Prior discussion:
speaker: VICE CHAIRMAN CORRIGAN.
text: That's about where I am. 
speaker: MR. PARTEE.
text: You are prepared to accept those low M2 and M3 numbers, though? 
speaker: VICE CHAIRMAN CORRIGAN.
text: Yes. 
speaker: MR. PARTEE.
text: You don't think that there is any information content in them? 
speaker: VICE CHAIRMAN CORRIGAN.
text: I do not. 

MR. MARTIN. "It seems to me that the growth in GNP right now is too low, and that there is a downside risk."

Full utterance: Picking up on Governor Rice's comments with regard to the economy growing under its potential, I would certainly subscribe to that comment. I don't know whether it's 3 or 3-1/2 percent or more, but certainly [2.7] percent and a range of 2 to 2-1/2 percent are under potential. It seems to me, though, that that question is properly addressed in the July review rather than in this short-run situation we face. Secondly, I would like to address the suggestion that M1 be brought down to the band--I think it was the band, not the cone. I won't get too methodical with you here. It seems to me that the growth in GNP right now is too low, and that there is a downside risk. The 7.3 percent potential growth rate [for M1] that Steve mentioned earlier--if that is the case for the year--I don't find all that disturbing, considering the discussions that we have had with regard to V1. It seems to me that in the usual model it would take a federal funds rate--what would it be: 8-1/2 or 9 cent?--to bring M1 down within that band. And it seems to me that that is not called for under these circumstances. As far as alternatives are concerned, the point I was trying to make by reviewing the horror stories that unfortunately are real and not in the movies anymore is that I think we made the correct move in reducing the discount rate but that there is enough speculative fever out there that if we were observed doing anything further in the direction of ease, we would run a risk that I don't believe is necessary of aiding and abetting that fever. So it seems to me that this is a wonderful time for the Chairman--as only the Chairman can do--to make that representation that we are central bankers and we are concerned with orderly markets and inflation and we are going to hold the line, as it were. That gets me certainly to voting for alternative B as the closest thing to the status quo I can read out of today's confusing events and the description thereof. If the market expects a nudge further in the direction of ease, our failure to satisfy that expectation might be the best thing we could do right now, when I feel there is so much potential panic out there. As far as the borrowing is concerned, I go along with Jerry's suggestion of $350-$375 million, partly because I cannot understand how the thrifts' borrowing [fits], and secondly because I don't know how much borrowing will occur as unfortunate events unfold and how that will affect the borrowing level. It seems to me that results in a federal funds rate, perhaps as was indicated, between 7-1/2 and 8 percent; and I think that is appropriate in terms of market pressures and the discount rate reduction.

Opinion: yes
About monetary policy: yes
Stance toward easing (NLI): contradiction