[Congressional Record Volume 142, Number 129 (Wednesday, September 18, 1996)]
[Senate]
[Pages S10735-S10736]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                       THE FEDERAL RESERVE BOARD

  Mr. DORGAN. Mr. President, I wish to make a couple of comments, 
first, about the Federal Reserve Board and a piece in this morning's 
newspaper about the Federal Reserve Board and, second, about the issue 
of confirming U.S. judges. First, the Federal Reserve Board.
  Page 1 references the story on page 2 about the Federal Reserve 
Board. Next Tuesday, the Federal Reserve Board is going to meet in 
secret and make a decision about whether or not it wants to increase 
interest rates in our country. Apparently 8 of the 12 regional Federal 
Reserve Bank boards have made a recommendation to the Federal Reserve 
Board that they ought to increase interest rates and somehow that was 
leaked to the press. ``Newspaper Story's Apparent Leak of Advice on 
Rates Shocks the Fed. Regional Banks' Opinions Are a Tightly Held 
Secret.''
  Why is this interesting? Because next Tuesday the Fed will make a 
decision that will affect every single American. If they increase 
interest rates, they will tax every single American with

[[Page S10736]]

higher interest rate charges on their indebtedness. Will there be a 
debate about it? No. Will it be public? Will it be a democratic system? 
No. It will be done in secret, just as everything else is done in 
secret. That is why this story talks about the FBI being called out in 
other circumstances to find out who leaked information about what is 
happening at the Fed.

  Why ought it be a crime to leak information? The American people 
ought to have information about what is happening in monetary policy. 
We ought to disinfect the Federal Reserve Board by opening the doors 
and providing some sunlight into their process, so the American people 
can become, at least in some minor way, a part of the process in 
determining whether this country ought to have higher interest rates.
  I simply want to point out how incredible this story is, written by 
John Berry. John Berry always writes stories from the institutional 
side of the Fed. I do not know, if he stepped back, six or eight paces 
away, he would see the absurdity of this institution which is now a 
dinosaur, the last remaining dinosaur in Washington operating in secret 
behind closed doors with those who are coming from around the country, 
hired by their boards of directors in the regional Fed banks--the 
boards of directors are local bankers--coming to Washington, DC, to 
make public decisions about interest rate policy that all Americans 
will be confronting.
  This obviously commends a much longer discussion than this. But next 
Tuesday the Federal Reserve Board, if it is thinking straight, will 
decide to just say no to higher interest rates.
  Inflation is down one-tenth of 1 percent, announced last week. You 
can almost find no inflation in this economy. It is down 5 years in a 
row. Unemployment is down to 5.1 percent. The models that the Federal 
Reserve Board use simply are not working. They have always felt you 
cannot have lower unemployment because lower unemployment would mean 
higher inflation. Now they are scratching their heads, wondering how is 
this happening? How is it that unemployment has come down to 5.1 
percent and there is no new inflation?
  If the Fed would open its doors and send some of its folks around the 
country to talk to real people, they will find wage earners know what 
the Fed has not known for the last two decades. Wage earners know wages 
have not been going up, they have been going down. The pressure to 
create more inflation from higher wages is not happening in this global 
economy. The global economy and circumstances of our participation in 
it are pushing wages down, not up. It is time the Fed changes its 
models or goes out and talks to real American people about this and 
maybe they would come to the right conclusion next Tuesday.

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