"Just because my first name is Arthur, I smoke a pipe, graduated from Columbia, am from New Jersey, and am Jewish, some members of the press art convinced I should be the next chairman of the Federal Reserve Board. Not me."
Speaking was Arthur M. Okun, who shares some of the same external characteristics as the current chairman, yesterday declared himself out of the running. Okun, chairman of the Council of Economic Advisers under Johnson and now a senior fellow at the Brookings Institution, had been mentioned as possible successor to Arthur F. Burns, should President Carter decide not to reappoint him.
In an address at the National Housing Center, Okun said Carter needs a new chairman responsive to his policies, not "an academic liberal like me." Okun decried Burns' monetary policy of restraint which, he said, has caused short-term interest rates to rise 2 basis points in the past six months to 6.5 per cent.
"The Fed has acted as though the world is out of step with M-1 (the supply of cash and checking accounts). The evidence is clear M-1 is out of step with the rest of the world," Okun stated. In his opinion, the consuming public is not about to go on a spending spree, so there is no reason to let interest rates rise so much.
He warned members of the housing industry that if short-term rates climb to 7.5 per cent - "but I'm not saying they will" - it would trigger a collapse in housing. Arthur Burns, monetary policy, and mortgage funds were continually on the lips of participants in yesterday's residential construction forecast conference.
Kenneth A. McLean, staff director of the Senate Banking Committee, said Burns' departure from the Fed could make a difference of as many as 200,000 housing starts, provided his successor eases monetary policy and interest rates go down. Various analysts in the public and private sectors anticipated total starts next year in the 1.75 to 1.85 million range, down from the current annual level of 2.1 million.
Apart from a natural market retreat from the highest monthly level since May 1973, a decline in available loans is expected to reduce starts next year. Richard Pickering, director of the statistical division of the Federal Home Loan Bank Board, projected a 50 per cent drop in net savings flows in 1978, to about $18 billion.
NAHB yesterday issued its five-year forecast for new housing starts. In 1978, total starts are expected to be 1.8 million; in 1979, 1.7 million; in 1980, an election year, 2.1 million; and falling thereafter to 1.6 million by 1982. Multifamily building will hit its peak of 761,000 in 1980, up from 583,000 in 1978.