June 20, 1978 FOMC Record of Policy Actions: Full Text
FEDERAL RESERVE press release For Use at 4:00 p.m. July 21, 1978 The Board of Governors of the Federal Reserve System and the Federal Open Market Committee today released the attached record of policy actions taken by the Federal Open Market Committee at its meeting on June 20, 1978. Such records for each meeting of the Committee are made available a few days after the next regularly scheduled meeting and are published in the Federal Reserve Bulletin and the Board's Annual Report. The summary descriptions of economic and financial conditions they contain are based solely on the information that was available to the Committee at the time of the meeting. Attachment
July 21, 1978 RECORD OF POLICY ACTIONS OF THE FEDERAL OPEN MARKET COMMITTEE Meeting held on June 20, 1978 1. Domestic policy directive The information reviewed at this meeting suggested that output of goods and services had expanded rapidly on the second quarter, reflecting the economy's rebound average in the in late winter and early spring from the effects of the unusually severe winter weather and the lengthy coal strike. More recently, however, the rate of expansion appeared to have slowed. The rise measured by the fixed-weighted price index in average prices--as for gross domestic business product--accelerated markedly in the second quarter, due in large measure to substantial increases in food prices. Staff projections continued to suggest moderate expan sion in output over the year ahead. The anticipated rate of growth was slightly lower than that projected a month earlier, mainly because the assumptions regarding fiscal policy were modified to reflect the administration's decision to delay the proposed tax cut from October 1 to January 1 and to reduce its size. The pro jected rate of price advance had been raised slightly from that of a month earlier, but it was still well below the rate in the second quarter. The projections also suggested that the unemployment rate would decline a bit further over the coming year.
Growth in production and employment moderated in May from months. Thus, the industrial pro the rapid rates of preceding duction index increased 0.6 per cent, compared with gains of 1.2 in March and April, respectively; and the rise in and 1.4 per cent nonfarm payroll employment in May was less than one-half the average increase earlier in the year. In manufacturing, the gain in employ ment was relatively small and the average workweek declined. The labor force continued to grow substantially and the unemployment rate edged up to 6.1 per cent from 6.0 per cent in April. Total retail sales were about unchanged in May, following 3 months of exceptionally large gains. Unit sales of new auto mobiles rose slightly further to a new high for the current expan sion. It appeared that some consumers were buying new cars in anticipation of further price increases. The latest Department of Commerce survey of business spend ing plans, taken in late April and May, suggested that outlays for plant and equipment would expand 11.2 per cent in 1978; this rate was marginally above that reported in the February survey. Other indicators of capital spending plans, such as manufacturers' capital appropriations, contracts for commercial and industrial buildings, and new orders for nondefense capital goods, appeared generally consistent with continued moderate expansion in investment outlays. The index of average hourly earnings for private nonfarm production workers rose at an annual rate of about 3 per cent in
to 10 per cent in earlier increases averaging close May, following For the first 5 months of the year the index had months of 1978. faster rate than it had on the average in increased at a somewhat wholesale price index for all commodities 1977. The advance in the smaller increases in prices of farm also slowed in May, reflecting and food products as of the time of the survey. Later in the month, of a number of farm products advanced. In April however, prices index for all urban consumers rose at an accel the consumer price erated annual rate of nearly 11 per cent, owing to further large increases in food prices and to higher service costs, especially those relating to home ownership. In general, prices had increased considerably faster in early 1978 than during the year 1977. In foreign exchange markets the trade-weighted value of the dollar reached a peak for 1978 in late May. Subsequently the dollar declined by about 2 per cent, but it remained above the low for the year that had been recorded in early April. The renewed downward pressure on the dollar appeared to reflect market concern about the high rate of inflation in the United States relative to rates in other industrial countries and about the continuation of large deficits in U.S. foreign trade and surpluses in the trade of Germany and Japan. The deficit in April was about the same as that in March but lower than the high level of the first quarter. Both exports and imports rose considerably in April.
The rate of expansion in total bank credit, which had accelerated sharply in April, slackened somewhat in May but remained above the average for other recent months. Bank holdings of secur ities changed little,but total loans, led by a surge in business loans, grew at an exceptional pace. Outstanding commercial paper of nonfinancial businesses declined slightly in May. Growth in the narrowly defined money supply (M-1) moder ated in May to an annual rate of about 6-1/2 per cent from the extraordinarily rapid 19 per cent in April. Growth in M-2 and M-3 also slowed in May, reflecting the deceleration in M-1. Inflows of the interest-bearing deposits included in M-2 generally were greater than in April as commercial banks issued a substantial volume of large-denomination time deposits to finance the sharp increase in business loans. However, inflows of funds into savings deposits and small-denomination time deposits remained slow both at banks and at thrift institutions. Preliminary data for the first part of June suggested that growth in M-1 and M-2 would accelerate in that month. At its meeting on May 16 the Committee had decided that the ranges of tolerance for the annual rates of growth in M-1 and M-2 during the May-June period should be 3 to 8 per cent and 4 to 9 per cent, respectively, and it had judged that such growth rates were likely to be associated with a weekly-average Federal funds rate slightly above the level of 7-1/4 to 7-3/8 per cent prevailing
at that time. The Committee had agreed that if growth rates in the aggregates over the 2-month period appeared to be deviating significantly from the midpoints of the indicated ranges, the operational objective for the weekly-average Federal funds rate should be modified in an orderly fashion within a range of 7-1/4 to 7-3/4 per cent. In accordance with the Committee's decision, the Manager of the System Open Market Account began after the May meeting to seek bank reserve conditions consistent with a firming of the Federal funds rate to around 7-1/2 per cent. Incoming data throughout most of the inter-meeting period suggested that growth in the monetary aggregates would be well within the ranges specified by the Committee, and the Manager continued to seek conditions consistent with a Federal funds rate of 7-1/2 per cent. Data that became available a few days before this meeting suggested that M-1 would grow in the May-June period at an annual rate of about 7-1/2 per cent, close to the upper limit of its range. M-2 also was projected to grow in the 2-month period at a 7-1/2 per in the upper half of the range specified for that aggre cent rate, gate. These data suggested the need for Committee consultation, and on June 16, in view of the proximity of the meeting scheduled for June 20, the Committee voted to direct the Manager to continue for the time being to aim for a Federal funds rate of 7-1/2 per cent.
Other market interest rates had risen further in recent weeks. Reflecting not only the rise in the funds rate but also substantial business credit demands, market rates on short term securities had increased from 30 to 60 basis points since mid-May, and commercial banks had raised the rate on loans to prime business borrowers in two steps from 8-1/4 to 8-3/4 per cent. Yields on long-term securities rose 5 to 20 basis points over the same period, apparently in response to the rise in short-term rates and investor concerns about the prospects for inflation. Conditions in mortgage markets had continued to tighten recently as strong demands for credit pressed against reduced avail ability of funds at lending institutions. At savings and loan asso ciations, net mortgage lending activity in April--the latest month for which data were available--was close to its reduced rate in the weather-affected first quarter, and mortgage commitments outstanding declined further. During the inter-meeting period there were further increases in interest rates on new commitments for con ventional home loans at the associations and, in most regions, a tightening of nonrate terms as well. Yields in the secondary market for home mortgages also had generally increased in recent weeks. In the Committee's discussion of the economic situation and outlook, the members generally agreed that the growth in real output of goods and services over the coming three quarters would be substantially slower on the average than it had been in the unusually
expected real GNP However, they still quarter just ending. strong with the the year ending rate during a moderate average to grow at thought that average 1979. While some members second quarter of below the be at or a little would probably for that period growth faster growth. expected somewhat the staff, others projected by rate than the would be greater the rise in prices feared that A majority rate that the unemployment members thought Most staff anticipated. from the rates be little changed the period would at the end of recently prevailing. immediately ahead, a majority With respect to the months members thought that the economy was likely to show of the Committee more strength than the staff projection suggested. These members noted that both consumer and business sentiment appeared to be strong, and they interpreted the latest data on consumer behavior as evidence that many households were adopting a speculative approach to spendinganticipating needs for housing and other durables, and in the process adding willingly to already heavy debt burdens. While these members acknowledged that national economic data did not yet suggest similar anticipatory spending on the part of businesses, several noted that many businessmen appeared to be optimistic about the prospects for their own firms and industries and that such optimism might soon be reflected in a step-up in over-all business inventory accumulation and investment outlays. A number of these members expressed
expectations were indications that inflationary concern about the and that both business and labor were intensifying their strengthening to protect themselves through price and wage increases. efforts who anticipated relatively strong growth Two of the members was likely to generate suf term thought that the economy in the near to maintain a favorable rate of expansion beyond ficient momentum mid-1979. Others in this group were concerned, however, that insofar as near-term spending of consumers and businesses embodied specula tive tendencies, the resulting economic distortions might lead to significantly slower growth in 1979. Of the Committee members who anticipated less near-term strength in the economy, some suggested that current business optimism might well reflect an overemphasis on the sharp rebound that had occurred in recent months rather than a considered assessment by busi nessmen of prospects for the future. These members thought it unlikely that growth in consumer outlays would continue at the recent rate, and they saw no obvious source of offsetting strength. They expected outlays for housing to slacken; they noted that surveys of business investment plans did not reflect much ebullience; and they thought businessmen would follow a cautious approach to inventory expansion. Finally, they noted that Federal fiscal policy would be less stimula tive than anticipated earlier in the year.
of the Committee observed that relatively Several members pressures and would tend to dampen inflationary slow economic growth in foreign exchange markets. the position of the dollar to bolster activity in major industrial these members noted that economic One of was expected to strengthen, and that such a develop countries abroad in the U.S. expansion. He would help to limit any deceleration ment a failure of activity abroad to strengthen as expected added that of unsatisfactory growth in the United would increase the chances additional problems with respect to the U.S. States and would create current account. At its meeting in April the Committee had agreed that from the first quarter of 1978 to the first quarter of 1979 average rates of growth in the monetary aggregates within the following ranges appeared to be consistent with broad economic aims: M-1, 4 to 6-1/2 per cent; M-2, 6-1/2 to 9 per cent; and M-3, 7-1/2 to 10 per cent. The associated range for the rate of growth in commercial bank credit was 7-1/2 to 10-1/2 per cent. It had also been agreed that the longer-run ranges, as well as the particular aggregates for which such ranges were specified, would be subject to review and modifica tion at subsequent meetings. At this meeting, in discussing policy for the period immediately ahead, Committee members expressed considerable concern about recent rates of growth in the monetary aggregates, particularly in light of the continuing strength of inflationary pressures and
The members agreed that open market operations in the expectations. inter-meeting period should be directed initially toward achieving slightly firmer money market conditions, and that later in the period the objectives of operations should depend on incoming data for M-1 and M-2. As at the preceding meeting, there were differences of view with respect to the degree of firming that might be undertaken. These differences were reflected in opinions on such issues as the magnitude and speed of the initial move toward firmer money market conditions and the amount of leeway--in terms of the inter-meeting range specified for the Federal funds rate--for further firming later in the period. As to the initial move, most members favored seeking an increase in the Federal funds rate to 7-3/4 per cent from the prevailing level of 7-1/2 per cent within a few days after this meeting. However, one member suggested that this quarter-point increase be achieved over a somewhat longer period, and another pro posed that the initial increase be limited to one-eighth of a point. With respect to the inter-meeting range for the Federal funds rate, most members favored 7-1/2 to 8 per cent, but a number preferred 7-1/2 to 8-1/4 per cent. There was greater diversity of views with respect to the ranges of tolerance to be specified for the annual rates of growth in M-1 and M-2 in the June-July period. Of the ranges
8-1/2 per cent, and the the lowest was 3-1/2 to suggested for M-1, for M-2 the suggestions covered was 6-1/2 to 10-1/2 per cent; highest discussion that if the mone It was noted during the a similar span. tary aggregates accelerated in June, as suggested by the early data, at rates near the midpoints of some growth over the June-July period be achieved only if there were to of the lower ranges proposed could slowing in July. Some members, who were inclined to stress be a sharp the risks to the economy of rapid firming of money market conditions, saw this circumstance as an argument for specifying relatively high 2-month ranges for M-1 and M-2. Other members, who placed more stress on the importance at this time of limiting growth in the aggregates for the sake of moderating inflationary pressures and expectations, thought such firming would be called for if the growth in the aggregates did not in fact slow sharply. At the conclusion of the discussion the Committee decided that the ranges of tolerance for the annual rates of growth over the June-July period should be 5 to 10 per cent for M-1 and 6 to 10 per cent for M-2. The Committee agreed that during the coming inter-meeting period operations should be directed initially toward a Federal funds rate of 7-3/4 per cent, slightly above the prevailing level of 7-1/2 per cent. Subsequently, if the 2-month growth rates of M-1 and M-2 appeared to be significantly above or below the midpoints of the indicated ranges, the objective for the funds rate was to be raised or lowered in an orderly fashion within
a range of 7-1/2 to 8 per cent. It was understood that in assess should continue to of the aggregates the Manager ing the behavior to the behavior of M-1 and M-2. give approximately equal weight understood that the Chairman might call upon It was also the need for supplementary instructions the Committee to consider appeared to be above the if the rates of growth in the aggregates of the indicated ranges at a limit or below the lower limit upper for the funds rate had already been moved time when the objective limit of its range. to the corresponding At this meeting the Committee considered certain proposed modifications in the language customarily employed in the concluding paragraphs of the domestic policy directive. It was noted that, perhaps because of the manner in which the directive was worded, the 2-month ranges of tolerance for M-1 and M-2 were subject to misinter pretation as embodying the Committee's short-run targets for these aggregates, intended to be achieved by appropriate changes in the Federal funds rate. In fact, however, the Manager could not be expected regularly to achieve 2-month growth rates in M-1 and M-2 within the specified ranges for various reasons--including the lag between changes in the Federal funds rate and changes in these growth rates, and the brevity of the period to which the operational para graphs of any single directive applied. It was noted in the discussion that the Committee's objectives for the monetary aggregates were embodied in the 1-year
established at quarterly intervals, and that the adjustments ranges made from time to time in the Federal funds rate were intended to increase the likelihood that the longer-run growth rates would fall within these ranges. The purpose of the 2-month ranges was to pro vide the Manager with an indicator for determining when changes in the funds rate were appropriate; specifically, the Manager was expected to adjust the funds rate within its range when the latest projections of 2-month growth rates in M-1 and M-2 deviated signifi cantly from the midpoints of their ranges (or, if the Committee so indicated in the directive, when the projections for the aggregates approached or moved beyond the limits of their ranges). At the May meeting, following a preliminary discussion of this matter, the Committee had deleted one potentially misleading phrase from the language previously employed, to the effect that the Committee "expects" the 2-month growth rates to be within the indi cated ranges. At this meeting the Committee agreed upon a more thorough revision of the customary language, in an effort to reduce the chances of misinterpretations. The following domestic policy directive was issued to the Federal Reserve Bank of New York: The information reviewed at this meeting suggests that real output of goods and services has grown rapidly the average in the current quarter as activity rebounded on from the effects of the unusually severe winter weather and the lengthy coal strike, but the rate of advance most recently to be slowing. Following substantial gains in March appears and April, increases in industrial production and nonfarm
payroll employment moderated in May and retail sales changed little. The unemployment rate edged up from 6.0 to 6.1 per cent in association with a large increase in the civilian labor force. Average whole sale prices rose somewhat less rapidly in May than earlier in 1978, reflecting smaller reported increases in farm products and processed foods. So far this year prices have increased at a considerably faster rate than they had on average during 1977. The index of average hourly earnings also has increased at a somewhat faster pace so far in 1978 than during 1977. Since the end of May the trade-weighted value of the dollar against major foreign currencies has declined about 2 per cent, but it remains above its early-April low. The trade deficit in April was down somewhat from its very high first-quarter rate. Growth in M-1 moderated in May from the extra ordinarily rapid pace in April, and as a result growth in M-2 and M-3 also slowed. Inflows of the interest bearing deposits included in M-2 picked up somewhat as commercial banks increased their reliance on large denomination time deposits to finance an unusually sharp increase in business loans. Market interest rates have risen somewhat further in recent weeks. foregoing developments, it is the In light of the Open Market Committee to foster policy of the Federal conditions that will resist monetary and financial while encouraging continued inflationary pressures expansion and contributing to a sus moderate economic transactions. At tainable pattern of international on April 18, 1978, the Committee agreed its meeting objectives would be furthered by growth of that these and M-3 from the first quarter of 1978 to M-1, M-2, of 1979 at rates within ranges of the first quarter 6-1/2 to 9 per cent, and 7-1/2 4 to 6-1/2 per cent, cent, respectively. The associated range to 10 per credit is 7-1/2 to 10-1/2 per cent. These for bank at any time as ranges are subject to reconsideration conditions warrant. short run, the Committee seeks to achieve In the market conditions that are bank reserve and money longer-run ranges for consistent with the broadly cited above, while giving due monetary aggregates
financial markets in developing conditions regard to until the next During the period more generally. operations shall System open market regular meeting, at attaining a weekly-average be directed initially the current level. slightly a ove funds rate Federal at maintain shall be directed operations Subsequently, the range of funds rate within the weekly Federal ing his specific objec In deciding on to 8 per cent. 7-1/2 shall be rate the Manager Federal funds tive for the between the latest by the relationship guided mainly of growth in the June-July of annual rates estimates ranges of M-2 and the following of M-1 and period M-1 and 6 to 10 per to 10 per cent for tolerance: 5 equal weight If, giving approximately cent for M-2. appear to be rates of growth M-1 and M-2, their to significantly above or below the midpoints of the indicated ranges, the objective for the funds rate shall be raised or lowered in an orderly fashion within its range. If the rates of growth in the aggregates appear to be above the upper limit or below the lower limit of the indicated ranges at a time when the objective for the funds rate has already been moved to the corresponding limit of its range, the Manager is promptly to notify the Chairman who will then decide whether the situation calls for supplementary instruc tions from the Committee. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Gardner, Jackson, Partee, and Wallich. Votes against this action: Messrs. Willes and Winn. Messrs. Willes and Winn dissented from this action because they favored more vigorous measures to curb the rate of monetary aggregates. Both preferred ranges of toler growth in the 2-month growth rates in M-1 and M-2 lower than those ance for the in addition, Mr. Willes favored an upper approved by the majority; limit for the funds rate range of 8-1/4 per cent.
strong consumer and business credit Mr. Willes, citing felt that a further rise in at prevailing interest rates, demands rates would not significantly damage economic short-term interest that such a rise tended to moderate prospects and that, to the extent have a positive impact on the inflationary expectations, it would if the Committee did not act now to economy. Mr. Winn felt that the rates of growth of the aggregates, an assure a reduction in would be required later on if the excessively restrictive policy longer-range objectives were to be achieved. Committee's Operations in Federal agency securities At this meeting the Committee discussed its procedures with respect to open market operations in Federal agency securities. The discussion arose because of a potential problem posed by a sta tutory requirement that Federal Reserve note liabilities be colla teralized by eligible assets, which included direct obligations of the Treasury but not Federal agency issues. At times recently, the margin of actual collateral over that required had been relatively small. The Board of Governors had proposed legislation that would make Federal agency issues eligible as collateral, but Congress had not yet acted on the proposal. It was noted that the problem of maintaining sufficient collateral for Federal Reserve notes could become critical at some point before the enactment of such legislation if, for example, a need arose to sell a substantial volume of Treasury securities to absorb redundant member bank reserves. It was also noted that the
problem would be mitigated by some slowing of the rate of growth in System holdings of agency securities and a correspondingly larger increase in holdings of Treasury securities. Paragraph 1(a) of the Committee's authorization for domestic open market operations authorizes the Federal Reserve Bank of New York to sell, as well as to buy, Federal agency securities for the System Open Market Account. Historically, however, sales of such securities have been quite infrequent. It was the sense of the Committee that modest sales of agency issues would be appropriate from time to time, but only when market circumstances permitted and when sales of securities were consistent with the objectives of open market operations. It was noted in the discussion that, even apart from the problem of collateral requirements, occasional sales of agency issues would help enhance the flexibility of open market operations. The Committee also agreed that the Desk should reduce somewhat the volume of agency issues it purchased when supplying reserves, and that occasionally, when there was a need to absorb reserves, it should redeem maturing agency issues for cash rather than routinely exchange them for new issues. 3. Authorization for foreign currency operations At this meeting the Committee approved a technical amendment to paragraph 1D of the authorization for foreign currency operations, under which the definition contained in the second sen tence of that paragraph of "over-all open position in all foreign
is given as "the sum (disregarding signs) of net positions currencies" in individual currencies" rather than as "the sum (disregarding signs) of open positions in each currency." This change was approved in the clarity, and to make the language of this paragraph con interest of form to certain new language concurrently introduced in the procedural instructions governing foreign currency operations, as described below. With this amendment, paragraph 1D read as follows: To maintain an over-all open position in all foreign currencies not exceeding $1.0 billion, unless a larger position is expressly authorized by the Committee. For this purpose, the over-all open position in all foreign currencies is defined as the sum (disregarding signs) of net positions in individual currencies. The net position in a single foreign currency is defined as holdings of balances in that currency, plus outstanding contracts for future receipt, minus outstanding contracts for future delivery of that currency, i.e., as the sum of these ele ments with due regard to sign. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Jackson, Partee, Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Mr. Gardner. Under the first sentence of paragraph 1D, which was not affected by the foregoing amendment, the Federal Reserve Bank of New York is authorized, for System Open Market Account, to maintain an over-all open position in all foreign currencies not exceeding $1.0 billion, unless a larger position is expressly authorized by the Com mittee. On March 21, 1978, the Committee had authorized an open position of $2.25 billion in view of the scale of recent and poten tial System operations in foreign currencies. On May 16, 1978, the
Committee had reduced this limit to $2.0 billion, in light of decreases in the System's open position. Against the background of further decreases in the open position, the Committee reduced the limit to $1.5 billion at this meeting. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Jackson, Partee, Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Mr. Gardner. 4. Procedural instructions with respect to operations under the foreign currency documents In December 1976 the Committee had adopted certain procedural instructions for the purpose of clarifying the respec tive roles of the Committee, the Foreign Currency Subcommittee designated in paragraph 6 of the authorization for foreign currency operations, and the Chairman in providing guidance to the Manager of the System Open Market Account with respect to proposed or on going foreign currency operations under the authorization and the foreign currency directive. Paragraph 1B of the instructions called for clearance of any transactions that would result in gross trans actions in a single foreign currency exceeding $100 million on any day or $300 million since the most recent regular meeting of the Com mittee. At its meeting in March 1978 the Committee amended paragraph 1B to increase these dollar limits, which had occasionally hampered ongoing operations, and to remove an ambiguity in the language.
At this meeting the Committee decided to discontinue the use of the concept of gross transactions in the procedural instructions. In its stead it introduced (a) a clearance require ment formulated in terms of daily and inter-meeting changes in the System's net position in a single foreign currency and (b) a require ment for clearance of any operation that might generate a substan tial volume of trading in a particular currency by the System, regardless of the effect on the System's net position in that cur rency. The purpose of these changes was to improve the effective ness of the consultation procedure. In addition, for the sake of clarity the word "transaction" was replaced by the word "operation" wherever the former had occurred in the instructions. The two new provisions were identified as paragraphs 1B and 1C. Paragraph 1A, which refers to daily and inter-meeting changes in the System's over-all open position in foreign currencies, was retained, and the paragraph previously designated 1C, which relates to swap drawings by foreign central banks, was redesignated 1D. With these changes, the procedural instructions read as follows: In conducting operations pursuant to the authorization and direction of the Federal Open Market Committee as set forth in the Authorization for Foreign Currency Operations and the Foreign Currency Directive, the Federal Reserve Bank of New York, through the Manager of the System Open Market Account, shall be guided by the following procedural understandings with respect to consultations and clearance with the Committee, the Foreign Currency Subcommittee, and the Chairman of the Committee. All operations undertaken pursuant to such clearances shall be reported promptly to the Committee.
(or with with the Subcommittee shall clear 1. The Manager that consultation believes if the Chairman the Chairman, time available): in the is not feasible the Subcommittee with in a change in which would result A. Any operation cur in foreign open position over-all the System's any day or $300 million on exceeding $100 rencies meeting of most recent regular since the million the Committee. in a change in which would result B. Any operation foreign cur in a single net position the System's or $300 mil on any day $100 million rency exceeding of the regular meeting most recent since the lion Committee. a substantial might generate which C. Any operation currency by the trading in a particular volume of System's net change in the though the System, even less than the might be in that currency position in 1B. limits specified by a foreign bank not D. Any swap drawing proposed the larger of (i) $200 million or (ii) 15 exceeding per cent of the size of the swap arrangement. shall clear with the Committee (or with the 2. The Manager Subcommittee, if the Subcommittee believes that consultation with the full Committee is not feasible in the time available, or with the Chairman, if the Chairman believes that consultation with the Subcommittee is not feasible in the time available): A. Any operation which would result in a change in the System's over-all open position in foreign cur rencies exceeding $500 million since the most recent regular meeting of the Committee. B. Any swap drawing proposed by a foreign bank exceeding the larger of (i) $200 million or (ii) 15 per cent of the size of the swap arrangement. 3. The Manager shall also consult with the Subcommittee or the Chairman about proposed swap drawings by the System, and about any operations that are not of a routine character. Votes for this action: Messrs. Miller, Volcker, Baughman, Coldwell, Eastburn, Jackson, Partee, Wallich, Willes, and Winn. Votes against this action: None. Absent and not voting: Mr. Gardner.
Also: Minutes of Actions