Word: frb
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John Kenneth Gallraith, Warburg Professor of Economics and frequent consultant to Johnson, called the FRB's action "an arrogant exercise in self assertion." He added. "The Board's 4-3 decision reflects less interest in stability than a desire of people with money to tend to get a greater return on their loans...
Last week's policy switch also represents a sharp about-face for William McChesney Martin, 54, the shrewd, conservative chairman of the FRB. During World War II and the early postwar years, the Fed was little more than the Treasury's valet, pegging bond prices to keep interest charges-and the cost of the war-low for the Government. Though the policy was fine for wartime, in peace it made the Fed, as one chairman, Marriner Eccles, complained, "an engine of inflation." Finally in 1951 the Fed rebelled, refusing to support the price of Treasury bonds...
...other areas of policy affecting business, one of Kennedy's chief arguments with the Administration has been with the Federal Reserve Board's tight-money policy, which he says has choked off economic growth while trying to stem inflation. Kennedy has singled out for attack the FRB's "bills only" policy, under which FRB usually buys and sells only bills (i.e., short-term obligations), to regulate the supply of credit and influence interest rates. Kennedy thinks FRB should also deal in bonds, contends that the "bills only" policy has dropped short-term interest rates far more rapidly...
Kennedy and the FRB have recently grown closer in their views about curbing gold speculation on foreign markets. To maintain the dollar's value, Kennedy has called for the "free sale" of U.S. gold on markets abroad to prevent speculation, a move that many foreign bankers believe would quickly end it. The Treasury, which previously opposed such free sale, three weeks ago informed the Bank of England that it had no objection to the bank's selling gold to keep the market orderly, and that the bank could replace such gold from U.S. stocks. Last week gold...
...FRB insisted that the new credit easing was a routine seasonal matter, but bankers and economists viewed it as a measure clearly designed to aid the static economy. One reason for FRB's caution is that it wants to avoid any sharp change in interest rates lest it step up the U.S. outflow of gold to nations with higher interest rates (see The Solid Gold Problem). Even more important, FRB is moving slowly because, like everyone else, it is unsure about where the economy is going - and whether it needs a nudge or a big push of easier credit...