[Congressional Record Volume 141, Number 21 (Thursday, February 2, 1995)]
[Senate]
[Pages S1969-S1971]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      FEDERAL RESERVE BOARD ACTION

  Mr. DORGAN. Mr. President, yesterday I came to the floor before the 
Federal Reserve Board had finalized action, worried about whether they 
would once again make another very 
[[Page S1970]] large mistake with respect to increasing interest rates 
and further injuring the American economy.
  Of course, we know from news yesterday that the Fed raised short-term 
interest rates again. Seven times in a year the Federal Reserve Board 
has met in secret and then told the American people they have decided 
that for the country's own good, interest rates must once again go up.
  I was looking again at the Constitution, and the Constitution under 
article I, section 8, says: ``The Congress shall have the power to coin 
money, regulate the value thereof,'' et cetera, et cetera. The 
interesting thing about the Federal Reserve Board, it is a creature 
created by the Congress in the early 1900's with a national promise 
that this will not become a strong central bank. Of course, it has 
become a strong central bank, accountable to no one.
  I said yesterday that they apparently view themselves as a set of 
human brake pedals, whose mission in life is to slow down the American 
economy. Well, unfortunately they will succeed beyond their wildest 
dreams. I think they risk throwing this economy into another recession.
  More importantly, their actions mean that virtually every American 
will pay more credit card interest; those millions of families out 
there with adjustable rate mortgages will find that their home payments 
are going to go up. I had a fellow tell me recently, ``I am paying $115 
a month more now than a year ago because my adjustable rate mortgage 
was adjusted.'' And I said that resulted not from some democratic 
action, not some concerted action in Congress where there was a big 
debate and a discussion about what should be done; that happened 
because of a group of central bankers. They went into a room, shut the 
door, and made a decision outside of the view of the public citizens to 
increase interest rates.
  It will impact virtually every American. But more importantly, in my 
judgment, it risks throwing this country back into a recession.
  I just do not understand why the current Federal Reserve Board 
apparently feels unemployment should never go below 5 percent and 
economic growth somehow should never be more than 2.5 or 3 percent. 
Where on Earth did they get these notions? What schools out there could 
possibly teach this kind of nonsense?
  There is not much we can do about what the Fed did yesterday, but 
shortly I intend to reintroduce the Federal Reserve reform legislation 
that I have sponsored previously. I would introduce this even if rates 
were going down, so it is not just that they are going up that causes 
me to come and describe to my colleagues what I think we should do. But 
I am very concerned that rates are going up at a time when they should 
not be going up, when there is no credible evidence of inflation--none. 
Inflation is down 4 straight years. Last year, 2.7 percent.
  Mr. Greenspan, with whom I disagree substantially, says, ``We think 
it overstates inflation by up to 1.5 percent.'' If that is the case--I 
do not agree with that. But using his own numbers and his own logic, 
maybe inflation is only 1.2 percent. If that is really the case, then 
what on Earth are they doing raising interest rates seven times? How 
can one conclude that inflation is somehow on the cusp of being out of 
control if it is 1.2 percent? Again, I do not know just what kind of 
air they are breathing that can cause this kind of internal chaos and 
this kind of unusual thinking.
  We cannot do much about yesterday, but we sure can do something about 
tomorrow in terms of how decisions are made about monetary policy. 
Should decisions be made by a bunch of politicians? No, I do not think 
so. There are not enough cigars in the world to pass around to give 
politicians the opportunity to close the door and make their own 
decisions about money. I do not agree with that. That is not my 
suggestion. But should monetary policy be conducted outside of the view 
of the American public in some closed room by a bunch of central 
bankers who serve their constituency, not ours? The answer is no. It is 
the wrong thing. We should change it. Congress created the Federal 
Reserve about 80 years ago. We should change it.
  How would we change it? I recognize the minute we talk about changing 
anything here Wall Street has an apoplectic seizure. But most anything 
gives Wall Street seizures. Let us talk about what ought to be done and 
let Wall Street worry about its future.
  What ought to be done? Well, first of all, we ought to pass a Federal 
Reserve reform bill that says the following: Nobody ought to vote on 
monetary policy in this country in any room, locked or unlocked, unless 
they are accountable to the American people. And the fact is those who 
voted in the Open Market Committee on interest rates yesterday and who 
are the regional Fed bank presidents are neither appointed by the 
President of the United States, nor are they confirmed by the Congress. 
They are unaccountable to anyone except their boards of directors, the 
majority of which are private bankers. None of them should ever cast a 
vote on the Federal Reserve Board Open Market Committee. No regional 
Fed bank president ought to have a vote on that committee. That is No. 
1.
  No. 2, I think there ought to be immediate disclosure. There has 
been, incidentally, in recent months, immediate disclosure of actions 
by the Fed. When they take action in secret, it ought to be disclosed 
immediately. I have read stories about people using voice stress 
analyzers on speech by the Fed Chairman after a meeting was held and 
they made a decision in secret but are not set to announce it until 
later. So somebody is using voice stress analyzers on the voice of the 
Chairman to figure out what has happened in the room. That is how 
bizarre the secrecy at the Fed has become. It has persuaded people to 
try to penetrate the secrecy.
  So, make a decision and announce it immediately. Let the small 
investor know as much as the big investors think they know.
  Third, I think that the Federal Reserve Board budget ought to be 
published in regular order and in regular form in the budget of the 
United States, and I think it ought to be subject to performance 
audits. The Federal Reserve Board ought to be like other Federal 
agencies and accountable.
  Fourth, I believe the Federal Reserve Board ought to meet on a formal 
basis with the executive branch of Government, especially the Treasury 
Secretary, who is involved in fiscal policy. If we have monetary policy 
on the left hand and fiscal policy on the right hand, the two ought to 
talk a little bit to figure out which direction they are going.
  We have had circumstances in the past where they looked like they 
were riding a bicycle built for two, with fiscal policy on the front 
end trying to chug uphill and monetary on the back end trying to keep 
the brakes on. And they get somewhere near the cusp of the hill, and 
they are talking to each other and one says, ``We are exerting a lot of 
pressure to get away,'' and the other says, ``We are putting the brakes 
on.''
  What sense does that make? There ought to be some coordinated policy 
in this country, or at least some understanding of what one is doing 
relative to the other.
  Those are the things that I think need to be done to make changes in 
the Federal Reserve Board. Very modest changes. This is not taking the 
Fed and flipping it upside down and shaking the daylights out of it. It 
is not doing that. Would I like to do that? Maybe. But am I proposing 
that? No, I am proposing very modest steps.
  Even these steps, interestingly enough, are largely too much for most 
Members of Congress, because they say, ``Oh, Lord we don't want to get 
involved in that. We don't want to talk about the Fed. It is some 
mysterious priesthood of action and language down there which we don't 
understand. Let's not interfere with it. Those who want to talk about 
this basically want to put politics right in the middle of the Federal 
Reserve Board System.''
  Nonsense. Total baloney. We ought to do this. We ought to at least 
give the American people some notion that monetary policy constructed 
in this country is of, by and for all the people, not just the 
constituency of the big money center banks that is represented so well 
and so consistently by current policies of the Federal Reserve Board.
   [[Page S1971]] I hope I do not come to the floor again in the months 
ahead to be critical of the Federal Reserve Board. My preference would 
be to praise the Federal Reserve Board for doing the right thing. But 
they are doing the wrong thing. It is time for us to say when the 
Federal Reserve Board is on the wrong course doing something that is 
going to injure this country. When the Fed feels its role is to be a 
human brake pedal to slow the country down and risk throwing it into a 
recession, it is time for some of us to stand up and say this makes no 
sense for our country.
  I come from a State that is a heavy user of credit--agriculture. The 
family farmer plants in the spring and does not get a crop until fall. 
They need to use credit to tide them over during the year.
  Do you know what sort of behavior this does to a family farmer? It is 
an enormous hit for a family farmer or rancher. This substantially 
increases their costs. Farmers in North Dakota will pay, on average, 
thousands of dollars more in interest payment because of the Fed's 
actions this past year. Did they have any opportunity to participate in 
these decisions? Any voice at all? No. The interest of the family 
farmer or rancher out there is subordinated to the interest of the 
money center banks. I guarantee you, the interest of the money center 
banks is present, front and center in that room when these decisions 
are made.
  But I also guarantee you that there is not anybody in that room 
talking about my Uncle Joe, about people who produce things, about the 
farmers out there who are planting and hoping, about the ranchers who 
are working in subzero weather trying to make sure their cows are all 
right and then come to the bank at the end of the year and decide they 
have substantially increased costs. It has nothing to do with their 
cows, but it has to do with some folks down there behind a closed door 
at the Federal Reserve Board.
  This ought to change. I would not be here if I thought the Federal 
Reserve Board was on the right track and doing the right things for our 
country. I feel so strongly they are not. I think the Fed is moving in 
a direction counterproductive to this country's interest.
  That is what persuades me to talk and to, once again, want to 
introduce this legislation. Let me in 1 final minute read something 
from the Washington Post today. After yesterday's action by the Federal 
Reserve Board, it is not, I suppose, surprising for anyone to see a 
quote:

       Many Wall Street analysts, however, praise the course of 
     Fed policy.

  I tell you what, that probably is not very surprising to most 
Americans. Many Wall Street analysts praise the Fed policy. Of course 
they praise the Fed policy. Who do you think the Feds are doing this 
for? It is not Main Street, it is not the family farmer, not the 
rancher, not the working person out there.
  So I guess when previous Fed Reserve folks said to Members of 
Congress at a hearing, ``We are serving our constituency''--that is 
what they said arrogantly--we know who their constituency is. But it is 
different than our constituency, and that is the dilemma.
  I hope one of these days there is a reconciliation in this country 
about who monetary policy is created and fashioned for and in whose 
interest it now serves.
  Mr. President, I yield the floor, and I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. HATCH. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.


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