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PRESIDENT'S MEETING WITH THE QTJADRIAD January 23, 4:00 p.m. The first meeting of tba Preaidant with the Qttadriad took place at 4>00 p.m. on January 23 (the Qttadriad consists of the Secretary of the Treasury, the Chatman of the Board of Governors of the Federal Reaerve System, Director of the Bureau of the Budget and the Chairman of the Council of Economic Advisers). The discussion at this meeting vaa generally rather freewheeling, vith most of It concerned about domestic economic and financial developments, and the external payments problem. There was general agreement that the thrust of economic policy should be in the direction of cooling down the overheated domestic economy, though it was recognised that this would have to be done carefully and gradually to minimise the adverse effect of these actions on unemployment. The Chairman of the Federal Reserve Board said that the System had pulled a boner after the tax Increase last year by pursuing for a tine an easier monetary policy. This decision heavily reflected projections of their stsff that the tax increase night produce an overkill effect, causing substantial slack in the economy. In retrospect this evaluation of prospects was inj&srror. The Federal Reserve, beginning in January, has set out on a less expansive course, their sin being an expansion in the money supply of something like 7 percent. In regard to the external problem the discussion largely focused on controls over foreign investment. There was general agreement that with prevailing conditions in the money market the interest equalization tax probably had little deterrent effect since eredit markets here are extremely tight already. It was also agreed that controls over bank lending probably do not have a major effect because of these same tight credit and money market conditions. On controls of foreign direct investment the issue seemed to be more complex and the Quadriad recoamended further study before any action could be proposed.