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fomc | 1,978 | How about trying 5 to 9? | 9 |
fomc | 1,978 | Yes, how many would go for 5 to 9? All right, four. Doesn't prove much, does it? Looks like 4 to 8 is a pretty good compromise. Yes, you've got company; we have switch votes. What if we have a vote now where you only get one vote? You don't get two votes; you only get one vote. There were two votes, obviously, going bo... | 196 |
fomc | 1,978 | I'm still thinking about it. I certainly would not vote for 8-1/2; I might vote for 8. | 26 |
fomc | 1,978 | Just for a moment, assume we are going to have a 4 to 8 range. It looks like the majority was lined up that way, by a very close margin. Then the next question is: How [directly] do we get to 8, as the midpoint of the [funds rate] range? There's some possibility that we might want to [wait] a few days on moving to 8 an... | 108 |
fomc | 1,978 | I have another question, too, Mr. Chairman. Could we ask Steve? There's a Treasury financing intervening here. | 24 |
fomc | 1,978 | I don't think that poses any problem over the next few days. | 13 |
fomc | 1,978 | The only reason I would think of hesitating a little, although I think I originally said move it to 8, would be if in the next few days or by the end of the week we have some international package. Then I think we might reserve this to flow out of that process. That might just be a little running room for us. How do yo... | 77 |
fomc | 1,978 | Any time is fine; moving to 8 percent is not going to have much effect. | 18 |
fomc | 1,978 | Not much effect one way or another. | 8 |
fomc | 1,978 | It would add to the package, but if it came earlier that would be fine, too. The market is waiting for something. | 26 |
fomc | 1,978 | It'll take a day or two for people to realize what you are doing. I would at least state it this way: See whether there is a consensus on this and it shouldn't be [implemented] any later than the international package. There is no point in waiting to move an 1/8 beyond Thursday or Friday if you're going to have an inte... | 73 |
fomc | 1,978 | Actually, Peter, you'll find that people will test you today or tomorrow. | 15 |
fomc | 1,978 | I think they might very well because we have a reserve need over the next few days and it would be a probably convenient time--if we wanted to accommodate 8 percent--just to kind of permit that to happen. | 44 |
fomc | 1,978 | What is your preference as the person on the firing line--give you the freedom to go ahead? If it takes too much to hold it below 8, to let it stay at 8? | 40 |
fomc | 1,978 | I think that would be an acceptable approach, Mr. Chairman, yes. | 15 |
fomc | 1,978 | I think that's a sensible approach. I think there's just too little in it for the international to hold off if you're getting [market resistance]. Now, if the market is just quiescent, I would leave [the funds rate] where it is until we see what things look like this week. That directive language--does that formulation... | 71 |
fomc | 1,978 | I think that would be fine. | 7 |
fomc | 1,978 | Anybody feel differently? So we will let the market judge a little. But certainly once the international matter is decided, if the rate hasn't been moved by the market, it will be moved by the Desk to 8. And then we will proceed. | 50 |
fomc | 1,978 | In no event, later than next week. | 9 |
fomc | 1,978 | Oh, I think the market will move it tomorrow. | 11 |
fomc | 1,978 | I think that's the truth. Well, thank you. Now we will have an official vote. We will call the roll. It came out that the majority had 4 to 8 and 6 to 10 on M1 and M2 and the range for federal funds is 7-3/4 to 8-1/4. And the midpoint is 8, with the instruction we discussed for moving to 8. On the draft directive a sug... | 273 |
fomc | 1,978 | I would have thought that would have belonged around line 41, Mr. Chairman. | 17 |
fomc | 1,978 | Well, let's see. | 5 |
fomc | 1,978 | Where we say "while giving due regard to developing conditions in financial markets...." Add it there especially-- | 21 |
fomc | 1,978 | Well, you can say "domestic and international financial markets" or you can-- | 17 |
fomc | 1,978 | Yes, or you could even emphasize the international. | 10 |
fomc | 1,978 | Well, what was used before was in that place. The language for the short run that we used before said: "In the conduct of day-to-day operations, account shall be taken of emerging conditions in domestic and international financial markets." Where do you prefer it gentlemen--in the paragraph on page 2 or page 4? | 66 |
fomc | 1,978 | I would prefer it in the latter one since it's more operational. | 13 |
fomc | 1,978 | It seems to me that if we want the Desk to actually use it as a basis of decision, it ought to go in the latter part. | 29 |
fomc | 1,978 | That is Paul's point. | 5 |
fomc | 1,978 | Well then, let's tell him what to do. There's no direction. I presume he would not ease on account of international. | 25 |
fomc | 1,978 | It would not put the federal funds rate down if the aggregates were weak unless they get [extremely] weak. | 23 |
fomc | 1,978 | You're biasing the whole result. | 7 |
fomc | 1,978 | I think I'd put it in the earlier one. | 10 |
fomc | 1,978 | It sounds like there's enough confusion; maybe we better put it in page 2. I think we are going to have to have a consultation if things get wild anyway. I don't like to see us operate without talking. So let's do it that way if everyone's agreeable. Hearing no dissent, they are agreeable. Now, let's vote on the propos... | 89 |
fomc | 1,978 | Will you repeat the specifications? | 6 |
fomc | 1,978 | The specs were: 4 to 8 and 6 to 10 on the M1 and M2 ranges, 7-3/4 to 8-1/4 on fed funds, and a move to 8 on instructions that we have discussed. Now we will take votes. | 60 |
fomc | 1,978 | Chairman Miller Yes Vice Chairman Volcker Yes Governor Coldwell Yes President Eastburn Yes Governor Gardner Yes Governor Jackson Yes Governor Partee No Governor Wallich Yes President Willes No President Winn Yes | 38 |
fomc | 1,978 | I think that is a remarkable vote. One is negative because we should be higher on M1 and one is negative because we should be lower. So we have two dissents in this case. It's too bad we can't have a series of votes so we could have a unanimous vote on the [funds rate] range. I don't think we've ever formulated a vote ... | 92 |
fomc | 1,978 | Mr. Chairman, as a technical point in the directive, the Committee has to decide on the language under alternative B whether it should say a range initially attaining a weekly-average federal funds rate "slightly" or "somewhat" above the current level. I think the Committee has to choose. | 59 |
fomc | 1,978 | Well, you tell us what we are supposed to choose. | 12 |
fomc | 1,978 | Well, I think the 8 is slightly. | 10 |
fomc | 1,978 | Is "slightly" satisfactory? | 7 |
fomc | 1,978 | Is "somewhat" bigger than "slightly"? | 11 |
fomc | 1,978 | That's the staff's lexicon. | 7 |
fomc | 1,978 | You have to know the code words. That's why I asked Steve to tell us what to say. Thank you very much; you had a great contribution. | 31 |
fomc | 1,978 | Mr. Chairman, do I understand this initially to be a contravention of the instructions that we gave the Desk as to promptness of movement? | 30 |
fomc | 1,978 | Pardon me? | 4 |
fomc | 1,978 | What does "initially" mean? Does this have a bearing on the instructions that you gave the Desk as to how promptly we'd move? | 28 |
fomc | 1,978 | Promptly might be a better word than initially. | 10 |
fomc | 1,978 | I think you have a very good point. Initially means that he should do it immediately. | 18 |
fomc | 1,978 | Well, that's the way I read it. | 9 |
fomc | 1,978 | Yes, I think you are absolutely right. We can change the word initially to promptly in due course. | 21 |
fomc | 1,978 | Why don't we just leave out the adverb? | 10 |
fomc | 1,978 | Do you need it at all? | 7 |
fomc | 1,978 | Why don't we just say "directed at attaining" and leave out "initially." | 18 |
fomc | 1,978 | And it could be understood that the Desk would move as you suggested. | 14 |
fomc | 1,978 | Right. Thank you for catching that. Are there any other comments on this? We have a vote. Thank you very much. We have the confirmation of the date of the next meeting, which is September 19. Now I'd like to discuss the international situation. Henry, is there anything you'd like to say before I do? | 66 |
fomc | 1,978 | Well, Mr. Chairman I think you've made it clear that we have a crisis on our hands--a crisis of confidence. For some currencies yesterday, it was a panic. I think it's at a point where the functioning of the monetary system is in some doubt. That is, it could lead to severe capital controls and it could lead to trade c... | 119 |
fomc | 1,978 | I've outlined some actions that might be taken. As we discussed yesterday, one of the actions is to be more aggressive in the D-mark intervention. But there I believe we have to have a better concept of where we're going or we may find some disagreement from the Bundesbank on what to do. We certainly need to have a mor... | 146 |
fomc | 1,978 | Or you could do just the foreign; you could take it to zero. | 15 |
fomc | 1,978 | That's right. The skewing is a matter of how many basis points difference it makes, Chuck, which would be up to the Board of Governors. We could raise the discount rate. The activation of the yen swap line would be, I think, the one area we should get some viewpoint on now and some direction to us as to proceed or to n... | 355 |
fomc | 1,978 | Would the sharing arrangement have to be negotiated? | 9 |
fomc | 1,978 | I think it's already-- | 5 |
fomc | 1,978 | It's in there, isn't it? | 7 |
fomc | 1,978 | It's not in, but they've indicated that they'd be very quick to agree. | 15 |
fomc | 1,978 | We'd also have to agree on the method of operation. It seems to me that we would want to have an agreement on the amount, on the relative amount of intervention they would do for their own accounts in New York and in Tokyo. And we'd want some understanding on the repayment. Those points, Scott, I believe you feel you c... | 75 |
fomc | 1,978 | Hopefully, yes. | 4 |
fomc | 1,978 | And, Mr. Chairman, the interest rate. | 10 |
fomc | 1,978 | And the interest rate would have to be discussed. | 10 |
fomc | 1,978 | So that we don't just pay a higher rate. | 10 |
fomc | 1,978 | Right. | 2 |
fomc | 1,978 | Now that's a bigger complication. | 6 |
fomc | 1,978 | That's right, I think, Mr. Chairman. | 10 |
fomc | 1,978 | That would change the nature of the swap arrangement that we have with the Bank of Japan and would be a difference between the swap arrangement we have with them and those with other central banks. | 37 |
fomc | 1,978 | Yes, you're right; we'd probably have a hard time getting them to agree to that, because it isn't what we're doing with the Bundesbank. | 29 |
fomc | 1,978 | I think you might get them to agree that if we change the others, they would change. | 19 |
fomc | 1,978 | And they're changing in the wrong direction. If we change the non-50-50--incidentally, the other condition I think we would want, if we did this, is to have the Treasury in either as a participant in our swap line or opening a swap line of their own. I don't believe necessarily that we should do that unless there were ... | 188 |
fomc | 1,978 | I haven't been an advocate of intervention as a general rule, but I must say that I'm beginning to warm up to a yen intervention program, particularly if we can get some of the conditions that you have specified. I would not as one of those conditions want to encourage them to have a special imports scheme for material... | 307 |
fomc | 1,978 | Mr. Chairman, I'd note as a matter of fact to Chuck that the Japanese already are doing that type of import program. | 25 |
fomc | 1,978 | I know they're doing it, and I've been a little worried about it. | 15 |
fomc | 1,978 | I just didn't want others to be misled, thinking that the Japanese weren't when they in fact are. | 21 |
fomc | 1,978 | I wouldn't want to encourage them to do any more, for sure. | 14 |
fomc | 1,978 | Thank you, Chuck. John Balles. | 9 |
fomc | 1,978 | Well, Mr. Chairman I guess my views are biased strongly against supporting the yen as a result of sitting through a meeting of and giving a speech a little over a week ago to the Japan California Society. Without going into gruesome details, the American contingent there was in a state of deep distress and shock and di... | 267 |
fomc | 1,978 | Thank you, John. Phil Coldwell. | 9 |
fomc | 1,978 | Mr. Chairman, I have been on both sides of the fence. I think there have been times when intervention has been desirable. If we're going into this we ought to go into it in a major way; I would not want to go into this if we're going to fritter away a few hundred million. I think we ought to embark on a program of this... | 86 |
fomc | 1,978 | Between the two combined you mean. | 7 |
fomc | 1,978 | No. The Treasury and us. | 7 |
fomc | 1,978 | And the Japanese, too. | 6 |
fomc | 1,978 | And the Japanese also. Though actually I think if we're going in with the Japanese, in the sense of coming back from the other side, then my figure might be higher. But I think we ought to at least be willing to commit $4 billion as far as the United States is concerned. I think the conditions that you've said you're l... | 173 |
fomc | 1,978 | Thank you, Phil. Frank Morris. | 8 |
fomc | 1,978 | Mr. Chairman, I support the operation. I think [of] the United States currency as a world currency, and we have the responsibility of seeing--to the extent that we can--that the foreign exchange markets operate in a rational way. But I agree with Phil Coldwell that if we're going to do this, it ought to be done on a su... | 187 |
fomc | 1,978 | But $4 billion is an awful lot, Frank. It might come to that but I don't see why you'd operate on that scale to begin with. | 30 |
fomc | 1,978 | Well, Chuck, if you did $2 billion under one swap line and 50-50 sharing, we're risking $1 billion, other than the interest cost. And if the Treasury did $1 billion, that's $3 billion; if the Japanese did $2 billion more on their own, that's $5 billion. | 64 |
fomc | 1,978 | Well, I think Phil meant $4 billion on our end, and that is pretty big. | 19 |
fomc | 1,978 | Oh, I see. | 5 |
fomc | 1,978 | I'm not saying do this tomorrow. But I think the Committee ought to be prepared to commit that kind of money if it's going into this kind of deal. | 31 |
fomc | 1,978 | Four billion on our end ought to imply $20 billion on their end. | 15 |
fomc | 1,978 | This [is] not in line with the rules of floating. We'd clearly be acting to change rates; I would be very skeptical of such a move. | 31 |
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