[Congressional Record Volume 140, Number 27 (Friday, March 11, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 11, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]


                              {time}  1620
 
                          THE FEDERAL RESERVE

  The SPEAKER pro tempore (Mr. Johnson of South Dakota). Under the 
Speaker's announced policy of February 11, 1994, the gentleman from 
Texas [Mr. Gonzalez] is recognized for 60 minutes, as the majority 
leader's designee.
  Mr. GONZALEZ. Mr. Speaker, for more than a year, certainly much more 
than that before I became chairman of the Banking Committee, I have 
been urging the Federal Reserve to fully disclose to the American 
public, that is to the Congress and the American public, what is behind 
its decisions on monetary policy. I think though that I will repeat for 
the benefit of my colleagues, so many of whom have expressed surprise 
when I have explained exactly what the Federal Reserve Board is. It is 
not a Government agency. It is a private corporation. And the stock in 
that corporation is owned by the private commercial banking system. The 
Federal Reserve is a federally chartered corporation whose stock is 
owned by the member banks. The board of directors of this corporation 
are appointed by the President, confirmed by the Senate. But unlike any 
other public official, there are no provisions for recalling any board 
member in case their policies run counter to those of the elected 
Government.
  There are 12 regional banks in the country which again shows how 
petrified this system has become. The 12 were designated regionally in 
1913, long before the tremendous center of gravity or whatever you want 
to call it of commercial and financial activity had gone across the 
Mississippi. So, therefore, today we should have long ago recognized 
the need to have additional Federal Reserve Board banks. California, 
for instance, alone has an economy and financial transactions that are 
equal or in excess of the country of France. So the backwardness is not 
just in the lack of the accountability, because of the awesome power 
that has been grasped and usurped actually, but actually Congress 
abdicated in every sense of the word, but nevertheless usurped this 
awesome power that no other country, no other country gives its central 
bank.
  So with that, let me go into some explicit events, my colleagues.
  What are behind these decisions that are described by this fancy 
phrase, ``a monetary policy?'' Well these are no small matters because 
these are decisions that have the profoundest of impacts on interest 
rates, employment, unemployment, inflation, and the international value 
of our currency, all of which are subject matters which I have been 
addressing in the 32 years that I have been here by the use of this 
great privilege which now is called special orders, but which really is 
under the general aegis of the long established parliamentary 
procedures in some respects derived from the mother parliament and in 
other unique American provisos that are reflected in the first rules 
such as Jefferson's Manual governing proceedings, and what it really is 
is general leave by a Member to address the House, and then about some 
two and a half or three decades ago it was formalized, and then given a 
procedure that has been called special order time.
  The truth of the matter is that a member of a body such as this one 
has only one or two basic powers. One is the vote, and the other is his 
voice. So that less than 120 days after I was sworn in 32\1/2\ years 
ago, a little bit around 32\1/2\ years ago in the House, I began to use 
what is called special orders. The only thing is that some of the older 
Members were aghast because I would actually take the floor and make 
the speech or the statement which I felt was in keeping with the 
intention of the Congress when it set up this procedure. But, in that 
day and time and until much later, a Member could submit a statement in 
writing without speaking it and it would be printed in the Record as 
though he uttered it. I did not think that was right and so I have been 
speaking out since then and there has not been a year of service in 
these 32\1/2\ years when I have not addressed this House under this 
general grant of leave under unanimous consent to address the House. 
And the reason is that it is the only opportunity, and this is the 
reason this privilege was instituted, that a member in a numerous body 
which in regular debate be very limited to expand on a subject matter 
related to the legislative business, and I ask any of my colleagues who 
want to, or have somebody evaluate and scrutinize every address I have 
made since 1961 or 1962 and see if I have ever strayed from that. I 
never have attempted to take this privileged forum for a political 
stump, and this is where the trouble has come with respect to all of 
this ado about so-called special orders since the inception of 
television coverage of these proceedings or part of the proceedings of 
the day.
  But I think to be faithful and actually deserve the privilege, one 
must stick to the intended purpose that the House had in enacting the 
rules and providing the procedures for this privilege, and that I have 
done.
  In a democracy, it is absolutely necessary that we have 
accountability. As I said yesterday, all through written history of 
mankind, any individual or group of individuals who for whatever reason 
have power of any kind and no accountability, will find themselves 
corrupted and working against the best interests of the greatest 
number, and of course antithetical to the Democratic process.
  Accountability is the linch pin since colonial times as well as 
majority rule in our system of government, as I say and repeat, since 
the very beginning, even before nationhood in the colonial times in 
each one of the colonial State legislatures. So therefore the Federal 
Reserve having this awesome power, it can decide in its secret open 
market committee whether or not a businessman will be able to live by 
having a line of credit that will not make him a servant and working 
for a bank by charging usurious interest and having to pay usurious 
extortionate rates of interest that would not allow him to survive as a 
businessman unless he in effect becomes a slave of the lender.
  So that it becomes paramount that we have the information, and the 
reason why these decisions are being made in secret, so that the people 
through their elected representatives and agents will be able to 
establish the justification and the wisdom or folly of such policies.

                             {time}   1630

  The Federal Reserve though lives by different rules. Rather than 
providing the public with a complete account of what goes on at its 
decisionmaking body, the so-called Fed Open Market Committee I referred 
to awhile ago, the Federal Reserve has chosen to continue releasing an 
inconclusive summary of its action, but this only after our exposure 
just last year after having the celebrated and historic, and it is the 
first time that the Banking Committee on either side ever had the full 
panoply of Governors of the Fed and presidents of the banks before it, 
and it was then that the chairman of the Federal Reserve, even though 
he was not invited to both hearings, we had him alone in the first one, 
he insisted on coming to the second one because he has rigorous control 
over the presidents of these 12 regional banks, and he wanted to be 
there.
  But, by golly, he slipped and he was caught fibbing and attempting to 
deceive the U.S. House of Representatives Committee on Banking, Finance 
and Urban Affairs, and that in my book is unforgivable. The Federal 
Reserve, as I say, still attempts to shield itself from complete 
accountability and that, of course, is unacceptable.
  In response to my call for a greater accountability, the Federal 
Reserve nudged a bit last Wednesday, took a step in the right direction 
by releasing edited transcripts of its FOMC meetings for the last half 
of 1988. I plan to continue to insist that the Fed release all past, 
present, and future transcripts. Without this the Congress, the media, 
and the public will never understand the monetary policy that is 
supposed to be affecting this country and whether it is in the best 
interests of the greatest number or just inures as it has through these 
recent years to the benefit of the banking fraternity.
  In other words, I predict that either we move, as Alexander Hamilton 
said at the time he was waging the effort for the adoption of the 
Constitution, and the issue, I believe, is still the same, and he said,

       It seems to have been reserved to the people of this 
     country by their conduct and example to decide the important 
     questions, whether societies of men are really capable or not 
     of establishing good Government from their reflection and 
     choice or whether they are forever destined to depend for 
     their political constitutions upon accident and force.

  And I ask my colleagues to tell me which has been happening in the 
last two or three decades in our great country. But I have always said 
that there is a tremendous countervailing of great forces.
  In fact, if you study the laws that govern the physical universe you 
have some very basic verities, and you will find that nature always 
seeks balance. If you induce a positive charge on one end of a needle, 
immediately there is a negative charge on the other end balancing.
  And people such as our great society and the people who constitute it 
entrust to our hands as their agents this great stewardship and assume 
that we have some participation in the formulation of these policies 
that are so vital in their well-being. Instead, we see the parable for 
voting that Thomas Jefferson said at the inception of our nationhood, 
because this is what we in other words fancily call monetary policy 
really means allocation of credit, who gets what, who is going to have 
the power to determine that, and from the very beginning of our 
nationhood that was the key issue as I said yesterday.
  And, of course, the First Continental Congress, the Second 
Continental Congress, which incidentally they thought so little of such 
executive things as the Presidency or that they called then the chief 
magistrate, that they did not bother to have that kind of office. They 
had the Congress, the First Congress, the Second Continental Congress, 
then the Confederation, Articles of Confederation. But they had to have 
a banker, or a fiscal agent.
  What did the bankers in Philadelphia do? They said, ``Oh, sure, we'll 
lend your body the money but you've got to pay this kind of interest,'' 
and Thomas Jefferson said, ``Not on your life, for that would mean that 
the bankers,'' and those are the words he used, ``would rule the land 
and it would be like a standing army of occupation, and soon we 
Americans would be homeless and rootless.''
  What is it we are facing today like never before since the 
Depression, if it is not that, any why? For the very same reasons 
expressed in those statements by the great man, Thomas Jefferson, and 
so what did they do? They said, ``Mr. Banker, we'll borrow. But we are 
not going to pay more than 6 percent.'' And what did the bankers do? 
They took it. Of course they were.
  Here in the 20th century, where the United States up until 1914 had 
been a debtor nation, and was the reason why two world wars were won by 
those that we call our allies, because we were the only creditor nation 
in World War I and World War II, but as of 1985 we became a debtor 
nation again. And the system that gave the greatest boost of power, of 
control, to the Federal Reserve was not in 1913, or 1923 when the FOMC 
was created but in 1979 when Paul Volcker, the Chairman of the Fed, 
decided that he would use these forced measures to do what, control 
inflation.
  But now, my colleagues, go out to your districts, go to the grocery 
stores, talk to your constituents, ask them if they are paying less or 
more for groceries than they were 10 years ago, 15 years ago. Ask them 
if they were paying less for lights, gas, water, utilities than they 
were 10 years ago. Ask them if they are paying less now than they were 
10 years ago for rent or a mortgage and they will tell you, ``Well, 
don't you know where we are? We are paying more, and in the meanwhile 
our paychecks,'' because the average paycheck of the average wage 
earner in the United States for the past consecutive 3 years has lost 
$80 a month in net payroll value. But as of 3 years ago, and I brought 
that out in previous orders, over 70 percent of our families in America 
after the month had no disposable income.
  And all you have to do is go talk to the average little folk and 
particularly in districts such as mine where we have an abundance of 
marginally employed, right below the low middle class.
  So where is inflation control? Oh, an economist said business 
inflation has been controlled. But we are talking about bread and 
butter. We are talking about the absolute necessities that a family 
must have today to live: shelter, food, clothing, and you are paying 
more now than before. Rents keep going up; they are not going down. Ask 
anybody where in the District of Columbia; they will tell you how much 
they have been going up. And as I said before on the other key items 
that are the cost of living.

                              {time}  1640

  Naturally, the Irish have a saying, ``It is easy to sleep on another 
man's wound.'' First, we are privileged in being the trustees selected 
by our constituents to represent them as true and faithful agents. But 
above all, our pay, our rate of pay puts us in a pretty good bracket, 
nationally speaking. So, to those of us who are well fed, well clothed, 
who can go home and sleep in a comfortable bed, warm bed, have a good 
meal, it is not easy to go across town and see those who do not have 
enough to eat or the head of the household who at the end of the month, 
``I just can't make this paycheck stretch in order to get that pair of 
shoes for the child or the dress for the wife.'' That is what I meant 
by the awesome statistic that over 70 percent of our families having on 
disposable income.
  The Federal Reserve Board is the one who dictates what those 
conditions shall be, like Mr. Volcker, ending in the 1970's and 1980's 
with such things as the so-called prime interest rate as high as 20 and 
21 percent. Now, that wrecked thousands, tens of thousands of 
businessmen.
  I reported all of that, if anybody wants to look up the records of 
the proceedings of the U.S. House of Representatives through those 
years. So I plan to continue to insist on accountability because 
without this there is no way we bring about accountability.
  Now, the Federal Reserve, through its member banks, who depend on it 
when it examines them, uses them to lobby, come up here and tell my 
colleagues, ``Hey, I hope you won't let this guy Gonzalez cause us to 
lose our independence.''
  I have had several reports. I know that that has always happened. I 
am not shocked at that.
  But I will say this, my colleagues: When the day comes--and it is 
coming--and the patient loses his or her patience, woe to this land in 
the social disruptions and the belated accountability that, I hope I am 
wrong and will not come in an undesirable way. But the handwriting is 
already on the wall. We have already had clear indications that the 
social contract that is at the base of our form of democracy has been 
disturbed and endangered.
  Now, an inspection of these transcripts that we have been able to get 
reveals very interesting aspects of the FOMC works. I think it should 
be a major concern of everybody to know how the most powerful committee 
in the United States determines how much we will pay for the goods and 
services we buy and whether we will have jobs or employment or, more 
importantly, whether your share, your share of stock in our Government, 
which is that dollar note you have in your pocket--and that is a 
Federal Reserve note, I will point out to you, and you have to pay 
interest for the Federal Reserve to print that $1 note, believe it or 
not.
  But the value of that, known as our currency, just within less than 
10 years, two-thirds of the value of that dollar has been lost; two-
thirds of that value lost in comparison to the Japanese yen and the 
German deutsche mark.
  Now, how long can that continue before the value of our currency is 
debauched? Or--and here is where the Fed comes in because it is our 
central bank, it is the monetary center--where is it in reporting this 
loss of value? Why is it you are paying more for all that you have to 
buy, including the necessities of life? That is why.
  But it is hard to translate one to the other no matter how hard one 
wants to explain it. But that is it.
  But if we reach the point where our currency is debauched and if 
anybody thinks that cannot happen, I want to disabuse you of that, my 
colleagues, disabuse you of that smug feeling or thought, for it can. 
In my opinion, and I hope again I am wrong, the danger is clear and 
very present that it could.
  Now, what happens if the dollar is replaced as so-called 
international reserve currency unit? I have been raising this question 
for 5 years. Nobody wants to listen, in or out of Congress, in or out 
of the committee, in or out of our places of power.
  I have discussed it with the chairman of the Fed, who says the same 
thing as a couple of three big international bankers, ``Oh, that can't 
happen, at least not in the immediate future, unless there is some day 
when there is great instability in the United States.''
  Well, that is fine, but then I ask them, Why can't it happen next 
year? You know, all it takes would be 5, no more than 5, of the so-
called Group of 7 countries to just merge their currencies and 
nationalize a unit. They have already that in the ecu, the European 
currency unit. The European currency unit is right now worth a little 
better than $1.30, right now. And all the quotations that are made in 
the trade in Europe are made in ecus, not dollars. Here is what it 
means, in view of the fact that we are the most privileged nation in 
history, which used to get the French leader DeGaulle very angry. He 
called it the ``arrogant American privilege.'' We are the only people 
who have ever been able to pay our debts in our currency. But if that 
supplanted, it means that this huge debt structure we have now at all 
levels--governmental; corporate; and private, you and I--would have to 
be paid in somebody else's currency. And then, my colleagues, that 
means that we will go back to colonial times and the old mercantile 
system where we were the slaves of the controllers in the mother 
country. And we are back, much more than anybody wants to admit who 
knows the facts.
  Mr. Speaker, the second point I want to make about the transcripts 
concerns the Federal Reserve's foreign policy program--yes, I said 
``foreign policy program'' because the Fed is issuing loans to foreign 
countries without congressional approval. My colleagues, you probably 
thought it was your duty to debate and vote on loans to foreign 
countries, but the minutes reveal how the Fed members debate and 
authorize billions of dollars' worth of loans without any congressional 
action or authorization. The least the Fed can do is send us minutes of 
these debates. Unfortunately, the monks at the money temple have edited 
out many of the crucial terms of the loan package. Do you trust them to 
handle these loans without fully describing the terms of the loans to 
foreign countries?
  Included in the November 1, 1988, FOMC transcripts that the Fed has 
released, is a discussion of loans to Mexico in 1988 following their 
hotly contested July 1988 election. In August 1988, the Federal Reserve 
granted a $700 million loan to Mexico. We do not as yet have any full 
accounting from the Federal Reserve about the discussions that led up 
to this loan.
  In the November 1, 1988, FOMC transcript, Chairman Greenspan, his 
FOMC colleagues, and staff discuss a new special system swap 
arrangement for $1.25 billion on which various amounts would be drawn. 
The term ``SWAP'' refers to the Federal Reserve's Reciprocal Currency 
Arrangements, which is an integrally authorized fund that the Fed can 
use for a number of purposes including intervening in foreign currency 
markets and making loans to Mexico. In the past, the Fed has 
appropriated itself over $30 billion for its SWAP lines of credit.
  My colleagues, did you believe that you would be consulted before the 
debate and vote on appropriations for foreign loans? If so, you had 
better read the 1988 FOMC minutes. I remind you that the Federal 
Reserve has fought any effort to change the law which prevents the 
General Accounting Office from examining any of the Fed's activities 
that involve foreign exchange activity or the loans discussed in these 
FOMC transcripts. Is that the way we should be overseeing the spending 
of taxpayers' money? Of course not.
  As background for the political conditions in Mexico at the time the 
Federal Reserve granted Mexico a $700 million loan and was discussing 
the $1\1/4\ billion line of credit for Mexico, I quote from a September 
2, 1988, Los Angeles Times article:

       A chaotic scene unparalleled in Mexico's political history 
     erupted in Congress on Thursday as President Miguel de la 
     Madrid delivered his final ``State of the Nation'' address 
     amid repeated shouts of ``Fraud!'' and an opposition walkout.
       De la Madrid was interrupted more than 10 times by 
     protesters from both the left and the right, who charge that 
     the government committed widespread fraud in the July 6 
     election in which ruling-party candidate Carlos Salinas de 
     Gortari was officially declared the winner.

  The government election commission declared a bare-majority victory 
of 50.3 percent for Carlos Salinas de Gortari, candidate of the PRI, as 
the ruling party is known. Although his nearest rival, Cuauhtemoc 
Cardenas, candidate of a coalition of leftist parties, won 31 percent 
of the vote according to official figures, there was still doubt about 
Salinas' margin of victory and, among some Mexicans, about whether he 
won at all.
  In the middle of this political turmoil comes the Federal Reserve 
with its $700 million loan--it even discussed a much larger line of 
credit. Should the taxpayers have a timely record of what the Fed was 
doing? Should we be told why they chose to support the ruling party at 
this time?
  Now we know, over 5 years later, what the FOMC members were saying at 
their November 1, 1988, meeting. Former Fed Gov. Martha Seger said:

       The day this bridge loan was announced in the newspaper, I 
     happened to have breakfast with a Congressman from the House 
     Banking Committee and he said, `What in the world is the 
     Federal Reserve doing in that? Why would they be involved 
     with the Bridge loan?'

  Next I quote from former Cleveland Federal Reserve Bank President Lee 
Hoskins:

       The concern is that we would be subject to being viewed as 
     perhaps circumventing Congress by working more closely with 
     administrations down the road on this kind of activity. In 
     that sense, I don't think it's appropriate to continue those 
     kinds of relationships because I think it risks the political 
     independence of this body to some extent. That's my longer 
     term concern. As for the shorter ones, I'll wait until I see 
     what you are going to put in your telegram.

  The transcript shows that Chairman Greenspan did not answer President 
Hoskins. Instead, Chairman Greenspan asked if there were any further 
questions and then said, ``If not, let's move on to the domestic 
desk.''
  Chairman Greenspan, I have some further questions and I regret that 
they have to come more than 5 years after the fact. Even more important 
than this specific loan, is the question of why the Federal Reserve can 
engage in this kind of activity--loaning American tax dollars to 
foreign countries--without complete oversight from the Congress.
  The third point I want to make about the transcripts is the 
revelation from the December 13, 1988, transcript that FOMC members 
knew they were changing monetary policies and following the advice of 
Chairman Greenspan, neglected to inform the Banking Committees of the 
Congress which have oversight jurisdiction. I quote from the December 
1, 1988, transcripts:

       Chicago Federal Reserve Bank President Silas Keehn: * * * 
     The only question I would have is how do we explain it in the 
     markets what we are doing. I have in mind your February 
     Humphrey-Hawkins testimony. Are we doing something different 
     that you're going to have to explain in your testimony?
       Chairman Greenspan: What we are doing is what we've been 
     doing, whether we defined it or not, for at least as long as 
     I've been here. I don't know what difference we have to 
     explain.
       President Keehn: Well, I would think in your testimony the 
     aggregate discussion tends to be on the heavy side in terms 
     of ranges on performance relative to the ranges, etc.
       Chairman Greenspan: Not in that sense.
       President Keehn: I think what we're talking about is a 
     quite different procedure with which I agree. I think we may 
     have a responsibility to explain both to the Congress as well 
     as to the markets that we are doing something a little bit 
     different here.
       Chairman Greenspan: On the other hand, we've stayed within 
     our [monetary] target ranges which we have defined to the 
     Congress--right in the middle--and it's likely that we don't 
     have anything to explain.

  This discussion clearly shows that Chairman Greenspan prefers to 
withhold information from the Congress even during the Humphrey-Hawkins 
law which require a report on past performance and future plans for 
monetary policy. We deserve a full explanation of why this was not done 
and why there is such a predilection to be secretive.
  The fourth point I want to make about the transcripts is that they 
clearly reveal that Federal Reserve staff members play a major role in 
the FOMC meetings and their comments constitute a significant part of 
the transcripts. In many cases they are explaining policy decisions 
that many FOMC members then ratify. The expertise of the staff is 
important, but if they are determining our Nation's monetary policies 
there is all the more reason for a complete record of what each of them 
is saying at FOMC meetings and what, if any, relevant questions the 
members of the FOMC are asking before they ratify policies.
  It was not until after the House Banking Committee's October 19, 
1993, hearing on Federal Reserve accountability that I obtained Federal 
Reserve Chairman Alan Greenspan's admission that the Federal Reserve 
had transcripts of FOMC meetings dating back to 1976. At the hearing, 
16 Federal Reserve witnesses, including members of the Board of 
Governors and Federal Reserve Bank presidents, carried out their plan 
to stonewall and mislead the Congress about the existence of this 
inventory of transcripts. I have issued a complete report of this sorry 
episode entitled, ``The Federal Reserve's 17-Year Secret.''
  On October 26, 1993, Chairman Greenspan admitted a letter to me that 
the Fed had 17 years' worth of FOMC meetings transcripts on file. 
Rather than complying with my requests for these transcripts, Chairman 
Greenspan wrote to me on November 17, 1993, that the FOMC had decided 
to release transcripts of the FOMC meetings with a 5-year delay and 
that they would begin issuing the 1988 transcripts in early 1994 and 
then release the remainder of their 17 years of transcripts over 
several years.
  There is no valid reason for making the public wait 5 years to obtain 
accountability for the actions of the Federal Reserve and even less 
justification for pretending that editing can only be done at a snail's 
pace. That again is arrogant disdain for public accountability.
  After my long experience with the Federal Reserve, including its 
performance before my committee on October 19, 1993, I do not wish to 
turn over the editing of these transcripts to their staff without fixed 
rules approved by the Congress. I am not sure what was left out of the 
transcripts. They say that ``All information deleted [. . .] is exempt 
from disclosure under applicable provisions of the Freedom of 
Information Act.'' There is no way to tell if these deletions were 
proper. That is one reason I have insisted that the Banking Committee 
receive all the transcripts immediately.
  I am still waiting for the Fed to tell me whether it plans to release 
complete transcripts of future FOMC meetings. The Fed is upholding the 
stonewallng tradition to protect its turf, and the immense political 
power it has built up over the years, by using bankers to lobby the 
Congress.
  But I will say this to the panjandrums of power, Mr. Greenspan, and 
to you, my colleagues, and the privileged orders of our country: If we 
do not, the day will come when the people in full knowledge will rise 
in wrath and indignation and chase all of these moneylenders that have 
sold out their inheritance from this temple of democracy.

                          ____________________