Notes From The Nanny State

I read them so you don't have to. As part of my twisted taste in reading material and perhaps as an indication that I need to get out more, I'm finding interesting nuggets in recently-released transcripts of Federal Reserve meetings. At the FOMC meeting on May 16, 2000, Peter Fisher, then manager for the Fed's System Open Market Account, said the following as part of his presentation to the committee:

We also purchased $2.3 billion in bills for System account on April 11th. On that occasion we conducted operations from which we learned something by doing. On the first day of the quarter, [REDACTED] That was not something I was expecting to wake up to that morning; their request was a consequence of their intervention the prior evening. [REDACTED] it seemed to me that the bill market adjusted rather well to that rather large effect on supply. So, on behalf of the Committee, we purchased $2.3 billion of bills on April 11th for our own account.

Take a minute to view the actual FOMC transcript here; the above section appears on page 7 near the bottom. Note that the actual transcript does not use the word "redacted" to indicate missing text; it merely shows blank spaces where words have been removed. As a sidenote, I've read many FOMC transcripts and can't recall having seen such obviously altered text before.

Some context: Fisher refers to "the first day of the quarter," which was April 3, 2000. Readers may recall what was happening in the stock market at that time: the Nasdaq had fallen 18% from an intraday peak in early March to its low on April 3. On April 3, the Nasdaq fell 7.6%. But on that same day the Dow rose 300 points or 2.8%, which caused market observers to marvel at the relentless buying of a handful of psychologically important stocks while the technology sector collapsed.

I've contacted the Federal Reserve twice to ask about the redacted text, and have not received a reply. I know this blog has many keen observers of and participants in the financial markets, and I look forward to your speculation via posted comments or private email about the nature of the "intervention" to which Fisher refers, and by which he was apparently surprised.

This is not an insignificant issue, as the consequences of various forms of intervention over many years are manifest now in oil, the dollar, gold, and geopolitics.