[Congressional Record Volume 140, Number 32 (Monday, March 21, 1994)]
[House]
[Page H]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: March 21, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                   MY ADVICE TO THE PRIVILEGED ORDERS

  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, last week Federal Reserve Chairman Alan 
Greenspan met with President Clinton. This is neither unusual, 
controversial, nor startling. It is a practice that has been common as 
long as I can remember as a member of the Committee on Banking, Finance 
and Urban Affairs for 32 years. It is proper because the American 
people have elected the President, and he, in turn, has chosen and 
selected members of the Federal Board, and it would be proper for them 
to review the country's economic health and financial policies. But 
under the secrecy role of the Fed, the newspaper, the Washington Post, 
as of Saturday, March 19, reports White House talk sinks bond prices, 
Clinton-Greenspan meeting starts rumors. Now this, of course, is also a 
part of what should be the oversight jurisdiction of the Committee on 
Banking, Finance and Urban Affairs and the reporting requirements for 
monetary policy legislated in the Humphrey-Hawkins Act of 1978.
  The Federal Open Market Committee [FOMC], the powerful 12-member 
committee of the Federal Reserve that determines the Nation's monetary 
policy, should recognize this need for accountability to the Congress 
and the American public. The FOMC meets tomorrow. One of the topics 
committee members will reportedly discuss is how to reply to my request 
that the FOMC make public complete minutes of its eight annual meetings 
and how it should promptly disclose any decisions to raise or lower 
interest rates.
  These reforms, contained in my legislation, H.R. 28, the Federal 
Reserve System Accountability Act of 1993, are not an attempt to 
influence or micromanage the Fed. The Fed would continue to remain 
independent of short-term political pressures. These reforms would 
simply establish individual accountability for the members of the FOMC 
because the Nation has the right to know what each individual member of 
the FOMC thinks about monetary policy. This is a basic requirement of 
decisionmakers in a government bureaucracy in a democracy. Supreme 
Court Justices publicly state their opinions--and justice is better 
served.
  Not so the Fed. Far from making its opinions public, in 1976 the FOMC 
stopped releasing complete minutes of its meetings. The then Chairman 
of the Federal Reserve, Arthur Burns, went as far as to testify that no 
detailed minutes would be taken after this time. This testimony was 
intended to block Freedom of Information Act [FOIA] and other requests 
from the Congress, press and public for detailed accountability for 
FOMC discussions. I found out on October 26, 1993, that this statement 
was untrue. The Federal Reserve, in fact, has maintained a 17-year 
treasure trove of transcripts of its FOMC meetings.
  It was not easy to elicit this admission from Federal Reserve 
officials. I had asked specifically in my letter of invitation that 
each of the Federal Reserve Bank presidents and Governors slated to 
appear before my committee on October 19, 1993, independently disclose 
what they knew about the records being kept of FOMC meetings.
  My colleagues, on October 15, 4 days before they were to testify 
before the committee, the FOMC held one of two conference phone calls 
where they discussed their strategy for this upcoming hearing. On 
January 13, 1994, after long negotiations, my staff listened to a tape 
and read the transcript from this call.
  During this call many of the FOMC members found out perhaps for the 
first time, that the Federal Reserve has maintained 17 years of 
transcripts dating back to 1976, the year the FOMC erroneously claimed 
it had stopped taking minutes of its meetings. During the conference 
call, participants indicated they were worried how this embarrassing 
information would look when seen in the harsh light of day.
  The Federal Reserve staff tried to calm their fears, with one staff 
member indicating that the Fed planned to try to hide the existence of 
the 17 years of transcripts from the Banking Committee. He announced in 
the conference call that the ``[Fed] Chairman [Alan Greenspan] is not 
highlighting these transcripts * * *. We're not waving red flags.'' 
Chairman Greenspan then read his prepared testimony which conveniently 
left out any mention of 17 years of FOMC transcripts.
  During the call, some of the Fed officials despaired that they would 
not be able to hide the existence of the transcripts for long, and that 
Chairman Greenspan should offer to release them in 5 years but settle 
for 3 years. The general counsel of the Federal Reserve warned that in 
the event of FOIA requests he saw the chances of the Fed holding on to 
these FOMC transcripts for longer than 3 years as not good.
  I urge the Federal Reserve not to stonewall and to make the full 
transcript of the conference call public. There is no sensitive 
material involved. No monetary policy was discussed, rather the 
discussion is centered around a plan to mislead the Congress when 
Federal Reserve witnesses were to appear before the Banking Committee 4 
days later. As Dallas Federal Reserve Bank President Robert D. McTeer, 
Jr. said during the call, the Fed ``had better quit stonewalling.'' 
Federal Reserve Congressional Liaison Don Winn said, ``I don't have any 
sense that they [the Banking Committee] have any knowledge whatever of 
what we've been talking about.''
  The plan to conceal the existence of these 17 years of FOMC 
transcripts was actively carried out when all 16 Fed witnesses failed 
to reveal to the Banking Committee at the October 19, 1993, hearing 
that they knew about the transcripts. When asked about a permanent 
record of FOMC meetings by Congressman Maurice Hinchey of New York, 
Chairman Greenspan testified:

       There is no permanent electronic record, that is correct. 
     We obviously have rough notes.

  But these are verbatim transcripts, not rough notes. Chairman 
Greenspan deliberately shaded the truth. I pursued my inquiry and on 
October 26, 1993, Chairman Greenspan admitted that there were 17 years 
of complete FOMC transcripts. The FOMC agreed to edit them at a snail's 
pace and to make them public with a 5-year lag, which means we will 
have to wait 5 years before we can read the transcript of this week's 
FOMC meeting. This is wholly unacceptable. The Fed surely won't be 
harmed by letting the light shine in, so we can all know what it is 
doing, and why.
  I think it is long past time for the FOMC members to change their 
version of accountability to one that is compatible with full 
accountability of government officials in a democracy. I therefore urge 
the Fed to comply with my requests to give the Banking Committee the 
FOMC transcripts, to continue the practice begun on February 4, 1994, 
of promptly announcing monetary policy changes, and to make the 
transcripts of FOMC meetings available on a timely schedule. Full 
accountability will enhance the credibility and stature of the Federal 
Reserve. It cannot afford to do less and still earn any trust from the 
American people whom it serves.

               [From the Washington Post, Mar. 19, 1994]

 White House Talk Sinks Bond Prices--Clinton-Greenspan Meeting Starts 
                                 Rumors

                           (By Clay Chandler)

       A hastily convened meeting yesterday between President 
     Clinton and Federal Reserve Chairman Alan Greenspan at the 
     White House sent a shudder through the bond market and 
     generated broad expectation that the central bank will raise 
     short-term interest rates at a key policy meeting next week.
       Clinton aides insisted there was nothing unusual about 
     yesterday's meeting. But the fact that Greenspan canceled a 
     long-standing speaking engagement in Houston for yesterday's 
     one-hour audience with the president kicked Wall Street's 
     rumor mill into overdrive.
       Many market observers speculated that Clinton summoned 
     Greenspan to the White House in a last-ditch effort to stop 
     him from raising short-term interest rates at Tuesday's 
     meeting of the Federal Open Market Committee, the central 
     bank's main policy board.
       Others guessed that Greenspan had initiated the meeting to 
     warn Clinton that he planned a substantial rate increase at 
     the FOMC meeting.
       Both theories gave markets the willies. At the end of 
     trading yesterday, the Treasury's 30-year bond had dropped 
     27/32 point, or $8.44 per $1,000 in face value, driving up 
     long-term interest rates to 6.90 percent from 6.82 percent. 
     Stocks recoiled as well early in the day, before closing 
     higher amid heavy volume related to options trading.
       The Fed last engineered a rise in short-term rates on Feb. 
     4, when it boosted the federal funds rate a quarter of a 
     percentage point for the first time in five years.
       Yesterday's White House meeting was ``a big mistake,'' said 
     Charles Leiberman, managing director at Chemical Securities 
     Inc. He argued that Greenspan now must raise short-term rates 
     at least a quarter of a percent at next week's FOMC meeting 
     to maintain his credibility in financial markets. Anything 
     less, he said, ``will give the impression that Greenspan's 
     arm can be twisted by the administration.''
       The White House professed surprise at the market's adverse 
     reaction to the meeting. ``This was a routine meeting between 
     the president and the chairman,'' said Gene Sperling, deputy 
     director of National Economic Council.
       Clinton and Greenspan ``had a wide-ranging discussion on 
     the economy,'' Sperling said, but there was ``no discussion 
     whatsoever about the FOMC meeting and the chairman did not in 
     any way signal or indicate any future Fed policies on 
     interest rates.''
       Greenspan meets with Clinton every six to eight weeks to 
     talk generally about the economy. As a rule, the White House 
     does not publicize those meetings. Word of yesterday's 
     meeting surfaced because Greenspan was scheduled to give a 
     speech at a conference sponsored by the Federal Reserve Bank 
     of Dallas, but bailed out suddenly to meet with Clinton.
       The abrupt change in Greenspan's schedule, combined with 
     the fact that the FOMC meeting is just days away, sparked the 
     firestorm of speculation.
       Some White House officials acknowledged yesterday that the 
     timing of the meeting was ill-advised.
       But members of Clinton's economic team said they didn't 
     know Greenspan would have to cancel a speaking engagement to 
     see the president.
       White House handling of the meeting provoked the ire of 
     many in the market yesterday. ``The market is confused by 
     actions of Greenspan and the administration,'' said Thomas 
     Sowanick, chief fixed-income strategist at Merrill Lynch & 
     Co. ``It's not clear to Wall Street that the White House 
     understands the dynamics of how the bond market works.''

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