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Interview of Robert Black Conducted by Robert L. Hetzel June 6, 1994 Robert L. Hetzel: …FOMC members in the late ’60 — or late ‘50s and early ‘60s, they were primarily bankers by training and they looked to the — at the world as bankers. The interest rates — Robert Black: Bankers and lawyers, everything. Szymczak, for example. He served longer than anybody else on the board, I think. Robert L. Hetzel: What was his name? Robert Black: Szymczak. It’s a Polish name. He’s from Chicago. I’m trying to remember who got him appointed. It was a political debt to him. And he — that was sort of the pay off. And he got — he served probably 12 years on an unexpired term and then was appointed for 14 years. He had — he had a lot of time on there. He was, I think, a local government official. I’m a little — nice guy, very nice guy, but, you know, no particular training for that kind of position. But sometimes people with good judgment can make better policy makers than people with a lot of formal training if you don’t have really good… Mr. Leach, a case in point. Mr. Leach was a CPA and an accountant and a very tough, very smart guy, very tough mind. He wanted to encapsulate everything in just a very few words. And he would get all the economists around the dining room table, and he always sat in the same place and questioned them. He never did anything else. You know, he never talked about much. You know, just occasionally he’d talk about buying a car for his son or something like that, or — but he always wanted to — he looked at it from every side and wanted to get it completely accurate and very simple, because he was convinced that people couldn’t listen to very obtuse statements, and he was dead right. And so he would get down to the very essence of it. And I remember Dave Eastburn’s telling me one time that he gained a lot of respect for people like Mr. Leach who had been … I think that intuition was a lot of the guide as to what they did. It’s not the kind of precision either you or I like. But, you know, during that period it was — the policy was very good under Bill Martin. Bill Martin was a great leader he is one of [unintelligible] magnetism. Led people to respect him and they had a great deal of affection for him. And he just guided the committee, and he was real interested in the go-around. He never spoke first, as Burns often did or occasionally did, and Greenspan has done on occasion. As far as I know, there were only two occasions. Mr. Wayne used to say there were only two occasions. When he had something that was very vital and he shared this. But they would go around the table and people would speak in turn. And they went around clockwise one time and counter-clockwise the other, and people had these prepared statements. And then at the end, you would have listened to a diverse statement of opinions, and Bill Martin would typically say, “Well, there’s not a lot of disagreement among us today.” And he would wrap it up and nobody ever objected to what he said. Robert L. Hetzel: Was he truly forming a consensus, or was he to some extent imposing his view? Robert Black: To some extent, he was imposing his; but it was — people were usually struck by the wisdom of what he said. He was a very smart man and very astute in his — the record shows he had a good understanding of the markets. And by some process or another, which is very mysterious, this was really a little black box. He came up with — with very good policy recommendations. And I don’t think there was any resentment about this at all. People realized you had to have a consensus. And what he would state would be about as close to the consensus as you could get. But sometimes, like [unintelligible] actual consensus of the group. [00:04:27] Robert L. Hetzel: In general, did you — did people have a sense of what his objectives were, what he wanted to do as a leader? Robert Black: I think so. You know, I think he placed a great deal of the emphasis on price stability and that was … in quite those precise terms in those days, because we wanted the economy growing and it, you know, there was steady growth. It’s through controlling inflation. We were looking at all of these things, and we sort of tried to attain all those goals. And, fortunately, we pretty well did. During a good part of that period. A lot of it was the times, and a lot of it was just good policy. More done, I would think, in part, by accident. But also, there was an uncanny ability on his part and a lot — it’s not unlike what we’re doing now. How do you decide what’s the right policy now? It’s very much back to the way it was, I think. -2- Robert L. Hetzel: But Martin had, of course, been a young man during the Depression, and he had the idea that the Depression had been caused by inflation and speculation in the 1920s, so that must have made him sensitive to inflation in the ‘50s and ‘60s, the Fed concern that you have inflation, you have extension of credit for speculative reasons, you have imbalances, and then you get a reaction. I mean, so, he really cared about inflation. Robert Black: Oh, and no question about that. And he was a great chairman. You know, I would say Martin was a great chairman, Volcker was a great chairman, and Greenspan was a great chairman. And they were [unintelligible] the money supply. But looking back on it, it may have been that that harsh medicine was necessary to wringing out the inflation. I don’t know. It seemed the right price to pay, you know. But I was not voting in authority. But all the other times, including his first two meetings, I dissented entirely. But I — the guy had a lot of courage, and I told the Six and this is probably my first two dissents in April and September when we had the so-called change in direction. It really was a change in direction, although we repudiated a lot of it, as you well know. But, yeah, I remember his calling, I guess, everyone. I didn’t know at the time, but he called me and told me what he proposed….A happy day, the only day I’ve ever voluntarily wanted to miss golf, because he was going to go do what I thought we ought to do. All because of bad policies on our part earlier, it made it necessary. Robert L. Hetzel: Let’s go back to Martin. He came out of the Treasury. Robert Black: Right. Robert L. Hetzel: And went to the Fed. Robert Black: And he was the author of the Accord, you know. So he saw the danger of that. He was the guy that really was responsible for the Accord. And he’d been president of the New York Stock Exchange. His father had been president of the Federal Reserve Bank of St. Louis, so he’d had — he’d been steeped in Federal Reserve lore for a long time. Robert L. Hetzel: He had to talk to Truman on one side and McCabe on the other side, and the Accord, and he had some sense of what was right. And he couldn’t have been doing what Truman and the Treasury thought. He must’ve had some independent — Robert Black: He was a very independent man and very persuasive. He did, in convincing people that’s what had to be done. It’s a big part of the credit. And this was before I joined the system. Your knowledge of it would be as good as mine, but my reading and recollection of the system would have been in favor of it, but he wouldn’t have done anything without the Administration agreeing to it. Robert L. Hetzel: Paul Douglas from Congress must’ve been very — Robert Black: Yeah. -3- Robert L. Hetzel: — important. Robert Black: Yeah. The Douglas Report. We read that back and forth. Robert L. Hetzel: And the president of the New York Fed, Allan Sproul, he must have been — Robert Black: Sproul. Robert L. Hetzel: He must’ve been important, too. Robert Black: Yeah, he was a powerful figure. And he had left by the time I started during the open market. There was an Al Hayes. Robert L. Hetzel: Hayes had the — probably the most concern for international — Robert Black: Oh, yeah. Foreign. Robert L. Hetzel: — considerations. Robert Black: To give you one little example, in 1960, which will show you how much attention was being paid to international issues then, nobody was really worried about the foreign side of it at all. And people began to think about it. 1960, I guess it was. Jim had just — Parthemos — had just arrived fresh from teaching graduate international economics at Tulane, and Mr. Leach was president then, and we were all seated around the table in the dining room. And Mr. Leach said in his gruff voice, “What would happen if we devalued the dollar?” What Mr. Leach wanted us to say was that would tend to improve the balance of payments, our balance of payments. [Unintelligible] said, “Well, Mr. Leach, that would depend a lot upon the six elasticities involved in foreign trade. He looked at me and he said, “What kind of dang fool monkey talk is that?” And those are his exact words, I think. And we just died laughing about that, because I don’t know any graduate student who hadn’t had a stroke trying to understand. I never can remember whether it was six or eight. [00:10:00] Robert L. Hetzel: I remember that. I remember that. Robert Black: I had that asked on my comprehensive, but I never labored as much over anything. You know, you get into the elasticity of demand for foreign exchange, it’s very — it’s very tricky. It’s just not like other elasticity. -4- Robert L. Hetzel: Yeah, yeah. But Martin was also sensitive, though, to the concerns of the Treasury and the concerns of the White House. He was willing to, often, to temporize, to accommodate [unintelligible], depending upon the kinds of pressures he was under from the Treasury and — Robert Black: Well, Bob, I think he was very much of a diplomat, and I think he would discuss things with them. But if you look at what happened to policy, I don’t think he really compromised to any great extent. I mean — Robert L. Hetzel: [Unintelligible] in ’67 that really marked the break from earlier periods in the — in earlier periods, inflation would rise, and it would even get up to 4 percent, a number like that, but then the Fed would bring it down. So it fluctuated, but it fluctuated around a relatively low level. But in ’67, when we should’ve stayed with restricted monetary policy until we brought the inflation rate down, monetary policy became easy again. And it stayed easy in ’68, and that was really the beginning of inflationary -Robert Black: When did the Vietnam War start? Robert L. Hetzel: Well, the buildup started at the end of ’65, and Martin — Martin knew that fiscal policy was going to be expansionary. He was hoping that Congress would pass a tax increase. So — Robert Black: [Unintelligible] Robert L. Hetzel: Yeah. So there was a period of time where the Fed and the Administration were negotiating over whether Johnson would go to Congress for a tax increase, and Martin was saying, “Well, I’ll hold off on an interest rate increase, but you’ve got to go to Congress for a tax increase.” And I think we were too easy, too long. Robert Black: That’s been our mistake most of the time. When Lyndon Johnson summoned him down to the Texas White House in December — I’ve forgotten what year that was exactly — Robert L. Hetzel: ’65. Robert Black: — to blast us on the increase in the discount rate. But the discount rate — Robert L. Hetzel: That rate went from 4 to 4 and a half percent, so what we viewed as a major policy move, we’re — with a later perspective, really wasn’t as strong. Interest rates were very low in those periods. Robert Black: They were. Robert L. Hetzel: We argued about whether the interest rate should go from two and three-quarters to two and seven-eighths. -5- [00:12:45] Robert Black: Well, I remember when I came there, I said — talking about Mr. Leach, talking about some of his wife’s U.S. bond investments, Treasury bond investments, during that period, or it may have been later. I just, you know, sat around that table a lot of years with him. I don’t think Martin ever willingly subjugated the fight against inflation. It’s hard to pick out what the appropriate level of interest rates is. How do you know when you’ve gotten there? It’s the same right now. Apparently, Al and Wayne Angell thought we ought to, I’m gathering wool here, tighten the action; others were less convinced. And, as usual, we probably waited too late. Robert L. Hetzel: Until February of ’70. Robert Black: That’s about right. Robert L. Hetzel: So among all the FOMC members, Martin was clearly dominant— Robert Black: No question. No question. He — he dominated that more than anybody has ever done, but in a very democratic kind of way, except for Burns. And Burns — Burns was an old autocrat. He just simply wouldn’t let you dissent. And I’ve never seen — I’ve never seen Martin rude to anybody in a meeting. Jim Parthemos said one time he jumped on Howard Hackley, who was the general counsel, and one of the finest people ever to assist-Burns, now, was so afraid that Hayes was going to be a second Benjamin Strong or Allan Sproul, that he sat on him every time and was very rude to him on many occasions. And I’ve seen him — and I think his — his intentions were very good, but, boy, the policy we had boy, because he would tolerate no dissent. I remember his first — first meeting when he stated that he really thought the important thing was to control bank credit, because that’s really all we could control, and he was deemphasizing the money — the money supply and anything else. His views evolved, but I’m not exactly sure. But that was his initial statement. I remember so well Jim Parthemos and I went to that meeting, and Aubrey was out of town. And I went to that meeting, and I remember Jim and I were speculating on the way up the street whether he’d be there — on the way up the road whether he’d be there. And this thing he said at the meeting was, “Jim, there’s going to be a drastic change in the format of the meeting.” And Jim and I thought, well, here we go…three members and nobody else there. And he said at eleven o’clock we’ll have a coffee break. And I remember all the way back Jim and I were laughing about that. Jim said, “Well, I tell you one thing, a guy that leaves in a coffee break for the open market committee can’t be all that bad.” And I was very fond of Burns as a person. I wouldn’t give him good marks on policy, but [unintelligible] I remember he wrote back [unintelligible]…indeed a true friend. Yours is -6- the warmest, most cordial letter [unintelligible]. We were good friends, but there were a lot of things about him I didn’t like. [00:16:10] Robert L. Hetzel: The system was moving toward reserve control — Robert Black: Yeah. That’s right. Robert L. Hetzel: — at the — before Burns. Robert Black: That’s right. Robert L. Hetzel: But he really — he thought money velocity was completely unstable. It would jump around for psychological reasons and he looked at interest rates. Robert Black: Yeah. I think it’s — that’s a fair assessment. Robert L. Hetzel: [Unintelligible] much — you said Martin cared primarily about inflation. But Burns, I mean, he really thought he could balance off — Robert Black: I think that’s right. Robert L. Hetzel: — unemployment and inflation. He thought he could control — push the unemployment rate down. Robert Black: I think he sort of — he sort of had a Phillips curve in his thinking, you know -Robert L. Hetzel: It’s interesting, because he wasn’t a Keynesian — Robert Black: No. No, he wasn’t. Robert L. Hetzel: — but yet he thought that you could — Robert Black: He was an institutionalist, I guess, more than anything else. You know, he believed in distilling because of his work at the National Bureau, huge amounts of empirical information and drawing conclusions from that. And I remember several times he would talk to the committee and say, “Now, this is something that I studied this very, very carefully.” And he had. If it related to business cycles, he was into that. Not in an irritating manner, but rather in a manner of saying, you know, this is my field of expertise. I really looked into this and the rest of you, you’re not that familiar with it. But it wasn’t the kind of thing that would irritate you, because he was right. He was right on that. He had spent more time looking at it than anybody else. It never bothered me the way he did it. Robert L. Hetzel: But there was no one who could challenge him intellectually in the system, or at least he wouldn’t let anyone. -7- Robert Black: He wouldn’t let — Robert L. Hetzel: -- the staff, so that was a problem because — Robert Black: Absolutely. Robert L. Hetzel: — because there was no one who could say, “No. Look. This is not right.” Robert Black: There were plenty of people that were his intellectual equals or superiors that — but he would just squelch you. That’s all there was to it. He ran it like a — a graduate seminar, where the students didn’t have much freedom. The professor’s voice was the authority. And it was bad. It was very undemocratic. And Volcker, in contrast, was a [unintelligible]. I never saw — I never saw Volcker show any irritation to anybody or treat anybody rudely at a meeting at all. Burns frequently-- Now, I don’t know what. And my first dissent was recorded when he was there on a telephone conference when I was filling in for Dave Eastburn — no, Ed Bailey, who was on vacation. I dissented, and Mark Willis dissented, and that started him on that — I being, “b” being ahead of “w”; they called it alphabetically. I dissented first and then Mark dissented. And then he became known as a great dissenter. That was the term applied to him, because he dissented all the rest of the time. [Unintelligible] if I’d been voting, but, you know, we were in Philadelphia. Robert L. Hetzel: That’s Mark Willis. Robert Black: Yeah, yeah. Mark Willis is a good man. It was worrisome to whoever was chairman that he would dissent. [Unintelligible]. [00:19:32] Robert L. Hetzel: How did Burns and St. Louis get along? That must’ve been a great source of — Robert Black: He was — Robert L. Hetzel: — dissention, because — Robert Black: — he was very rude to Darryl Francis. He had no tolerance at all for his statements. Darryl would read long statements all in the monetarist vein, written by Homer Jones. And then Homer’s successors were monetarists, too. But Darryl didn’t present that very well, and wasn’t very persuasive, and Burns couldn’t stand him. And I think Burns really ran him out of the system. I’ve never been completely sure whether the Board of Directors of the St. Louis Bank recommended him for a five-year appointment. You know, the president’s appointed in the first place for five-year terms, and the Board of Governors got to approve those every five years. Routinely for five year terms. But I do not know the -8- answer to that for sure. [Unintelligible] down the recommendation that Darryl be reappointed, so he retired early. [Unintelligible] now, after twenty years research that [unintelligible]. Everybody at St. Louis has been a monetarist ever since then. (Laughs). And Homer Jones — Homer Jones was really the one who got all this started more than anyone else. There were some others out there, and I wrote my dissertation there on the money supply. [Unintelligible] always thought the money supply made more sense, but I — I hadn’t quite reached the point that I had given up hope that we could ever fine-tune it and put it on automatic pilot, which I subsequently came to believe was the only reasonable thing to do. It’s sort of a matter of pragmatism that led me to that point, which was perfectly compatible in my conservative position that I’d always had. [Unintelligible] research department bothered me so much, relative to what I need. And I don’t mean in any absolute sense, but relative to what I — what I… Robert L. Hetzel: Back to Burns. Burns also viewed himself as a Presidential counselor and — Robert Black: He took great pride in that. Robert L. Hetzel: — wanted to be included in all kinds of policy discussions in Washington, knew everyone. Was his political sensitivity ultimately a problem? Did he handle that differently than Martin? Martin was sensitive to political concerns, too. Robert Black: I would say Burns was much more a political animal, really. He was — he was much more fascinated by politics. He liked to be right in the middle of all political decisions. And it was borne out even in his memorial service, which I attended. Where he had, he had Ford, Nixon, and… I believe one more President. [Unintelligible] But you know, somewhere there’s a program. Robert L. Hetzel: I have that. I have that. Robert Black: Yeah. But it was really impressive. And I remember Nixon, if I’m not mistaken, it was Nixon, spoke entirely without notes. He — he loved to be the trusted advisor of Presidents. That was something that [unintelligible]. I remember when — you know, he’d been chairman of the Council of Economic Advisors. That was his first major governmental position, and it was under Nixon, I guess. Robert L. Hetzel: Eisenhower. Robert Black: Oh, Eisenhower, was it? Okay. I remember when we had his retirement party. John Balles, one of the Reserve Bank presidents, gave him his retirement party, John Balles was chairman of the conference of presidents, and I was vice chairman. And John asked me if I could pick him up and take him to the University Club where we would give him a [unintelligible 00:23:38] that we financed. Picking him up consisted of -9- going over to the board and having a board driver drive us over, and then I came back with him. And while we were at the dinner, Bob Mayo, who president of Chicago then and had been director of the Bureau of the Budget, got up and told a story about a time they’d been discussing what ought to be done about some rather significant public expenditure. Bob Mayo made a proposal. It was probably more than he thought really ought to be permitted. [Unintelligible 00:24:13] Burns is saying, “Gentlemen, I think we have caught the director of the Bureau of the Budget in a very generous mood. I suggest we accept his [unintelligible 00:24:23].” On the way back, Burns was talking in the car with me, and he said, “You know, that’s — it’s really kind of scary to think that we were talking about two or three hundred million dollars there in cavalier fashion.” That’s the way Nixon was. He talked — talked fiscal austerity, but he was really a big spender. And it was all I could do to bite my [unintelligible 00:24:52]. I think it was deliberate. I think it was, again, an era of increased inflation, [unintelligible 00:24:57] opposed inflation. He, also, was weighing this against [unintelligible 00:25:05]. Robert L. Hetzel: Politically, how was he different from Martin? I mean, they were both very successful in moving rapidly to the top of — of organizations and government. I mean, in their own ways, they were extraordinarily capable and entrepreneurial. But Burns had a fascination with power and politics that Martin didn’t go — it went to — it went Burns’ — it affected Burns’ personality in a way that it didn’t affect Martin’s. Robert Black: I think that is absolutely correct, that it really did. I think Martin did it through personal magnetism and great leadership abilities. As I told you, I don’t think I’ve ever seen a greater [unintelligible 00:25:53]. Burns kind of bludgeoned his way there. He — he was not a [unintelligible 00:25:58] sort of person. People listened to him. He could command attention. [Unintelligible 00:26:03] did it through charm and Burns did it through a very [unintelligible 00:26:10]. But I did think a lot of Burns. I think he always — he was a patriot. I think he always had the country’s best interests at heart. [Unintelligible 00:26:20] his personal agenda may have clouded his vision a little bit. I don’t think that ever happened to Martin. It’s just kind of hard to criticize anything about Martin. [Unintelligible 00:26:36] Martin was a registered Democrat, but, you know, the Democrats in those days were better than the Republicans today [laughs]. That’s a sad commentary. But it’s interesting. This relates to my probably dismal outlook for the future. I bought this house 24 years ago, and I remember telling Mary, [unintelligible 00:26:59] sometime or another, so we really ought to go ahead and do it and enjoy it while we can. [Unintelligible 00:27:07] been there that long yet. Robert L. Hetzel: Well, how — how would you characterize Burns’ advocacy of wage and price controls, and his head of committee on interest and dividends? - 10 - Robert Black: I think that was a terrible mistake for him to do that, but, again, you know, he wanted to be in the middle of everything. He may have had some pressure brought down, but I think he probably secretly — I’m guessing, now. Jim may see it differently — probably secretly wanted to have that kind of thing. But I think he probably thought — and I may be unfair to him — that they would help in a marginal way. But he was not the kind who really would’ve been a strong advocate of control like that. I never would’ve agreed to [unintelligible 00:28:01], that’s the reason that I think… Robert L. Hetzel: As head of the committee on interest and dividends, he was quite aggressive in getting after banks who raised rates. Robert Black: [Laughs.] I tell you, that was a — that was a political animal, let me tell you, right down to the way his — he may well had — I don’t know that he did, and he probably didn’t, but he — it’s not beyond the realm of possibility to think that he might have suggested how he would like his memorial service to be done, you know, with all these important figures. They — they extolled his many virtues very well, and you got a feeling this was a great patriot who had gone, and the world was a horrid, worse off with his being gone. But well I wasn’t laughing when they replaced him with Miller, but when Volcker took that, Miller was talking with Burns about that. I said, “As chairman, I hate to see you go, because [unintelligible 00:28:59] Robert L. Hetzel: [Unintelligible 00:28:59] policy. Burns wanted to be reappointed. Robert Black: Oh, yeah. Absolutely. Loved the job. Robert L. Hetzel: And, surely, if he had been reappointed, policy would’ve been tighter, much, much sooner. Robert Black: Yeah. Robert L. Hetzel: We never would’ve been through the early ‘80s, all that. On the other hand — Robert Black: I think that — I think that’s right. Robert L. Hetzel: On the other hand, during the year ’77, when he wanted to be reappointed, policy was too easy again. Robert Black: Well, there was a good series of articles on that thing. Dave Eastburn, that I mentioned a while ago, former president of [unintelligible 00:29:32] in Philadelphia, wrote an article explaining in part why that was true. We had bad money supply, I think he was saying. Those things were revised upwards a great deal from what we had at the time, the workout policy. The data was just not good, and they didn’t show as much monetary expansion that was really taking place so [unintelligible 00:29:53]. He defended the chairman, which defended the system. I guess, primarily, he wasn’t inclined to defend the - 11 - chairman, because the chairman thought Dave was too liberal, and he kind of put the screws down on him. He retired early, in part, to get out from under Burns, whom he couldn’t stand. And I remember after Burns retired, they tried to establish a — I guess it was a research position. [Unintelligible 00:30:26] an American enterprise institute, and they asked all of us to contribute. Dave asked me one day if — if I’d given any money to them, and I said, “Did you?” And he said, “Hell, no.” Robert L. Hetzel: That’s funny. Robert Black: [Laughs.] Couldn’t stand that guy. Robert L. Hetzel: That’s funny. Robert Black: I never — I never disliked him, though — but, despite disagreeing with him on a lot of occasions. And he was determined to put Dewey Daane at the Richmond bank. I was an unknown quantity to him. Robert L. Hetzel: That was — Robert Black: Burns. Robert L. Hetzel: — Burns? Robert Black: Burns. And so, after Aubrey died in January, they wouldn’t go along with me until August of that year. And I was out in Minneapolis attending a conference of [unintelligible 00:31:13] bank, and if it — if the board will approve [unintelligible 00:31:17]. He had — he had, I think what happened was, you know, I attended all those meetings, and I think he, you know, kind of looked me over, and he decided that I’d probably be an ally on conservative issues. He knew I was a conservative by that time, and he — he always thought I would be an ally, not an enemy. And by that time, we’d be kind of buddies. And so he decided I wouldn’t be all that bad. Richmond bank [unintelligible 00:31:43], for various reasons that I won’t go into. [Comment removed.] I think we say he was a Keynesian. He’s a — he’s a conservative Keynesian, is what he is, and I think he would [unintelligible 00:31:54], and that was my position. And I [unintelligible 00:31:58], but the way I ran up against the problem was when [unintelligible 00:32:02] when you had an older appropriate level of interest rates. And I couldn’t figure out any way you could do that. And so [unintelligible 00:32:08] another way. And that just leads you [unintelligible 00:32:11]. Robert L. Hetzel: Yeah. - 12 - Robert Black: [Unintelligible 00:32:15] finance the economy, and don’t put out too much. And then when you see the lags and the inability to change at the right time, that the Reserve did more and more towards putting it on automatic pilot to the extent you can. I don’t know what we’d do now, Bob. You’ve got to come up with something. Robert L. Hetzel: I think it’s much of what we’ve always done. I think the FOMC has a lot of pragmatic, practical-minded persons. They have a lot of contacts in the business community. They follow the economy, and they think they have a common sense, intuitive feeling for what interest rates ought to be doing given what the economy’s doing. And sometimes it works; and other times it works very, very badly, especially when the Fed thinks that it can temporize or accommodate or put off an interest rate increase because it’s facing political pressure. It’s, well, it’s okay. We can wait a little bit and get it through later, and — Robert Black: I can — I can understand that, as long as you don’t wait to the point that it’s done some damage. That is human nature to do that. [Unintelligible 00:33:32] some good conservatives that — that didn’t dissent with Al. I don’t — I doubt that Tom Melzer (phonetic) was voting, but I’m sure he was sympathetic [unintelligible 00:33:42]. Robert L. Hetzel: I think people accord [00:33:43] — they give the chairman the benefit of the doubt. They realize he has problems. Robert Black: Yeah. Robert L. Hetzel: And I think they realize, especially when the Fed has stopped moving interest rates down and has to begin moving them up, I think they realize that the chairman has to have some support within the political system, some understanding. And he has — it takes him some time to develop that, and I think the committee members are willing to give the chairman some latitude for when it’s all right to begin moving rates up. Robert Black: I think that’s exactly right. Robert L. Hetzel: And I think sometimes it’s — they let it go too long [laughs.] Robert Black: Most often, we let it go too long. And, you know, I’ve had — I’ve had the Greenspan [unintelligible 00:34:35]. Robert L. Hetzel: Did he anything to you about ’87 when he came in? He came in at a very difficult time. Inflation expectations had really gotten out of control. Volcker was good, but Volcker was political, too, and — Robert Black: Much more so than Greenspan, much more so. Robert L. Hetzel: — and in the middle, he — Robert Black: And not as [unintelligible 00:35:49]. - 13 - Robert L. Hetzel: He was — he believed inflation should be low, but he also believed you could fine tune at a lower level of inflation, and I — I believe that in the mid‘80s he thought that the economy was under enough stress, particularly in the Midwest, that protectionist sentiment was to the — to the point where the political system could bring down the free trade system. And he thought Germany and Japan had to get their economies going. They had — we had to do something about our balance of payments. Deficit, and given the kinds of political pressures that the Fed was under, and particularly the strains to the system of free trade, we were too easy too long. Robert Black: No question [unintelligible 00:36:38]. Robert L. Hetzel: And when Volcker went out, inflation expectations were on the rise, and Greenspan didn’t have — at that point, he didn’t have the credibility that Volcker had. Volcker could — Volcker could put off, I think, because he had an enormous credibility. Robert Black: Still does. Robert L. Hetzel: And then, when he wasn’t reappointed, Greenspan came in without that credibility, but in a very difficult situation, and it would be very interesting to get his thoughts on. Robert Black: Well, I remember his — I mentioned to him one time that I had dissented — let’s see, it would have been when I dissented five out of eight times, the last two times that I had voted. He said, “You dissented that much to Mr. Volcker?” I said, “Yeah. I just felt like we were going too fast.” Paul agrees we were too easy about [unintelligible 00:36:40]. Robert L. Hetzel: [Unintelligible 00:37:44] was interesting, the period where Manny — Manny Johnson and Wayne Angell came in. And then you had the vice chairman, Martin. Robert Black: Angell — Angell was an easy money man when he first got there. Robert L. Hetzel: They took over the discount rate and pushed the funds rate down against what the FOMC wanted to do. Robert Black: And Manny Johnson was a very weak person in terms of his commitment and his intellectual analysis, I think, really. Robert L. Hetzel: He was probably the most political vice chairman — Robert Black: That’s right. Robert L. Hetzel: — we’ve ever had. - 14 - Robert Black: That’s right. And, I guess, it’s sort of like you’re going to have with Bland, I hope. I don’t know. He’s probably going to become more conservative the longer he stays on the board. I remember when Wayne got there, he said, “Now, the time will come when I’m the tightest member of the board.” But at that time, you know, he was pretty easy. [Unintelligible 00:37:44] Robert L. Hetzel: Well, he saw commodity prices falling, and he thought, “This is the 1870s.” Robert Black: That’s right. Robert L. Hetzel: [Laughs] You know, he was saving the country. But he was not a person that listened to other people. Robert Black: Oh, Lord. No. He never listened to other people. Robert L. Hetzel: I mean, unfortunately he’s still in trouble because of it. Robert Black: As an interesting flap about his question on whether he used inside information. I would imagine it was based on my knowledge of the people involved. Robert L. Hetzel: That’s right. But he didn’t put it — he didn’t say, “This is a guess,” you know. He just sat there — Robert Black: Yeah. I never saw the thing, and I gathered that’s what he done, which was a dumb move. It was terribly dumb. Robert L. Hetzel: Yeah. If he had spent more time trying to learn about the system, rather than trying to reinvent it himself, I think he never could’ve made that kind of mistake. But he thought he could reinvent how everybody looked at things. Robert Black: I was — I was in a real dilemma when he retired. I wanted to write and tell him I really appreciated his stand against inflation. It would’ve been so conspicuous that I had not omitted — that I had omitted all the other things he was involved in, none of which I thought he did very well. Robert L. Hetzel: He didn’t believe in a Federal — Federal Reserve System. Robert Black: And so I just didn’t write him anything. Robert L. Hetzel: Yeah. - 15 - Robert Black: I read his letter now. I always got Larry — well, for years I’ve gotten Larry Kudlow’s letter. They continue to send it to me. All he had was an undergraduate degree. Robert L. Hetzel: That’s right. Robert Black: I thought he had — I thought he had a Master’s and was working on his — and never finished his dissertation, but he never got beyond undergraduate school. Robert L. Hetzel: He was one of those people who could just network and meet important people and make the right contacts. Robert Black: [Unintelligible 00:39:35]. Robert L. Hetzel: Of course, Greenspan was that way, too. Robert Black: Oh, yeah. Robert L. Hetzel: It’s very surprising. He comes across as very low key, but throughout his whole life he always knew how to meet the right people. Robert Black: Oh, yeah. Absolutely. Absolutely. [Unintelligible 00:39:49] He got there. I don’t suppose anybody else will ever get there by any other route either. It plays a real role. But in terms of affection among the people in the System, nobody ever, ever matched Martin. There was much more personal affection towards him than — and respect than anybody else. And I’d say, really — I guess, it’s kind of hard to separate my own views. I expect most people would say Volcker as the second — second greatest amount. But Volcker was much softer on the budget than Greenspan. And Greenspan [unintelligible 00:40:33] people. And I just like Greenspan a lot better than Volcker, myself. Robert L. Hetzel: Volcker was so dominating intellectually. Robert Black: Yeah. Robert L. Hetzel: And he could — he basically did what he wanted to, but the committee supported him because they thought he was doing the right thing — Robert Black: Yeah. Robert L. Hetzel: — until, of course, you got this combination of Preston Martin, Manny Johnson, Wayne Angell and Martha Seger. And then they went their own way, you know. - 16 - Robert Black: Martha’s a jigsaw. Robert L. Hetzel: Well, actually, considering the Reagan appointees, it’s surprising that monetary policy was as good as it was, considering what we got. Robert Black: They were lousy. In general, they were lousy. Robert L. Hetzel: [Laughs] Yeah. Robert Black: In general, they were lousy. Robert L. Hetzel: Johnson was pretty smart, Manuel Johnson, pretty articulate. Robert Black: Well, he rambled an awful lot. He started talking before he thought about what he was going to say. Robert L. Hetzel: Yeah. Robert Black: Kind of like Bob Mayo. You — Bob Mayo never looked up from the table. He just talked, and I don’t think Bob had the foggiest idea what he was going to say until he started. Robert L. Hetzel: [Laughs.] Robert Black: And we used to — Al and I [unintelligible 00:41:41]. Robert L. Hetzel: Who was the president from Cleveland? I remember, oh, Parthemos or Al trying to talk about his statements and just saying, “Well, pot holes. He talked about pot holes.” And he’d go from the international to the domestic. That was before — would’ve been before Karen Horn? Robert Black: That was John Balles? Robert L. Hetzel: No. He was San Francisco. Balles was usually pretty good. Robert Black: Well, he was from Cleveland. Yeah. [Unintelligible 00:42:23] was a nice guy, but Willis was miscast, hopelessly miscast. I remember he had a favorite expression, “Mr. Chairman, I wonder if we’re asking ourselves the right questions.” And Burns would say, he said, “You know, really, we’re worrying about the energy shortage [unintelligible 00:42:23]. It’s almost a practical reality.” And Burns said, “Really?” He said, “I didn’t [unintelligible 00:42:29].” - 17 - Talking about what the money supply was doing. “I wonder if we ask the right …” I mean, that’s an absurd example, but it was always something that really wasn’t all that relavant. Robert L. Hetzel: Yeah. Robert Black: But his favorite express. But a nice, nice guy. I get a long Christmas card [unintelligible 00:42:52]. He did dissent at times when he should have dissented, and I sat next to him. [Unintelligible 00:42:56] Willis, you can be proud of that dissent. Robert L. Hetzel: Dissent. Robert Black: It — he was a very unhappy person. They — always begin things that he [unintelligible 00:43:04]. When he did [unintelligible 00:43:14] when he was chairman of the board there, it was more of [unintelligible 00:43:16] really. You know, he was a very caring person and very kind person. He just was just miscast. [Unintelligible 00:43:24] a book, I think I had as a text book in a course in investments I took one time and it was a [unintelligible 00:43:31]. But he fancied himself an investment expert. And, you know, [unintelligible 00:43:37] period when, I guess, Wharton was at its peak in reputation. [Unintelligible 00:43:44] when Jim Tucker got his Ph.D. and he always talked about his [unintelligible 00:44:14]. He sure was miscast in his — in his last incarnation. It was the last Christmas card, it said — Willis said that they had stopped paying any portion of the medical insurance for the retirees, which is not guaranteed, but I think most retirees never assumed that would happen [unintelligible 00:47:07]. I think Jerry joined in the effort to get the cost down to the lowest allowable, and did that and — and Willis was really kind of incensed about that. Robert L. Hetzel: Sure. Robert Black: You know, it was an implied… (END OF RECORDING) - 18 - - 19 -