,999 | Actually, I find myself more in agreement with Al Broaddus on other points than on the final one he discussed just now. I think the Working Group has done us a favor by de-linking the discussion of symmetry from the implied authority of the Chairman to change monetary policy between FOMC meetings. My understanding is t... | 364 |
fomc | 1,999 | Ed Boehne, you were next. | 9 |
fomc | 1,999 | Thank you, Roger. I think that you and your colleagues on this Working Group have really done quite an extraordinary job to move us this far and you are to be complimented. My comments are intended within that overall framework. As for the two alternatives, I favor "I." The main reason is that the finger ought to be a ... | 488 |
fomc | 1,999 | Roger, I think President Boehne was just practicing law. It seems ironic that the General Counsel would propose something different and I want to know why. | 31 |
fomc | 1,999 | I was actually pointing in the General Counsel's direction. I think it is important for everyone to know that the language proposed is Virgil Mattingly's language. He can continue to work at it, if you think that's appropriate. | 47 |
fomc | 1,999 | Virgil, if I had known it was your language, I would not have questioned it. [Laughter] But I'd still like to hear your explanation. | 32 |
fomc | 1,999 | What is involved here is the fact that only the Committee can direct a Federal Reserve Bank to take action. What the Chairman's authority derives from is the ability to interpret that direction. And that's what this language is intended to address. I don't think it's possible for the Committee to give to the Chairman t... | 69 |
fomc | 1,999 | I withdraw my suggestion on the words. My main point is the substantive issue that the Chairman needs such authority. | 22 |
fomc | 1,999 | The Working Group did change the draft wording to say the New York Bank could adjust the rate but only with the approval of the Chairman, instead of after consultation. | 32 |
fomc | 1,999 | Okay, that's fine. | 5 |
fomc | 1,999 | I think Tom Hoenig was next. | 8 |
fomc | 1,999 | Thank you. On the alternatives, I strongly prefer alternative I. In my view it's more honest in the sense that we are balancing the risks. If we weren't, we could take the action only at the time of the meeting. So I think it is the better way of expressing how we see the likelihood of developments in the future rather... | 199 |
fomc | 1,999 | Gary Stern, I have you next on the list. | 11 |
fomc | 1,999 | With regard to the alternatives on symmetry or asymmetry, I strongly favor alternative I as well for the reasons that the other advocates have cited. With regard to recommendation number nine and the Chairman's authority, I'm in favor of something like what is proposed here. I'm willing to leave the decision on the exa... | 72 |
fomc | 1,999 | Jack Guynn. | 4 |
fomc | 1,999 | In the interest of time, I'll echo Gary Stern's comments. I also strongly prefer alternative I. I think there's less chance of the statement being seen as a tentative policy decision. I, too, would like to see us be as explicit as possible in finding the right words for the Chairman's authority. I would emphasize the d... | 120 |
fomc | 1,999 | Bob McTeer is next. | 7 |
fomc | 1,999 | I continue to think that the best thing for us to do is not to vote on a bias at the meeting and, therefore, there won't be one to report on. I think it creates too many opportunities for us to be wrong, to come up with a bias and then not follow through on it. Sometimes I worry that we might follow through on it becau... | 199 |
fomc | 1,999 | Bill McDonough. | 5 |
fomc | 1,999 | First of all, I respect highly the ability of the General Counsel to practice law. But I think we have to be careful that in the process of clarifying the Chairman's authority we don't overlook the fact that the Committee's agent to carry out its responsibilities is the Federal Reserve Bank of New York or whichever Res... | 168 |
fomc | 1,999 | Does it actually say "in consultation with the Federal Reserve Bank of New York"? | 16 |
fomc | 1,999 | No, what it says is that the Federal Reserve Bank of New York will consult with you. | 19 |
fomc | 1,999 | Does it say the Federal Reserve Bank of New York? | 11 |
fomc | 1,999 | This draft says the Federal Reserve Bank of New York. | 11 |
fomc | 1,999 | We can't have that because we vote on that every year. | 12 |
fomc | 1,999 | This would be voted on every year as well. The point is that both would be voted on annually. | 21 |
fomc | 1,999 | This would be voted on after we decide which Reserve Bank will execute transactions for the System Open Market Account. | 21 |
fomc | 1,999 | Yes, after we have decided that. This is written with the current status quo in mind, but if we voted to select a different Bank, then we would make a conforming amendment in the Authorization. Bill, did you have a perspective on alternative I versus alternative II? | 55 |
fomc | 1,999 | My main desire is that we get away from the business of looking at ourselves in the mirror. Therefore, I like the idea that most of the time-ideally all the time--we would have one of three psalms. The 23rd psalm, my favorite, which starts out "The Lord is my Shepherd," has been around for 2,850 years and it has been d... | 184 |
fomc | 1,999 | I think Larry Meyer had another comment. | 8 |
fomc | 1,999 | I just had a comment on the Chairman's latitude. When Ed Boehne talked about it, the first thing he said was something like: Of course, the Chairman must have the authority to move in exceptional cases. I didn't see anything here about "exceptional cases," and that's part of my problem. If this were handed out as a pub... | 364 |
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