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Meeting of the Federal Open Market CommitteeDecember 21, 1999A meeting of the Federal Open Market Committee was held in the offices of the Boardof Governors of the Federal Reserve System in Washington, D.C., on Tuesday, December 21,1999, at 9:00 a.m.PRESENT:
Mr. Greenspan, Chairman
Mr. McDonough, Vice Chairman
Mr. Boehne
Mr. Ferguson
Mr. Gramlich
Mr. Kelley
Mr. McTeer 
Mr. Meyer 
Mr. Moskow
Mr. Stern
Messrs. Broaddus, Guynn, Jordan, and Parry, Alternate Members of the
Federal Open Market Committee
Mr. Hoenig, Ms. Minehan, and Mr. Poole, Presidents of the Federal
Reserve Banks of Kansas City, Boston, and St. Louis respectively
Mr. Kohn, Secretary and Economist
Mr. Bernard, Deputy Secretary
Ms. Fox, Assistant Secretary
Mr. Gillum, Assistant Secretary
Mr. Mattingly, General Counsel
Mr. Baxter, Deputy General Counsel
Ms. Johnson, Economist
Mr. Prell, Economist
Ms. Cumming, Messrs. Howard, Hunter, Lang, Rosenblum,
Slifman, and Stockton, Associate Economists
Mr. Fisher, Manager, System Open Market Account
Mr. Winn, Assistant to the Board, Office of Board Members,
Board of Governors
Messrs. Ettin and Reinhart, Deputy Directors, Divisions of Research and
Statistics and International Finance respectively, Board of Governors
 
12/21/992Messrs. Madigan and Simpson, Associate Directors, Divisions of Monetary Affairs and Research and Statistics respectively,Board of GovernorsMs. Roseman, 1/ Director, Division of Reserve Bank Operations andPayment Systems, Board of GovernorsMessrs. Dennis 1/ and Whitesell, Assistant Directors, Divisions of ReserveBank Operations and Payment Systems and Monetary Affairsrespectively, Board of GovernorsMs. Low, Open Market Secretariat Assistant, Division of MonetaryAffairs, Board of GovernorsMr. Moore, First Vice President, Federal Reserve Bank of San FranciscoMessrs. Beebe, Eisenbeis, Goodfriend, Hakkio, Rasche, and Sniderman,Senior Vice Presidents, Federal Reserve Banks of San Francisco,Atlanta, Richmond, Kansas City, St. Louis, and Cleveland respectivelyMs. Perelmuter, Messrs. Rosengren and Weber, Vice Presidents, FederalReserve Banks of New York, Boston, and Minneapolis respectively ______________________ 1/ Attended portion of meeting relating to the Committee’s consideration of the Report of Examination of the System Open Market Account.
 
Transcript of the Federal Open Market Committee Meeting of December 21, 1999CHAIRMAN GREENSPAN. Good morning, everyone. Would somebody like tomove approval of the minutes for the November 16
th
meeting?VICE CHAIRMAN MCDONOUGH. Move approval.CHAIRMAN GREENSPAN. Without objection. Peter Fisher, you wanted todiscuss the report of examination, I understand?MR. FISHER. Yes. I wanted to elaborate a little on Louise Roseman’s memo toDon Kohn about the unresolved difference between the internal accounting records of theMarkets Group Accounting and Control Unit and those reflected in the IntegratedAccounting System regarding the System’s net interest accruals on foreign currencyinvestments. I thought it would be helpful if I gave a couple minutes of background, if youwill bear with me.Last spring, as members of the Committee will recall, we entered into a series of transactions with the ESF to re-balance our euro and yen holdings so we could come to a better split both in terms of total holdings and the currency mix. This involved a number of transfers of ownership of a series of investments and resulted in quite a significant amountof accounting activity. In the course of reviewing that, our own accounting staff identifiedan error that had been introduced in the prior year in our treatment of the premium on bondsheld in the accrual account, overstating the accrual account by about $5 million. In thecourse of confirming that, they identified an additional $26.6 million overstatement in theaccrual account for interest on foreign currency investments. We have had a number of staff members working full time trying to trace the source of that $26.6 million overstatement.They have worked back through the records to December 1994, before which detailedrecords at the transaction level just no longer exist due to the routine and appropriatedestruction of documents.The Board examiners were at our Bank to conduct an examination of the SystemOpen Market Account in September and PricewaterhouseCoopers also has looked over our methodology to try to trace this overstatement back through time and find its source.PricewaterhouseCoopers is confident that we have traced it back as far as we can. They
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