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fomc
1,978
Or 7-3/4 to 8. It may bounce back to 7-3/4 some days; it may not.
29
fomc
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Let it bounce a bit.
6
fomc
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I don't think there is anything wrong with that. One, two, three, Paul?
18
fomc
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That's all right with me, I think. I assume we are going with these lower [M1 and M2 ranges of] 4 to 8 and 5 to 10.
38
fomc
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4 to 8 and 5 or 6 to 10.
14
fomc
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I don't think 5 to 10. I think [the M2 range] ought to be 6 to 10. I don't want to cut it too much [because of] the time deposit component.
43
fomc
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Does 4 to 8 work on that instruction, Steve?
13
fomc
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Well, if our projections are anywhere near right, that pretty much assures that we will be at 8 fairly promptly if that is the upper limit of the range.
33
fomc
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That is all you do.
6
fomc
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That means you're frozen for the next month.
9
fomc
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That's why I'm not sure if we shouldn't go ahead and have the ranges a little wider, because--
20
fomc
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You could make these ranges to 5 to 9 and 7 to 11. I would prefer that.
23
fomc
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Yes, 5 to 9 and 7 to 11 because you're just making a decision to operate at 7-3/4 to 8 and you're really going to be operating at 8 percent at the next meeting.
47
fomc
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Our uncertainties about July and the seasonals and all that seem to me to argue for a wide range in this period.
24
fomc
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[If growth is] more than that, we certainly ought to [bring] the Committee back in consultation.
22
fomc
1,978
I don't believe I could accept that high a range. I think that's too much. If we are really headed to try to restrain this, we should not be accepting a 5 to 9 range.
42
fomc
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That is a midpoint of 7.
8
fomc
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[The midpoint] doesn't mean anything with a money market directive.
13
fomc
1,978
Can we try 7-3/4 to 8 on the understanding of 4 to 8 and 6 to 10?
28
fomc
1,978
What was that, please?
6
fomc
1,978
Can we try 4 to 8 on M1, 6 to 10 on M2, and 7-3/4 to 8 on the funds rate, conducted in the manner Mr. Axilrod has just described?
49
fomc
1,978
With a money market directive.
6
fomc
1,978
Cap it at 8.
6
fomc
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That seems to be where we are.
8
fomc
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That is as high as I am going to go.
11
fomc
1,978
Yes.
2
fomc
1,978
I'd put the cap at 8-1/4 with a consultation at 8.
18
fomc
1,978
Well, I would prefer that but--
8
fomc
1,978
If you put an 8 percent cap now, if it's inconsistent, you'll get a consultation anyway. So you get the same result.
27
fomc
1,978
Not necessarily, if we're talking about 7-3/4 being [unintelligible] too.
22
fomc
1,978
Let's see if we can make this wording [acceptable to] get a majority vote here. Let's look on page 3 at the operating paragraph. The first problem is line 57, [or] page 2, line 43. Steve, on the formulation we are talking about, what does that line read?
64
fomc
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I think that it could read "about the current level" because that could refer to the last very few days and the Committee understands that as 7-3/4 to 8 percent. So I don't see any problem with that.
48
fomc
1,978
All right, it's "initially at...about the current level." Then "Subsequently, operations shall be directed at maintaining...7-3/4 to 8 percent....In deciding on the specific objective for the federal funds rate the Manager shall be guided mainly by the relationship between the latest estimates of annual rates of growth...
115
fomc
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It doesn't create a problem for me, but if most people wanted to delay [a rise in] market interest rates--
24
fomc
1,978
All right then as we go on we will say "If, giving approximately equal weight to M1 and M2, their rates of growth appear to be close to or beyond the upper or lower limits...." We will use the money market emphasis. That is a suggestion and proposal. Are we all clear on that? Use 7-3/4 to 8 on line 45, 4 to 8 on line 5...
100
fomc
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May I get a clarification of the understanding?
9
fomc
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Yes, the understanding is that the current level is above 7-3/4 but not yet at 8.
24
fomc
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In the last two days, it has been in the 7-3/4 to 8 percent range.
23
fomc
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I really wanted a clarification that if the M1 and M2 figures came in strong and you moved up to 8 and they still came in strong we would have another consultation.
36
fomc
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It is not clear to me--it's a matter of simplification--why we need those lines 42 and 43 that say "shall be directed initially" at one thing and subsequently at another thing. The ranges are narrow anyway. Why don't we just say "during the period until the next regular meeting System open market operations shall be di...
75
fomc
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I like that a little bit.
7
fomc
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I think that is perfectly okay with this very narrow range.
12
fomc
1,978
I think that would be perfectly acceptable. Are you with us on that? [Instead of] directed "initially at maintaining" just say "at maintaining" the weekly average within the range, right? Gentlemen, can I have a show of hands of those on the Committee who are voting if that would be acceptable? Yes, a straw vote.
71
fomc
1,978
Could you just run through the specific numbers again?
10
fomc
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Now it says "During the period until the next regular meeting, System open market operations shall be directed at maintaining the weekly average federal funds rate within the range of 7-3/4 to 8 percent. In deciding on the specific objective for the federal funds rate the Manager shall be guided mainly by the relations...
191
fomc
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It sure doesn't.
4
fomc
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Peter can set the dial and go on vacation.
10
fomc
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That is what he intends to do!
8
fomc
1,978
Do you have any final comment before we nail you up on this one?
15
fomc
1,978
I think that should be workable, Mr. Chairman.
11
fomc
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Yes, I want it to be workable because we really shouldn't push something on you that is foolish.
20
fomc
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It is workable, but I take it on the understanding that the Committee recognizes there is a substantial chance you are going to end up at 8 percent in a week or so.
36
fomc
1,978
[The market will] probably take it away from us. That is probably what will happen. There's nothing wrong with that. Now may we have a show of hands--a straw poll--of those who are voting members? We should be able to count ten, I think.
56
fomc
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Seven.
2
fomc
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Those who don't like it?
6
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Three. It adds up.
6
fomc
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Now shall we do an official vote? I'll vote for it.
13
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Vice Chairman Volcker Yes President Baughman No Governor Coldwell Yes President Eastburn Yes Governor Jackson Yes Governor Partee Yes Governor Wallich Yes President Willes No President Winn No The vote is 7 to 3.
45
fomc
1,978
Gentlemen, we have a vote of 7 to 3. Thank you all very much for your patience. Now we have the matter of item 7; [you received] a memorandum. Tom O'Connell is here to explain it but I think it is self explanatory. And I think we would be wise to leave our language in force on the assumption that the Congress will act ...
460
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Mr. Chairman, may I have just two minutes? I would like to bring to the attention of this group the fact that the financial problems of our city are not all the theatrical exhibitions of our current mayor. We do have a very critical problem in the area, unlike New York City, which managed to get rid of most of the shor...
372
fomc
1,978
It is a tragedy isn't it, to see that happen? Thank you for your report. We will now go into Executive Session. Is John here now? Gentlemen, last meeting we had a discussion, as you know, of the security situation. I know that it was a new subject and that not everyone felt there was adequate time to deal with the issu...
372
fomc
1,978
The critical aspect, technically, is that of extending beyond just a point-to-point link between here and New York. As we pointed out earlier, any conferencing of three or more stations involves a rather astronomical rise in cost. To tie in the twelve Reserve Banks with the Board would amount to about $800,000, over ha...
227
fomc
1,978
Why can't you use [unintelligible]?
10
fomc
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Because the secure link would be between Washington and New York. To add a third station requires a conferencing capability; you can't have half secure and half open.
31
fomc
1,978
The unsecured line can't hear the secure lines, so you have to go to an unsecured line to deal with the whole thing. That is the problem. You would have to go unsecured from New York to Washington, which is very vulnerable to being tapped, because it is well known [that communications between the two occur]. And the ca...
79
fomc
1,978
The Washington and New York areas are the ones that are most vulnerable to microwave intercept.
17
fomc
1,978
A land line is vulnerable to being tapped.
9
fomc
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It is a discrete tap.
6
fomc
1,978
I am sure you can, but how vulnerable is it? How much is the difference between-- Let me state the question straightforwardly. As I understood from earlier discussions, and as I thought of it myself after the previous meeting, the question that I have and I think some others had is: Given the microwave is too vulnerabl...
184
fomc
1,978
Well, I am from Missouri on spending $800,000 because the only things you'd use the line for are unsecured other uses. You wouldn't use it for other secure uses. So you can get the leased lines and [save] money on it.
50
fomc
1,978
You could use it for Committee meetings and--
9
fomc
1,978
Well, that is so rare.
7
fomc
1,978
Wouldn't the problem in your suggestion be that the obvious line to tap would be the New York to Washington line?
23
fomc
1,978
Sure.
2
fomc
1,978
Sure, but how "easy" is it on that line? I don't know.
17
fomc
1,978
Extremely. The thing is that now foreign agencies are undoubtedly monitoring by microwave. Those same foreign agencies would have to employ another technique. They can't do it from their physical facilities. They would have to have somebody go out and do it. They can hire those people, to be perfectly blunt, for a fee....
263
fomc
1,978
Mr. Chairman, I have thought long and hard before deciding to say this, but I guess partly growing out of my experience in the Nixon cabinet, I must question the basic premise. We say here it is known that information from these intercepts is being used, among other things, to develop economic intelligence on the Unite...
340
fomc
1,978
No, no, not at all. We must explore this. On the first point--John, you will have to clarify this--I understood the information to be just a report on what microwave intercepts are being used for. It had nothing to do with the Federal Reserve, but was generally on how they are being used. And I think there is pretty st...
254
fomc
1,978
Well, I can see the potential threat and I suppose an ounce of prevention is worth a pound of cure. But I don't see any real threat and I personally am willing to take the risk. But, of course, I am not in your position, so I--
54
fomc
1,978
No, I think we should do this together. If the value of the morning market call monitored by a President rather than a Governor has enough benefit--public benefit and benefit to the System--to outweigh that potential risk which is undefined, then we should go ahead with the calls. If the benefit of that call outweighs ...
106
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I think it does, Mr. Chairman, if I may continue just for a moment. Granted, there are many occasions when our participation as individual Presidents monitoring the call consists of saying "yes" and "I haven't any comments" when the approach [being contemplated] is more or less an orthodox one. But there have been many...
213
fomc
1,978
Well, Bob, I think we all ought to decide. The point, I guess, was to leave it unchanged--not that a Governor would be monitoring but we'd make that assignment if we went this way. We haven't implemented this yet, as I understand it. We are still doing it the way it was. Is that correct?
67
fomc
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Yes.
2
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1,978
You haven't very many Governors even when you have seven, and there is so much work to do. I think it--
24
fomc
1,978
Well, would you please write a letter to the Senate and House Banking Committees to explain that to them?
22
fomc
1,978
The only comment I was going to make, Mr. Chairman--I'm sure everybody is quite aware of it--is that of course any President or Governor is quite welcome to join the call either here at the Board or in New York even.
48
fomc
1,978
Sure. That is true.
6
fomc
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Yes, no doubt about that.
7
fomc
1,978
But it's haphazard. That is physical presence by chance.
13
fomc
1,978
That is by chance.
5
fomc
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That's right.
3
fomc
1,978
If you were in New York or if you were here, you could do it. But you could not if you were in neither of those places.
30
fomc
1,978
I think the only discussion we ought to have is not whether the cost of getting a secure line to New York is--
24
fomc
1,978
The cost is not material to my point.
9
fomc
1,978
We ought to do that. The only discussion is whether we extend it throughout the System. It is my judgment that [that decision] could well be made by all of you collectively and individually to see whether or not you think spending $850,000 is worth it.
54
fomc
1,978
Well, it probably isn't quite that simple though, Phil, at this point. What I am arguing for is the status quo.
26
fomc
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You are arguing for not even putting in the secure line between here and New York?
17
fomc
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I see no objection to that.
7
fomc
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It won't do us any good.
7
fomc
1,978
It wouldn't do you any good if you have an outsider on the call.
15