Edward Kane alleges that the Federal Reserve System recently has taken a turn for the worse, with respect to monetary policy, in that Chairman Burns has re-politicized the System beyond prudent bounds. It is interesting to note that Kane changed the title of his paper from “The Politicization of the Fed” in his first draft (and before he had heard my comments at the meeting) to “The Re-Politicization of the Fed” in his second draft (after he had heard my comments). In my view, Kane's latest title is closer to the truth–though still somewhat misleading–in that, over time, the Fed has necessarily factored political and social considerations into the formulation of economic and monetary policy. But so what, and what else is new? The examples cited by Kane to “document” his case can best be characterized as allegations that illustrate a certain behavioral pattern over time, but these examples fail to support his case that–because of the repoliticization of the Fed–recent monetary policy has been at times counterproductive to the public interest. Perhaps a more legitimate conclusion that Kane could have reached from his observations of public policy in recent years is that the appointment of Dr. Burns as Chairman of the Committee on Interest and Dividends tended to formalize the quasipolitical nature of the position of the Chairman of the Federal Reserve Board.

Among the topics that have been subjected to intensive research by businessschool scholars over the past two decades, few have received more attention than those which collectively comprise the field of investments. What is more important, even fewer have witnessed the plethora of important research findings that has been forthcoming in the investments field. Indeed, it seems reasonable to argue that in recent years no other business field's research accomplishments have been either as impressive or as generally reinforcing.

Municipal bond credit ratings are currently being created and distributed by two main rating agencies. Controversy has urrounded these ratings and their effects on interest costs to municipalities. This paper summarizes these controversies and presents a methodology which would enable a more objective appraisal of municipal credit quality.

Various studies reported in the literature overwhelmingly reach the conclusion that the mutual funds in general have not outperformed the market. This result seems at variance with the tremendous growth the mutual fund industry has experienced over the past two decades. If the market efficiency hypothesis is valid, and there is considerable evidence in its support, then a mutual fund may not be able to consistently outperform the market. However, while an average mutual fund does not outperform the market, the mutual fund industry as a whole may be able to do so.

The thoughts presented in this paper were developed during the first stage of an ongoing research project. This project is designed to shed light on the management of the size and exchange composition of financial assets and liabilities in the U.S. multinational companies (MNCs). The study also intends to analyze the impact of these policies on the international and national financial markets.

Bernell Stone's paper extends the single-factor market model to a two-factor model to “better” explain the stochastic process that generates security returns. The inductive search for new models (of which his paper is one) presumably is predicated upon some unsatisfactory results of joint tests of the single-index market model and the capital asset pricing model. It is well known that there are other components of systematic or covariance risk that are not explained by the single-market factor. In the most general sense then, one would conclude that the truth of the return generating process is a multiple factor model, given that the process is indeed linear in the factors. Professor Stone chooses a two-factor (or index) model, in which the known factors are: (1) the return on an equity index, and (2) the return on a bond index. To this extent his interesting work is a special case of the more general work of others.

The central theme of the paper by Professor Phillips is the effects of technological change on the way financial institutions operate and the implications for regulation. His analysis is an excellent combination of both sound economics and political economy. Increasingly, shifts are made between noninterest-bearing demand deposits and interestbearing savings deposits. The increased use of negotiable order of withdrawal (NOW) accounts represents a step toward permitting interest on demand deposits. The implications of the increased use of “electronic funds transfer system” (EFTS) are even greater. Professor Phillips indicates the EFTS could make all marketable and negotiable assets “money,” and that the turnover of deposits could approach “infinity.”

The paper reports three findings regarding equity investors' common stock perceptions which are an important part of their security decision process. These results are based on demographic and perceptual data collected from investment professors, portfolio managers, and individual round-lot investors.

William Gibson has presented a useful analysis of the Administration's proposals for financial reform, and I have no difficulty concluding with him that they should be passed. But, I find myself in some disagreement with him on a number of matters of interpretation.

The study had two objectives: 1) an evaluation of third-market operational efficiency vis-a-vis the New York Stock Exchange and 2) an evaluation of any impact resulting from inclusion of third-market issues in the NASDAQ quotation system on preexisting third market versus NYSE efficiency.

This examination of the role of foreign enterprise in Russian and Soviet industrial development from 1632 to the present indicates that it was a significant one. Tsarist and Soviet Russia used foreign enterprise to their own advantage very skillfully by periodically acquiring advanced industrial technology and thereby reducing their own “backwardness” relative to the West. In doing so, they succeeded in remaining firmly in control of their own economic affairs, an achievement that often eluded other countries.

Professor Yoshino traces the evolution of direct investment in overseas manufacturing by Japanese enterprises in the postwar era. Much of that expansion is of very recent origin, and the prospects are for the spread of considerably more Japanese investment abroad in the future.

Generalizations are always difficult, especially in the context of varied national experiences. But by looking at the evolution of oil company activity in the 1920s in South America and by examining the range of relevant business functions — marketing, refining, production, exploration, transportation — the author throws light on the development of business-government relations in that part of the world, where the hostility of host nations to multinational enterprises was to grow so strong.

European multinationals followed a different path of development from that pursued by United States firms, but European multinational manufacturing began even earlier than did American, and its story is no less significant. Dr. Franko offers a range of relevant data and analysis about the evolution of direct foreign investment by Western European manufacturers.

Most analyses of American direct investment abroad focus on the post-World War II era, and on manufacturing. Professor Kindleberger examines United States direct investment in a range of undertakings in France — finance, insurance, trade, marketing, services, and manufacturing — and concentrates on pre-1950 developments.

Professor Stopford explores the patterns of British direct investment in overseas manufacturing in the nineteenth and twentieth centuries, paying special attention to the quality of Victorian entrepreneurship and the opportunities and problems presented by the Empire and then the Commonwealth.