Federal Open Market Committee meetings entail central bankers going around a table discussing their views about the economy. They also include numerous jokes and attempted jokes, many from economists who have a unique sense of humor. Transcripts of the meetings mark such moments with a simple tag: [Laughter].
Here’s a sampling of jokes from the 2005 transcripts, released today with the customary five-year lag with updates to come:Alan Greenspan, March 22, 2005, in an exchange with Dino Kos, then head of the New York Fed’s markets desk.
- Bloomberg News
- Former Fed Chairman Alan Greenspan yukking it up.
CHAIRMAN GREENSPAN. Can we borrow from the Greeks? [Laughter]
MR. KOS. It’s interesting, since they are at about double the 3 percent (borrowing) limit. So the markets are not punishing anybody for not complying.
Fed officials joking about Bear Stearns and Lehman Brothers long before the crisis, November 1, 2005
CHAIRMAN GREENSPAN. On the bottom of page 3, are these brokerage sector CDS? Is this the mix of their individual portfolios or their estimates of the total market?
MR. KOS. No, no. This is if you want to buy protection on, say, Lehman Brothers or Bear Stearns. This is the price of protection on these firms.
CHAIRMAN GREENSPAN. Oh, this is the actual credit default swap on Lehman Brothers or on—
MR. KOS. Yes, all eight of them.
CHAIRMAN GREENSPAN. This tells you a good deal about the individual firms. That’s interesting.
VICE CHAIRMAN GEITHNER. There’s a moral hazard in there, too, if you look at it. [Laughter]
CHAIRMAN GREENSPAN. I’m going back in the private sector. I’ve got to know who’s risky! [Laughter] That was off the record. [Laughter]
Edward Gramlich, lamenting fiscal laxity, March 22, 2005
In recent meetings, I have held out one factor that could get me to be less hawkish—the prospect of real fiscal tightening. This has become less likely, too. There has been a dispute between those who want to cut spending and extend the tax cuts and those who want to maintain spending. When not dealing with steroids in baseball and feeding tubes in Florida, the Congress seems to be working toward one of their unique compromises: Let’s extend the tax cuts and maintain spending. [Laughter] There just doesn’t seem to be much voice for and hope for real fiscal tightening.
David Stockton, March 22, 2005, Sept. 20, 2005 and Dec. 13, 2005, economist and Fed funnyman
–I offer one more piece of evidence that I think almost surely suggests that the end is near in this sector. While channel surfing the other night, to the annoyance of my otherwise very patient wife, I came across a new television series on the Discovery Channel entitled “Flip That House.” [Laughter] As far as I could tell, the gist of the show was that with some spackling, a few strategically placed azaleas, and access to a bank, you too could tap into the great real estate wealth machine. It was enough to put even the most ardent believer in market efficiency into existential crisis. [Laughter]
–So what should we worrying about? While my colleagues who attend our lengthy forecast meetings were not exactly thrilled by it, the removal of my arm from its sling in the past few weeks has allowed me, once again, to bring my principal value added to the forecasting process, and that is copious amounts of hand-wringing. [Laughter]
–With the retail price of gasoline having risen above $3.00 per gallon in much of the country, there is certainly cause to be concerned. As a macro guy, I hope that those of you involved in supervision haven’t been too hard on home equity lending, because pretty soon people are going to need a loan to fill up their SUVs. [Laughter]
–Our calibrated vintage capital models failed us, and clearly finger-crossing has not proven a terribly robust forecasting technique. We even tried an approach gently suggested to us by Governor Olson at the time of our last forecast—you know, had we thought about trying common sense? [Laughter] We tried, but even that didn’t seem to work.
Kansas City Fed President Thomas Hoenig and Fed Vice Chairman Roger Ferguson with words of wisdom for central bankers, September 20, 2005:
MR. HOENIG. Mr. Chairman, I support your recommendation. And having listened to your comments, I would like to invoke the central banker’s prayer from Jackson Hole this year. It says, “Lord, if there be shocks, let them be varied and preferably moderate ones so that we can stress test our systems.” [Laughter]
…
Mr. FERGUSON. I’ll close with one other thing, the central banker’s anxiety, which is: “Good times are bad because they could turn out to be bad. Bad times are bad for obvious reasons.” [Laughter] I think you’ve given us a lesson in why these extremely good times are unlikely to be good for us in the long run.
David Stockton again and Dallas Fed President Richard Fisher with separate informational anecdotes, September 20, 2005:
MR. STOCKTON. In adjusting our forecast of the U.S. economy to incorporate the consequences of Hurricane Katrina, we were forced to rely more on economic judgment and assumption than our models. Perhaps that is just as well, given what I heard last month in Jackson Hole. At various turns, the staff was criticized for building models that bear no resemblance to economic reality and praised—or at least I think it was praised—for then having the good sense to essentially ignore those models through the wise use of add factors.
That mixed message reminded me of a story told by Nobel laureate Ken Arrow. During World War II, Arrow was assigned to a team of statisticians to produce long-range weather forecasts. After a time, Arrow and his team determined that their forecasts were not much better than pulling predictions out of a hat. They wrote their superiors, asking to be relieved of the duty. They received the following reply, and I quote “The Commanding General is well aware that the forecasts are no good. However, he needs them for planning purposes.” [Laughter]
…
MR. FISHER. I’m reminded of a story that George Shultz told me about his time working under President Reagan, who was very frustrated about spending. George picked up the phone and called I think it was Sam Cohen and said, “Tell me, Sam, is there really any difference between Republicans and Democrats when it comes to spending?” And Cohen said, “I want to think about it, do some research, and give you a serious answer.” He called back the next morning and said, “Yes, George, there is. Democrats enjoy it more.” [Laughter] “But otherwise there doesn’t appear to be any difference.”
Vincent Reinhart, Feb. 1-2, 2005, Director of Monetary Affairs
Over the intermeeting period, I surveyed you about whether the summary of your economic projections should be expedited—that is, released next week rather than three weeks later when the Chairman delivers the Monetary Policy Report in testimony to the Congress. My experience in surveying you has been that if I ask the 19 of you “What is the color of an orange?” I couldn’t be sure of getting a majority on a single answer. [Laughter] This most recent survey was no exception. Almost as many of you strongly endorsed an expedited release of your projections as strongly opposed it. An equal number of you endorsed it as opposed it, and there were two lonely people who were indifferent. [Laughter]
Alan Greenspan teasing Tim Geithner, then New York Fed President, March 22, 2005
VICE CHAIRMAN GEITHNER. I have no humor in my statement and nothing that differs from the consensus.
CHAIRMAN GREENSPAN. Your straightforward remarks are very humorous. [Laughter]
VICE CHAIRMAN GEITHNER. Careful. [Laughter]
Fed Chairman Greenspan, the Henny Youngman of the FOMC, June 29-30, 2005 and Nov. 1, 2005:
MS. JOHNSON. Absent a dollar depreciation that’s now probably on the order of 8, 9, or 10 percent, the deficit is going to steadily worsen. If the dollar were to start depreciating, that would slow the rate of deterioration. If the dollar depreciation that we put into the forecast were to get as high as 8 or 9 percent, that might plateau the deficit.
CHAIRMAN GREENSPAN. One thing we can be sure of is that the value of the dollar will be worth 100 cents. [Laughter]
…
MR. FERGUSON: Someone quoted Yogi Berra. I’m going to quote that equally famous poet, Archilochus, whom some of you may recall from the 7th century B.C. [Laughter]
CHAIRMAN GREENSPAN. I knew him well. [Laughter]
Richard Fisher again, June 29-30, 2005 and Nov. 1, 2005:
The largest paper product company, Kimberly-Clark, is in our District. Interestingly, its CEO reported only one product line where they feel the ability to pass on costs based on energy prices, which again was the diaper market. That has been the subject of quite a lot of discussion in our District! [Laughter]
…
Everyone I’ve talked to continues to try to figure out ways to exploit globalization. Each of them, from the IT [information technology] guys to the big box retailers to the specialty chemical firms to the service firms, wants to have offshore supply. One of the CEOs said, “We have a long way to go in exploiting China.” We’ve heard that forever. And one of my favorites was the comment, “China, India, and Indonesia can make Italian ceramics better than Italians can now or could 200 years ago.” [Laughter]
Federal Reserve Board economist David Wilcox, August 9, 2005:
I can’t think of any reason off the top of my head for the confidence band to have changed. We certainly perceived no asymmetry in the risks. We’ve gone to enormous effort this time, as always, to present to you a forecast with balanced risks. I don’t see any reason why the width of our confidence band should have narrowed or widened. I suppose I’m going to fall into a common conceptual error here, but I guess I would say that the uncertainty around the oil price projection might be even greater now than average. But I hear echoes in my brain saying, “You know, now is a particularly uncertain time,” and I never hear anybody ever saying, “Now is a particularly certain time.” [Laughter] Nevertheless, if I were going to point to something that would widen the confidence intervals, it may be the oil situation, but I don’t find that a very compelling piece of evidence.
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