[Congressional Record Volume 144, Number 49 (Tuesday, April 28, 1998)]
[Senate]
[Pages S3665-S3666]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          THE FEDERAL RESERVE

  Mr. DORGAN. Mr. President, this morning the front page of the 
Washington Post has an article that says, ``Interest Rate Fears Drive 
Stocks Down.'' The article makes the point that the Dow Jones average 
tumbled 147 points yesterday. And John Berry, in the

[[Page S3666]]

Post, who writes a fair amount about the Fed and about economic news, 
says the analysts on Wall Street indicate there was a strong concern by 
investors that the long-running bull market might be nearing a peak and 
that the Federal Reserve Board is looking at the potential of 
increasing interest rates.
  It is interesting to me that it is a front page story that the stock 
market is down 147 points. The fact is the Dow Jones industrial average 
is nearly 9,000. It is a stock market that has increased dramatically. 
We have had up days of 70 points, 90 points, 120 points. It is not 
surprising that we will have downturns in the market of 140 points or 
more when you have a market that is over 9,000 in the Dow Jones 
industrial average.
  But what surprises me is the notion somehow that the Federal Reserve 
Board somewhere behind closed doors at a March 19 meeting indicated 
that, gee, they were concerned that the economy was growing too fast 
and that maybe American workers are making too much money. They are 
concerned that maybe too many people in this country are employed.
  There is no amount of good news that will not give the economists 
down in the Fed a bellyache for a week or two. There is no amount of 
good news that does not cause them great concern. ``Gosh, the economy 
is doing well, so we better have a heartache about how well the economy 
is doing.'' It is interesting to me that the Fed has been consistently 
wrong. I know there are people in this Chamber who will stand up and 
say, the Fed ought to be credited with the good economic news in this 
country. In fact, just the opposite is the case.
  The Fed has been consistently wrong about this economy. They 
indicated time after time after time that if unemployment ever went 
below 6 percent we were going to be in huge trouble, we were going to 
see the new fires of inflation stoke up. Well, unemployment went below 
6 percent and has stayed below 6 percent. We have not seen new waves of 
inflation. The Federal Reserve Board has just missed the fact that the 
global economy has put downward pressure on wages in this country.
  But having said that, the Federal Reserve Board now has short-term 
interest rates higher than it ought to be, higher historically than it 
should be by a full half a percent. This means the prime rate is higher 
than it ought to be and higher than it historically would be given the 
rate of inflation of well over 1 percent at this point. Yet, they are 
talking about maybe increasing interest rates down at the Federal 
Reserve Board.
  What on Earth can they be thinking? I mean, if the job of the Federal 
Reserve Board is to simply slow down the economy, my uncle can do that. 
There are five or six people in my hometown who can do that. We do not 
have to pay them a lot of money to do that. What can they be thinking? 
Too many people are working? We are starting to see maybe some 
increases in some salaries at the bottom of the economic scale?
  I would say to the Federal Reserve Board, if you have a lot of time 
on your hands, take off those gray coats you wear from those gray suits 
you wear to work every day and start thinking about bank mergers. Maybe 
start thinking of what the CEOs make at the top--not workers at the 
bottom, and wonder what it does to the economy.

  The Fed should be talking about the biggest bank mergers in the 
history of this country. What does it mean for consumers that all of 
the biggest banks of this country are getting together and deciding 
there is so much romance going on in the financial industry and they 
would like to marry up?
  The Federal Reserve keeps a list down there called the ``too-big-to-
fail'' list. That is a list of the biggest banks in the country that 
will never be allowed to fail because the consequences of their failure 
would be too catastrophic for the economy. So they have the too-big-to-
fail list.
  As more and more banks merge, of course, that list gets bigger, and 
it means the risks of the merger will be borne by the American 
taxpayer. So this monopoly game played by American giants passes off 
its risk to the American taxpayer.
  So I say to the Federal Reserve Board, if you have lots of time on 
your hands, don't sit around scratching your heads and increasing 
interest rates, when the short-term Federal funds rate is already 
higher than is justified, given the rate of inflation. Start thinking 
about what these bank mergers do to the American economy. Start asking 
yourself why--if you keep a list that is called ``too-big-to-fail,'' 
why in this economy do family farmers out there face a risk of serious 
financial problems right now? And they seem to be, in the eyes of the 
Fed, and others, too small to matter? Why is it that some are too big 
to fail and others, who are critical of this country's success, somehow 
too small to matter?
  I would just say to the Fed--when I read this story this morning, I 
wondered again about those we hire to do monetary policy and who think 
about economic policy. What they can be thinking about when they 
suggest--and have now for about 3 years--that any good economic news in 
this country is somehow a step backwards.
  I just ask the Fed to understand this economy is doing quite well, 
notwithstanding the Fed's advice. And there is no justification--none--
for this Federal Reserve Board to be considering increasing interest 
rates.
  The Federal funds rate at the moment is historically higher than it 
should be, given the rate of inflation. If they take any action at the 
Fed, it ought to be to decrease the Federal funds rate to where it 
ought to be, given the current rate of inflation which, incidentally, 
is almost nonexistent.

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