[Congressional Record Volume 140, Number 31 (Friday, March 18, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 18, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                       THE FEDERAL RESERVE SYSTEM

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
February 11, 1994, the gentlemen from Texas [Mr. Gonzalez] is 
recognized for 60 minutes as the majority leader's designee.
  Mr. GONZALEZ. Mr. Speaker, since February 4, 1994, when the Federal 
Reserve raised rates, and thereby fueled the belief that this was only 
a first step, pervasive uncertainty has undermined world bond markets 
and interest rates in the United States have risen across the board. 
There is now the very real threat that Fed policy will bring our weak 
recovery from the 1990 recession to an end, and millions of Americans 
will suffer the consequences as tens of thousands have already.
  Why did the Fed adopt this policy? Was it because there was an 
increased inflation in the United States as they said they feared? 
Absolutely not. Even Federal Reserve Chairman Alan Greenspan admits 
that the 2.7-percent inflation last year was overstated because of 
problems in the way it is measured. It could have been less than 2 
percent as far as rise in prices was concerned.
  Did the Fed raise interest rates because our economy is too healthy 
and needs to be tamed, or as they put it, overheated, the old-fashioned 
remedy of bleeding the patient a little bit? Absolutely not.

                              {time}  1110

  The unemployment rate during the officially designated recession, 
from the peak of the recovery in July 1990 to the official low point, 
the so-called trough, in March 1991, rose to 6.8 percent, and that does 
not include those that disappeared from the unemployment rolls because 
they exhausted the period of unemployment compensation. They still did 
not find jobs, but they are not listed any longer.
  So that 6.8 percent is a faulty statistic. It would be considerably 
more.
  The unemployment rate is still, for our country, an abomination. 
There is nothing worse that can happen to a human being anywhere, and I 
would say particularly in America, than to find himself victimized by 
the feeling that eventually overwhelms him or her that he is not 
useful, that there is no useful, productive slot in his society for 
him. That is destroying more of our human moral fiber in our country 
than anything else.
  I can recall when those of us in the Congress, and before I came to 
the Congress particularly, would have been alarmed at anything 
approaching 4 percent unemployment. You would have had tremendous 
reaction in the halls of the Congress. Not anymore. And that is a 
shame.
  Because to translate a statistic, a cold statistic, in terms of human 
beings requires that our system be fulfilling its purpose, and that 
translates to us who would indulge in the conceit of concealing that we 
could ever achieve, and we can only attempt to, but never really 
achieve of being in the full sense of representative of every one of 
the segments of our communities. you can make an effort, but we are 
human. We have difficulties. We have weaknesses.
  Therefore, no matter how well endowed we are, it is a constant 
challenge. But our system is predicated on representative government 
based on the rule of majority will with built-in safeguards now 
constitutional.
  Even during the colonial times, these protections were engrafted to 
protect the minority from an oppressive majority, and now we have these 
protections embodied in the basic and fundamental law of our land.
  But when we translate the perversity of our situation in America, 
where we have millions of our citizens who in other days would have 
been called peasants or serfs, today are wage serfs, and not even that, 
because they cannot find a job, and that is not only morally wrong, it 
is criminally wrong and indefensible.
  The Irish, I will repeat, have an old saying that ``It is easy to 
sleep on another man's wounds,'' and those of us who have been 
fortunate enough to acquire a very strong definition of affluence, 
safe, decent housing, comfortable, sufficient food to feed one's self 
and family, clothing. Those are the essences, no matter where human 
beings exist on this globe, food, shelter, clothing.
  Unfortunately, our national policymaking body, the Congress, has been 
an accomplice and coconspirator with some recent administrations and 
leaders who have turned their back on those commitments.
  So here we are now with this entity that, through accretion and 
neglect on the part of the Congress that created it, known as the 
Federal Reserve Board, and through actual usurpation and grasping of 
power which always happens in human existence, has arrogated to itself 
this awesome power of determining the standard of living, employment or 
unemployment of Americans, whether it is possible for a family desiring 
a safe, decent home can afford to have one. These are decisions that 
are now made by this entity we call the Federal Reserve Board.
  After the so-called recession ended, though actually that is 
relative, even now recently when you had economists announcing that not 
only had the recession ended, but you had an upturn, you had recovery 
is the word they use; they all have to admit that if it is, it is a 
jobless recovery, because each week tens of thousands of workers, and 
this time mostly white-collar workers, are being let out by the giant 
corporations in our country.
  So the problem is here and it is hagriding our country.
  After the point in June 1992 in which segments announced the 
unemployment rate of 7.7 percent and 9.8 million American workers were 
trying to obtain employment and were counted as unemployed, today there 
is still, even by these faulty estimates, better than 8.5 million in 
that definition. They are officially counted as unemployed under the 
new jiggery pokery of the revised statistics.
  In many parts of the country and throughout the depressed areas of 
our cities, this is a devastating and cruel occurrence.
  I would like to introduce a graph into the Record that shows the 
unemployment rate and the number of unemployed from the 1950's to the 
present. You will be shocked to learn that none of the previous six 
economic recoveries since the 1950's have been as slow as our current 
recovery, and this I have mentioned as far back as over 20 years ago 
here to my colleagues in this ritual and privilege we call special 
orders, pointing out, in fact, since the 1960's and 1970's, that we had 
turned the corner as far as America's productivity.

                              {time}  1120

  I read statistics that, as best I can remember, showed that as late 
as the early 1950's, certainly the late 1940's, the United States, our 
country, was producing close to 80 percent of the total world's needs. 
By the middle 1960's that had shrunk to less than half of that, and 
today it is not even 17 percent.
  This was almost imperceptible. Oh, there were some of us talking 
about it and saying, ``This means we have got to sit down and have 
vision and think in terms of long-range consequences and what we will 
do.''
  There were parallel occurrences when I came to the Congress 32 years 
ago that were happening in Europe. Their desire toward unification, 
which they had the vision to plan. The blueprint they had since the 
late 1940's, not too long after the war, and they have been very 
faithful in following that blueprint.
  As developments occurred in 1985, May 1, when they had the economic 
summit in Bonn, Germany, President Reagan was President. I then took to 
the floor to announce--and it was the only time that you had the full 
communique of that economic summit printed anywhere; now, it was in the 
European press, but I mean the American press--the last sentence was 
the one that I emphasized, had implications of awesome importance. The 
last sentence of that communique said, ``And we agree in principle to 
the development of European monetary system, the EMS, and the European 
currency unit, the ecu.''
  All of that has been in place now, and certainly that announcement in 
1985 meant that with the common currency unit, which at this point the 
ecu is worth a little better than $1.30, and all of your transactions 
are quoted--look at all of the financial advertisements in Europe--you 
will see they are not quoted in dollars any longer, they are ecus. And 
I have mentioned the great danger.
  But where is this great organization that was created to function as 
the equivalent of our central bank, the Federal Reserve Board? Where is 
our leadership in the executive branch through the Department of the 
Treasury in anticipating and warding off the possibility that the 
dollar can be replaced as the international currency unit?
  I have gone into that before, my colleagues, so I will not take your 
time this afternoon but would like to refer you to the special order 
before last, if you are interested.
  We predicted, thanks to a great, great American and a most brilliant 
economist and economic mind, and scientific mind that I have ever 
known--and I was pleased to make his friendship before I even came to 
the Congress--that was Dr. Leon Keyserling. He was the one who authored 
the National Housing Act of 1947. He was part of Franklin Roosevelt's 
sort of sub-level brain trusters. He had a hand in the first Social 
Security Act of 1935-37, and the first Housing Act of 1937. But he 
actually wrote the 1947 Basic Housing Act. I was privileged to know him 
because of my long and sustained interest and commitment to the 
question of housing or shelter and community development.
  Many a day he would point out to me and would graph out, he would 
say:

       Every time we proceed into the future, since there has been 
     no long-range planning on the national level since President 
     Franklin Roosevelt, you will see that every time you have a 
     recession, it is going to dip a little bit deeper, take a 
     little bit longer to plateau.

  Well, before he died, which was the last and most grave Depression, 
right on the eve of the Reagan first term--and we must remember that 
the United States was a creditor nation, and was a creditor nation 
since 1914--but on September 16, 1985, we declared ourselves a debtor 
nation and are today the greatest debtor nation in the world. The 
transfer or the fulcrum or the pendulum of financial power then 
gravitated out of New York, and it is nestling in Tokyo.
  The Japanese have not really been producing and introducing 
automobiles into the American economy anymore, they use their money. 
Just up until not too long ago, they had about 35 percent ownership of 
our treasury, of our debt. That is a powerful, powerful fulcrum. As far 
as assets, direct asset ownership or indirect asset ownership, actually 
the British have more than 2 times what the Japanese have in America--
but you do not hear about that. And all of that has its implications.

  That is the reason that I have been troubled and have taken the time 
to announce to my colleagues, because I feel it is my responsibility. I 
sit on the committee and have done so for 32 years, since I came here, 
and therefore I am charged with knowledge. I concur with the great 
French thinker and hero, the great philosopher and writer who died in 
the First World War, Charles Peguy.
  He said in one of his writings, ``He who does not bellow the truth 
when he knows the truth makes himself an accomplice with liars and 
forgers.'' And I agree with that.
  Now, of course, that makes some people and some powerful forces quite 
upset. Too bad. That has always been the case, all through history.
  Since World War II, the unemployment rate began dropping within 2 
months of the recession. However, this time unemployment did not begin 
to drop until June 1992, like Dr. Keyserling had been predicting all 
along. Finally, he said it will reach a point where it just does not 
bottom out.
  But in June 1992, roughly 15 months after it was specifically 
admitted that there was a recession--and let me tell you that in 1990, 
October, I called a hearing of our Committee on Banking, Finance and 
Urban Affairs because the Secretary of State, Mr. Baker, announced that 
the real purpose of the buildup in the Persian Gulf--and remember, we 
were engaged in the buildup--this was right before the November 9, 
1990, announcement by the President that he was going to double the 
size of the projected expeditionary force.

                              {time}  1130

  Secretary Baker said, ``We're asked why. What is our commitment? What 
is our involvement?''
  And I will tell my colleagues what it is in one word: jobs, jobs, 
economics.
  Well, I felt that our committee had jurisdiction on credit allocation 
and the like. We called a hearing, and, lo and behold, Chairman 
Greenspan accepted the invitation to come and testify, and he did. I 
can provide to anyone who wants one a record of the hearings where Mr. 
Greenspan said:

       Well, officially I can't say that we can define it as a 
     recession, not officially. However all these disturbing 
     factors, high rate of unemployment, that have been endemic at 
     least since the middle of the summer, point to a very serious 
     end * * *

I would say that 70 percent of the present adverse impact on our 
economy is due to this diversion of resources for this buildup.
  Well, we were censored; that is, there was no coverage of that 
hearing. If there were reporters, they did not report what Chairman 
Greenspan said, and ordinarily anytime Chairman Greenspan appears 
anywhere they have everything from TV cameras to Associated Press and 
everything else. But the record is there.
  It was after that that it was admitted that one could say there was a 
recession so that clearly the economy is in very deep trouble.
  Now there can only be one reason why the Federal Reserve Board would 
train or target its guns on its own citizens. The officials at the 
Federal Reserve worship at the shrine known as zero inflation, and they 
intend to keep working toward this dream regardless of consequences.
  In the elections last year in Canada the incumbents and the 
equivalent of our Treasury Secretary were insisting on zero inflation. 
The voters came in, and, to the astonishment of everybody else, just 
threw the whole kit and caboodle out.
  So, here we are in the United States now prostrate before the sacred 
Golden Calf. They are tightening the money supply to counter an 
inflation that does not exist, or at least it is not targeting where 
the real goals should be targeted, and that is the cost of living of 
our citizens as I have said endlessly.
  Where has inflation been controlled? They boasted that they have 
controlled it. One economist finally said, ``Well, business inflation 
has been controlled,'' but, my colleagues, few among our constituents 
who are dependent on a wage and who go to the grocery store to do their 
shopping--ask them if they are paying less for groceries today than 
they were 10 years ago, and the answer is obviously they are not. Ask 
them if their rent is less or more. Ask them if they are paying more or 
less for utilities: light, gas, water, which are the essentials of 
today. My colleagues will find that it just is not happening.

  But in the meanwhile the wages are reduced. As of 3 years ago I 
announced to my colleagues that over 70 percent of our families at the 
end of the month have no disposable income left, and on top of that, 
the last 3 successive years, the average salary or wages of a worker 
have diminished 80-plus dollars a month.
  So why is that? Well, one thing that is not perceptible: It is very 
difficult to translate these things down to our living, real life, but 
why should we be paying more for these things? One reason is that the 
only share of stock each one of us has in our Government is that dollar 
note, the American dollar, and that dollar, in less than 15 years, has 
lost two-thirds of its value as against the Japanese yen and the German 
deutsche mark. That is the reason we are paying more. I am worried that 
if this continues, we will see the debauchery of our currency.
  Whenever any real enemy of a country was thinking how to do it on an 
intellectual basis besides the battleground, and even where they won in 
the battleground they lost in the money tables, the war, they always 
looked to diminishing the value of that currency; if possible, 
debauching it.
  Some of the Federal Reserve decisionmakers explicitly testified at 
our hearing of the Banking Committee on October 19 last year that they 
believe in the absurd and unrealistic notion of zero inflation, and the 
rest of the Federal policymakers have made it clear from their 
decisions to actively be in that same shrine of zero inflation. The 
truth is that heading for a target of zero inflation can devastate 
totally our economy, and what is more tragic is that it ends up in 
bringing higher rates of inflation. It can also destroy the use of the 
U.S. dollar as the key currency, as I have said repeatedly. This is not 
a distant and remote danger. This is a present and clear danger I have 
been saying. But who cares?
  My colleagues, I cannot get anywhere, even with those serving on the 
committee. But even if we could, there is nothing we in the Congress 
can really do directly. This has to be done through the agencies we 
have, the monetary setting board, the central banks, so called, which 
we call the Federal Reserve Board, and, instead of the Federal Reserve 
hunkering down to protect this largesse of power, they are overlooking 
what is happening now worldwide which will define, no matter what the 
Fed does, their ability to even control interest rates, and I have been 
saying that since 1985. We no longer have control over those external 
forces, and no matter what we do domestically it will impact us 
overwhelmingly unless we, the United States, exert leadership in a 
concert of nations, as we did with the great leaders that had plans and 
visions, Franklin Roosevelt being really the last one, and I have 
suggested that.
  They are totally unaware, or apparently unaware, of this huge 
overbuild worldwide even as I am speaking now. We have trillions of 
dollars moving in what they call nowadays nanoseconds--the speed of 
light--from money capital to money capital, all speculative, and 
especially since this thing they call derivative markets, which is 
complicated and all of that, but which simply means that on a worldwide 
basis now and in an uncontrollable fashion we have giant casinos 
involved in our banks.

                              {time}  1140

  Now, I do not care if it is the securities dealers who do not have 
deposit insurance backed by the taxpayers, but the banks do, and our 
leading banks have gone into that to the point where their so-called 
off-balance sheet activities now are depending on this high-risk 
gambling to report whatever profits they have been reporting but which 
exceed their capitalization structure.
  Now, in the 1920's we had that, but it was the sovereign nations. 
Today no one sovereign nation can control this because we have at least 
anywhere from half a million to three-quarters of the individuals all 
over the world in this, and all they have to do is get a computer and a 
modem and then have an ostensible line of credit of at least $100,000, 
and then they are in the game and they are betting hundreds of 
billions.
  The so-called derivative market is based on what they call a nominal 
value. Let us say they are going into the gambling on futures stocks 
and whatnot as well as currencies. It is gambling. They are betting 
that something will happen in the future. But if our banks are not 
restricted in the high-risk ventures, then we are going to face the day 
of reckoning, which is already happening.
  Most recently, the Spanish bank that went under, the reason it lost 
money was because it lost its shirt in this derivative, or this 
speculative, market.
  I repeat, no one sovereign nation can control it. We can pass laws to 
control it here, but that does not mean that it is controlled. It is 
going to take a concert of nations.
  Now, the Bundesbank of Germany is very disturbed. They have tried to 
control the gambling on their currency. And they are trying to get a 
concert of nations.
  Now, the European Parliament under the leadership of the Frenchman 
Delors, who was one of the architects of bringing about the European 
Community, had a committee--I obtained a copy of their committee 
recommendations last December--and that is what they are recommending, 
that you have to do something.
  The Bank for International Settlement, which is a mysterious entity, 
but it is where the power is. The BIS is really the central bankers' 
bank, and it controls everything.
  I can remember--I have been blessed to live through depressions and 
wars--when Franklin Roosevelt announced, to the great astonishment of 
the American people when he said, we are going to be the arsenal of 
democracy and we are going to produce 50,000 warplanes.
  Well, it was fine, but he could not really get started until the 
German cartel through their bankers and the BIS released the magnesium 
that was needed for production.
  So one can have wars but the thing behind it all is finance.
  We are really a very, very young nation and naive. But we are dealing 
with countries that have a thousand years of experience in government 
and more than 500 years in this kind of financial speculation, gold 
market, silver market, the most controlled markets of all.
  And we have had to pay the price, but I will not go into that, into 
the specifics. I have reported that in prior special orders.
  Now, who defines inflation? I just gave an example of what in real 
life the people know they face. They may or may not know what to call 
it. That does not mean they do not know what is happening.
  Well, the definition we have been getting is based on governmental 
statistics that have been doctored and cooked some 15 years.
  Zero inflation, I have said to my colleagues on the Banking Committee 
and all, the only place you can find real zero inflation is in the 
graveyard. It is the only place.
  Price indexes and so forth, even Chairman Greenspan announced a few 
months ago that they were faulty.
  But as I have said for years now and I will say that since the 
pendulum swung, the center of gravity of financial power gravitated 
from us in 1985--in September to be exact--no matter what the Fed 
thinks it can do, it is caught in a bind.
  It has really been in gridlock. In fact, I was the first one to use 
that term 8 years ago with Chairman Voelcker, and he agreed.
  He said, ``You know, that's right. That is a good word.''
  I said, well, don't you have gridlock, if you reduce or you increase 
interest rates in order to attract investment, which is what they did.
  And that is when we had this tremendous infusion and takeover of 
direct assets from banks to shopping malls by foreign money of all 
kinds; Germany, Japan, France, Great Britain, all of them. It was all 
borrowed.
  So that if you drive interest rates, that money will go out and seek 
other places, Germany or some other place, where they can get a higher 
yield. So that there is gridlock.
  It used to be we in the United States could control that because we 
would set the tone and the world would have to dance to that tone and 
tune. Not any longer, for a good while now.
  So the Fed's arguments of zero inflation are dangerous, they should 
not even be countenanced, and they should be rejected.
  But if you do not have access and the Fed does not have 
accountability and feels it does not have to account to anybody, either 
to the Congress who created it or to the President who appoints 
members, Governors, how can the people know?
  It is essential that the Congress and the public have access to the 
complete minutes of the Fed's decisionmaking body, the so-called 
Federal Open Market Committee.
  When did that begin? Did it begin with the enactment of the Federal 
Reserve Board Act of 1913?
  No, it wasn't until about 10 years later. So that I have introduced 
what is known as H.R. 28, and I call it the Federal Reserve System 
Accountability Act of 1993.
  In no way would it diminish the rightful independence of this body, 
the central bank, to have freedom from pressure in setting of the so-
called monetary and fiscal.
  We can pass laws or do whatever we can here. They can undo it, like 
they did with Gramm-Rudman-Hollings.
  The British used to have a similar program and that was reformed 
after the war. It used to be that the Chancellor of the Exchequer could 
determine whether the British Government went down or stayed on. They 
changed that somewhat. But today the Fed can decide the fate of an 
administration through still having domestic control of such things as 
interest rates.
  In H.R. 28, what we say is: ``We want you to give us an accounting of 
your actions. What were the reasons? What do your deliberations show 
that led you to this decision?''

                              {time}  1150

  There is another thing, and I have asked this of my colleagues 
before, as an example of how, when you do not have accountability, 
power can become such a runaway thing that it can undo even the basic 
innermost values of a country, and particularly a country such as ours. 
Whether it is the Federal, whether it is the CIA, whether it is the 
legislative body itself, if it is given unrestrained power and does not 
have to account, it will be corrupted sooner or later, and usually 
sooner than later.
  But I have asked this question, and I am going to leave off with 
that. Under the following circumstances, would you vote today to give 
the Federal Reserve a $30.1 billion line of credit that could be used 
to loan money to foreign countries?
  You will have nothing to say about who gets the money or why. You can 
put no conditions on the loans. And remember, the Constitution says you 
are supposed to be in control of the pursue strings, and you will have 
to abdicate your Congressional oversight role.
  In addition to that, our watch dog agency, the General Accounting 
Office, will be prevented by law from any examination of how the money 
is used, and the records of the expenditures will be incomplete and at 
times intentionally misleading; in other words, false.
  Well, my colleagues, if your answer is yes, then it does not matter. 
There is no use talking. But the Federal Reserve has established such a 
fund since 1962. In the special order before last I mentioned 
specifically the case of Mexico in 1988, where the Mexican Government 
was wallowing in its election dilemmas and the legitimacy of its 
election was being challenged. At that point the Federal Reserve 
decided to give President Salinas that huge amount overnight.
  Did Mexico have to pay any interest or anything? Who knows? But that 
is the power that the Federal Reserve has been exercising since 1962.
  The truth is that the Federal Reserve at the time in 1962, through a 
slight of hand of sleeper riders, whatever you want to call them, 
really conned the Congress.
  So I will additionally continue to bring out some of the specific 
uses in the past of some of this fund. In 1962 the Federal Reserve 
appropriated $50 million without congressional processes to intervene 
in the currency markets and also to make these foreign loans. They 
early called it the Federal Reserve reciprocal arrangements, referred 
to as the Swap Fund. It is still called that today.
  The minutes we were able to get our hands ons show that on February 
13, 1962, Federal Reserve Governor J.L. Robertston accurately called 
the $50 million an unlimited pocketbook and voted against it. The only 
one. The Federal Reserve made no bones about the fact they were 
establishing the fund to evade the congressional budget authority.
  So I will place in the Record further parts of these minutes, and I 
hope that my colleagues will carefully at some point or another read 
them.
  Mr. Speaker, I would like to know if any of my colleagues, under the 
following circumstances, would vote today to give the Federal Reserve a 
$30.1 billion line of credit that could be used to loan money to 
foreign countries: You will have nothing to say about who gets the 
money, you can put no conditions on the loans, and you will have to 
abdicate your congressional oversight role. In addition, the General 
Accounting Office will be prevented by law from any examination of how 
the money is used, and the records of the expenditures will be 
incomplete and sometimes purposely misleading.
  If you answer ``No,'' it doesn't matter. The Federal Reserve already 
established such a fund in 1962 and would like you to believe that 
Congress gave them the go-ahead at the time to establish this fund. The 
truth is the Fed conned the Congress into agreeing to this arrangement. 
I will provide you with details of this Federal Reserve chicanery which 
I have obtained from the Federal Reserve's decision-making body, the 
Federal Open Market Committee minutes that the Fed stopped issuing in 
1976. You will see first hand that when the Fed said it stopped taking 
minutes because of principle, it was the principle of power.
  In 1962 the Federal Reserve decided to appropriate a $50 million fund 
for intervention in currency markets and to make foreign loans. It was 
called the Federal Reserve Reciprocal Currency Arrangements referred to 
as the SWAP fund, which it is still called today. The FOMC voted for 
these funds, and the discussion is revealed in the February 13, 1962, 
FOMC minutes when Federal Reserve Governor J.L. Robertson accurately 
called the $50 million an ``unlimited pocketbook'' and voted against 
it. The Fed made no bones about the fact that they were establishing 
the fund to evade congressional budgetary authority.
  I quote the argument of Governor Robertson from the paraphrased 
minutes:

       Mr. Robertson recalled that he had opposed the whole 
     program of operations in foreign currencies on legal, 
     practical and policy grounds because it seemed to him that 
     the only basis for the entrance of the Federal Reserve into 
     this field would be to supplement the resources of the 
     [Treasury] Stabilization Fund and because the program is 
     being undertaken without specific Congressional approval.

  Once the fund was established, the Federal Reserve agreed to keep 
Treasury informed about the fund's activities by way of staff meetings 
and a daily conference call. The Treasury was denied the power to veto 
the Fed's decisions. And of course at this point, the Congress had been 
completely dealt out of the game.
  Federal Reserve Chairman William McChesney Martin, Jr., may have had 
some reservations about this power grab when he said that it might be 
desirable to seek legislation at some time in the future. But, he 
concluded, ``at the moment he doubted whether it would be feasible, 
with so little experience, to determine exactly what kind of 
legislation was needed.'' [FOMC minutes of February 13, 1962.]
  While it is true the FOMC did make an attempt to inform Congress 
about the SWAP fund, the Fed buried the information in a nine-page, 
single-spaced speech delivered before the Congressional Joint Economic 
Committee at its January 30, 1962, hearing. Chairman Martin deflected 
attention from the Fed's newly established SWAP fund by talking about 
the fact that the New York Federal Reserve Bank was acting as an agent 
for the Treasury's Exchange Stabilization Fund, their equivalent of the 
SWAP fund. Martin said Treasury's fund was used with the ``aim of 
defending the Dollar from speculative forays.'' [JEC Hearings, 1962, p. 
174.]
  Chairman Martin's brief, vague, and wholly unsatisfactory testimony 
gave Congress no indication that the Fed planned to turn this into the 
multi-billion fund it is today. There is no doubt the nine pages 
sedated most listeners as the Fed intended. However, an alert 
Congressman Richard Bolling, a Democrat from Missouri, asked Martin to 
explain what he meant. I quote part of Chairman Martin's testimony: 
``It is not possible to spell out here--what we are aiming at is to 
keep the speculators from unseating us.''
  Unfortunately, since that time, few members of Congress have 
questioned the Fed about its SWAP fund and the Fed as is its wont, has 
happily kept quiet and discouraged curiosity. For example, I read in 
the August 16, 1988, transcript of the FOMC meeting, which the Fed 
finally released last week after my prodding, how it covered up a 
transaction in which yen were traded for U.S. dollars. I wondered if 
the true nature of the transaction would ever be reported. The 
transcript reveals that they wanted to hide the yen intervention. True 
to form, one Fed staff member said, ``It's not reported per se, but 
it's in `Other Assets.'''
  The former Fed staff member who issued the final quarterly report 
said:

       We will not be specific about the source [of the currencies 
     that were received]--the counterpart--but we will indicate 
     publicly that we have picked up these currencies.

  Is this the level of accountability to the Congress that the Fed has 
come to expect? I find this totally unacceptable, and I am sure you 
would agree. We can't let the Fed bench the Congress while it runs the 
ball. The least we should demand of a large bureaucracy dealing with 
billions of dollars of taxpayers' money is an independent audit by the 
investigative arm of Congress, the General Accounting Office, to 
examine these operations to see if they are efficient and whether there 
is any leaking of exploitable information about the trillions of 
dollars of transactions that the Fed engages in every year.
  My colleagues, are you willing to turn your vote on appropriations 
for foreign loans over to the Federal Reserve? I know you want to 
retain the legitimate right of the Congress to oversee these 
transactions. I urge you to support my legislation, the Federal Reserve 
System Accountability Act of 1993, H.R. 28. This bill removes the 
restrictions on the GAO that presently prevent it from examining the 
Federal Reserve's foreign currency and foreign loan operations. H.R. 28 
will thus restore legitimate oversight of these foreign loan operations 
to the Congress--where it belongs.
  Since February 4, 1994 when the Federal Reserve raised interest rates 
and fueled the belief that this was only a first step, pervasive 
uncertainty has undermined world bond markets and interest rates in the 
United States have risen across the board. There is now the vary real 
threat that Fed policy will bring our weak recovery from the 1990 
recession to an end and millions of Americans will suffer the 
consequences.
  Why did the Fed adopt this policy? Was it because there was increased 
inflation in the United States? Absolutely not. Even Federal Reserve 
Chairman Alan Greenspan admits that the 2.7-percent inflation last year 
was overstated because of problems in the way it is measured. It could 
have been less than a 2-percent rise in prices.
  Did the Fed raise interest rates because our economy is too healthy 
and needs to be tamed--the old-fashioned medical remedy of bleeding the 
patient a little? Absolutely not. The unemployment rate during the 
officially designated recession, from the peak of the previous recovery 
in July 1990 to the official low point, the so-called trough in March 
1991, rose to 6.8 percent. A year after the recession ended, in June 
1992 the unemployment rate of 7.7 percent and 9.8 million American 
workers--over a million more than at the end of the recession--were 
trying to obtain employment and were counted as unemployed.
  Today there are still 8.5 million American workers who are officially 
counted as unemployed under the newly revised statistics. In many parts 
of the country and throughout the depressed areas of our cities, the 
slow recovery is devastating and cruel. I will introduce a graph into 
the record that shows the unemployment rate and the number of 
unemployed from the 1950's to the present. You may be shocked to learn 
that none of the previous six economic recoveries since the 1950's has 
been as slow as our current recovery. Since World War II, the 
unemployment rate began dropping within 2 months of the recession 
ending. However, this time, unemployment did not begin to drop until 
June 1992, roughly 15 months after the recession supposedly ended. 
Clearly the economy is still in trouble, making the Fed's current tight 
monetary policies a true abomination.
  There is only one reason that the Federal Reserve has aimed its guns 
at its own citizens. The officials at the Federal Reserve worship at 
the shrine of zero inflation and they intend to keep working toward 
this dream regardless of the consequences. They are tightening the 
money supply to counter an inflation that does not exist. Let me tell 
you why I have often said zero inflation can only be found in the 
graveyard.
  Some of the Federal Reserve decisionmakers explicitly testified at 
the October 19, 1993, House Banking Committee hearing on reforming the 
Federal Reserve, that they believe in the absurd and unrealistic notion 
of zero inflation. And the rest of the Fed policymakers have made it 
clear from their policy actions that they too are actively deifying the 
same shrine of zero inflation.
  The truth is that heading for a target of zero inflation can bring 
devastation to the U.S. economy and it can even bring higher rates of 
inflation. It can also destroy the use of the U.S. dollar as a key 
currency--which means it can destroy the use of U.S. dollars as a means 
of international payment throughout the world. That would be injurious 
to the standard of living in the United States.
  First, what is inflation? Inflation is a sustained rise in the 
average price of goods and services. The Government measures the 
average price of goods and services with mathematical averages called 
indexes. The most widely used index is the Consumer Price Index [CPI] 
which purports to measure the average prices of goods and services 
consumers buy each month. When the average price, as measured by the 
index, rises for a number of months it is called inflation.
  Zero inflation would occur if this CPI index did not change for a 
sustained period of time, for example, 6 months. What would that mean 
for the average American family and for the Nations 130 million 
workers? If the price indexes were absolutely correct, it would mean 
that approximately half of the prices and wages in the country would be 
falling and the other half would be rising so that the average change 
in prices would be about zero. Thus, those who plan for zero inflation 
dream of employers all over the United States telling their employees, 
``This year your wages will be lower but don't panic, we have zero 
inflation.'' The truth is that to get the demand for goods down to the 
level that would cause half the employers to make this announcement, we 
have to plunge the economy into a depression. There would be utter 
devastation in the labor markets if we dumped that policy on the 
country at this time or in the foreseeable future.
  To make matters worse, the price indexes are not accurate measures of 
average prices. Experts, and even Federal Reserve Chairman Alan 
Greespan, admit these measures of inflation could be way off the mark. 
This means that if the Federal Reserve were to tighten monetary policy 
enough to get the price indexes to record no change month after month, 
the true average price could be minus two percent. In other words we 
would have a deflation--falling prices--which translates into massive 
unemployment for the country.
  Those who worship at the shrine of zero inflation and say that free 
markets will take care of the unemployed might as well tell the 
millions who become unemployed due to tight money polices: ``The 
markets have cleared without you.''
  Those that understand representative government realize that this 
kind of devastation in an economy will produce a reverse reaction of 
fast money growth and inflation. And should our economy become 
devastated because of the Fed's fixation on inflation, our currency 
will not be sought as a key currency--a currency used to make 
international payments throughout the world.
  The Fed's arguments in favor of zero inflation are dangerous and 
should be rejected. My colleagues, I urge you to question the Fed's 
rationale for to do otherwise is to invite economic disaster. If we are 
to benefit our citizens, we must have a full employment policy and this 
can only be attained if we allow moderate changes in these inaccurate 
price indexes.
  It is essential that the Congress and the public have access to the 
complete minutes of the Fed's decision-making body, the Federal Open 
Market Committee [FOMC] so that we know what the individual FOMC 
members are thinking. These are the people managing the country's money 
supply. These are the people who raise and lower interest rates. These 
are the people who worship at the shrine of zero inflation and want to 
screech the brakes on economic growth. These individuals impact each of 
our lives with their decisions about our money supply, unemployment and 
inflation.
  Maybe some of the FOMC members should not be reappointed, 
particularly if their views are inimical to the country's best 
interest. As it stands today, some of the FOMC members are selected by 
the board of directors at their particular Federal Reserve Bank. These 
boards are heavily stacked with bankers or friends of bankers, whose 
interests are sometimes different from those of us in the Congress. I 
am advocating that the 12 Federal Reserve Bank presidents, who serve on 
the FOMC on a rotating basis, be appointed by the U.S. President and 
confirmed by the Senate. This way you can know where they stand on the 
issue of economic growth before they get in a position to determine how 
much or how little money should be pumped into the economy.
  This new selection process is included in H.R. 28, the Federal 
Reserve System Accountability Act of 1993, which I introduced last 
year. The public has the right to know if those managing the Nation's 
money supply are worshipping at a false shrine of zero inflation which 
will devastate the U.S. economy.

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