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fomc | 2,004 | We can't have a primary, though. Why don't you put forth your nominations so we can move on? | 21 |
fomc | 2,004 | I nominate Alan Greenspan to be Chairman and Tim Geithner to be Vice Chairman of the Committee. SEVERAL. Second. | 27 |
fomc | 2,004 | Any objections? Any other nominations? Hearing no objections and no other nominations, by acclamation we have a newly elected Chairman and Vice Chairman to serve for the year. Congratulations! | 35 |
fomc | 2,004 | Thank you. [Laughter] | 7 |
fomc | 2,004 | Democracy moves quickly. | 5 |
fomc | 2,004 | I understand that. With respect to staff officers, I'll call on our Secretary to read the nominees. | 20 |
fomc | 2,004 | The list of proposed officers is as follows: Secretary and Economist Vincent Reinhart Deputy Secretary Normand Bernard Assistant Secretary Michelle Smith General Counsel Virgil Mattingly Deputy General Counsel Thomas Baxter, Jr. Economist Karen Johnson Economist David Stockton Associate Economists from the Board Thomas... | 120 |
fomc | 2,004 | Are there any objections? If not, so ordered. We now need to reaffirm the selection of the Federal Reserve Bank of New York as the Bank to execute transactions for the System Open Market Account. | 39 |
fomc | 2,004 | I move that we select the Federal Reserve Bank of New York to execute transactions for the System Open Market Account. | 22 |
fomc | 2,004 | Without objection. We have a memo from Mr. Kos on the Authorization for Domestic Open Market Operations. Do you have any further comments on the memo, Dino? | 32 |
fomc | 2,004 | One amendment to the authorization is proposed, and I think the memo speaks for itself on that. I'd be happy to answer any questions. | 27 |
fomc | 2,004 | If there are no questions, so be it. We obviously forgot to grant Dino the authority to act in the capacity in which he just acted. So I will ask someone to move the reaffirmation of Dino Kos as the Manager of the System Open Market Account. | 52 |
fomc | 2,004 | So moved. | 3 |
fomc | 2,004 | Is there any objection? If not, so ordered. Now we'll go through a regular review of the Foreign Currency Authorization, the Foreign Currency Directive, and the Procedural Instructions with Respect to Foreign Currency Operations. Again, I call on Mr. Kos. | 50 |
fomc | 2,004 | I recommend that the Committee reaffirm those three documents as they currently stand. Again, I'd be happy to answer any questions. | 24 |
fomc | 2,004 | Mr. Chairman, I have a question and a comment. | 12 |
fomc | 2,004 | Certainly. | 2 |
fomc | 2,004 | I didn't see a reference in the memo to a warehousing limit, but maybe I missed it. Is there a dollar limit on warehousing that this Committee votes on? | 34 |
fomc | 2,004 | There is a $5 billion warehousing limit, which is a part of the package of authorizations and instructions under which we operate. That limit was mentioned in the memo. | 35 |
fomc | 2,004 | That's in there. So there's a $5 billion limit? | 12 |
fomc | 2,004 | That's right. The Committee voted to revert to a limit of $5 billion in 1997 after it had been raised from $5 billion to $20 billion in 1995 to facilitate U.S. participation in the program to aid Mexico. | 49 |
fomc | 2,004 | If I may, Mr. Chairman, talk just a little about that? | 15 |
fomc | 2,004 | Certainly. | 2 |
fomc | 2,004 | I spent a lot of time digging into the history of this, reading the memorandums of discussion from the early 1960s and the transcript--I think from 1990--when warehousing was discussed at length by the Committee. I want to discuss the wisdom of our having that warehousing authority. If we look at the domestic portfolio... | 329 |
fomc | 2,004 | Yes, there are a number of awkward relationships that we have in our role as fiscal agent, none of which to my knowledge has ever triggered any event that would be of concern to us. I would assume that we could batten down a lot of different holes here and there. I'm not certain that that would serve a useful purpose. ... | 117 |
fomc | 2,004 | Right. | 2 |
fomc | 2,004 | Which was only fourteen years ago! [Laughter] | 11 |
fomc | 2,004 | I'm not proposing that we redo that by the way! That was a very long discussion, and it took a good deal of time just to read it. | 31 |
fomc | 2,004 | What I would suggest you do, if you would like, is to write a memorandum on this, adverting to the comments and conclusions of the 1990 discussion, and we will circulate it. If there is significant interest in doing something of the nature that you are proposing, I would suggest that those who agree with that view make... | 97 |
fomc | 2,004 | That's fine. | 3 |
fomc | 2,004 | The next item on the agenda is-- | 8 |
fomc | 2,004 | The Committee needs to take a vote on this item. | 11 |
fomc | 2,004 | I'm sorry, I beg your pardon. Do you object to a vote being taken at this point? | 20 |
fomc | 2,004 | No, not at all. | 6 |
fomc | 2,004 | Without objection. I assume that the vote is in the affirmative on the recommendations in this memorandum. We also have a memorandum from Vincent Reinhart on the Program for Security of FOMC Information. Do you want to go beyond what you said in the memo? | 52 |
fomc | 2,004 | I have nothing to add. | 6 |
fomc | 2,004 | Next is item 6 on the agenda. Dino Kos has provided an evaluation of the use of GNMAs in outright transactions for the System Open Market Account (SOMA). Do you have comments on that? | 42 |
fomc | 2,004 | 1 I was just going to summarize briefly some of the points that were made in the memo and discuss the one-page set of graphs that I circulated today. The Committee will remember that this topic goes back to the time when we were worried about the stock of Treasuries shrinking rather than expanding and we were looking a... | 604 |
fomc | 2,004 | It certainly strikes me that the reason we moved in this direction was for contingency purposes--and necessarily so--but it turns out in retrospect to have been unnecessary in that respect. I think we should not move forward and expend additional effort or funds on this. I would put aside the work that has been done, a... | 91 |
fomc | 2,004 | By that time, the Ginnie Mae market may have disappeared totally. [Laughter] | 18 |
fomc | 2,004 | That's what I was going to say! | 8 |
fomc | 2,004 | President Poole. | 4 |
fomc | 2,004 | Dino, I thought this memo was superb, and I learned a lot from it. But I want to mention two arguments not discussed in the memo for why being in the GNMA market might be attractive to us. I realize that we certainly don't need GNMAs for the original reason that we embarked on the study. First of all, developing and ma... | 188 |
fomc | 2,004 | On the first point, our focus in the memo was on what it would take to get the program going. Clearly, there are some broader policy questions that we didn't think were for the staff to be opining on. But if the Committee feels that it's important to be in this market for whatever reason, the Committee can direct us to... | 70 |
fomc | 2,004 | That issue is independent of this memorandum and indeed just came up. But it's an interesting issue to keep in the back of our minds depending on how the discussion relating to GSEs evolves. It could move in the direction where it might be a reasonably sensible U.S. government policy to enhance GNMA as an operating age... | 83 |
fomc | 2,004 | I have a comment on President Poole's comment. I saw an advantage in going this route in terms of our being consistent across securities; we would buy everything that was backed by the full faith and credit of the U.S. government. But I also saw it as adding in some sense to the adversarial relationship with the GSEs b... | 185 |
fomc | 2,004 | No, I don't think they will be surprised. I think this veered off their radar screen maybe twelve to eighteen months ago. | 26 |
fomc | 2,004 | I think the costs of this are high and the benefits are very, very slight. We have been taught to make decisions using these comparisons. I would say, along with the Chairman and my colleague on the right, let's put it on the shelf for now | 51 |
fomc | 2,004 | President Minehan. | 4 |
fomc | 2,004 | I'd like to speak to President Poole's first point because I do agree that these are very important markets and that understanding how they operate is important. We only have to look at what was going on last spring to realize the importance of understanding how the mortgage-backed securities market works. But I think ... | 170 |
fomc | 2,004 | President Hoenig. | 4 |
fomc | 2,004 | I agree with those who have suggested that we put this on the shelf for now. The original purpose is being dealt with in other ways, and the cost seems to be sizable for this particular very narrow dimension. If we need to, we can bring it up at another time. I think it's better shelved for now. | 65 |
fomc | 2,004 | Does anybody object to that as a conclusion of the Committee? If not, we'll assume that is the decision. Now we go into our regular meeting agenda. Would somebody like to move approval of the minutes for our December 9 meeting? | 47 |
fomc | 2,004 | So moved. | 3 |
fomc | 2,004 | Hearing no objection, they are approved. Now we turn to the Working Group on Communications. Governor Ferguson and Vincent Reinhart. | 26 |
fomc | 2,004 | Thank you. I'll be very brief. Vincent is going to do most of the heavy lifting in terms of describing a number of different options and conclusions--both on issues that the working group looked at and on a number of issues that I asked the staff to address in the memos they prepared. In my introductory remarks I'd onl... | 271 |
fomc | 2,004 | 2 Thank you, Governor Ferguson. I'll be referring to the material called "The Committee's Communication Strategy" that was handed out to you before the start of the meeting. Next week marks the tenth anniversary of the Committee's first public explication of a change in its intended federal funds rate not associated wi... | 3,578 |
fomc | 2,004 | Thank you, Vincent. We know it's not the beginning of the end. Having done this a few times, I know that there will be deep emotion, short speeches, and long speeches, which is all fine. That's what democracy is all about. To help us try to figure out if we have a consensus, though, Vincent has given us what he describ... | 151 |
fomc | 2,004 | Yes, that's what this signal means. [Secretary's note: The Chairman had raised his hand.] | 20 |
fomc | 2,004 | That might end it! | 5 |
fomc | 2,004 | Yes, so much for democracy! Chairman Greenspan is recognized, and then my list says there are others who wish to follow. | 26 |
fomc | 2,004 | There are a number of very interesting ideas in here that have the characteristic that they are irreversible upon implementation. Hence there is a certain barrier above which I think a proposal has to rise before we move forward on it. I was a little distressed that my alternative to a number of these issues, which I h... | 69 |
fomc | 2,004 | It's in there somewhere! [Laughter] | 9 |
fomc | 2,004 | I've given considerable thought to various formulaic procedures that we could use in trying to craft our post-meeting statement. While I was one who thought in the beginning that it would be possible to use a formulaic approach to that endeavor, I've concluded at the end of the day that there's something fundamentally ... | 727 |
fomc | 2,004 | I think I would describe that, in terms of the options Vincent has laid out, as gradual evolution. | 21 |
fomc | 2,004 | Right. | 2 |
fomc | 2,004 | It gives us greater flexibility and involves using the Bluebook to provide alternative wording for the statement. | 19 |
fomc | 2,004 | I will grant you that that is probably the right characterization of my view. | 15 |
fomc | 2,004 | Since you have the floor, do you wish to go on to the other two topics on the menu, earlier release of the minutes and the role of the projections? Or would you like to hear more discussion? | 42 |
fomc | 2,004 | If I may suggest--since this is going to be a long discussion and each of these is a relatively separate issue--I think we'd be better off doing risk assessment first, then release of the minutes, and then the role of projections. After we've done that I'd go on to the fourth item, which would be the coordination of th... | 81 |
fomc | 2,004 | How they all work together. | 6 |
fomc | 2,004 | Yes. | 2 |
fomc | 2,004 | Okay. This being a committee, people will either accept or reject that approach. I have President Hoenig next on my list. | 26 |
fomc | 2,004 | Given the suggested approach that you've just outlined, Mr. Chairman, I'll confine my comments. On the risk statement, if that's what we're narrowly focusing on, I don't have any difference with you. But I'd start out by saying that I wish we could get rid of the risk assessment in the statement. I'd like the statement... | 91 |
fomc | 2,004 | Is that option listed? Oh, here it is. | 11 |
fomc | 2,004 | That's the very last one on the list--to discontinue the assessment of the risks. I'm not sure if you're saying you want to go with that one or with something else. | 35 |
fomc | 2,004 | Well, that's what I would prefer. But barring that, depending on how this Committee discussion comes out, my second choice would be the gradual evolution option. | 32 |
fomc | 2,004 | Okay. Do you want to stop there, or do you want to address the other topics? | 19 |
fomc | 2,004 | I'll stop there. | 4 |
fomc | 2,004 | Okay, why don't we keep going in this mode. We seem to have fallen into focusing mainly on the risk assessment. President Santomero. | 29 |
fomc | 2,004 | Following that model, I too found myself in the situation when I had finished reading the document--while it was well prepared and helped me think about the process--where I wasn't particularly happy with the set of options. I'm trying to decide whether I am in Chairman Greenspan's camp or President Hoenig's--whether m... | 417 |
fomc | 2,004 | Tony, that would be a shorter statement? | 9 |
fomc | 2,004 | It would be indeed. It's almost what we're doing now; it just doesn't go on into detail with the formulaic language regarding our assessment of the risks. I do worry about the formulaic wording. As I was reading the memo, I asked myself, Does this tell us the same thing using formulaic approach A, B, or C? And frequent... | 95 |
fomc | 2,004 | I must say, Tony, as I listened to what you said, it struck me as not very dissimilar from the gradual evolution approach because you want to talk about the future. You used some phrases that dealt with whether or not the outlook was problematic, which I think is what was intended by the gradual evolution option. But I... | 83 |
fomc | 2,004 | I was part of the working group, but I certainly agree that none of the alternatives is perfect. Confining myself to the risk assessment, if I were going to select formulaic language, I would select the "levels A" alternative--for very practical reasons. When I ran through the stress tests, that alternative seemed to m... | 181 |
fomc | 2,004 | I have Governor Gramlich next. | 7 |
fomc | 2,004 | I began the exercise thinking that we could come up with a formulaic statement that would work most of the time. In working through it--I was also part of the working group--I now think we can't. I'm pretty much in sympathy with the Chairman in believing that we will face situations where we may think the differences a... | 378 |
fomc | 2,004 | I have President Broaddus next. | 8 |
fomc | 2,004 | Let me approach it this way: In terms of the chart here, I'm probably going to come out with respect to the risk assessment somewhere in the gradual evolution area. But to me that's closely related to the early release of the minutes. I view that as an integral part of the communications effort--as sort of a package. A... | 1,072 |
fomc | 2,004 | Governor Bernanke. | 4 |
fomc | 2,004 | Thank you. This exercise shows us that achieving clarity and transparency for a large and diverse committee is quite difficult. But it's also very important both in our role as a public institution and for the efficacy of monetary policy. So I hope, even though it's a very difficult task, that we don't let ourselves ba... | 520 |
fomc | 2,004 | Thank you very much. President Minehan. | 9 |
fomc | 2,004 | Thank you, Roger. For the record anyway, I expressed the view last time that I was in favor of fewer moving parts, although I think that would translate to both fewer words and, I hope, fewer sentences as well. I think we should focus a little--and this picks up a bit on what the Chairman was saying--on the problem tha... | 583 |
fomc | 2,004 | President Parry. | 4 |
fomc | 2,004 | Thank you. I began this process as a member of the working group leaning toward formulaic language, and the alternative that seemed most appealing to me was the "levels A" one. But it became clear to me that, even in our group of seven, it would be extremely difficult to get a consensus built around that alternative. I... | 213 |
fomc | 2,004 | President McTeer. | 5 |
fomc | 2,004 | I came to this meeting somewhat fearful that we would do something fairly dramatic and possibly make a big mistake. So I was very reassured by the Chairman's opening remarks, which I would characterize as saying that the status quo is not all that bad. I think the gradual evolution alternative involves more gradual tha... | 207 |
fomc | 2,004 | We'll come back to those issues and explore them. President Guynn. | 14 |
fomc | 2,004 | Thank you. When Roger called me and I asked him if an option was "none of the above," I shuddered, thinking that I'd be the only one with that preference. But I gather from the comments thus far that I'm not alone. So let me just say up front that I certainly share the view that we ought to resist the temptation to tin... | 651 |
fomc | 2,004 | Okay. President Pianalto. | 6 |
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