[Congressional Record Volume 140, Number 20 (Tuesday, March 1, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 1, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
              THE FEDERAL RESERVE BOARD AND ACCOUNTABILITY

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Texas [Mr. Gonzalez] is recognized for 5 minutes.
  Mr. GONZALEZ. Mr. Speaker, the Federal Reserve Chairman in the past, 
and I have been on this committee, known as the Committee on Banking, 
Finance and Urban Affairs, and it used to be the Committee on Banking 
and Currency when I first came here over 32\1/2\ years ago, so I have 
seen some seven or eight different Federal Reserve Board Chairmen, they 
have traditionally deluded the American people into thinking that there 
is no need for individual accountability for their decisions by 
proclaiming the institution's independence from politics. However, this 
is only a useful sleight-of-hand to shift the public focus off of 
Federal Reserve objectives which predominantly benefit its banker 
constituency instead of the public it was created to serve by the 
Congress.
  Mr. Speaker, the truth is that the Fed is a skillful, wily and eager 
political player when it suits its own purposes.
  For example, the Fed does not like the administration's plan to 
consolidate bank regulatory agencies. It also does not like my bill to 
require greater accountability--and Fed officials are leaving no stone 
unturned in their efforts to defeat these bills. Notes from similar 
political wars in the 1970's, incidentally, show how the Fed played the 
game then, and how it is playing the game today.
  I often hear from some of my colleagues who say they receive calls or 
are visited by their local bankers who ask them, ``What are you doing 
to stop Henry Gonzalez from politicizing the Federal Reserve?'' These 
worried bankers are dispatched by the Fed to do its political bidding--
the same as always.
  They have done that with former Chairman Wright Patman and they did 
it with the other succeeding chairmen of the Committee on Banking, 
Finance and Urban Affairs, while some Federal Reserve Presidents and 
Governors are wailing about the horrors of losing their political 
virginity, so to speak.
  To show how hypocritical this is, I have attached a Federal Reserve 
checklist from the collection of former Federal Reserve Chairman Arthur 
Burns that outlines ``contacts and projects on GAO--the General 
Accounting Office--audit issue.''
  Here is a Chairman who takes the super-secret proceedings of the Open 
Market Committee for 3 years, and then on his retirement dispatches 
them as if they were his own personal property to the Gerry Ford 
Library at the University of Michigan in Ann Arbor, and squirrels them 
away there.
  In the meanwhile, we find out about it and have taken a look at those 
papers. Those are public documents. Those were never intended to be 
personal, private papers of a Fed Chairman.
  Here recently, when we had the historical hearing, at no time before 
in my memory did we ever have all the Governors and Presidents and the 
Chairman of the Fed at a hearing, in order to ask them just how they 
could reason and explain their great actions, that have everything to 
do with the well-being of the average American citizen, his standard of 
living, wages, whether he has a job at all; those are all decisions 
that are made in secret by these super-selected individuals who account 
to nobody, other than to their own whims, prejudices, and special 
interests. They are the creatures of the banking system, and obedient 
to the private banking system, not to the Congress that created them, 
nor to the President, as I have brought out ad nauseam.
  Despite the fact that the Fed maintains that it never lobbies a 
Congress, the Burns checklist, which I will include here today, proves 
otherwise. It is a blueprint for an efficient and high-powered lobbying 
effort that includes using top Fed officials and the officials from the 
same banks the Federal Reserve regulates. This is clearly unethical and 
it is clearly violative of the very fundamental premises upon which our 
whole governmental structure has been based, not only since the 
Constitution but since colonial times.
  The Federal Reserve then and today assigns these minions to contact 
past and present Government officials for horror stories and arranges 
meetings for the Chairman with the Senate and House Members, to be 
certain that their message has been heard.

                              {time}  1250

  The Burns paper shows how to contact ``Federal Reserve Bank Directors 
and Friends (through Bank Presidents).'' Since 6 of the 9 bank 
directors of each of the 12 Federal Reserve Banks are elected by the 
bankers in the district, we know what they mean by ``friends.'' This is 
evidence of the Fed's outrageous practice of using officials of the 
same private banks they regulate to conduct lobbying campaigns against 
any legislation the Federal Reserve does not like.
  After reading these documents, does anyone still believe that we 
should trust the Federal Reserve to regulate many of the Nation's 
commercial banks and bank holding companies from the greatest interest 
of the greatest number of our American people? The Fed does not have an 
arm's length relationship with those they regulate; they are in bed 
together. It is an incestuous relationship.
  This is why I am supporting legislation to take from the Federal 
Reserve its bank supervisory role and give it to a new, autonomous bank 
regulatory agency which will not be beholden to any constituent group.
  Our Government, through its elected representatives setting the 
Nation's policy, has worked through the years, over 200, and 
successfully managed the people's business when the will of the people 
was expressed faithfully and dutifully through its agents.
  The Fed uses its banker friends for lobbying to keep the Federal 
Reserve from being fully examined by the GAO, and to prevent the 
Congress from requiring that the Federal Reserve release complete 
minutes of its eight annual Federal Open Market Committee [FOMC] 
meetings to the public or anything else.
  No other country in the world has this kind of autonomous central 
bank operation, no country in the world, Japan, France, Germany, Great 
Britain, none. We are the only ones.
  The FOMC transcripts and notes I have collected indicate that Federal 
Reserve officials were frantic in their attempts to get themselves an 
exemption from the proposed 1976 ``Government in the Sunshine'' 
legislation. This legislation required all Government agencies to 
release to the public complete minutes of their meetings. The files 
document a full-press operation inside the Fed. For example, I quote 
from a December 2, 1975 memo from Ken Guenther, the Federal Reserve's 
chief liaison to Federal Reserve Chairman Arthur Burns:

       Ken Guenther is a Federal Reserve employee who today is the 
     big honcho, the big tamale of the Independent Bankers 
     Association of America. Where do Members think his 
     representation of the so-called Independent Bankers of the 
     United States is?

  I quote him from December 2, 1975 when he was the chief liaison to 
the Federal Reserve Chairman, Arthur Burns:

                           The Clay Operation

       I talked with George Clay [president of the Kansas City 
     Federal Reserve Bank] both yesterday and today and emphasized 
     the urgency of contacts between now and December 9. Clay will 
     focus first on the (congressional) Subcommittee and then 
     spread to the full (congressional) Committee. He is 
     approaching this effort enthusiastically.

  Like others at the Fed, President Clay wanted to make sure that the 
public never learned what was being said at the FOMC meetings, lest the 
light of accountability prove blinding to the decisionmakers at the 
Fed.
  My colleagues, it is very clear that the Federal Reserve is anything 
but nonpolitical. I intend to bring individual accountability to the 
Federal Reserve and let some sunshine in so that we have a detailed 
record of its Federal Open Market Committee meetings, and understand 
its presently secret machinations.
  My bill, the Federal Reserve System Accountability Act of 1993, H.R. 
28, requires prompt release of monetary policy changes, timely release 
of a detailed record of FOMC meetings, and allows the GAO to examine 
substantial parts of Federal Reserve operations which are now 
restricted from inspection. To do any less would be to shortchange the 
American public.
  I include for the Record the memo to Chairman Burns from Ken Guenther 
in its entirety as follows:

                                                 December 2, 1975.
     To: Chairman Burns.
     From: Ken Guenther.

     Subject: Your Meeting with Chairman Hills.

       The following is a list of actions you have taken on the 
     Government in the Sunshine legislation in the House.

Contacts With Members of the Subcommittee on Government Information and 
            Individual Rights, in Addition to Your Testimony

       (1) Breakfast with Chairwoman Abzug.
       (2) Telephone conversation with Sam Steiger (ranking 
     minority member).
       (3) Telephone conversation with Clarence Brown of Ohio 
     (minority member).
       (4) A letter enclosing your testimony to the three 
     Subcommittee Republicans (Steiger, Brown, and McCloskey).
       Comments: Note that we have done little with the Democratic 
     members of the Subcommittee, and there are eight Democrats 
     (including the Chairwoman) and only three Republicans on the 
     Subcommittee. Ashley recommended that you talk with 
     Democratic Congressmen Moss, Moffett, and Maguire.

           Contacts With Other Members of the Full Committee

       (1) You have written to Garry Brown of Michigan and Willis 
     Gradison of Ohio, Republican members of the Committee, who 
     also sit on Senate Banking, and expressed your concern over 
     this legislation. Mr. McMahon (whom Tom O'Connell dismisses 
     as not being worth much) of Congressman Wylie's office called 
     here and offered to be helpful, noting that he has been 
     coordinating with Brown and Gradison. (See attached memo.) 
     McMahon is not willing to go the ``exempt the Fed'' route, 
     feeling it is not politically salable. Wylie asked you the 
     question from the floor at the House Republican Conference 
     meeting.
       (2) This week you will be meeting with Frank Horton, the 
     ranking minority member of the Committee, and with St 
     Germain, who sits on both Government Operations and House 
     Banking.
       Comments: Again, more must be done with the Democratic 
     side, but this can wait until the bill is reported out of the 
     Subcommittee. Suggested contacts include the Committee 
     Chairman Jack Brooks of Texas (Ashley noted that his 
     ownership of a bank could work against us), Moorhead of 
     Pennsylvania, Richardson Preyer of North Carolina (I 
     believe Clarence Brown suggested this), and Jim Wright of 
     Texas. In addition to these, it probably would be 
     worthwhile contacting the second ranking Committee member 
     (L.H. Fountain, Democrat of North Carolina) and Ben 
     Rosenthal, given Rostenthal's effection for you.
       (3) Earlier the White House suggested contacting John 
     Erlenborn of Illinois, the second ranking Republican on the 
     Committee, in addition to Horton. You may wish to discuss 
     this and other possible fruitful Committee contacts with 
     Horton.
       Note--Horton comes from Rochester, New York--east of the 
     Genesee River, Barber Conable comes from Rochester--west of 
     the Genesee River. Horton is a moderate-to-conservative 
     Republican, a favorite of the Gannett papers, has many Kodak 
     and Xerox workers in his district, and has won his elections 
     quite handily. He is my parents' and families' Congressman. 
     He might be interested in Marine Midland matters.

                       Your Other House Contacts

       (1) With Reuss and Ashley.
       (2) With John Anderson and you followed up with a letter.
       (3) With John Rhodes and you followed up with a letter.
       (4) You discussed contacting Bolling with Ashley, and 
     Ashley indicated it wouldn't hurt. This contact can wait 
     until the matter moves closer to the floor.
       Note--I wouldn't recommend that any effort be made to stop 
     the legislation in Rules, since I feel it would be futile. In 
     my judgment, the attempt to bottle up legislation in Rules 
     which passed the Senate by a 94-0 vote would be 
     counterproductive. Bolling could be very useful on the floor 
     and could make some helpful preparatory noises in Rules--if 
     he were so included.

                           The Clay Operation

       I talked with George Clay both yesterday and today and 
     emphasized the urgency of contacts between now and December 
     9. Clay will focus first on the Subcommittee and then spread 
     his net to the full Committee.
       He is approaching this effort enthusiastically.

                  The SEC Strategy in the Subcommittee

       Unlike us, the SEC feels it has a Democratic friend in the 
     Subcommittee, Mr. Moss. They are concentrating on Moss in the 
     effort to have him introduce the SEC amendment--as put 
     forward in the Hills' testimony. They are also working with 
     liberal Republican McCloskey in this amendatory effort, and 
     Hills is a personal friend of McCloskey.
       If they get a Subcommittee Democrat, their chances of 
     success are greater than ours--assuming that Steiger will be 
     offering the Fed amendment. This argues for working with 
     Hills and Moss, looking towards an amendment that will meet 
     the SEC needs and our needs.
       As indicated this morning, Moffett already is playing 
     games, and this does not bide well in terms of his 
     cooperation.

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