[Congressional Record Volume 141, Number 35 (Friday, February 24, 1995)]
[Senate]
[Pages S3134-S3135]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


  SENATE RESOLUTION 80--RELATIVE TO THE FEDERAL OPEN MARKET COMMITTEE

  Mr. DORGAN (for himself, Mr. Baucus, and Mr. Reid) submitted the 
following resolution; which was referred to the Committee on Banking, 
Housing, and Urban Affairs:

                               S. Res. 80

       Whereas the Federal Open Market Committee of the Federal 
     Reserve System has increased interest rates 7 times during 
     the 12 months preceding the date of adoption of this 
     resolution, despite the absence of any serious threat of 
     inflation;
       Whereas the inflation rate declined to very modest levels 
     during the 4 years preceding the date of adoption of this 
     resolution;
       Whereas the Board of Governors of the Federal Reserve 
     System maintains that the Consumer Price Index overstates the 
     true rate of inflation by as much as 50 percent;
       Whereas increases in short-term interest rates have been 
     accompanied by increases in long-term interest rates, 
     reversing the downward trend that helped strengthen the 
     national economy;
       Whereas such higher interest rates will have a devastating 
     impact on the economy, including home builders, homebuyers, 
     and homeowners;
       Whereas higher interest rates will increase the Federal 
     deficit by adding $171,000,000,000, over 5 years, to pay the 
     interest on the national debt;
       Whereas the housing industry is one of the most interest 
     rate sensitive sectors of the economy;
       Whereas some home mortgage payments have increased by 
     hundreds of dollars per month because of the increase in 
     interest rates by the Federal Open Market Committee;
       Whereas the interest rate on a 30-year fixed rate mortgage 
     increased from approximately 7 percent since February 4, 
     1994, to the level of 9 percent 12 months later, increasing 
     the monthly payment on a $100,000 home mortgage loan by more 
     than $140 per month;
       Whereas homeowners with adjustable rate mortgages will 
     spend an estimated aggregate increase of $12,000,000,000 to 
     $15,000,000,000, in monthly payments during 1995;
       Whereas the National Association of Home Builders estimates 
     that a 1 percentage point increase in mortgage interest rates 
     means that approximately 4,000,000 households could not 
     qualify to purchase a median-priced home: Now, therefore, be 
     it
       Resolved, That it is the sense of the Senate that--
       (1) additional interest rate increase at this time could 
     risk throwing the economy into a recession;
       (2) the Board of Governors of the Federal Reserve System 
     should act with caution so as not to risk another recession; 
     and
       (3) the Board of Governors of the Federal Reserve System 
     should carefully weigh the effects of interest rate increases 
     on homeowners, homebuyers, home builders, and American 
     taxpayers when evaluating interest rate policy.

  Mr. DORGAN. Mr. President, yesterday Federal Reserve Board Chairman 
Alan Greenspan testified before Congress that the Fed's recent actions 
to increase interest rates were achieving their intended goal: to put 
the brakes on economic growth in this country. He also left room for 
the Fed to raise interest rates even further to deal with inflationary 
pressures. Well, I say enough is enough. No more interest rate hikes.
  The Fed says it has raised short-term interest rates by a full three 
percentage points this past year to combat inflation. But what 
inflation? Like Don Quixote on a mission to root out an imaginary 
enemy, the Fed has made inflation the invisible foe it seeks to defeat. 
In fact, the evidence shows that inflation has actually been falling 
for the past four years.
  [[Page S3135]] What the Fed has actually accomplished with higher 
interest rates is to put at risk those most vulnerable to interest rate 
change including homeowners, homebuyers, and home builders.
  Just look at what's happening to middle-income Americans in 
communities all across this country as a result of the Fed's actions.
  The interest rate on a 30-year fixed rate mortgage has jumped from 7 
percent to 9 percent in less than a year.
  A homeowner carrying a $100,000 fixed mortgage is paying almost $150 
more a month now for that loan than just a year ago.
  Homeowners with adjustable rate mortgages will spend an estimated $12 
to $15 billion more in total monthly payments this year.
  The National Association of Home Builders estimates that a one 
percentage point increase in mortgage rates will prevent four million 
families from realizing their dream of owning their own home. That is 4 
million broken dreams.
  Higher interest rates will increase the Federal deficit by adding 
$171 billion, over 5 years, to pay the interest we must pay on the 
national debt.
  That's why I am submitting today a sense-of-the-Senate resolution, 
which puts the Fed on notice. Stop the interest rate increase. Do not 
risk another recession. Consider the interests of the homeowners, 
homebuyers, home builders, taxpayers, and others who wind up bearing 
the burden of these actions.
  If you're as exasperated as I am with the Federal Reserve Board 
actions that put a hammer lock on middle-income families and the 
businesses that serve them, I hope that you will join me in 
cosponsoring this resolution. The threat is not inflation, which has 
decreased four years in a row. The threat we face is that of throwing 
our economy into another recession.


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