As do I.

I don’t share that view because, if we take out that sentence, we in effect divorce ourselves from the previous form of the statement before we have an opportunity to discuss it adequately at our next meeting.

If not in seven weeks!

Thank you, Mr. Chairman. I support the recommendation of no change in the fed funds rate, and I further support the reasoning behind it as evidenced by the statement you have distributed.

Thank you, Mr. Chairman. The Second District economy has shown scattered signs of improvement since my last report. But generally most sectors can still be characterized as weak. Employment and labor force indicators have been mixed with little change overall, as labor markets have remained slack. Manufacturers note some improvement ...

Thank you.

But that would add to my view that they called the Defense Department and got the facts.

Ah, I had it backwards. How much weaker would your forecast be if OMB is correct?

Dave, you mentioned that there was a very considerable spread between the OMB and the CBO forecasts of defense expenditures in the second and third quarters. The big variable in defense expenditures clearly has to be the speed with which the armaments that were used in Iraq are restored. By ...

Move approval.

SPEAKER(?). Second.

Move approval of domestic operations.

May I make a comment? I think the general Street talk in New York is that, since the Mexicans have been the most vehemently opposed to CACs, their going first was rather statesmanlike—especially since they didn’t pay anything for including the CAC. The Brazilians went next, but there ...

So moved.

Mr. Chairman, Bill McDonough here. I think that is very wise. The likelihood of our needing to have meetings for the next two weeks is very low, and I believe we ought to go into May 6 with our eyes very wide open to our responsibilities then.

Mr. Chairman, I’ll be very brief. The mood in the Second District is very much related to what is going on in financial markets and financial firms. Usually reliable sources say that the global settlements with the financial firms regarding their research conflicts of interest may occur very soon ...

Thank you, Mr. Chairman. When I discussed this with you before it became public, I asked you whether you thought I was taking leave of my senses to accept this position, and it’s true that I may be. But when Bill Donaldson started to talk to me about it ...

That really wasn’t worth repeating!

Mr. Chairman, I fully agree with your analysis of the possible need for an intermeeting move and your judgment that we simply don’t know enough at this stage to determine whether that will be necessary or not. I do believe, though, that your analysis of the situation is right ...

Bravo!

That does it.

I agree.

I’d suggest weekly.

Mr. Chairman, the present Manager of the System Open Market Account and I, as a previous Manager, are absolutely in agreement with you. We cannot peg an intermediate rate. It would be very, very dangerous to try to do that.

The idea is to have the possibility but not the certainty of a move; otherwise the market will be waiting every morning for us to have a meeting.

Mr. Chairman, I assume that what you are recommending is that we do nothing today, that we have no balance of risk statement, and that we remain very alert to developments. Assuming that’s what you are recommending, I’m fully in favor of it.

If you go down and look, there could be two openings on the Committee. [Laughter]

Thank you, Mr. Chairman. Our views regarding the Second District, the national economy, and the international economy are all clouded by uncertainties. So rather than sharing our confusion about those three subjects, I’d like to talk about the uncertainty. What we do not know is the degree to which ...

I move approval of the domestic operations, Mr. Chairman.

I think the bottom line is that it’s good judgment on their part. It just shows that markets are not perfect after all.

I think what is really happening is that the management of Freddie Mac—when one discusses this with their chairman it’s very clear— does not want to take as much risk as Fannie does. In my view, however, the market is much too inclined to see Fannie and Freddie ...

So move.

Perfect draftsmanship.

A lot more attention than the statement would.

Mr. Chairman, I think in an atmosphere of enormous uncertainty it’s the easiest call in the world to agree with your recommendation, which I support fully.

The Second District economy has been mixed but generally weaker since the last report. The labor market has softened noticeably. Housing activity has retreated, but manufacturing conditions have improved a bit. Retailers report that holiday season sales were generally sluggish, marked by very steep discounting but decent unit sales. Consumer ...

The American Revolution.

Governor Gramlich and I had a fascinating discussion over coffee about the Revolutionary War. I will spare you that conversation.

SPEAKER(?) Which revolution?

Just as a footnote, I think Karen’s answer is what one would have to say; it’s the right answer. In these countries when you forbear, you appease the worst of their politicians, and you discourage the ones—they may be somewhere—who are sensible enough to do the ...

The sad part is that it’s exaggerated but factual.

Deliberately.

Indeed. That’s exactly where I’m going. If there is a successful modern regime and there is reform, that would be wonderful. The question is, Will the reform be benign? Will it take place over an orderly period of time, therefore allowing that part of the world to modernize ...

The West, after being subservient to a predominantly and powerful Islamic world, began to modernize. The Islamic world had a choice of either competing or of retreating into religion and an unwillingness to modernize. That has continued ever since. Iraq is the seat of civilization as we know it, never ...

Thank you, Mr. Chairman. Let me shift to the international arena. I think two very important events occurred yesterday that affect which of the likely Iraq scenarios will play out. One was obviously the State of the Union speech by the President. The other, which may be equally important, was ...

Mr. Chairman, I move approval of the domestic operations. Sorry, I almost forgot.

We ought to amplify the charts to show that.

Exactly.

May I slide a comment in here? In talking with people in the New York, London, and Paris financial centers, it’s very, very hard to determine to what extent they are saying that the uncertainty is geopolitical when it’s really a cover story for uncertainty about economic issues ...

Well, as the Chairman said, there’s a good deal of psychology involved. Therefore, we’re dealing with all the social sciences, however mathematical we try to make them, at the same time. What is the reaction of financial markets? That’s largely psychological. What is the reaction of the ...

That’s why you’re prudent—also known as risk averse—but prudent sounds so much better.

Thank you, Mr. Chairman. Most of the people that I know in financial markets understand as much about these models as I do, which isn’t very much. Having the enormous benefit, unlike all previous speakers, of not having a PhD in economics—or perhaps in English literature, in the ...