[Congressional Record Volume 146, Number 7 (Wednesday, February 2, 2000)]
[Senate]
[Pages S258-S278]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           EXECUTIVE SESSION

                                 ______
                                 

NOMINATION OF ALAN GREENSPAN, OF NEW YORK, TO BE CHAIRMAN OF THE BOARD 
               OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM

  The PRESIDING OFFICER. Under the previous order, the Senate will now 
go into executive session and proceed to the nomination of Alan 
Greenspan, of New York, which the clerk will report.
  The legislative clerk read the nomination of Alan Greenspan, of New 
York, to be Chairman of the Board of Governors of the Federal Reserve 
System for a term of 4 years.
  The PRESIDING OFFICER. The distinguished Senator from Texas is 
recognized.
  Mr. GRAMM. Mr. President, we have an unusual time agreement where we 
have 4 hours 50 minutes. I have asked, as chairman of the committee, to 
have 45 minutes under my control to make the case for Chairman 
Greenspan, the President's nominee.
  I have a very small number of people who wish to speak. Senator 
Sarbanes, as ranking member, has made a similar request for 45 minutes. 
I think the normal procedure would be to run off time proportionately 
among those who have asked for time. But since Senator Sarbanes and I 
have such a small amount of time, and many other Members who aren't 
members of the committee have more time reserved than we do, I would 
like to begin, so that there will be no dispute, no misunderstanding, 
by asking unanimous consent that the time be charged proportionately to 
the two sides. The minority side has 4 hours 5 minutes. The majority 
side has 45 minutes. I ask unanimous consent that the time be charged 
proportionately.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  Mr. GRAMM. Secondly, let me say that when we do have the minority 
side represented on the floor, I am going to seek to amend that to 
protect the time of the distinguished ranking member of the committee, 
Senator Sarbanes, and to protect my time. I urge those who have 
reserved up to an hour each in some cases to come to the floor and 
speak.
  With that, I yield the floor and reserve the remainder of my time.
  The PRESIDING OFFICER. The Senator from Maryland is recognized.
  Mr. SARBANES. Mr. President, parliamentary inquiry: What is the 
pending business before the Senate?
  The PRESIDING OFFICER. The pending business is the nomination of Alan 
Greenspan.
  Mr. SARBANES. I thank the Chair.
  Mr. President, I rise in support of the nomination of Alan Greenspan 
to be Chairman of the Federal Reserve Board. As I mentioned in the 
Banking Committee when we held the hearing on the nomination of Alan 
Greenspan to a fourth term as Chairman of the Federal Reserve Board, 
one of the distinctive aspects of the Federal Reserve Board as an 
institution has been its remarkable stability of leadership.
  Since 1934, when President Franklin Roosevelt appointed Marriner 
Eccles to be Federal Reserve Board Chairman until today--a period of 
over 65 years--there have been only seven Federal Reserve Board 
Chairmen; only seven. Among them are some of the outstanding economic 
leaders of our country. Marriner Eccles himself served 14 years as 
Chairman of the Federal Reserve. William McChesney Martin served 19 
years. Arthur Burns and Paul Volcker each served 8 years.
  If Chairman Greenspan is confirmed--I am assuming, I think reasonably 
so, that would be the case--and serves the full length of his fourth 
term, as I expect he will, he will be the second longest serving 
Chairman of the Federal Reserve Board. I think it is fair to say, in 
looking at his tenure as Chairman, that he will take his place among 
those other outstanding public servants who have provided exceptional 
economic leadership to our country.
  Earlier this week, the U.S. economy achieved the longest expansion in 
its history with 107 months of continuous growth. We have achieved high 
levels of growth that have brought us the lowest levels of unemployment 
in 30 years, and all of this has been accomplished with the lowest 
levels of inflation in 30 years.
  We have had a very virtuous economy in terms of low unemployment and 
low inflation. The expansion has now gone on long enough that its 
benefits have begun to be felt by the hardest to employ workers in our 
economy. Many companies now have instituted training programs which, of 
course, is all to the good. It enables us to improve the skills and the 
abilities of our workforce. It enables us to draw people into the 
workforce who heretofore have not been a part of it. A strongly vibrant 
economy is important to the success of any Welfare-to-Work initiative. 
One of the reasons that Welfare to Work has shown some of the results 
which it has shown is because it has taken place in the context of an 
economy moving towards or at full employment.
  The performance of the economy has defied the conventional wisdom 
once held by some in the economic profession that there was some 
arbitrary rate of unemployment below which the economy could not go 
without triggering inflation.
  Credit for this achievement should be shared. President Clinton and 
former Treasury Secretaries Bentsen and Rubin deserve credit for their 
disciplined leadership on fiscal policy which has eliminated our budget 
deficit and moved us into budget surpluses. The Congress also should 
share in that credit for maintaining fiscal discipline which has 
enabled us to come out of a deficit budget situation

[[Page S259]]

into a surplus budget situation, although I would add as a word of 
caution that I think we need to be extremely careful and prudent now in 
the steps we take.
  These surpluses about which so many people are talking in terms of 
what are they going to do with them are projected surpluses. They are 
not surpluses in hand and they depend very much on the continued 
healthy performance of the economy. I think it is imperative that we 
not go to excesses, whether on the spending side or the tax-cutting 
side, which would knock this economic engine off the track.
  In addition--obviously highly relevant to the subject before us--
Chairman Greenspan deserves credit for complementing the tight fiscal 
policy of the administration and the Congress with a monetary policy 
that has allowed our economy to grow. In doing so, he focused on the 
evidence before him and  was not bound by arbitrary assumptions about 
the limits of our economy's ability to grow without triggering 
inflation.

  I think the Chairman has been very pragmatic as he has made his 
judgments. I think he has been very much driven by the facts of the 
situation and has not come at it with these ideological presuppositions 
into which he then tries to bend the facts but has taken the facts, 
evaluated them, and made his judgments.
  I am reminded of the fact that some years back within the Federal 
Reserve System there was a regional bank president who asserted that if 
the economy started growing and drove the unemployment rate down or 
looked as though it was going to be below 6.7 percent unemployment, 
then inflation would virtually automatically start to rise and, 
therefore, the Fed had the responsibility--the Open Market Committee--
as the economy was growing in this direction to start curtailing the 
economy, of slowing it down by raising the interest rates because 
unless they did that, a strongly growing economy would bring the 
unemployment rate down below 6.7 percent. And that was the magic point 
at which the inflation rate would start going up.
  Fortunately, the Chairman, Chairman Greenspan, and a majority of his 
colleagues, never bought into this theory. Now we see the fact we have 
brought unemployment down to just over 4 percent, and we have no 
significant inflation problem before us.
  There is a lot of credit that can go around. I mean, when you have 
success, everyone has fostered it. But I am quite happy certainly to 
allocate a portion of that to the Chairman and the policies of the 
Federal Reserve Board.
  I have disagreed with Chairman Greenspan in the past about monetary 
policy, and may well disagree with him again in the future. I have been 
very much oriented to growth and jobs. I have always been deeply 
concerned about these so-called preemptive strikes against inflation 
where you slow growth and job production without any visible sign of 
inflation--simply some sort of anticipation of it. I have always argued 
that we ought to let the economy run for a while and see what it 
produces. The recent experience, of course, has been very encouraging 
because we brought unemployment down very significantly and have not 
triggered an inflation problem.
  All in all, though, I think it is more than fair to say that Alan 
Greenspan has been a skillful and dedicated Chairman of the Federal 
Reserve Board and merits confirmation for another term.
  I urge my colleagues in the Senate to join in supporting this 
nomination of Alan Greenspan to another 4-year term as Chairman of the 
Federal Reserve Board.
  Mr. President, I yield 5 minutes to the able Senator from New York, 
and not only a member but a very strongly contributing member of our 
committee.
  The PRESIDING OFFICER. The Senator from New York.
  Mr. SCHUMER. Mr. President, I thank the Senator from Maryland, not 
only for the generous yielding of time but for his thoughtful remarks--
as always. I think the name ``Sarbanes'' and the word ``thoughtful'' 
are almost attached in this body, and with good reason.
  I rise today in full support of the nomination of Alan Greenspan. I 
do it for a whole variety of reasons. Before I get into those reasons, 
I am holding something in my hand. Senator Gramm's staff gave us the 
application of a man of such gravity and success and magnitude, it is 
kind of funny to hold an application where he lists his schooling. Even 
on the last page, there is a section that says ``qualifications,'' why 
he would be a good Chairman of the Federal Reserve. But he begins by 
saying, ``I have been an economist for almost half a century.'' One 
does not have to read this application, fortunately, to know of 
Chairman Greenspan's merit to be renominated as Chairman of the Federal 
Reserve.
  First, I am proud personally, and I know the other representatives of 
my State are proud, because Alan Greenspan is one of New York's 
contributions to the national economy. He is a true New Yorker, born in 
the Bronx, attended George Washington High School, got his B.S., M.A., 
and Ph.D. from NYU. When you think about it, the two men who have had 
their hand on the economic tiller for a large part of the past decade, 
Bob Rubin and Alan Greenspan, are both New Yorkers. We are proud of our 
contribution. We have always been proud, in New York, that we send men 
and women around the country in so many different fields who make real 
contributions to America. Sometimes America does not recognize it as 
much as we would want, but it is true. I think there can be no one we 
can be more proud of, at least in the last decade, than Alan Greenspan.
  Alan Greenspan is the perfect man for the job. He is thoughtful. I 
regularly eat breakfast with him at the Fed. I will never forget the 
first time we had breakfast together. I really didn't know him that 
well. He had been Chairman of the Fed for maybe 3 or 4 months.
  I said, ``Mr. Chairman, how do you like the job?''
  He said, ``I love it.''
  ``What do you like best about it?''
  His eyes lit up. He rubbed his hands together, and he said, ``The 
data.''
  That, I think, is at the root of Alan Greenspan's great success as 
Chairman of the Fed--his knowledge. He knows the economy. He is a 
careful man. Those of us who have sat in the Banking Committee, both in 
the Senate and the House, as I did before I was lucky enough to become 
a Senator, know he is a careful thinker--almost too careful sometimes, 
when we ask questions. But that is his job, not to reveal too much. At 
the root of his merit for the position is the fact that he believes 
knowledge should guide his decisions, the data should guide his 
decisions.
  He has also been a very careful Chairman of the Fed, and that is a 
job where care is important. I was always opposed to some of the people 
in my party who wanted to tie the hands of the Fed or subject the Fed 
to more popular whim because, frankly, monetary policy is one of those 
areas of policy that should have some distance from the popular whim. 
That is because monetary policy takes a while; it takes a while to 
formulate, and then it takes a while to have its effect once it is 
implemented. To have it subject to the political vicissitudes and whims 
to too great an extent would be a tragedy and would make no sense for 
this country.

  In fact, I always marvel at the genius of our Founding Fathers in 
setting up the structure of merit. But one of the great additions that 
was made was made in 1912 or 1913 when the Federal Reserve System was 
finally established. Over the years, we have seen the merit to that 
system. Yes, there is some popular control, but there is also some 
distance. I think Chairman Greenspan understands that very well.
  There is a third reason I think he makes such a fine Chairman.
  I ask unanimous consent I be given 3 additional minutes.
  Mr. SARBANES. Yes.
  The PRESIDING OFFICER. The Senator is recognized for 3 additional 
minutes.
  Mr. SCHUMER. Not only his thought and care but his solid and sound 
judgment. The Chairman told me, and he said it repeatedly, he always 
had a slight lean towards combating inflation. It was not an 
ideological lean, as opposed to stimulating the economy or combating 
inflation. But he always said, once you let the genie out of the 
bottle, it is very hard to get it back. So he erred on the side of 
caution in terms of letting the economy overheat. My goodness, has that 
served us well during his 12 years as Chairman.
  His steadiness, his intelligence, his judgment, his thoughtful care, 
his

[[Page S260]]

knowledge, all add up to the fact that this is a wonderful day, not 
only for him--and I hope he will be approved unanimously by this body. 
This should not be a nomination where ideology--I think he is a 
Republican, actually. I think he served in the Council of Economic 
Advisers under, I guess it was President Ford. It is not one where 
ideology or party should play but, rather, the good of America.
  So it is my honor to cast my vote for a great New Yorker, a great 
American, a great Chairman of the Federal Reserve, and someone who is 
truly a national treasure. I will be proud to vote for Alan Greenspan.
  I thank the Chair and yield the remainder of my time.
  The PRESIDING OFFICER. The Senator from Vermont.
  Mr. LEAHY. Mr. President, how much time is reserved?
  The PRESIDING OFFICER. The Senator from Vermont has 19 and one-half 
minutes.
  Mr. LEAHY. I thank the Chair.
  Mr. President, the economy is now entering its 107th month of 
expansion. That is almost 9 years out of the 25 years I have had the 
pleasure to serve in this Chamber. Not since the 1960s has the economy 
experienced such an extended period of growth.
  A number of Senators have spoken on the floor today to commend Alan 
Greenspan for his foresight and his quick hand in raising interest 
rates to keep inflation in check. The actions of Alan Greenspan and the 
Fed have certainly contributed to our unprecedented growth--growth that 
has also been sustained by the sound fiscal policies of President 
Clinton and Congress. I would remind the Congress, that we can also do 
our part to help the economy by continuing to pay down our national 
debt.
  Today the Fed is meeting again to consider another possible rate 
hike. The American economy was certainly on fire during the fourth 
quarter of 1999. Mr. Greenspan and the Fed have hesitated little in 
hiking rates to nip inflation in the bud. Last year, the Fed raised 
interest rates three times by a quarter point each--three times over 
the short span of 6 months. Such vigilance has been one important part 
of maintaining the unprecedented growth of our economy.
  While it might be blasphemy among macroeconomic economists, I would 
like to take a moment to urge members of the Federal Open Market 
Committee to consider the disproportionate effect that these hikes have 
on low and middle income families. As the Fed mulls rate policy as we 
speak, I would urge Mr. Greenspan to be doubly sure about raising rates 
when such hikes, while keeping the economy strong to the benefit of 
wealthy Americans, may also be tying the hands of low and middle income 
Americans.
  Each time the Fed raises interest rates, average Americans are hit by 
an immediate increase in mortgage costs, car payments, and credit card 
rates. These payments are a disproportionate burden on lower and middle 
income Americans.
  For the past week we have been debating a reform of our country's 
bankruptcy laws. During the course of debate, we have talked at length 
about the rise in credit card debt. By December of 1999, Americans 
racked up nearly $589 billion in revolving credit debt. This burden is 
carried primarily by low and middle income families. An increase in 
interest rates is likely to pinch these individuals and make it more 
difficult to pay off their debt and save for the future.
  I have been contacted by Vermonters who say they are struggling to 
pay off their debt and save money to buy homes. These Vermonters face a 
major setback each time the Fed makes the decision to increase interest 
rates. In its meeting today and in the future, I urge the Federal 
Reserve to consider the effect of raising rates on these individuals.
  With all the praising being done of Chairman Greenspan today, I wish 
to note there are a number of Vermonters who contacted me who feel 
quite a bit differently. Nobody doubts a strong economy, an expansive 
economy. I think much of the credit, frankly, goes to those who, in 
1993, were willing to face down the naysayers and take the first step 
to have a real balanced budget in the Congress. It sent a signal to the 
financial markets that for the first time, certainly in my lifetime, 
the Congress was serious about balancing the budget.
  During the 1980s we had seen all the lip service paid and the 
sloganeering about balancing the budget, while during the 1980s we 
tripled the national debt and ran the biggest deficits of any nation in 
the history of the world.
  In 1993 I heard many voices, actually on the other side of the aisle, 
saying if we cast these votes to bring about balancing the budget, it 
would bring about economic collapse. It would bring about staggering 
unemployment. It would bring about runaway inflation. And it would 
bring about huge deficits. It did just the opposite. The unemployment 
rate has dropped, inflation came to a standstill, the economy boomed, 
the deficits disappeared, and now we have a budget surplus. Many 
Members of Congress were courageous enough to cast the real votes that 
might do that--as compared to simply the sloganeering and doing 
nothing--and many of them lost their place in the House and Senate for 
doing it, even though they made a better country for all of us and for 
our children.
  I note that because I believe that vote was as significant a part of 
bringing about the credibility necessary for a strong economy as 
anything we have done. The expansion of the information technology 
industries, high tech, and so forth, also were part of it and a 
steadying influence by Chairman Greenspan and the Fed.
  But this idea that one person controls this economy by himself is 
something that even some who sit here in the Senate cannot say with a 
straight face. As many Vermonters have told me, when they see interest 
rates being raised over and over and over again at a time when there is 
no inflation, when the economy has more and more people coming into the 
workforce--because every time you have a merger, thousands of people 
are laid off. They go and seek jobs in other parts of the labor market. 
We see all these things and question why interest rates go up. The 
interest rates going up apparently have given a great benefit to the 
wealthiest of Americans but has done very little for the average man 
and woman, certainly in my State.
  In my State, we have seen oil prices and heating oil costs go up 
substantially this winter, and now the Fed is about to tell everybody: 
We are going to raise your interest rates again; we are going to raise 
your mortgages rates again; we are going to raise the interest rates on 
your credit cards again. If you are a small business, we are going to 
raise your costs of doing business again.
  I am not sure what is gained by these interest rate hikes. It puts a 
very heavy burden on those families where the husband and wife are both 
working and trying to pay the kids' tuition, pay the bills, and pay the 
mortgage. It certainly puts a heavy burden on small businesses in my 
State.
  It will help some bankers, absolutely. It will help credit card 
companies, absolutely. It will help some of the wealthiest, absolutely. 
And maybe there is a plan in here that by helping all of them, some day 
it may help the people who keep the country going and pay the bills. 
Possibly.
  I share the skepticism of those Vermonters, and I hope when this vote 
is cast, which I assume will be overwhelming for the reconfirmation of 
Chairman Greenspan, that he will not take this as some kind of an 
accolade that nobody disagrees with what he has done; that he will 
understand there are those who actually have to pay their mortgages, 
those who do not have millions of dollars, those who do not have six-
figure incomes and are hurt by these interest rate hikes; that they are 
the ones who see no inflation and probably have been laid off from jobs 
because of mergers and are out seeking another job and are now hit with 
an extra whammy of paying more for their mortgages, their credit cards, 
for the things they need.
  Some of the thoughts of the Fed that the boom will not continue, that 
inflation was around the corner has not been proven, and I do not think 
the steps they are taking are right. That is one person's opinion. 
Obviously, it is very much a minority opinion but certainly an opinion 
that is felt strongly by the average man and woman who are earning a 
weekly salary and paying the bills.

[[Page S261]]

  I hope the Fed will look at some of the data they have available to 
them and understand there are other ways of combating inflation than 
simply raising interest rates and that the country will realize there 
are a lot of very courageous people who voted for a balanced budget in 
1993. Rather than simply talking about it, all those courageous people 
who lost their places in Congress for doing that are also the ones who 
deserve an enormous amount of credit today for the huge economy we have 
underway.
  Mr. President, how much time does the Senator from Vermont have 
remaining?
  The PRESIDING OFFICER. The Senator has 11\1/2\ minutes remaining.
  Mr. LEAHY. Mr. President, I ask unanimous consent that the time I 
have remaining be turned over to the Senator from Maryland for such use 
as he may wish to make of it.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. SARBANES. Mr. President, what is the time situation now?
  The PRESIDING OFFICER. The time situation is as follows: The Senator 
from Maryland controls 38\1/2\ minutes; the Senator from Texas controls 
42 minutes; the Senator from Minnesota, Mr. Wellstone, controls 58 
minutes; the Senator from Iowa, Mr. Harkin, controls 58 minutes; the 
Senator from Nevada, Mr. Reid, controls 29 minutes; and the Senator 
from North Dakota, Mr. Dorgan, controls 29 minutes.
  Mr. SARBANES. I simply make the observation for those Members of the 
Senate who wish to be heard on this nomination that this is an 
opportune time, and that includes members of the committee and others 
who will seek either Senator Gramm or myself to yield time to them in 
order to speak. There are other Members who have been actually 
allocated time specifically. Of course, we presume they will be coming 
to the floor in order to use that time.
  I put an inquiry to the Chair: I understand that if no one speaks, 
the time will be charged proportionately to all those to whom time has 
been allocated?
  The PRESIDING OFFICER. The Senator is correct.
  Mr. SARBANES. Mr. President, I cease and allow that circumstance to 
prevail.
  The PRESIDING OFFICER. Time will be charged proportionately to those 
who have time reserved.
  The PRESIDING OFFICER. The Senator from Nevada is recognized.
  Mr. REID. Mr. President, we are experiencing the longest economic 
expansion in the history of this country. As of the end of January, we 
underwent 107 consecutive months of economic growth. Much of this can 
be attributed to the economic policies of Federal Reserve Chairman Alan 
Greenspan.
  In the midst of this unprecedented prosperity, it's easy to say, 
let's not change anything. Let's not rock the boat. Things are great, 
why rain on the parade? Why even ask tough questions that might upset 
the delicate and fine-tuned mechanism of the economy?
  But I think that we have to ask those questions.
  Today the Senate is considering the President's nomination of Mr. 
Greenspan to his fourth consecutive four-year term as Chairman of the 
Federal Reserve Board of Governors. In my opinion, if we are to confirm 
him to serve in that post again, we should not do so simply to reward 
him for the good that he has accomplished over the last few years--we 
should only do so because we think that he is the best person for the 
job for the next four years.
  In making that decision, we have to take a hard look at everything 
that has happened under Chairman Greenspan's watch--the bad as well as 
the good.
  We are considering him not only for his views on the economy, but for 
his ability as a manager, as the head of the largest, most powerful 
institutions in the world.
  Viewing his record as a whole, Mr. President, I am not convinced that 
Chairman Greenspan is the best man to guide the Fed for the next four 
years. I intend to vote against his confirmation.
  Let me make this clear: I rise today not to criticize Alan Greenspan 
as a person, or to criticize his economic policies. Chairman Greenspan 
is a fine man, who has worked hard for this Nation. The results of 
Chairman Greenspan's monetary policies over the last 10 years speak for 
themselves, in rather eloquent terms.
  The Federal Reserve is one of the most powerful institutions in the 
world. It makes decisions that fundamentally change our economy, and 
the world economy.
  It is also, as columnist Jack Anderson wrote, a secret government of 
unaccountable, unelected bankers and bureaucrats that has long resisted 
Congressional oversight, and that is completely exempt from the 
Congressional budgeting process.
  For the past six years, Senator Dorgan and I have worked to try to 
achieve greater accountability over the Federal Reserve. Last year, we 
added an amendment to the Financial Services Modernization Bill that 
would have required a consolidated yearly audit covering the operations 
of each Federal Reserve Bank, the Federal Reserve Board of Governors 
and the Federal Reserve System.
  Our amendment was all about accountability in the day-to-day 
operations of the Fed. It did not seek to interfere with monetary 
policy. That is an area that should be kept separate, for good reason. 
Our amendment sought to open the doors of a taxpayer-financed 
institution which has been closed to Congressional oversight or review 
for more than 80 years.
  Unfortunately, our amendment was stripped down in conference. That 
happened in part because the Federal Reserve strongly opposed any kind 
of audit or oversight.
  In 1993, Senator Dorgan and I asked the GAO conduct a review of the 
Fed's operation and practices. The review found a number of disturbing 
revelations about the way the Federal Reserve does its business, 
including evidence of serious mismanagement at the highest levels.
  Significantly, many of the incidents of waste and mismanagement have 
increased since 1988, the year Mr. Greenspan first became Chairman.
  (1) The Report found numerous and significant weaknesses in the Fed's 
planning, budgeting, oversight, and audit processes that have resulted 
in unnecessary waste in the Fed's operating costs.
  (A) The Fed's operating policies and practices do not include cost-
minimizing that are commonplace in private-sector entities and even 
other government agencies.
  (B) Overall Federal Reserve operating expenses increased from $1.36 
billion in 1988, to $1 billion in 1994:
  A 50 percent increase that was more than twice the rate of inflation 
during that same time period;
  The increase in operating expenses also exceeded the rate of increase 
in the Fed's revenues; and
  It also far exceed the 17-percent increase in overall federal 
discretionary spending.
  (C) The report concluded that, among other things, the Federal 
Reserve could reduce its personnel benefits and travel-related 
reimbursements without affecting its operation:
  The employee benefits paid by the Fed for even low-level employees 
were called ``generous'' compared to other government agencies and 
comparable financial institutions; and

  Travel reimbursement policies among the various Reserve banks varied 
widely
  (D) The report found that the Fed's Interdistrict Transportation 
Service has been engaging in questionable practices such as the 
implementation of non-competitive contracts, gifts of payments for 
missing backup and grounded aircraft to non-performing contractors, and 
a disturbing pattern of indifference to fraud, waste and abuse.
  (2) The Board's internal oversight mechanisms were called 
``fragmented, inefficient, and lacking in independence.''
  (A) Operating costs vary among Reserve banks because the Federal 
Reserve has not established consistent policies.
  (B) Several Reserve banks used contracting and procurement policies 
that violated written government policies, and which resulted in 
favoring some sources over others--raising questions of conflicts of 
interest, favoritism, and whether the Federal Reserve is receiving the 
best services and most favorable prices.

[[Page S262]]

  (C) The Los Angeles branch alone documented over $121 million in 
bookkeeping errors in a single month.
  (3) The Fed maintains a reserve account of $5.2 billion dollars which 
could be re-directed into the Federal Treasury. That fund is intended 
to protect the Fed against unexpected losses.
  But the Fed has recorded substantial net profits for 84 straight 
years, and the fund has never been used since it was created in 1913. 
Nonetheless, the size of that fund has increased nearly 150 percent in 
only the last ten years, rising from $2.1 billion in 1988 to $5.2 
billion in 1998.
  Most important, the report raised serious questions about Mr. 
Greenspan's ability to manage the Fed in a time of rapid economic 
change.
  The Report concluded that numerous technological, political, and 
marketplace developments could profoundly affect the Fed's mission and 
operation in the years to come, and which require the Fed's careful 
attention and leadership.
  (A) Increased competition from private institutions and a shift to 
electronic banking could significantly reduce the Fed's revenues, 
particularly in areas such as check-clearing. The Fed has not taken 
sufficient steps to compensate for these shrinking revenue sources.
  (B) A major consolidation in the banking industry is going on that 
could significantly affect the Fed's oversight and review activities.
  Changes in the number and location of bank-holding companies the Fed 
oversees could require adjustments in Fed staffing at the various 
Reserve banks.
  To pay for these changes, the Fed's oversight staff could charge 
local banks a fee for their oversight activities, but choose not to, 
resulting in taxpayers paying the bill for those activities to the tune 
of $388 million a year.
  The Fed's Reserve banks have not changed their geographic location 
since 1913, despite major shifts in population demographics and 
economics, raising question of whether the Fed's oversight functions 
are being performed effectively and equally around the country.
  (C) Overall, increasing competition from private-sector suppliers of 
financial services, coupled with changes in technology and commerce, 
and increasing globalization of economic policy,'' present significant 
challenges to the Federal Reserve to rethink many aspects of its 
operations and raise important questions regarding the future role of 
the Reserve banks, their management structures, their locations''--and 
``call for a careful re-examination of the Federal Reserve's mission, 
structure, and work processes.'' But it appears that no such re-
examination has taken place in the five years since the report was 
issued.
  The report concluded that if the Federal Reserve Board is to plan 
strategically for the future, so that it can continue to deliver 
services efficiently in a world that is changing rapidly and 
substantially, it will need the Board's ``sustained leadership.'' That 
sustained leadership appears to have been absent.
  If this report had been made about a Cabinet Secretary, the Congress 
and the public would demand answers. If it were about the CEO of a 
private corporation his board would probably send him packing.
  We live in a world of change.
  Only a few years ago, nobody had heard of the Internet, and 
electronic commerce didn't exist.
  Nobody bought stock on-line.
  Only a few years ago, the European Economic Union was a pipe dream.
  GATT and NAFTA didn't exist.
  Japan's economy was the envy of the world, and the United States was 
thought to be in decline.
  Nobody can predict what the world will be like years from now. But 
one thing we do know, is that if the Fed is to continue its ability to 
successfully manage our economy, change will be necessary. Not 
superficial tinkering, but fundamental, structural changes.
  I do not believe that Mr. Greenspan is the right kind of manager to 
drive that change.
  Let me read to you from the GAO report:

       The Federal Reserve must create the necessary self-
     discipline for the institution to adequately control its 
     costs and respond effectively to future challenges. However, 
     GAO found weaknesses in the planning and budgeting processes 
     that are key mechanisms for accomplishing those goals . . . 
     the Federal Reserve did not have an integrated, systemwide 
     strategic plan that identified the emerging issues and 
     challenges affecting the entire system and how to effectively 
     address them.

  In a climate of rapid change, that is a recipe for disaster.
  For these reasons, I do not believe that Alan Greenspan is the right 
man for the job, and I intend to vote against his confirmation, and I 
urge my colleagues to do the same.
  Mr. DORGAN. Mr. President, does the unanimous consent agreement 
include a time for me to speak?
  The PRESIDING OFFICER. It does. The Senator has 24 minutes remaining.
  Mr. DORGAN. Mr. President, I understand we are here on the floor of 
the Senate to talk about the renomination of Alan Greenspan as Chairman 
of the Federal Reserve Board. I want to start my presentation by saying 
it is not my intention to come to the floor of the Senate to persuade 
people Mr. Greenspan is not a good person or has not been a good public 
servant--I do not believe that. He is someone with great skill and 
great devotion to public service.
  But I do come to say that I have profound differences with Mr. 
Greenspan over monetary policy issues and I believe his stewardship 
with the Federal Reserve Board, while widely hailed by many, falls 
short of what I think should have been done at the Fed during the same 
period. I would like to spend some time describing that.
  As I begin this discussion, let me point out that just this afternoon 
the Federal Reserve Board has announced yet another interest rate hike. 
They have announced today that the Federal Open Market Committee is 
hiking short-term interest rates another one quarter of 1 percent.
  What does that mean? A lot of people will not think much about the 
one quarter of 1 percent in terms of what it means to them. It means 
the Federal Reserve Board is imposing a tax on every single American 
with these interest rate hikes because they are worried about some new 
wave of inflation that does not exist in our country. I had some work 
done at the North Dakota State University by Dr. Won Koo in the 
Department of Agricultural Economics. I asked him to tell me what it 
means, just in terms of North Dakota, when the Federal Reserve Board 
has now on four occasions in a matter of 8 months raised interest rates 
by 1 percent. What does it mean when we have a 1-percent interest rate 
increase?
  The additional average interest payments for North Dakota farmers 
will be nearly $23 million a year as a result of the actions of the 
Federal Reserve Board, or about $719 per farm annually.
  A typical North Dakota household will see their interest charges go 
up by an additional $356 a year because of the four Fed interest rate 
hikes. The Federal Reserve Board is imposing a tax on every single 
American with these four rate hikes.
  I will explain more later why I think the rate hikes are 
unjustifiable. But these rate hikes are unjustifiable because the 
Federal Reserve Board is searching for inflation that does not exist. 
Inflation has gone down, down, way down, all the while the Federal 
Reserve Board has insisted the fires of inflation are just around the 
corner. The Fed has been consistently wrong on that. And there seems to 
be almost no debate about it. It is OK if the Fed decides it wants to 
increase interest rates and effectively tax all the American people 
with higher interest rates.
  Some of those who come to the floor of the Senate who are the most 
aggressive people in opposition to any kind of a tax increase, sit 
silently while the Federal Reserve Board says: We want to impose new 
costs on the American people in the form of mandated higher interest 
charges. That is rather curious to me. Why so silent when the Federal 
Reserve Board does this without justification, I might add.
  Here is the Federal Reserve Board. And I do this to give the American 
people a sense of who makes monetary policy. We have a Board of 
Governors. There are two seats that are currently vacant. We are hoping 
maybe we can get someone appointed to the Federal Reserve Board who 
cares something about consumers and family farmers and others who will 
have to pay the higher interest charges. It is not likely

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to happen, but we are trying. None of the current Board members is from 
our part of the country. There have only been three Board members from 
the Upper Midwest appointed to the Board of Governors since it was 
created. We are hoping maybe somebody who might take one of these 
vacant seats will be somebody who knows how to make something, to 
produce something, who does something every day and will come here not 
representing the money center bankers' interests but representing the 
interests of consumers, family farmers, or Main Street businesses.
  The Board of Governors and, the presidents of the regional Fed banks 
on a rotating basis, go in a room, shut the door, and in secret decide 
what kind of monetary policy they want to employ and whether they want 
to increase interest rates. The American people were not present in the 
room and I was not present in the room because we are excluded from 
these deliberations by the Federal Reserve Board.
  These are the folks who went into that room: Roger W. Ferguson, Jr., 
Alan Greenspan, Edward Gramlich, Edward W. Kelley, Jr., Laurence Meyer; 
and then these folks from the Fed regional banks, the ones with the 
gold stars: Robert Perry, Jack Guynn, Mr. Broaddus, Mr. Jordan, and Mr. 
McDonough. They apparently think the American people's interest charges 
are not high and decided to raise it one-quarter of 1 percent, a total 
of 1 percent over the last four rate hikes. The question is why.
  It is interesting, the Chairman of the Federal Reserve Board says he 
does this because there is a threat of new inflation in this country. 
Over the past 12 months, however, inflation has been well under 
control. The CPI has risen 2.7 percent in the last 12 months. In the 
last 3 months, the CPI has risen at an annual rate of 2.2 percent, and 
the core CPI--if you take out volatile food and energy prices, has 
risen 1.9 percent in the last 12 months, the lowest it's been since 
1965.
  In addition, Mr. Greenspan has come to the Capitol and said: We think 
the CPI overstates inflation by 1.5 percent. I do not think he is right 
about that, but if he is right, we have effectively no inflation in 
this country. If we have no inflation in this country, what on Earth 
are these folks doing in a secret meeting downtown, wearing suits and 
glasses and talking in bankerspeak, deciding to increase taxes in the 
form of a higher interest rate on every American? What are they doing? 
How do they justify that? Why do those in this Congress who wail so 
much about taxes sit silently while the Federal Reserve Board does this 
without justification? You tell me where the new fires of inflation 
exist.

  Alan Greenspan for years came to counsel us on Capitol Hill. He said: 
We cannot countenance economic growth in this country more than 2.2 or 
2.5 percent without risking substantial new waves of inflation--just 
can't do it. He was wrong. Again and again he was wrong. Economic 
growth has been well above 2.5 percent, and inflation has been way 
down, not up. Mr. Greenspan came to Congress and gave us the sage 
advice that if we saw unemployment fall below 6 percent, we risked new 
fires of inflation. He was wrong again and again. He was wrong.
  Yet we hear people come to the floor to say he is the greatest 
American ever. He is a nice enough fellow. I have nothing against him 
personally. His policies, in my judgment, have imposed an added 
financial burden on the American people in the form of higher interest 
charges than is justifiable. I ask all of you who know these numbers, 
evaluate what have been the interest rates relative to inflation--that 
is, the real rate of interest--in the Greenspan years versus pre-
Greenspan years. What is the real economic rent for money? What kinds 
of policies imposed by the Greenspan years at the Fed have resulted in 
what kinds of charges to the American people relative to what had been 
done before Mr. Greenspan came to the Fed?
  I will tell you the answer. The answer is, interest rates on a real 
basis have been higher in the Greenspan years by about one-half of 1 
percent than the pre-Greenspan years. Can you justify that? I do not 
think so. And Mr. Greenspan, leading this Fed--and make no mistake, he 
is in charge, it is his policy, no one would contest that--has said 
over the years: We must grow more slowly; we cannot support higher 
growth; we must shade on the area of having more people unemployed 
rather than fewer people unemployed, and because of the risks of having 
too few people out of work and too much economic growth, we must retain 
interest rates at a level that is higher than historically justified 
relative to the rate of inflation.
  Some might come to the floor and be able to justify that in their own 
minds. I certainly cannot. I do not think the American people believe 
either that Mr. Greenspan's higher interest rates relate to this new 
economy that can grow faster with lower unemployment numbers than most 
economists ever thought available or doable.
  Let's talk just about the numbers for a few minutes. I mentioned that 
the core rate of inflation is now 1.9 percent over the last 12 months, 
the lowest its been since 1965. I mentioned Mr. Greenspan thinks the 
CPI overstates the rate of inflation by a percent and a half. That 
means we have virtually no inflation. But today the Fed said we are 
worried about inflation, therefore we must increase interest rates once 
again. The Fed is wrong once again.
  In 1999, the GDP grew at 4 percent; in 1998, 4.3 percent; in 1997, 
4.5 percent. In other words, in the two previous years to 1999, we had 
higher rates of growth than in the last year, and yet the Fed today, by 
its interest rate increase, says our economy is growing too fast. 
Again, in my judgment, it is implausible. This Fed Chairman steers the 
Fed on monetary policy on the side of money center banks. I think 
monetary policy ought to be steered in a direction and on a course that 
relates to all of the needs and all of the interests of this economy 
and of the American people.
  I talked a little about unemployment. In the past, the Fed has 
preached that the non-accelerating inflation rate of unemployment was 6 
percent. In short, if the unemployment rate goes below 6 percent, 
consumer prices will go up. The Fed's reliance on this and other buggy-
whip approaches to economic analysis have been terribly misdirected 
given the globalization and the galloping globalization of the 
workforce.

  The unemployment rate has been below 6 percent for 64 consecutive 
months, over 5 years, without a peek at a new wave of inflation. Today, 
unemployment rates are at a 30-year low of 4.1 percent, and our economy 
is growing at a healthy rate without a shred of evidence that there is 
a new threat of inflation.
  Some say Mr. Greenspan is increasing interest rates not so much 
because he is worried about inflation, although that is what he says, 
but because he wants to curb speculation in the stock market. He thinks 
there is something in the stock market; he said once ``irrational 
exuberance''--whatever that means to economists. I used to teach 
economics ever so briefly. Irrational exuberance, he says--it is 
interesting--irrational exuberance on the part of those who are 
engaging in transactions on Wall Street that are presumably market 
transactions, and presumably in a circumstance where the market works. 
It is interesting that Mr. Greenspan decides, because of this 
irrational exuberance, he wants to impose a penalty on all the American 
people through higher interest rates rather than deal with what I think 
may be the cause of this so-called irrational exuberance.
  If Mr. Greenspan really wants to try to bust some of the bubble on 
Wall Street, maybe he ought not raise interest rates that cause direct 
and immediate harm to families and to producers, but maybe he ought to 
consider taking real steps to put limits on the use of ``margins'' by 
investors to buy stocks.
  It is interesting, the amount borrowed by investors to buy equity 
securities is growing to levels of significant concern.
  Last November, the margin amount increased by 13.2 percent in 1 month 
alone--the largest monthly increase since 1971. Perhaps Mr. Greenspan 
might want to put some limits on the use of margins; but, no, not Mr. 
Greenspan. He would sooner impose an added interest charge on all 
Americans.
  Let me talk for a moment about what I think is the low watermark of 
the Fed in recent times. That is the

[[Page S264]]

issue of Long-Term Capital Management, the ill-fated hedge fund, 
because it relates not only to the management of the Fed, but it 
relates to what the Fed is interested in and relates to the Fed's, in 
my judgment, insensitivity of or, perhaps in a stronger sense, 
blindness to solve the risks that exist that they ought to be concerned 
about but are not.
  Long-Term Capital Management.
  Mr. President, how much of my time remains?
  The PRESIDING OFFICER. Eleven minutes.
  Mr. DORGAN. Mr. President, some while ago the Federal Reserve Board 
orchestrated a $3.6 billion bailout of something called Long-Term 
Capital Management, the highflying hedge fund, which I think calls into 
question the leadership at the Federal Reserve Board and calls into 
question what they think is important and what they are willing to 
ignore.
  The federally insured banks were lenders and investors in this Long-
Term Capital Management fund. The GAO, in its 1999 report, requested by 
myself and Congressman Markey, Senators Harkin and Reid, found that 
federal regulators failed to detect lapses in risk management by 
lenders, and others, that allowed Long-Term Capital Management to 
become large and excessively leveraged until after the crisis.
  Mr. Greenspan testified that the intervention in the Long-Term 
Capital Management debacle was needed to prevent a crisis in the global 
financial markets. But then he appears just as quickly to dismiss the 
Fed role in the bailout as little more than a spectator providing 
office space.
  What makes this more troublesome, to me, is that just days before the 
Federal officials visited Long-Term Capital Management in Connecticut 
to discuss its financial problems, Chairman Greenspan was testifying 
before the House Banking Committee that: ``Hedge funds were strongly 
regulated by those who lend the money.'' Of course, nothing could have 
been further from the truth, as was uncovered by the GAO's 1999 
investigation of the Long-Term Capital Management's near collapse.
  The independent report reveals that our Federal regulators, including 
the Fed, allowed this speculative hedge fund to load up with $1.4 
trillion notional value in derivatives, which threatened to bring chaos 
in financial markets here and around the world.
  While I am on this subject of unregulated hedge funds, which the Fed 
on a Sunday had to bail out by arranging bank loans, shortly after they 
said: Gee, there is no problem here with hedge funds.
  Let me add that the subject of derivatives ought to have some 
attention by not only our committees but by the Fed and other banking 
regulators, as well. There is something around $33 trillion notional 
value derivatives by banks in this country, and we have banks whose 
deposits are insured by the Federal Government, doing proprietary 
trading on derivatives on their own accounts.
  They could just as well put a craps table in the lobby of a bank. 
They could just as well put a roulette wheel in the lobby of a bank. A 
bank, with federally insured deposits, trading on its proprietary 
accounts in derivatives, and nobody seems to care. But someday, some 
way, someone will care because this is going to go the way of Long-Term 
Capital Management, unless there is adequate supervision. When those 
cards collapse, that collapse is going to be significant.
  We need, in my judgment, strong management. We need assertive 
oversight by our committees. We need strong, aggressive oversight in 
the regulatory approaches by the Federal Reserve Board. Regrettably, 
that is not the case these days with respect to the Federal Reserve 
Board.
  Since the chairman of the Banking Committee is here, I will say that 
I urge the committee to pay some attention. You probably already have. 
I am not suggesting you have not. I don't know what your agenda is. I 
hope very much the issue of derivatives and the issue of the regulation 
of hedge funds, or at least the concern about what hedge funds are 
doing in light of Long-Term Capital Management scandal, is something 
that is part of the agenda of the Banking Committee in this Congress.
  I have described, at the start of my presentation, it is not my 
intention, nor would I expect it to be the intention of the Senator 
from Iowa, Mr. Harkin, or others, to come to the floor to say that the 
Chairman of the Federal Reserve Board is a bad person. I do not believe 
that. I met him. I like him. I think he is a good public servant. I 
think he has given a great deal to this country.
  He and I simply have fundamental differences on monetary policy. He 
has run monetary policy with a tight fist, believing a certain way, and 
those beliefs include that we could not allow more growth. We had to 
have slower growth in order to avoid inflation. We had to have more 
people unemployed in order to avoid inflation. He was wrong on both 
counts, wrong consistently.
  My point is, I think it is time--and I have told this to the 
President--I think it is time for new blood at the Federal Reserve 
Board.
  I say to the Senator from Iowa, who has come to the floor, look at 
this Board. I, from time to time, as a public service--because the Fed 
is so closed and so secretive; it is the last dinosaur on the American 
landscape in public policy--I bring pictures to the floor to show 
people what the Fed looks like. Here is who they are. Here is where 
they graduated from. Here is what their degrees are. Put a gray suit on 
all these folks, and they all look the same, talk the same, and think 
the same. That is why this policy is a homogenized policy that does not 
provoke any debate in this country about monetary policy.
  A century ago they used to debate monetary policy in bars and 
barbershops. I thought that was healthy. Fifty years ago and 40 years 
ago, when McChesney Martin was running the Federal Reserve Board up 
here, he was going to raise interest rates by one quarter of 1 percent, 
and Lyndon Johnson got him down to the ranch in the Perdinales in Texas 
and darn near broke his shoulders he was squeezing him so tight.
  The point is, it was front page headlines around the country because 
McChesney Martin was going to have the Fed raise interest rates by a 
quarter of 1 percent. The President got so upset he even called 
McChesney Martin down to the ranch. The Fed did not have to respond to 
Lyndon Johnson, but my point is, back then interest rate policy was a 
matter of public concern, of public debate. These days, these folks go 
in that well-paneled room and shut the door, and it is all done in 
secret. Then they open the door and say: Guess what we have done for 
you. There are too many people working. We are growing too fast, so 
therefore we have increased a tax on all the American people by 
increasing interest rates once again.
  Four successive interest rate increases--1 full percent. Again, let 
me say that the average North Dakota household, which pays $356 a year 
more in interest rate charges--that is a new tax on the American 
consumer in my State and around the country.
  Mr. HARKIN. That is true.
  Mr. DORGAN. It was not a tax debated on the floor of the Senate. If 
we had that debate, my friend from Texas, Senator Gramm, the 
distinguished chairman of the Banking Committee, would be on the floor, 
I guarantee you, because when we debate taxes he is on the floor. He is 
a passionate combatant in those debates. But we cannot have that debate 
on the floor of the Senate because the Federal Reserve Board does not 
have a debate in public. It does it in secret.
  What I am saying is, I think the Federal Reserve Board process needs 
to be more open. I know the response and the rejoinder to that will be: 
Well, the Senator wants to make the Federal Reserve Board process 
politics on the floor of the Senate. That is not my point. My point is, 
I think there ought to be, leading into this process somehow, some 
interests of the American people. It does not exist at the moment.
  It is my intention to not support this renomination. I expect this 
renomination will carry with a very large vote in the Senate, but it 
will not carry with my vote because I believe monetary policy ought to 
change in this country. I do not believe our country is growing too 
fast. I do not believe too few people are unemployed. I do not

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share that view, that is too often shared in the bowels of the Federal 
Reserve Board. I would like someday for us to have a monetary policy 
that represents the entire interests of our country, not just the 
interests of money center banks.
  Mr. HARKIN. Will the Senator yield for a question?
  Mr. DORGAN. I am happy to yield.
  Mr. HARKIN. I thank the Senator for his statement on the floor, 
pointing out that what this interest rate increase is is a tax on hard-
working Americans, a very insidious kind of tax, too. It is going to 
have other repercussions.
  The question I have to ask of the Senator is this: The Senator talked 
about the Federal Reserve Board meeting in secret and not knowing what 
is going on. I don't want to make it political either. No one wants to 
make it political. But I think we do have a right to know why they make 
the decisions they make.
  It is my understanding that the transcripts of the meetings of the 
Fed are kept secret for 5 years, if I am not mistaken. It may be a 
shorter period. I stand to be corrected. We don't know for years why 
they made the decisions they made. What is so secretive about this?
  Even if they do meet in secret, it seems to me that within 1 month or 
3 months or 6 months we ought to at least have the transcript so we 
would know what was the discussion that went into why the Board raised 
interest rates a quarter of a point today; what the discussions were 
last year that caused them to raise interest rates three times. Keep in 
mind, the Fed has raised interest rates four times in a 1 year period. 
A little nick here, a little nick there, pretty soon you are bleeding 
pretty badly. Four times in a 1 year period. What were the reasons for 
it? We don't know because they meet in secret. Again, it is my 
understanding--I stand to be corrected--that the transcripts are kept 
secret for 5 years.
  Again, the Senator from North Dakota has pointed this out many times, 
the Federal Reserve was not created by the Constitution of the United 
States. The Federal Reserve was created by legislation. It is a 
creature of Congress created by legislation. It seems to me we have a 
right and a responsibility to have a better understanding not only of 
how the Fed operates but why they make the decisions they do. I ask the 
Senator that question, about opening up the transcripts so we know why 
they make those decisions.
  Mr. DORGAN. I don't know what length of time they keep the transcript 
private. However, the Federal Reserve Board is enormously private. I 
have said it is the last dinosaur. A little sunlight would be a great 
disinfectant for monetary policy.
  The PRESIDING OFFICER. The time of the Senator from North Dakota has 
expired.
  Mr. DORGAN. Mr. President, I ask unanimous consent for 1 additional 
minute.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. DORGAN. There is so little known about the Federal Reserve Board 
that when Senator Reid and I had a GAO report done recently, they said 
that the Federal Reserve Board has stashed away now close to $6.4 
billion--then I believe it was $3.7 billion--in a kind of a rainy day 
fund. The rainy day fund was described by the Fed as a surplus fund 
that was to be used in the event they needed it if they suffered a 
loss.
  This is an institution that makes money. This is an institution that 
has never had a loss, will never have a loss, and stashes away a cash 
reserve in the event that it has a rainy day. The GAO report, of 
course, was very critical of the management of the Fed on a wide range 
of things. But I will not put it in the Record.
  The PRESIDING OFFICER. The Senator's additional minute has expired.
  The Senator from Texas.
  Mr. GRAMM. Mr. President, I thank Senator Harkin. It is my 
understanding that since the distinguished Senator from Missouri wanted 
to speak only 3 or so minutes, that he had agreed that after I speak--
and I should speak only 5 or 10 minutes--the Senator from Missouri 
could speak 3 or 4 minutes before Senator Harkin takes the floor. I 
think he has an hour. I thank him for that.

  I hope people are watching this debate. Our dear colleague from North 
Dakota does an excellent job of presenting his point of view. It is not 
a point of view I agree with, but it is a point of view that obviously 
he believes and he presents very effectively, as does Senator Harkin.
  For people who believe that there are no differences among Members, 
that parties don't make any difference, that Democrats and Republicans 
are identical, I hope they are listening to this debate because we are 
getting to the very heart of the fundamental differences that separate 
us and, in separating us, serve the country. In the process, we have an 
opportunity to present competing visions. Then every 2 years, on the 
first Tuesday after the first Monday of November, people decide whose 
vision they want to follow.
  I think this debate is very informative and very important. I have 
asked for a fairly short amount of time. I think the minority side has 
4 hours 5 minutes. I have asked that our side have 45 minutes because I 
think our case is a very strong one, and we don't think we have to be 
repetitive to make it.
  As I look down the list of Americans who have served as Chairmen of 
the Board of the Federal Reserve Board, it reads like a Who's Who in 
economics and banking: Paul Volcker, Arthur Burns, William McChesney 
Martin. These are Americans who have provided distinguished service to 
our country. But as I look at the record of Alan Greenspan, I can stand 
on the floor of the Senate and say, without any fear of contradiction, 
that Alan Greenspan's record is the finest record that has ever been 
established by a Chairman of the Board of Governors of the Federal 
Reserve Board since we created the Federal Reserve and it began 
operating in 1913.
  I go further in saying that whether we are talking about Nicholas 
Biddle at the Second Bank of the United States or about monetary policy 
conducted by the Treasury or about any central banker in any monetary 
center anywhere on the planet, I believe a strong case can be made that 
Alan Greenspan is the greatest central banker in the history of the 
world.
  Why do I say these things? Let the record speak for itself in terms 
of what has happened under Alan Greenspan's leadership. First, how many 
people have been appointed to the highest appointed position in the 
land by Ronald Reagan, George Bush, and Bill Clinton? Is there any 
other person who has been appointed to a high position of public trust 
by those three men? The answer is no. And why have three successive 
Administrations appointed Alan Greenspan to be Chairman of the Board of 
Governors of the Federal Reserve Board? Because he is the best central 
banker we have ever had.
  As we all debate this issue and have our opportunity to second-guess 
Alan Greenspan, let me talk about the record. The day Alan Greenspan 
became Chairman of the Board of Governors of the Federal Reserve Board 
in 1987, long-term interest rates were 8.98 percent. Today they are 
6.42 percent. As a result, millions of Americans who did not have the 
opportunity to build and buy their own homes the day Alan Greenspan 
became Chairman of the Federal Reserve Board, now have that 
opportunity, and they are seizing it in record numbers.
  The day Alan Greenspan became Chairman of the Board of Governors of 
the Federal Reserve Board, the Dow Jones Industrial Average stood at 
1,938.83. Today the Dow stands at over 11,000. In other words, the 
equity value of the broad cross-section measure of the fundamental 
industry in America has risen during the period that Alan Greenspan has 
been Chairman of the Board of Governors of the Federal Reserve Board by 
nearly 500 percent.
  Today, schoolteachers, firemen, insurance salesmen, and coaches find 
that the value of their 401(k)s and their IRAs have skyrocketed, and as 
a result, their financial security has grown. They approach retirement 
in a better position than anyone could have ever expected. And that 
wealth is widely distributed. More Americans own part of the equity 
value of America than ever before in history. Indeed, we have come the 
closest of any society in history of fulfilling the Marxist dream of 
workers owning the means of production--only we have done it the real

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way, not with the government stealing it and claiming that workers own 
it; workers really do own it.
  The unemployment rate the day Alan Greenspan became Chairman of the 
Board of Governors of the Federal Reserve Board stood at 5.7 percent. 
Today, it is 4.1 percent--the lowest level in 30 years. In fact, when 
you look at the array of social programs in the economy and their 
impact on the incentive of people to take jobs, when you look at the 
environment in which that 4.1 percent exists, I doubt if there has ever 
been a day in American history where the unemployment rate was 
effectively lower than it is today. The wonderful thing about this 
growth in employment is that it is not just the same people who are 
always getting jobs. A Congressman's daughter and the son of the bank 
president get jobs--good times and bad times.
  What is wonderful about the golden economic age in which we are 
living is that employment among minorities is growing faster than 
employment in the economy as a whole. We have had an explosion in the 
number of women who have gone into business and succeeded, and the 
benefits of this economic growth are being more widely shared today 
than any economic growth that we have ever achieved.
  The rate of inflation on the day Alan Greenspan became Chairman of 
the Board of Governors of the Federal Reserve Board was 4.5 percent, 
and we were grateful. Today, the inflation rate is just 2.7 percent. As 
one of our colleagues already noted, if we could account for quality 
differences, if we could take into account the quality differences in a 
new Suburban versus a Suburban 10 years ago, or the quality difference 
in a Sony television as compared to 10 years ago, that inflation rate 
would be virtually zero.
  Just as Alan Greenspan was beginning his service as chairman of the 
Federal Reserve Board in 1987, we had a stock market drop of 500 
points. That was a time when 500 points were real and represented a 
dramatic drop in equity values. Some argued that the Government had to 
intervene; too many people are investing in the equity market; we have 
to have dramatic reforms. But under the stable leadership of Alan 
Greenspan, and several other members of the Working Group that was put 
together at that time, we basically set about to strengthen the system 
in terms of liquidity and transparency, and Government kept its cold, 
dead hand off the equity market, and we have seen in the 1990s what the 
result has been.
  At the end of the 1980s, we experienced the S&L collapse, the 
greatest financial crisis during my period of service in Congress. It 
cost $100 billion to fix. It could have been avoided had we put up 
money earlier and acted earlier, as President Reagan urged. But under 
the leadership of Alan Greenspan, while nobody knew it at the time, we 
instituted a procedure of closing troubled thrifts and selling off 
assets, which the whole world looks at as the standard of how you deal 
with a financial crisis.
  Have we forgotten the Mexican peso crisis? Have we forgotten the 
Asian economic crisis? Can you remember when it was conventional wisdom 
that the collapse in Asia was going to mean an economic downturn in 
America? I missed that downturn, and so did America. Under Alan 
Greenspan's leadership, we have set a course that helped Asia regain 
its footing. Korea, through reforms, has done it. Other countries will 
achieve greater stability when they reform. Have we forgotten the 
Russian economic collapse? Have we forgotten the Brazilian currency 
collapse?

  In other words, Alan Greenspan's stewardship as chairman has not been 
uneventful. But the net result is that the American economy has stayed 
on track. It is easy for us to second-guess the policies of the Federal 
Reserve Board, but who thought Alan Greenspan would raise interest 
rates on the very day that we are considering his confirmation? If that 
is not a statement of confidence in him, I don't know what is, and I 
don't see any reason to be second-guessing Alan Greenspan's record.
  If I have a concern today as we move toward this vote, it is what are 
we going to do when Alan Greenspan is gone. I hope there is someone out 
there who will be capable of matching this record. But I am not sure 
there is such a person, and it worries me. My grandmother used to say, 
``The graveyard is full of indispensable men.'' Alan Greenspan is not 
going to have this job forever. But as long as he wants it, and I have 
a vote about whether he is going to get it, based on this record, I am 
going to vote to give him the opportunity to continue to serve.
  Let me conclude with a final remark, and then I will turn it over to 
my colleague. Our founders were afraid of men on white horses. They 
tried to write a system so that it didn't make any difference how 
elections turned out. They tried to make it so that it didn't matter 
who was appointed to various positions because they knew that people 
were fallible. They tried to write a system that was relatively 
infallible. And so when someone achieves a record like this, while you 
can't give Alan Greenspan all the credit--I think a lot of the credit 
goes back to Ronald Reagan and the reforms that we undertook then, and 
I am willing to give some credit to Bill Clinton and some to Congress. 
But if you were going to pick anybody who is currently holding a 
position of public trust and ask who has had more to do with the 
success we have had in this last decade--the last 12 years, really--of 
unparalleled economic achievement, I think you would have to give the 
prize to Alan Greenspan.
  So there are two sides to the story. I hope people will listen to 
these arguments. This is serious business when you are talking about 
the Chairman of the Board of Governors of the Federal Reserve Board. I 
hope they will listen to these arguments and that they will see that 
there are differences among Members, differences between the two 
parties. As long as there are people like Alan Greenspan who are 
willing to serve, I think America is in good shape. I am eager to see 
him have the opportunity to serve for another 4 years. I hope he is 
blessed with health that will allow him to continue in this job for a 
very long period of time.
  With that, I yield the floor.
  The PRESIDING OFFICER. The Senator from Missouri is recognized.
  Mr. BOND. Mr. President, I thank the distinguished chairman of the 
Banking Committee for giving me the opportunity to make these remarks. 
I hope our colleagues are listening to his remarks. As a former 
economics professor, he has been able to bring to common terms, in 
understandable language, the message that is so important in economics.
  I have stayed awake longer listening to his treatises on economics 
than I have on most of the ones I had in school. While the record is 
not perfect, at least it is better. We appreciate his kind words.
  I also thank my colleague from Iowa for permitting me to make these 
remarks.
  Mr. President, I rise to express my strong support for the nomination 
of Alan Greenspan for his fourth term as Chairman of the Board of 
Governors of the Federal Reserve System.
  As has just been said, since Chairman Greenspan was originally 
appointed in 1987, his wise stewardship of the monetary policy of this 
country has in no small part contributed to the best economic times in 
our country's history.
  Yesterday we reached a milestone of economic expansion. Our country 
has a record 107 consecutive months of economic growth. At no other 
time in our history have we experienced uninterrupted economic growth 
that has lasted this long. Moreover, it does not appear that this 
growth is slowing. Unemployment is at record lows. Consumer confidence 
is at record highs. Inflation, the unfortunate byproduct of expansion 
in the past, has been kept under control.
  Some of our colleagues on the other side of the aisle have raised 
questions about the way Chairman Greenspan and the Federal Reserve have 
conducted their business. Make no mistake--it is an arcane science. 
Maybe it is an art. I am never sure whether it is an art or a science. 
Make no mistake about the fact that the Chairman of the Federal Reserve 
and the Board itself have tremendous power in this economy. It can 
cause inflation or it can foster low inflation. It can promote sound 
economic growth or it can cause a depression. As tough as that job is--
and probably none of us here in this body would fully understand it--
fortunately, we have a means of judging the

[[Page S267]]

success of the work that is done by the Chairman and by the Federal 
Reserve. In no place can I think of a better application for the 
admonition that you shall be judged by your works or, as we say at home 
in Missouri and in the country: Show me. Don't tell me what you are 
going to do; show me what you have done. Under that test, Alan 
Greenspan has received the highest marks.
  When you look at what has happened, more people are working. More 
people can buy homes. More people can keep their jobs. And they can see 
that their savings are not eroded by inflation.
  It was only about 20 years ago we saw inflation destroying savings 
and driving the price of homes out of reach of almost every American--a 
tremendous crisis--because monetary policy had gotten out of control. 
Today we see monetary policy under control; we see growth; we see 
opportunity. All American citizens stand to benefit from this growth, 
and I think they owe a debt of gratitude to the dedicated public 
service of Chairman Greenspan.
  Many economists did not believe low unemployment and low inflation 
could exist for a significant period of time. Indeed, our colleagues on 
the other side of the aisle have cited the fact that even Chairman 
Greenspan has learned as he has gone along. As he stated in his 
remarks, he has seen that there is a new paradigm. There is a new 
operation in effect. Times have changed, and we are learning more about 
economics.
  But as we learn more about them and how monetary policy affects our 
country, the Chairman's firm hand on the rudder of economic policy has 
been responsible for keeping us on the straight and steady course. He 
wisely steered America clear of the potential harm that may have 
resulted from the Asian financial crisis and, as the chairman of the 
Banking Committee said, the other crises back through the savings and 
loan debacle.

  In addition, he has provided unwavering support for fiscally 
conservative budgetary policy and has been of enormous assistance to 
this body. He explained to us even recently, as he probably well needed 
to, the necessity of continuing to link sound monetary and sound fiscal 
policy. I believe if you translate what he said in his speech, it was: 
Don't blow the surplus on big spending programs. That is an important 
message for us.
  As we look to the future, we see that the near-term economic future 
of this country looks promising. There are clearly--and we all 
recognize it--dangers to our prosperity that will likely arise, 
including inflation fears, increasing labor costs, dampening market 
problems, and structural problems in the economy. But Chairman 
Greenspan's thoughtful leadership over the last 12 years will serve us 
well in the coming years.
  I am very proud to add my name in support of Alan Greenspan for 
another term as Chairman of the Federal Reserve. I congratulate and I 
thank President Clinton for nominating him because I think not only we 
as a country are grateful that he has agreed to accept a fourth term 
but we will all benefit from his service in that term.
  I urge all of my colleagues to support his nomination.
  I thank the Chair. I thank my colleague from Iowa.
  Mr. HARKIN. Mr. President, how much time do I have remaining?
  The PRESIDING OFFICER (Mr. Voinovich). Forty nine and one half 
minutes.
  Mr. HARKIN. I would like to let my fellow Senators know I don't 
intend to take that much time.
  Mr. President, I noted with some interest that the chairman of the 
committee, Senator Gramm from Texas, when he started speaking a few 
moments ago said this debate we were having--and he mentioned the 
Senator from North Dakota, he mentioned this Senator--indicated the 
fundamental difference between the parties. I waited to see just 
exactly what he meant by that. I never heard an explanation.
  But maybe this debate does show some fundamental differences. For 
example, we are for openness. We believe the Federal Reserve ought to 
meet in the open, that it shouldn't meet in private. We believe 
transcripts ought to be made available to the public sooner than they 
are. Of course, we believe in lower interest rates. We want open 
meetings and lower interest rates, and the other side wants private 
meetings and higher interest rates. Perhaps that is really the 
fundamental difference we are talking about. I say it only tongue in 
cheek. But it does, I think, really say what this is all about.
  That is whether or not we are going to have some more accountability 
and openness in the Federal Reserve rather than what we have had in the 
past. Its decisions affect every American's life. It affects all of us. 
This recent interest rate increase today, as the Senator from North 
Dakota said, is a tax on all Americans. We are all going to pay for it. 
Some of us can afford to pay it a lot more easily than others. If you 
are a creditor, if you are part of the creditor class in America where 
your income exceeds your outgo, where you are able to save, where you 
have a lot of assets, and you are into investing and lending, higher 
interest rates may not be such a bad idea.
  However, if you are in the lower income sector of our economy, you 
need to buy a new car to get to work and the old one has run out, you 
do not have enough money, you have to put some money down, pay for it 
on time, or roll your interest on your credit cards month to month, 
maybe you need to make your house payment, maybe your kids are in 
college, you need to make some college payments, and you are an 
individual making less than $30,000 a year as a family, this is a real 
tax. It is going to cost you more money. Yet we don't know what the 
debate was. We don't know the details of why they did this. We will not 
know for years.
  I believe there is an important difference. The Open Market Committee 
just announced another quarter-point interest rate from 5.5 to 5.75 and 
an increase in the discount rate as well.
  This makes four times in 1 year that we have had interest rate 
increases--four times, three times last year, and then once this month.
  These increases hurt prospective homeowners. It is going to hurt the 
housing market. I want to say at the outset, we all want Americans to 
save more money. For modest-income Americans, the best savings program 
they have is owning their own homes. For modest-income Americans, when 
they are through with their working lives and they retire and they are 
on Social Security, the biggest asset they have, and in many cases the 
only asset they have, is the equity they have in their homes. So we 
want Americans to become homeowners.
  This interest rate increase will hurt Americans hoping to own their 
own homes. It will decrease the number of Americans who can own their 
own homes and have that as their savings vehicle. It will hurt small 
businesses and manufacturing. My farmers, who are already hurting 
enough and who have to borrow every year to get their crops in, they 
are going to get hit again. Everyone will be hurt one way or another. 
Some will feel it more profoundly than others. The prime rate is moving 
up today from 8.5 percent to 8.75 percent. That means the real interest 
rate, not the nominal but the real interest rate, adjusted to 
inflation, is close to 6.55 percent.
  Again, it is the real interest rate that you feel, not the nominal. 
For example, if interest rates were at, say, 10 percent, and inflation 
were at 8 percent, the real rate of interest would be 2 percent. If, 
however, interest rates are 8.75 percent, and inflation is only 2.2 
percent, your real rate of interest is 6.55 percent. That hurts you 
more.
  When our economy was flourishing in the 1960s with the highest growth 
rates we ever had, our real prime rates ran around 2 percent to 3 
percent. In other words, the real interest rates were 2 to 3 percent. 
Today it is about 6.55 percent. Think about that.
  Hopefully, the Fed will not be continuing this process because this 
hurts people, and there is no reason for it. That is really the essence 
of my remarks today. Mr. Greenspan and the Federal Reserve Board seemed 
to think they needed to make a preemptive strike on inflation before we 
see clear signs of inflation out there. This view, if aggressively 
acted upon, would place an absolute cap on our economy's ability to 
grow. It would destroy much of our potential for growth. That is a 
tragedy.
  Back in 1996, I opposed the renomination of Mr. Greenspan along with 
a number of my colleagues--a small

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number. I said at the time, and I say again today, I have no personal 
animus toward Mr. Greenspan. I agree with those who said he has had a 
distinguished career in public service. I think he is a bright 
individual. Like I say, I have only met him, as I can remember, once in 
my entire lifetime, so I have no personal animosity toward him. I think 
he is an honorable individual, exceptionally smart--bright.
  I did have one thing someone brought to my attention at one time. 
They said back in his youth he was a follower of Ayn Rand, and was with 
some little group with Ayn Rand in New York City. I said: Don't hold 
that against him. I said: If you can't test way-out theories, far-out 
kinds of philosophies when you are young, when are you ever going to 
test them? I assume Mr. Greenspan has moved on from his youthful days 
of following that way-out philosophy of Ayn Rand's and is now more 
mainstream and more centrist than that. But like I say, that is fine. I 
don't mind what people do in their youth. That is the time to test 
theories and philosophies, when you are young.
  As the Senator from North Dakota said, I have no personal animosity 
toward Mr. Greenspan. I just have a problem with what I believe the 
philosophy is at the Fed. I don't think it just applies to Mr. 
Greenspan, It applies to a lot of people at the Federal Reserve Board.
  In 1996, I opposed the renomination because I feared that he, along 
with others, had a history of jumping to raise interest rates and to 
choke off economic growth too soon, blocking the economy from growing 
at its potential and keeping millions of modest-income, middle-income 
Americans from benefiting from their hard work.
  A former Chairman of the Fed, William McChesney Martin, once said it 
was the Fed's job to remove the punch bowl at the party. At some point 
that should be done. But doing it too early kills our chance for 
growth, for jobs. It effectively kills any chance for the maximum 
number of Americans to climb the ladder of opportunity.
  Prior to 1996, Mr. Greenspan showed very little concern in that 
regard. He was focused on the possibility of accelerating inflation. He 
had, in the past, I believe--and again I say he and the others on the 
Fed--had damaged the economy by moving too quickly to raise rates and 
choking off our growth potential.
  For some time, a lot of economists, not all but a lot of economists 
took the view that NAIRU, the nonaccelerating inflation rate of 
unemployment, was 5\1/2\ or 6 percent; in other words, that if 
unemployment went below 5\1/2\ or 6 percent for a period of time, then 
inflation would take off. Once it started to accelerate, it would be 
very hard to stop. So that view was once unemployment got down to that 
level for a period of time, one had to raise interest rates and stop 
unemployment from being too low.
  At the same time, the orthodox view among a lot of economists about 
how fast could the economy grow over the long term was about 2.3 
percent; somewhere between 2 and 2.5 percent.
  I must again be very frank. That was the administration's estimate of 
the economy's potential for sustainable growth. That was in President 
Clinton's budget's economic assumptions for FY 97 and I opposed that. I 
said to the President and his economic advisers at the time: That is 
nonsense. You are following some of these economists who do not 
understand the new economy that is out there. They do not understand 
the new rate of productivity growth and what is causing it. They are 
still looking back. They are back in the eighties and not in the 1990s.
  So it was not just the Fed at that time, it was also the 
administration of President Clinton and the CBO.
  They saw it as a simple calculation. You take the increased expected 
productivity of the economy, estimated at 1.2 percent--again, very 
low--add the increase to the labor pool--about 1.1 percent--and you get 
a 2.3-percent rate of growth.
  Again, they said if economic growth exceeded 2.3 percent over time, 
or if unemployment fell below 6 percent, the alarm bells would have to 
go off. It was prudent to raise interest rates or we would be on the 
perilous path of accelerating inflation.
  So in 1996, viewing that, I feared we would never get a chance to see 
what our economy was really capable of doing. That is why I opposed the 
renomination of Mr. Greenspan in 1996. I suggested in 1996, that the 
supporters of NAIRU were wrong, that it was an outdated concept. I said 
at the time we could have unemployment at 4.5 percent or less, and I 
said it was possible because of increased productivity due to the new 
technologies, because of the greater integration of the world economy, 
the new marketing techniques that are taking place in America and that 
NAIRU was wrong and ought to be thrown out the window.
  I suggested in 1996 that we ought to give our economy a chance to do 
better or we would limit our economic growth and limit the ability of 
average Americans to see their incomes rise.
  Mr. Greenspan indicated that he would not raise rates simply because 
of the NAIRU. That was a good statement, but again we had a history of 
these preemptive strikes, and I feared we would not let the economy 
reach its potential.
  I believed Mr. Greenspan would be quick to see the specter of 
inflation behind some little statistic. I am here to say fortunately I 
was wrong about that. Mr. Greenspan and the Fed have allowed the 
economy to grow. Part of the reason was particular situations, such as 
the crash of the Asian economies, but I believe there was a willingness 
to let the economy grow and a new attitude that there were some new 
things happening in the economy.
  I read a speech Mr. Greenspan gave in which he mused about the 
increase in productivity and how it did not seem to have any end, the 
use of computers and how they helped to control inventories. Quite 
frankly, there seemed to be a shift then at the Fed at that time.
  The results have been very impressive. Gross domestic product has 
been increasing at an average rate of about 4.3 percent since Greenspan 
was last confirmed. Unemployment has gone down by over a percentage 
point. The portion of our population over 16 in the workforce is at or 
near a record high. Unemployment for minorities, teenagers, 
traditionally hard-to-employ groups are at record lows. Incomes for 
those at the middle are rising--not as much as I would like--and, to 
some extent, those at the bottom are rising.
  What has happened is unemployment fell below 6 percent and inflation 
did not take off; economic growth was near 3 percent and inflation did 
not take off. And then unemployment came down to 5.5 percent and 
nothing happened. Then unemployment went below 4.5 percent. It has been 
under 4.5 percent for almost 2 years now. No inflation. We are seeing 
our GDP increase at over 4 percent on average per year, almost twice 
what people were saying a feasible sustainable rate of growth of 2.3 
percent and there is no inflation and productivity continues to 
increase.
  That was in the initial years. Then starting last year Mr. Greenspan 
seems to have shifted his view. The concern was not NAIRU. It was 
irrational exuberance in the stock market. Therefore, we had to put 
interest rates back up. Last year, there were three ticks up. Today 
there was another tick up; bringing us to a 1-percent increase in 1 
year. It almost seems as Fed are looking for something out there. If it 
is not NAIRU, which has been discarded, then it is something else out 
there as to why we have to raise interest rates. There is something 
else out there lurking that is going to cause inflation to happen.
  Is it irrational exuberance in the stock market. What this is going 
to mean is that, quite frankly, we are going to have more ticks up in 
the interest rate, enough till we see the rate of unemployment start to 
rise again.
  I believe that would be a tragic mistake. People need to be employed. 
We still have people out there who need job training and skill 
upgrading. Can unemployment stay this low without causing accelerating 
inflation? Absolutely. The common wisdom is that we have a pool of low-
skill workers still to be tapped. All they need is job training and 
skill upgrading, but they are there.
  Robert Lerman, in an October 26, 1998, Washington Post article said:

       Differences between the groups entering and leaving the 
     workforce explains the surprisingly high qualifications of 
     newly employed adults. Older workers without a high school 
     degree are retiring, replaced by younger, better educated 
     workers. In the past 6 years, the population of college 
     graduates aged 25 and over increased by about 20

[[Page S269]]

     percent, well above the 7 percent growth in total adult 
     population. Meanwhile, the population of high school dropouts 
     declined by nearly 3 million.

  We are getting that higher skilled workforce, and they are more 
productive. The economy is also attracting people who were not 
considering work to come back into the work force.
  The job market has been tight in most places. In Iowa, we have a low 
rate of unemployment, about 2.2 percent, and that is good. Are wages 
skyrocketing in Iowa because we have low unemployment? No. Are they 
rising modestly? Yes, and they should. With this booming economy and 4-
percent growth in our GDP, wages ought to be going up.

  As an aside, I find it more than passing strange that here we are in 
the second week back this year and we could move through the Banking 
Committee at almost light speed the renomination of a central banker, 
Mr. Greenspan, to be head of the Fed, but we cannot do it to raise the 
minimum wage. We cannot do anything to help low-income people get a 
better share of the economic growth of this country. Gosh, we could 
sure move fast to help the banking system out, but not to help modest-
income Americans.
  Many economists now come to conclude that NAIRU should not be used to 
predict a new wave of inflation. Quite frankly, I am happy it is dead. 
We had this irrational exuberance in the stock market. Now we have a 
new concept. As I said, if it is not NAIRU, then it is this irrational 
exuberance. The new concern is the wealth effect. Mr. President, have 
you heard about the wealth effect? Mr. Greenspan is talking about the 
wealth effect as a reason we should fear inflation and that we should 
have some preemptive strike. You have to have something, there has to 
be something out there. Chairman Volcker had the money supply. Now we 
have the wealth effect.
  In a speech at the Economic Club in New York earlier this month, 
Chairman Greenspan noted the possible negative impacts of the wealth 
effect. He said that estimates of the wealth effect on the GDP has 
hovered around 1 percent of the GDP since late 1996. He then said, in 
part:

       . . . the impetus to spending by the wealth effect by its 
     very nature clearly cannot persist indefinitely. In part, it 
     adds to the demand for goods and services before the 
     corresponding increase in output fully materializes. It is, 
     in effect, increased purchasing from future income, financed 
     currently by greater borrowing or reduced accumulation of 
     assets.

  There are always limits, aren't there? Economists were right not to 
clamp down on the economy until we see real signs of inflation. The Fed 
should stick with that view. Today's increase makes me believe the Fed 
will endanger the economy by not waiting for real signs of inflation, 
and now the wealth effect has become the latest reason, despite the 
fact inflation is nowhere in sight, except for the runup in oil prices 
caused, in large part, by OPEC's setting of limits on oil production. 
The Fed raising interest rates will have no effect on that. I think 
everyone agrees with that.
  This wealth effect is estimated by some to add about 4 cents in extra 
spending per dollar of increased wealth. A prominent study by senior 
vice president Charles Steindel and economist Sydney Ludvigson, both 
with the New York Fed, concluded the wealth effect was likely to be 
between 3 and 4 cents per dollar in annual consumption. They also said 
it is impossible to predict how quickly the wealth effect will kick in. 
It can take years for consumer spending to reach a permanently higher 
level. They said:

       Forecasts of future consumption growth are not typically 
     improved by taking changes in existing wealth into account.

  So I guess what I am saying is the wealth effect--just like NAIRU, 
should not be the reason for raising interest rates, simply because of 
the fear that it will cause an inevitable cascade of economic effects 
leading to accelerating inflation.
  As the Senator from North Dakota said earlier, I believe if the Fed 
wants a more targeted instrument to more carefully check some of the 
excesses in the stock market, they should look at margin requirements 
for buying stock on credit. But raising the interest rates is not going 
to do it without great harm to the economy as a whole.
  So quite frankly, again, we see no signs of higher inflation. We have 
had inflation down from 3.3 percent in 1996 to 1.7 percent in 1997, and 
1.6 percent in 1998, and in 1999 it jumped to 2.7 percent.
  Is that a problem? It sounds like a problem until we take out food 
and energy. Without food and energy, the core inflation rate continues 
to improve on a December-to-December basis. In 1996 it was 2.6 percent, 
in 1997 it was 2.2 percent, in 1998 it was 2.4 percent, and in 1999 it 
dropped to 1.9 percent--when you take out food and energy.
  So inflation is going down. Inflation is dropping. And the Fed is 
raising interest rates. Please, will some economist tell us what is 
going on here?
  Again, inflation took a jump in December two-tenths of a percent. 
But, again, without food and energy. And energy--that was the culprit, 
not food--energy prices shot up 1.4 percent that month. Raising the 
interest rate is not going to cure that. I do not know of anyone who 
says it will.
  Petroleum prices move with the OPEC cartel's production, not by the 
effects of interest rate increases. I will repeat that. We all 
understand petroleum prices move with the OPEC cartel's production and 
not by the effects of interest rate increases.
  So again, I repeat, last year inflation actually went down on a 
December-to-December basis. Yet we had three increases in interest 
rates last year and another increase just today.
  Why? What is happening out there? This is hitting our farmers. It is 
hitting our working families. It may not be hitting Senators and 
Congressmen making 130-some thousand dollars a year. It is not hitting 
people making money in the stock market. We have our share of 
megamillionaires in this body. It is not hurting us, not hurting them.
  But you go out and talk to that husband and wife who are both working 
jobs, and they have a couple of kids at home, and they are making 
$40,000 a year, and they are trying to pay a mortgage on a house, 
trying to keep a car--maybe two cars; they need two for both of them 
with their jobs--and keeping their kids in clothes. This is a tax on 
them.
  We have no signs of accelerating inflation. I believe we are going 
down the wrong path in raising interest rates.
  I basically believe we ought to have the lowest possible reasonable 
interest rates at all times, and only when we see clear signs of 
inflation should we then begin the process of ratcheting up interest 
rates. We have had a period of quality growth and we should be doing 
all that we can to sustain it.
  Again, I have a lot more I could say about this and what we ought to 
be doing. What we should be doing is keeping interest rates low. We 
ought to be taking the surpluses we have, not using them for a tax cut, 
which, again, would be the wrong thing to do at this time. That would 
do more to stimulate inflation than anything, having some tax cut that 
is going to stimulate and fuel even more demand out there.
  What we ought to be doing is using the surplus we have now to buy 
down the national debt. This is where I do agree with Mr. Greenspan: 
Buy down the national debt. He is right in that regard. I do agree with 
him on that.
  But we also need to use some of the surplus to invest in 
our children's education so they can partake of the new economies as 
they grow older. Every child in grade school today ought to have access 
to computers and to the Internet. Every teacher who teaches in grade 
school today ought to be fully trained in teaching the new kinds of 
skills using the new technologies.

  We need to reeducate those already in our workforce with job 
training. We need to upgrade our infrastructure. There are $100 billion 
in needed repairs in our schools in America. I understand the 
President's budget was going to have $1.3 billion for that.
  We need to improve our infrastructure. We need to improve our 
transportation infrastructure in this country. These are the things we 
ought to be doing. This would help to keep our GDP high, keep our 
workforce employed, keep unemployment low, and keep inflation down. It 
would not be a tax on working Americans like raising the interest rates 
that the Fed is doing right now.
  Productivity is good. Productivity is increasing. We hope it will get 
back to

[[Page S270]]

where it was in the 1960s. Long term high productivity. A lot of people 
think we are more productive today than in the 1960s. From 1960 to 
1970, our productivity increased by 31.8 percent. From 1990 to the year 
2000, it increased 21 percent, although we are doing a lot better in 
the last half of the 90s. So we have a ways to go before we are as 
productive as in the 1960s. But I believe that will happen in the next 
decade if we have reasonable policies. In the next decade, I believe 
our productivity will continue at a high level and further increase and 
will closely approximate what we had in the 1960s.
  I was chastised back in 1996 when I opposed the Greenspan nomination. 
I was on a couple talk shows, and people asked: What do you think the 
growth rate could be, the sustained growth rate? I said: At least 3.5 
percent, 3 to 3.5 percent without any problem. I got hit by a few 
economists who said: Oh, Harkin is way out on that one.
  Since 1996 we have had--what?--4 percent and no inflation. So even 
I--as optimistic as I am about the American economy and the ability of 
our workforce--was a little underestimating the real rate of growth we 
could have.
  I am just saying, in the next 10 years we can still maintain a 3- to 
4-percent growth rate. I believe we can maintain an honest average of 
over a 3-percent growth in the next decade. It is not going to happen 
if this Federal Reserve continues to raise these interest rates. They 
are going to choke it off. And they are going to choke it off for no 
good reason whatsoever.
  We can improve the quality of the lives of Americans, and we can 
invest in our future, and we can buy down the national debt. We can do 
all those wonderful things. But if the Fed persists in raising interest 
rates, it is going to choke off our rate of growth. All of the good we 
do here--in terms of keeping a surplus, in getting rid of the national 
debt, of investing in young people and in education--all that will be 
for naught because our rate of growth will be choked off. When that 
rate of growth is choked off, unemployment is going to go up.

  The Fed talks about a soft landing. If you are flying well and the 
airplane is working and you have a lot of fuel and the sky is clear, 
why are you worried about a landing? Why are they talking about a 
landing? This economy, I believe, can grow at a 3-percent plus rate for 
the next decade. We will have a landing all right. If they keep raising 
interest rates, we will have a landing.
  Let me close by saying I think there is a reverse side to the wealth 
effect. I coin the term the ``poor effect.'' Some economists believe 
that shrinking wealth has an even bigger effect on spending than 
growing wealth. If we push the economy into a dive, we will experience 
the poor effect again. Economist Mark Zandi suggests that declining 
wealth reduces spending by about 7 cents per dollar of wealth lost. So 
if the wealth effect is 3 to 4 cents a dollar, declining wealth reduces 
spending by 7 cents per dollar, almost twice as much. So any danger 
that is out there of accelerating inflation must be weighed against the 
possible result of slowing the economy and what I call the poor effect, 
not the wealth effect but the poor effect.
  Rural Iowa, my State, experienced the poor effect in a deep 
agricultural recession in the mid-1980s. The value of land fell by more 
than 50 percent as our rural economy crumbled. I saw grown friends of 
mine cry in public, farmers lose their lands, and some of them took 
their own lives. Families fell apart; couples divorced. The economy of 
rural Iowa shrunk. Let's not jump too quickly to use the club of higher 
interest rates.
  The Federal Reserve has two mandates in law. The Federal Reserve is 
not a creature of the Constitution of the United States. You won't find 
it in the Constitution anywhere. It is a creature of Congress. We 
legislatively created it. We gave it two mandates: to balance concerns 
about inflation on the one hand and to stimulate full employment on the 
other. Those goals were placed in the law in 1978.
  Prior to 1978, there was no specific mention of inflation at all in 
the law. It was not in any of the laws about the Fed going all the way 
back to its founding in 1913. By the Full Employment and Balanced 
Growth Act of 1978, the Congress, in the exercise of its constitutional 
power, said to the Fed: You have two functions now: check inflation and 
stimulate full employment. That law we passed in 1978 set a goal of 4-
percent unemployment for those 16 and older, 3 percent for those over 
19. We are near 4 percent now. Throughout the 1980s and 1990s, 
conservative economists laughed at those goals. They said they were 
ridiculous targets set by politicians. That is the law of the land, and 
it sure doesn't look so silly now.
  I worry that the Fed has a hard time maintaining a balance between 
inflation and full employment concerns. They are only focused on the 
specter of inflation, and there is no inflation out there. As I said, 
new advances in our technology, in our computers, designing products at 
high speed, the rapid replacement of parts, tight controls on 
inventories at lower cost, reduces the inventory buildup, one of the 
classic causes of past recessions. Communications costs are dropping 
like a rock. Every day I get something in the mail that I can make 
long-distance calls cheaper than I did the day before. Now you can get 
computers individually tailored for retail customers under $1,000 from 
Gateway Computer. Amazing, a world economy, capital flowing around the 
world.
  I know others want to speak. I see my good friend from Minnesota, who 
has been a great leader on this in the past, on the floor. I know he 
wants to speak. I took this time because, as I said, I don't want 
anyone to mistake that I have some personal animosity toward Mr. 
Greenspan. That is not so. I do have very deep-seated questions about 
the direction of the Fed, the fact they are raising interest rates 
without any inflation, and they are going to choke off this great 
growth we are having in this country with a series of interest rate 
increases. They are going to push up unemployment.

  I will yield the floor with the final statement that we need to open 
up the Federal Reserve System's meetings. I don't want to make them 
political. It should not be political. We need to know why they are 
making the decisions they make. The decision they make on raising 
interest rates taxes every working American. How would they feel if we 
debated tax policy behind closed doors? I don't want to make it 
political, but I think it ought to be open. Secondly, I believe the Fed 
should pay more attention to unemployment and to growth and not just 
get so fixated on some specter of inflation that is not even out there.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Minnesota.
  Mr. WELLSTONE. Mr. President, my colleague from Virginia is here. I 
have a fairly lengthy statement. I know our colleague from Virginia 
wants to speak. I wish to take a few minutes. I ask the Chair, are we 
going to vote tomorrow? Do we have a time limit today or not?
  The PRESIDING OFFICER. We do have a time limit. The Senator has 49 
minutes remaining.
  Mr. WELLSTONE. If I take a few minutes now and then come back after 
the Senator from Virginia speaks, are we going to be in session for a 
while tonight speaking on this? Will I be able to do that?
  The PRESIDING OFFICER. The Chair is not aware of any time limit.
  Mr. WELLSTONE. I thank the Chair.
  Mr. WARNER. I wonder, if I took but 3 minutes, would that convenience 
my colleague?
  Mr. WELLSTONE. I have to leave anyway in a few minutes for a meeting 
with some farmers. Let me take a few minutes, and I will be done. Then 
I will be pleased to yield the floor and then come back later.
  Mr. President, first of all, let me thank the Senator from Iowa for 
his comments. I think I can be brief because much of what he says I am 
in such strong agreement with.
  Mr. President, tomorrow morning, do we have any time for debate 
before the vote?
  The PRESIDING OFFICER. There are no orders that have been entered for 
tomorrow as of yet.
  Mr. WELLSTONE. Is there a scheduled vote tomorrow at a particular 
time?
  The PRESIDING OFFICER. Nothing has been ordered yet for tomorrow, so 
the Senator can assume there might be some time.
  Mr. WELLSTONE. I ask unanimous consent that I may have 20 minutes to 
speak tomorrow morning.

[[Page S271]]

  Mr. WARNER. Reserving the right to object, I suggest that the manager 
of this nomination be consulted first. Can the Senator withhold that 
and as a matter of courtesy discuss it with the manager and leadership 
of the Senate? I think that would be an important consideration. At 
this time, with no discourtesy to my colleague, I register an 
objection.
  The PRESIDING OFFICER. Objection is heard.
  Mr. WELLSTONE. Mr. President, how much time do I have left?
  The PRESIDING OFFICER. Forty-two minutes.
  Mr. WELLSTONE. I yield the floor.
  Mr. WARNER. Mr. President, I say with a great sense of humility that 
I have been privileged to be in public office for over 30 years. In the 
course of that time, I have had the privilege and wonderful opportunity 
to meet dozens and dozens of people who have held public office. I have 
listened to the very interesting comments of my colleagues with regard 
to the economy and interest rates and the like concerning the 
distinguished nominee, Mr. Greenspan. I simply go to a very simple but 
direct point with regard to this nomination; that is, dollars have a 
different meaning to people--savings, investments, and the like. But 
almost without exception they represent the efforts of hard work.
  Therefore, when it comes time to preserve, invest, save, whatever you 
may do with those dollars--the man and woman primarily who have earned 
it--you want to know that the system, the value of that dollar, the 
protection of that dollar is there for your anticipated use and in many 
instances for the next generation. As to those people who are directly 
concerned with the regulatory process and decision process which 
vitally affects the value of the dollar and the protection of the 
investments, you want to know they are of unquestionable character.
  I have known the nominee for many years and have had the privilege of 
working with him, playing golf and tennis with him. You get to know the 
totality of the man. This man is extraordinary. There will not be 
raised in the course of this debate, in my judgment, one single comment 
by any of my colleagues questioning this man's character. He is known 
by many in this community, he is known in this country, and he is known 
worldwide. The solidarity of his character and ethical standards is 
second to none. You may differ with him on some of his decisions, and 
that is understandable, but in terms of integrity, character, and 
ethics, he is beyond question. How fortunate we are that the President 
has selected this man to continue to serve this country and, indeed, 
the world because we are the world's leader in economics, national 
security, and in every other respect.
  I am happy to add my few words and indicate my support that we are 
fortunate to have a person of his great character to step up once again 
and assume the arduous role and time-consuming lifestyle of this 
important post. But before we confer on him the advice and consent of 
the Senate and every other aspect, he is not infallible. As I said, I 
remember someone many years ago talking about Great Britain who said: 
You get to know a man--on the playing fields I think it was. He is not 
infallible. This man cannot keep a golf score. His partners constantly 
have to remind him. He cannot keep score in a tennis game. This is 
perplexing. I can bring witnesses to attest to this. But we have to 
overlook that minor matter as he deals with major figures, and we wish 
him luck with the anticipated action of this distinguished body.
  I yield the floor.
  Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. HUTCHISON. Mr. President, I ask unanimous consent that I be able 
to use as much time under Senator Gramm's time allotment as I may 
consume.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. HUTCHISON. Mr. President, I rise in support of Alan Greenspan's 
nomination as Chairman of the Federal Reserve Board. Many years from 
now, historians may look at the Clinton Presidency and say that the 
best decision he made in office was to keep Alan Greenspan at the helm 
of the Federal Reserve.
  Alan Greenspan, the individual, is a man of unquestioned integrity 
and intellect. I have known him for over two decades. He is truly one 
of our finest public servants. He has served at the Federal Reserve 
since 1987, and a steady hand at the wheel he has been. When the 
economy could have been volatile with a less experienced person, having 
him there caused the seas to be more tranquil. As my colleague Senator 
Gramm has said, he may be the finest central banker we have ever had in 
the United States or, for that matter, the world has ever known.
  In fact, it is the example he has shown that has caused many other 
countries to realize the importance of having a central bank of 
transparency, of having someone who is not political at the helm of 
Federal Reserve policy. This example is going to strengthen many new 
democracies we are seeing in the world today, and his example will be 
the one they follow.
  I find it curious that there are some in opposition to this 
nomination, and it is really ironic in light of yesterday's headlines 
that the economic expansion that began in 1991 is now the longest in 
American history. That did not happen by accident. It did not happen by 
luck. It happened because there was a steady hand at the wheel. That 
may not be the only reason we have had economic expansion. Our 
creativity, the spirit of entrepreneurship in our country, also has a 
part in that. But if we had someone who was trigger happy at the Fed, 
someone who would jump too quickly and too far, it could have caused a 
very different result. I am very pleased that the President has 
renominated Alan Greenspan.

  There is an old saying: If it ``ain't'' broke, don't fix it. It seems 
to me some of the Senators I have heard on the floor today speaking in 
opposition to Alan Greenspan's renomination are fixing a Maytag. In 
fact, this ``ain't'' broke, and the last thing we need to do is tinker 
with something that is working very well.
  America is enjoying an unprecedented economic expansion. Of course, 
Alan Greenspan's steady hand at the Federal Reserve Board has allowed 
our economy to flourish and not be crippled by high inflation or 
interest rates. It has not been an easy task. Every time the Federal 
Open Market Committee meets, the airwaves are full of people saying the 
Fed either made the right decision or the wrong decision, they should 
have done more, they should have done less. It is a careful balancing 
act, but I can think of no one I would be happier to have in charge 
than Dr. Greenspan.
  He knows the power of his words. Many times I have been in the 
audience when he has spoken, and he is very careful not to overstep. He 
knows that what he says is going to affect the stock market, and he 
does not want to have such an impact. He himself jokes sometimes to 
audiences: If you think you understand what I am about to say, you have 
misunderstood.
  He does not want to do something that is going to have a drastic 
impact, that will have a 1-day impact or a 2-day impact or a 1-week 
impact. What he wants is to have a steady, noninflationary atmosphere 
so we will not have interest rates that are too high, interest rates 
that are too low, an economy that is too hot, an economy that is not 
hot enough. He understands these issues because of his experience.
  We do not know what our economic future holds, but this much we do 
know: Whatever economic ups or downs may confront us in the future, and 
particularly economic ups and downs of other countries which we cannot 
control, the person most capable of dealing with them is Alan 
Greenspan. With him in charge, we are much more likely to avoid 
economic pitfalls for our country.
  I urge the Senate to approve his nomination. I am certain it will. 
From the speeches I have heard on the floor today, the overwhelming 
sentiment is going to be to confirm Alan Greenspan.
  He has been at the Federal Reserve for 13 years. He has presided over 
the greatest economic expansion in the

[[Page S272]]

world, and most surely we will be in our strongest position to 
withstand whatever might hit us in the future if we have someone with 
his experience, his integrity, and his intellect at the head of the 
Federal Reserve Board.
  I hope my colleagues will confirm him tomorrow and that it will be an 
overwhelming vote. The time has come for us to move on this important 
nomination.
  I thank the Chair. I yield the floor and suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant bill clerk proceeded to call the roll.
  Mr. VOINOVICH. Madam President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER (Mrs. Hutchison). Without objection, it is so 
ordered.
  Mr. VOINOVICH. Madam President, I ask unanimous consent to speak as 
in morning business for up to 20 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The remarks of Mr. Voinovich pertaining to the introduction of S.J. 
Res. 38 are located in today's Record under ``Statements on Introduced 
Bills and Joint Resolutions.'')
  The PRESIDING OFFICER. The Senator from New York.
  Mr. MOYNIHAN. Mr. President, as I did 4 years ago, I wish to record 
my emphatic and enthusiastic support for the nomination of the 
honorable Alan Greenspan to a fourth term as Chairman of the Board of 
Governors of the Federal Reserve System. He is a national treasure. He 
has served our Nation with principle and wisdom, and I shall attempt to 
show in these brief remarks, unprecedented success.
  Let me cite four principal reasons--updated from four years ago--why 
he should again be confirmed by the Senate.
  The economy is now in its 107th month of an expansion--the longest in 
American history--which shows no sign of ending.
  The unemployment rate for December was 4.1 percent and has been below 
5 percent for almost three years. Not too long ago, economists 
estimated that the NAIRU, as the acronym was for the nonaccelerating 
inflation rate of unemployment--what we might call full employment--was 
about 6 percent.
  Next, inflation is in check. Measured by the CPI--which economists 
believe overstates inflation--consumer prices have increased by less 
than 3 percent per year for the past three years.
  Finally, the misery index--the sum of the unemployment rate and the 
inflation rate--is about 7 percent, the lowest level in 30 years.
  These outcomes are a tribute to Alan Greenspan's stewardship of our 
Nation's monetary policy for the past 13 years. But his wisdom and 
influence extend far beyond mere stewardship of monetary policy.
  Last Wednesday, at his confirmation hearing before the Senate 
Committee on Banking, Housing, and Urban Affairs he had this to say in 
response to a question about the use of budget surpluses from Senator 
Phil Gramm, the Committee's Chairman, Dr. Greenspan said:

       . . . my first priority would be to allow as much of the 
     surplus to flow through into a reduction in debt to the 
     public. . . . From an economic point of view, that would be, 
     by far, the best means of employing it.

  And last month, in remarks before the Economic Club of New York, 
Chairman Greenspan demonstrated why he has been so successful. He 
understands--as perhaps few others in high level economic policy 
positions--how the economy works. One can only marvel at the clarity 
and insights he brought to bear as he explained to his audience the 
impact on productivity of just-in-time inventories, and reasons why the 
wealth effect from the increase in the stock market has sustained the 
current expansion, while at the same time containing ``the potential 
seeds of rising inflationary and financial pressures that could 
undermine the current expansion.'' Ever vigilant to these potential 
dangers explains why the FED, under Chairman Greenspan, today increased 
interest rates by one-quarter of a percentage point.
  Based on his performance, Chairman Greenspan deserves to be 
reconfirmed. I have no doubt that the Senate will, in a near unanimous 
vote, concur.
  I ask unanimous consent that remarks of Chairman Greenspan, at the 
Economic Club of New York be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Remarks by Alan Greenspan, Chairman, Board of Governors of the Federal 
 Reserve System, before the Economic Club of New York, January 13, 2000

       We are within weeks of establishing a record for the 
     longest economic expansion in this nation's history. The 106-
     month expansion of the 1960s, which was elongated by the 
     Vietnam War, will be surpassed in February. Nonetheless, 
     there remain few evident signs of geriatric strain that 
     typically presage an imminent economic downturn.
       Four or five years into this expansion, in the middle of 
     the 1990s, it was unclear whether going forward, this cycle 
     would differ significantly from the many others that have 
     characterized post-World War II America. More recently, 
     however, it has become increasingly difficult to deny that 
     something profoundly different from the typical postwar 
     business cycle has emerged. Not only is the expansion 
     reaching record length, but it is doing so with far stronger-
     than-expected economic growth. Most remarkably, inflation has 
     remained subdued in the face of labor markets tighter than 
     any we have experienced in a generation. Analysts are 
     struggling to create a credible conceptual framework to fit a 
     pattern of interrelationships that has defied conventional 
     wisdom based on our economy's history of the past half 
     century.
       When we look back at the 1990s, from the perspective of say 
     2010, the nature of the forces currently in train will have 
     presumably become clearer. We may conceivably conclude from 
     that vantage point that, at the turn of the millennium, the 
     American economy was experiencing a once-in-a-century 
     acceleration of innovation, which propelled forward 
     productivity, output, corporate profits, and stock prices at 
     a pace not seen in generations, if ever.
       Alternatively, that 2010 retrospective might well conclude 
     that a good deal of what we are currently experiencing was 
     just one of the many euphoric speculative bubbles that have 
     dotted human history. And, of course, we cannot rule out that 
     we may look back and conclude that elements from both 
     scenarios have been in play in recent years.
       On the one hand, the evidence of dramatic innovations--
     veritable shifts in the tectonic plates of technology--has 
     moved far beyond mere conjecture. On the other, these 
     extraordinary achievements continue to be bedeviled by 
     concerns that the so-called New Economy is spurring 
     imbalances that at some point will abruptly adjust, bringing 
     the economic expansion, its euphoria, and wealth creation to 
     a debilitating halt. This evening I should like to address 
     some of the evidence and issues that pertain to these 
     seemingly alternative scenarios.
       What should be indisputable is that a number of new 
     technologies that evolved largely from the cumulative 
     innovations of the past half century have not begun to bring 
     about awesome changes in the way goods and services are 
     produced and, especially, in the way they are distributed to 
     final users. Those innovations, particularly the Internet's 
     rapid emergence from infancy, have spawned a ubiquity of 
     startup firms, many of which claim to offer the chance to 
     revolutionize and dominate large shares of the nation's 
     production and distribution system. Capital markets, not 
     comfortable dealing with discontinuous shifts in economic 
     structure, are groping for sensible evaluations of these 
     firms. The exceptional stock price volatility of most of the 
     newer firms and, in the view of some, their outsized 
     valuations, are indicative of the difficulties of divining 
     from the many, the particular few of the newer technologies 
     and operational models that will prevail in the decades 
     ahead.
       How did we arrive at such a fascinating and, to some, 
     unsettling point in history? The process of innovations, of 
     course, is never-ending. Yet the development of the 
     transistor after World War II appears in retrospect to have 
     initiated an especial wave of innovative synergies. It 
     brought us the microprocessor, the computer, satellites, and 
     the joining of laser and fiber-optic technologies. These, in 
     turn, fostered by the 1990s an enormous new capacity to 
     disseminate information. To be sure, innovation is not 
     confined to information technologies. Impressive technical 
     advances can be found in many corners of the economy.
       But it is information technology that defines this special 
     period. The reason is that information innovation lies at the 
     root of productivity and economic growth. Its major 
     contribution is to reduce the number of worker hours required 
     to produce the nation's output. Yet, in the vibrant economic 
     conditions that have accompanied this period of technical 
     innovation, many more job opportunities have been created 
     than have been lost. Indeed, our unemployment rate has fallen 
     notably as technology has blossomed.
       One result of the more-rapid pace of IT innovation has been 
     a visible acceleration of the process of ``creative 
     destruction,'' a shifting of capital from failing 
     technologies into those technologies at the cutting edge. The 
     process of capital reallocation across the economy has been 
     assisted by a significant unbundling of risks in capital 
     markets made possible by the development of innovative 
     financial products, many of which themselves owe their 
     viability to advances in IT.

[[Page S273]]

       Before this revolution in information availability, most 
     twentieth-century business decisionmaking had been hampered 
     by wide uncertainty. Owing to the paucity of timely knowledge 
     of customers' needs and of the location of inventories and 
     materials flowing throughout complex production systems, 
     businesses, as many of you well remember, required 
     substantial programmed redundancies to function effectively.
       Doubling up on materials and people was essential as backup 
     to the inevitable misjudgments of the real-time state of play 
     in a company. Decisions were made from information that was 
     hours, days, or even weeks old. Accordingly, production 
     planning required costly inventory safety stocks and backup 
     teams of people to respond to the unanticipated and the 
     misjudged.
       Large remnants of information void, of course, still 
     persist, and forecasts of future events on which all business 
     decisions ultimately depend are still unavoidably uncertain. 
     But the remarkable surge in the availability of more timely 
     information in recent years has enabled business management 
     to remove large swaths of inventory safety stocks and worker 
     redundancies.
       Information access in real time--resulting, for example, 
     from such processes as electronic data interface between the 
     retail checkout counter and the factory floor or the 
     satellite location of trucks--has fostered marked reductions 
     in delivery lead times and the related workhours required for 
     the production and delivery of all sorts of goods, from books 
     to capital equipment.
       The dramatic decline in the lead times for the delivery of 
     capital equipment has made a particularly significant 
     contribution to the favorable economic environment of the 
     past decade. When lead times for equipment are long, the 
     equipment must have multiple capabilities to deal with the 
     plausible range of business needs likely to occur after these 
     capital goods are delivered and installed.
       With lead times foreshortened, many of the redundancies 
     built into capital equipment to ensure that it could meet all 
     plausible alternatives of a defined distant future could be 
     sharply reduced. That means fewer goods and worker hours are 
     caught up in activities that, while perceived as necessary 
     insurance to sustain valued output, in the end produce 
     nothing of value.
       Those intermediate production and distribution activities, 
     so essential when information and quality control were poor, 
     are being reduced in scale and, in some cases, eliminated. 
     These trends may well gather speed and force as the Internet 
     alters relationships of businesses to their suppliers and 
     their customers.
       The process of innovation goes beyond the factory floor or 
     distribution channels. Design times and costs have fallen 
     dramatically as computer modeling has eliminated the need, 
     for example, of the large staff of architectural 
     specification-drafters previously required for building 
     projects. Medical diagnoses are more thorough, accurate, and 
     far faster, with access to heretofore unavailable 
     information. Treatment is accordingly hastened, and hours of 
     procedures eliminated.
       Indeed, these developments emphasize the essence of 
     information technology--the expansion of knowledge and its 
     obverse, the reduction in uncertainty. As a consequence, risk 
     premiums that were associated with all forms of business 
     activities have declined.
       Because the future is never entirely predictable, risk in 
     any business action committed to the future--that is, 
     virtually all business actions--can be reduced but never 
     eliminated. Information technologies, by improving our real-
     time understanding of production processes and of the 
     vagaries of consumer demand, are reducing the degree of 
     uncertainty and, hence, risk.
       In short, information technology raises output per hour in 
     the total economy principally by reducing hours worked on 
     activities needed to guard productive processes against the 
     unknown and the unanticipated. Narrowing the uncertainties 
     reduces the number of hours required to maintain any given 
     level of production readiness.
       In economic terms, we are reducing risk premiums and 
     variances throughout the economic decision tree that drives 
     the production of our goods and services. This has meant that 
     employment of scarce resources to deal with heightened risk 
     premiums has been reduced.
       The relationship between businesses and consumers already 
     is being changed by the expanding opportunities for e-
     commerce. The forces unleashed by the Internet are almost 
     surely to be even more potent within and among businesses, 
     where uncertainties are being reduced by improving the 
     quantity, the reliability, and the timeliness of information. 
     This is the case in many recent initiatives, especially among 
     our more seasoned companies, to consolidate and rationalize 
     their supply chains using the Internet.
       Not all technologies, information or otherwise, however, 
     increase productivity--that is, output per hour--by reducing 
     the inputs necessary to produce existing products. Some new 
     technologies bring about new goods and services with above 
     average value added per workhour. The dramatic advances in 
     biotechnology, for example, are significantly increasing a 
     broad range of productivity-expanding efforts in areas from 
     agriculture to medicine.
       Indeed, in our dynamic labor markets, the resources made 
     redundant by better information, as I indicated earlier, are 
     being drawn to the newer activities and newer products, many 
     never before contemplated or available. The personal 
     computer, with ever-widening applications in homes and 
     businesses, is one. So are the fax and the cell phone. The 
     newer biotech innovations are most especially of this type, 
     particularly the remarkable breadth of medical and 
     pharmacological product development.
       At the end of the day, however, the newer technologies 
     obviously can increase outputs or reduce inputs and, hence, 
     increase productivity only if they are embodied in capital 
     investment. Capital investment here is defined in the 
     broadest sense as any outlay that enhances future productive 
     capabilities and, consequently, capital asset values.
       But for capital investments to be made, the prospective 
     rate of return on their implementation must exceed the cost 
     of capital. Gains in productivity and capacity per real 
     dollar invested clearly rose materially in the 1990s, while 
     the increase in equity values, reflecting that higher 
     earnings potential, reduced the cost of capital.
       In particular, technological synergies appear to be 
     engendering an ever-widening array of prospective new capital 
     investments that offer profitable cost displacement. In a 
     consolidated sense, reduced cost generally means reduced 
     labor cost or, in productivity terms, fewer hours worked per 
     unit of output. These increased real rates of return on 
     investment and consequent improved productivity are clearly 
     most evident among the relatively small segment of our 
     economy that produces high-tech equipment. But the newer 
     technologies are spreading to firms not conventionally 
     thought of as high tech.\1\
---------------------------------------------------------------------------
      Footnotes at end of Remarks.
---------------------------------------------------------------------------
       It would be an exaggeration to imply that whenever a cost 
     increase emerges on the horizon, there is a capital 
     investment that is available to quell it. Yet the veritable 
     explosion of high-tech equipment and software spending that 
     has raised the growth of the capital stock dramatically over 
     the past five years could hardly have occurred without a 
     large increase in the pool of profitable projects becoming 
     available to business planners. As rising productivity growth 
     in the high-tech sector since 1995 has resulted in an 
     acceleration of price declines for equipment embodying the 
     newer technologies, investment in this equipment by firms in 
     a wide variety of industries has expanded sharply.
       Had high prospective returns on these capital projects not 
     materialized, the current capital equipment investment boom--
     there is no better word--would have petered out long ago. In 
     the event, overall equipment and capitalized software outlays 
     as a percentage of GDP in nominal dollars have reached their 
     highest level in post-World War II history.
       To be sure, there is also a virtuous capital investment 
     cycle at play here. A whole new set of profitable investments 
     raises productivity, which for a time raises profits--
     spurring further investment and consumption. At the same 
     time, faster productivity growth keeps a lid on unit costs 
     and prices. Firms hesitate to raise prices for fear that 
     their competitors will be able, with lower costs from new 
     investments, to wrest market share from them.
       Indeed, the increasing availability of labor-displacing 
     equipment and software, at declining prices and improving 
     delivery lead times, is arguably at the root of the loss of 
     business pricing power in recent years. To be sure, other 
     inflation-suppressing forces have been at work as well. 
     Marked increases in available global capacity were engendered 
     as a number of countries that were previously members of the 
     autarchic Soviet bloc opened to the West, and as many 
     emerging-market economies blossomed. Reductions in Cold War 
     spending in the United States and around the world also 
     released resources to more productive private purposes. In 
     addition, deregulation that removed bottlenecks and hence 
     increased supply response in many economies, especially ours, 
     has been a formidable force suppressing price increases as 
     well. Finally, the global economic crisis of 1997 and 1998 
     reduced the prices of energy and other key inputs into 
     production and consumption, helping to hold down inflation 
     for several years.
       Of course, Europe and Japan have participated in this 
     recent wave of invention and innovation and have full access 
     to the newer technologies. However, they arguably have 
     been slower to apply them. The relatively inflexible and, 
     hence, more costly labor markets of these economies appear 
     to be an important factor. The high rates of return 
     offered by the newer technologies are largely the result 
     of labor cost displacement, and because it is more costly 
     to dismiss workers in Europe and Japan, the rate of return 
     on the same equipment is correspondingly less there than 
     the United States. Here, labor displacement is more 
     readily countenanced both by law and by culture, 
     facilitating the adoption of technology that raises 
     standards of living over time.
       There, of course, has been a substantial amount of labor-
     displacing investment in Europe to obviate expensive 
     increased employment as their economies grow. But it is not 
     clear to what extent such investment has been directed at 
     reducing existing levels of employment. It should always be 
     remembered that in economies where dismissing a worker is 
     expensive, hiring one will also be perceived to be expensive.
       An ability to reorganize production and distribution 
     processes is essential to take advantage of newer 
     technologies. Indeed, the combination of a marked surge in 
     mergers and acquisitions, and especially the vast increase in 
     strategic alliances, including

[[Page S274]]

     across borders, is dramatically altering business structures 
     to conform to the imperatives of the newer technologies.\2\
       We are seeing the gradual breaking down of competition-
     inhibiting institutions from the keiretsu and chaebol of East 
     Asia, to the dirigisme of some of continental Europe. The 
     increasingly evident advantages of applying the newer 
     technologies is undermining much of the old political wisdom 
     of protected stability. The clash between unfettered 
     competitive technological advance and protectionism, both 
     domestic and international, will doubtless engage our 
     attention for many years into this new century. The turmoil 
     in Seattle last month may be a harbinger of an intensified 
     debate.
       However one views the causes of our low inflation and 
     strong growth, there can be little argument that the American 
     economy as it stands at the beginning of a new century has 
     never exhibited so remarkable a prosperity for at least the 
     majority of Americans.
       Nonetheless, this seemingly beneficial state of affairs is 
     not without its own set of potential challenges. 
     Productivity-driven supply growth has, by raising long-term 
     profit expectations, engendered a huge gain in equity prices. 
     Through the so-called ``wealth effect,'' these gains have 
     tended to foster increases in aggregate demand beyond the 
     increases in supply. It is this imbalance between growth of 
     supply and growth of demand that contains the potential seeds 
     of rising inflationary and financial pressures that could 
     undermine the current expansion.
       Higher productivity growth must show up as increases in 
     real incomes of employees, as profit, or more generally as 
     both. Unless the propensity to spend out of real income 
     falls, private consumption and investment growth will rise, 
     as indeed it must, since over time demand and supply must 
     balance. (I leave the effect of fiscal policy for later.) If 
     this was all that happened, accelerating productivity would 
     be wholly benign and beneficial.
       But in recent years, largely as a result of the 
     appreciating values of ownership claims on the capital stock, 
     themselves a consequence, at least in part, of accelerating 
     productivity, the net worth of households has expanded 
     dramatically, relative to income. This has spurred private 
     consumption to rise even faster than the incomes engendered 
     by the productivity-driven rise in output growth. Moreover, 
     the fall in the cost of equity capital corresponding to 
     higher share prices, coupled with enhanced potential rates of 
     return, has spurred private capital investment. There is a 
     wide range of estimates of how much added growth the rise in 
     equity prices has engendered, but they center around 1 
     percentage point of the somewhat more than 4 percentage point 
     annual growth rate of GDP since late 1996.
       Such overall extra domestic demand can be met only with 
     increased imports (net of exports) or with new domestic 
     output produced by employing additional workers. The latter 
     can come only from drawing down the pool of those seeking 
     work or from increasing net immigration.
       Thus, the impetus to spending from the wealth effect by its 
     very nature clearly cannot persist indefinitely. In part, it 
     adds to the demand for goods and services before the 
     corresponding increase in output fully materializes. It is, 
     in effect, increased purchasing from future income, financed 
     currently by greater borrowing or reduced accumulation of 
     assets.
       If capital gains had no evident effect on consumption or 
     investment, their existence would have no influence on output 
     or employment either. Increased equity claims would merely 
     match the increased market value of productive assets, 
     affecting only balance sheets, not flows of goods and 
     services, not supply or demand, and not labor markets.
       But this is patently not the case. Increasing perceptions 
     of wealth have clearly added to consumption and driven down 
     the amount of saving out of current income and spurred 
     capital investment.
       To meet this extra demand, our economy has drawn on all 
     sources of added supply. Our net imports and current account 
     deficits have risen appreciably in recent years. This has 
     been financed by foreign acquisition of dollar assets 
     fostered by the same sharp increases in real rates of return 
     on American capital that set off the wealth effect and 
     domestic capital goods boom in the first place. Were it 
     otherwise, the dollar's foreign exchange value would have 
     been under marked downward pressure in recent years. We have 
     also relied on net immigration to augment domestic output. 
     And finally, we have drawn down the pool of available 
     workers.
       The bottom line, however, is that, while immigration and 
     imports can significantly cushion the consequences of the 
     wealth effect and its draining of the pool of unemployed 
     workers for awhile, there are limits. Immigration is 
     constrained by law and its enforcement; imports, by the 
     willingness of global investors to accumulate dollar assets; 
     and the draw down of the pool of workers by the potential 
     emergency of inflationary imbalances in labor markets. 
     Admittedly, we are groping to infer where those limits may 
     be. But that there are limits cannot be open to question.
       However one views the operational relevance of a Phillips 
     curve or the associated NAIRU (the nonaccelerating inflation 
     rate of unemployment)--and I am personally decidedly doubtful 
     about it--there has to be a limit to how far the pool of 
     available labor can be drawn down without pressing wage 
     levels beyond productivity. The existence or nonexistence of 
     an empirically identifiable NAIRU has no bearing on the 
     existence of the venerable law of supply and demand.
       To be sure, increases in wages in excess of productivity 
     growth may not be inflationary, and destructive of economic 
     growth, if offset by decreases in other costs or declining 
     profit margins. A protracted decline in margins, however, is 
     a recipe for recession. Thus, if our objective of maximum 
     sustainable economic growth is to be achieved, the pool of 
     available workers cannot shrink indefinitely.
       As my late friend and eminent economist Herb Stein often 
     suggested: If a trend cannot continue, it will stop. What 
     will stop the wealth-induced excess of demand over 
     productivity-expanded supply is largely developments in 
     financial markets.
       That process is already well advanced. For the equity 
     wealth effect to be contained, either expected future 
     earnings must decline, or the discount factor applied to 
     those earnings must rise. There is little evidence of the 
     former. Indeed, security analysts, reflecting detailed 
     information on and from the companies they cover, have 
     continued to revise upward long-term earnings projections. 
     However, real rates of interest on long-term BBB corporate 
     debt, a good proxy for the average of all corporate debt, 
     have already risen well over a full percentage point since 
     late 1997, suggesting increased pressure on discount 
     factors.\3\ This should not be a surprise because an excess 
     of demand over supply ultimately comes down to planned 
     investment exceeding saving that would be available at the 
     economy's full potential. In the end, balance is achieved 
     through higher borrowing rates. Thus, the rise in real rates 
     should be viewed as a quite natural consequence of the 
     pressures of heavier demands for investment capital, driven 
     by higher perceived returns associated with technological 
     breakthroughs and supported by a central bank intent on 
     defusing the imbalances that would undermine the expansion.
       We cannot predict with any assurance how long a growing 
     wealth effect--more formally, a rise in the ratio of 
     household net worth to income--will persist, nor do we 
     suspect can anyone else. A diminution of the wealth effect, I 
     should add, does not mean that prices of assets cannot keep 
     rising, only that they rise no more than income.
       A critical factor in how the rising wealth effect and its 
     ultimate limitation will play out in the market place and the 
     economy is the state of government, especially federal, 
     finances.
       The sharp rise in revenues (at a nearly 8 percent annual 
     rate since 1995) has been significantly driven by increased 
     receipts owing to realized capital gains and increases in 
     compensation directly and indirectly related to the huge rise 
     in stock prices. Both the Administration and the Congress 
     have chosen wisely to allow unified budget surpluses to build 
     and have usefully focused on eliminating the historically 
     chronic borrowing from social security trust funds to finance 
     current outlays.
       The growing unified budget surpluses have absorbed a good 
     part of the excess of potential private demand over potential 
     supply. A continued expansion of the surplus would surely aid 
     in sustaining the productive investment that has been key to 
     leveraging the opportunities provided by new technology, 
     while holding down a further reliance on imports and 
     absorption of the pool of available workers.
       I trust that the recent flurry of increased federal 
     government outlays, seemingly made easier by the emerging 
     surpluses, is an aberration. In today's environment of rapid 
     innovation, growing unified budget surpluses can obviate at 
     least part of the rebalancing pressures evident in marked 
     increases in real long-term interest rates.
       As I noted at the beginning of my remarks, it may be many 
     years before we fully understand the nature of the rapid 
     changes currently confronting our economy. We are unlikely to 
     fully comprehend the process and its interactions with asset 
     prices until we have been through a complete business cycle.
       Regrettably, we at the Federal Reserve do not have the 
     luxury of awaiting a better set of insights into this 
     process. Indeed, our goal, in responding to the complexity of 
     current economic forces, is to extend the expansion by 
     containing its imbalances and avoiding the very recession 
     that would complete a business cycle.
       If we knew for sure that economic growth would soon be 
     driven wholly by gains in productivity and growth of the 
     working age population, including immigration, we would not 
     need to be as concerned about the potential for inflationary 
     distortions. Clearly, we cannot know for sure, because we are 
     dealing with world economic forces which are new and 
     untested.
       While we endeavor to find the proper configuration of 
     monetary and fiscal policies to sustain the remarkable 
     performance of our economy, there should be no ambiguity on 
     the policies required to support enterprise and competition.
       I believe that we as a people are very fortunate: When 
     confronted with the choice between rapid growth with its 
     inevitable insecurities and a stable, but stagnant economy, 
     given time, Americans have chosen growth. But as we seek to 
     manage what is now this increasingly palpable historic change 
     in the way businesses and workers create value, our nation 
     needs to address the associated dislocations that emerge, 
     especially among workers who see the security of their jobs

[[Page S275]]

     and their lives threatened. Societies cannot thrive when 
     significant segments perceive its functioning as unjust.
       It is the degree of unbridled fierce competition within and 
     among our economies today--not free trade or globalization as 
     such--that is the source of the unease that has manifested 
     itself, and was on display in Seattle a month ago. Trade and 
     globalization are merely the vehicles that foster 
     competition, whose application and benefits currently are 
     nowhere more evident than here, today, in the United States.
       Confronted face-on, no one likes competition; certainly, I 
     did not when I was a private consultant vying with other 
     consulting firms. But the competitive challenge galvanized me 
     and my colleagues to improve our performance so that at the 
     end of the day we and, indeed, our competitors, and 
     especially our clients, were more productive.
       There are many ways to address the all too real human 
     problems that are the inevitable consequences of accelerating 
     change. Restraining competition, domestic or international, 
     to suppress competitive turmoil is not one of them. That 
     would be profoundly counterproductive to rising standards of 
     living.
       We are in a period of dramatic gains in innovation and 
     technical change that challenge all of us, as owners of 
     capital, as suppliers of labor, as voters and policymakers. 
     How well policy can be fashioned to allow the private sector 
     to maximize the benefits of innovations that we currently 
     enjoy, and to contain the imbalances they create, will shape 
     the economic configuration of the first part of the new 
     century.


                               footnotes

     \1\ Since the early 1990s, the annual growth rate in output 
     per hour of nonfinancial corporate businesses outside high 
     tech has risen by a full percentage point.
     \2\ For example, the emergence of many alternate technologies 
     in areas where only one or two will set the standard and 
     survive has created high risk, high reward outcomes for their 
     creators. The desire to spread risk (and the willingness to 
     forgo the winner-take-all return) has fostered a substantial 
     number of technology-sharing alliances.
     \3\ The inflation expectations employed in this calculation 
     are those implicit in the gap between the interest rates on 
     ten-year Treasury inflation-indexed notes and those on a 
     nominal security derived from Treasury STRIPS constructed to 
     have comparable duration. The latter are used because, they 
     have the same relatively limited liquidity as inflation-
     indexed notes.
  Mr. MOYNIHAN. I thank the Chair. I yield the floor. 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. WELLSTONE. Mr. President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. WELLSTONE. Mr. President, about the only chance we ever have to 
discuss interest rates and monetary policy in this body is when Alan 
Greenspan gets renominated to the Federal Reserve Board, which 
admittedly seems to happen on a fairly regular basis.
  That is a shame, because there aren't many issues we debate in the 
Senate that have a bigger impact on the average American family. Why 
are interest rates so important? Well, for one thing, the decision to 
raise or lower interest rates directly affects pretty much every single 
American, in one way or another. Small businesses and farmers who need 
to take out loans. Families who want to buy a home or a car. Parents 
who need a loan to send their children to college. The economic future 
of all these people may hinge on the decisions of the Federal Reserve 
Board.
  More importantly, the decision to raise or lower interest rates has a 
direct effect on anybody who has or wants a job. Interest rates have 
got to be the single most important factor determining the rate of 
unemployment. They're also tremendously important in determining how 
fast our economy grows. If the Fed slams the brakes on the economy, 
consumer demand falters, inventories pile up, employers lay workers 
off, and millions of lives are disrupted. The health and vitality of 
every community in every corner of every state depends to some extent 
on monetary policy decisions made by the Federal Reserve Board in 
Washington.
  The importance of monetary policy has only grown over time. As former 
Labor Secretary Bob Reich likes to point out, we used to have two 
accelerator pedals for the economy. One was cutting interest rates. The 
other was government stimulus. But now that we're locked into running 
surpluses for as far as the eye can see, fiscal policy is pretty much 
dead. Interest rates are the main policy tool we have left for 
influencing the economy. Indeed, interest rates have a greater impact 
on most American families than the budgets we pass and most of the 
legislation we consider.
  Yet for some reason monetary policy has fallen off the political 
radar screen. At one time, of course, it was a front-burner political 
issue. Certainly in the late 19th century, there were few issues that 
inspired more heated debate among farmers in the Midwest than the gold 
standard and monetary policy. And for decades after the Great 
Depression, one of our most pressing national political issues was full 
employment, which was--and is--integrally connected to interest rates.
  While interest rates and monetary policy have become the most 
important instruments of U.S. economic policy, they have also been 
virtually walled off from democratic decisionmaking and debate. In this 
as in so many other areas, there seems to be an inverse relationship 
between an issue's importance to the American people and the amount of 
time we spend debating it here on the floor of the U.S. Senate.
  I don't think that's the way it ought to be. That's not the way a 
democratic government should operate. These are vitally important 
issues, and they deserve a full and open debate involving broad public 
participation.
  We did have something of a debate on monetary policy the last time 
Mr. Greenspan was renominated to the Board. Looking back on that 
discussion, I'm proud to say it was a substantive one. It focused not 
on personal criticisms, but on the important issues of monetary policy 
that affect all of our constituents.
  I also think the arguments raised in the 1996 debate can serve as a 
useful starting point for today's deliberations. We have a record from 
that debate, and we have four years of economic experience to compare 
it against. And based on that record and that experience, we can draw 
certain conclusions.
  The conclusions I draw are as follows. I think monetary policy over 
the past 4 years has been a pleasant surprise for some of us, in ways 
that I'll discuss in a moment. Nevertheless, it seems to me that the 
premise of the current movement toward higher interest rates is not 
only unfounded--but also contradicted by our experience of the last 
four years. In other words, I'm less troubled by where we've been than 
by where I see us heading in the near future.
  The past four years have been a tremendously successful experiment in 
monetary policy. I would hope we could all draw the right lessons from 
that success. During this entire period, we have had relatively low 
levels of unemployment and strong economic growth. Yet throughout that 
time, we have also heard repeated demands from various quarters for the 
Fed to raise its rates.
  We all know what these appeals sound like, but let me just give a 
couple examples. In January 1997, soon after the conclusion of our last 
debate, the Bond Buyer quoted an analyst from Merrill Lynch as saying,

       If we see further employment gains that are above the 
     equilibrium level, it looks like wage acceleration will get 
     worse and that will be about as bad a news as we could have 
     for the markets.

  In the January 1997 American Banker, an analyst from Chase Manhattan 
issued a very similar warning:

       The labor market is growing progressively tighter because 
     of job growth, unemployment is near 20-year lows and there is 
     an unambiguous acceleration in wage rates when you get beyond 
     the volatility. At some point the Fed is going to have to 
     raise interest rates.

  Another banker quoted in the January 1997 American Banker said,

       The Fed is going to have to do something to slow the 
     economy down. If you want to have an impact and want to slow 
     the economy down, you hit it with the big stick first.

  And so on and so forth. There is nothing unusual about these appeals 
from inflation hawks. We hear them all the time, no matter what 
economic conditions may be. The Fed hears them all the time from the 
Reserve Banks. In fact, Chairman Greenspan makes the same argument 
himself from time to time. This is more or less the same argument he 
made last month in his speech before the Economic Club of New York.
  The difference is that back is 1997 and 1998, Mr. Greenspan and the 
Federal Reserve ignored those repeated and urgent appeals for higher 
rates to put a lid on wage growth. For its wise

[[Page S276]]

and dovish stance on interest rates in 1997 and 1998, I think the Fed 
deserves a great deal of credit.
  The important thing for us to realize is that this unexpected 
experiment in monetary policy worked. The Fed's unusual deviation from 
tight money orthodoxy was clearly successful. Yesterday the President 
was handling out kudos for the longest economic expansion in our 
history. He did praise Chairman Greenspan, but I think we need to be 
more specific in our praise. The key policy choice we should be 
focusing on is the Fed's reluctance to raise rates during a critical 
period in the mid to late 1990's.
  The results of that policy choice have been much-discussed elsewhere, 
so I don't need to go into all the details here. But there is one thing 
I want to emphasize: the importance of sustained low unemployment for 
people on the lower end of the income scale. Finally, in the last 
couple years we are beginning to see wage gains for lower-income 
workers--for the first time since the 1970's. Unemployment for workers 
who haven't completed high school was only 6 percent in December, an 
historical low. And low unemployment is especially important for 
minorities, who traditionally experience higher rates of joblessness. 
Black male joblessness has fallen to its lowest level in 30 years, 
through it's still about twice the rate for whites.
  The benefits of low unemployment and strong economic growth extend 
beyond the people who found jobs or are starting to see higher wages 
for the first time in a long time. We all benefit. The principal reason 
why the federal budget went into surplus four years ahead of schedule--
in 1998 rather than 2002--was because of higher-than-expected economic 
growth. That wouldn't have been possible had the Fed slammed on the 
brakes.
  Higher economic growth also extended the life of the Social Security 
Trust Funds, demonstrating how probably the best thing we can do to 
protect Social Security is to ensure strong economic growth in the 
future. Because of lower unemployment and higher growth, crime rates 
declined, as many people who would otherwise have no hope were able to 
obtain stable employment. And finally, it goes without saying that the 
consequences of welfare reform would have been much more devastating 
had the Fed followed the advice of those inflation hawks and raised 
interest rates.
  There is one other milestone decision by the Fed that deserves to be 
singled out for praise. In September 1998, I and several other senators 
spoke on the floor about the need for interest rate reductions to 
address the instability in the global economy in the wake of the Asian 
Crisis and the collapse of the Russian economy. The Fed acted quickly 
and decisively. It not only resisted calls to raise rates in 1998; it 
actually lowered them by \3/4\ of a percentage point between September 
and November. I'm convinced that those rate reductions made a decisive 
contribution towards stabilizing global financial markets.
  So much for my sweet talk about the Federal Reserve. Today I also 
want to express my deep concern about where the Fed appears to be 
headed in the next few months. I'm troubled that the Board may be 
unlearning the lessons of its successful recent experiment in monetary 
policy and reverting to its old ways. Already in June, August, and 
November of last year, the Fed raised rates by \1/4\ of a percentage 
point. These hikes effectively restored rates to where they were before 
the Russian crisis of 1998.
  In his speech last month, Chairman Greenspan announced that he is 
once again worried about wage-induced inflation. Virtually everyone 
understood those remarks as another signal that the Fed will raise 
rates soon. The Federal Open Markets Committee (FOMC) has been meeting 
yesterday and today, and today announced another increase of \1/4\ 
percent. Some economists believe there could be a total of four rate 
increases by the end of June.

  To panic over inflation in the present economic circumstances strikes 
me as something close to irrational paranoia. Inflation is the true 
``Phantom Menace.'' First of all, the core inflation rate last year 
fell to 1.9 percent in 1999, the lowest it's been since 1965. Let me 
repeat that: core inflation is the lowest it's been since 1965. It's 
true that consumer prices rose faster than that last year, but this was 
due to sharply higher energy prices, which should not lead to higher 
rates. Most commodity prices are still at record lows.
  In his speech last month, Chairman Greenspan spelled out his 
concerns. He underscored the danger that rising wages could cause 
inflation to spiral out of control. I find this argument very 
troubling. It seems to disregard our experience since 1996, for which 
the Fed deserves, as I said, a great deal of credit. Just a moment ago 
I was praising the Federal Reserve for rejecting this very same 
argument in 1997 and 1998.
  Simply put, I do not believe there is any credible indication that 
labor costs are about to send inflation spinning out of control. Wage 
growth actually slowed in the last year, despite persistently low 
unemployment. In the fourth quarter of 1999, average hourly wages 
increased at an annual rate of 3.3 percent. That's less than the 4 
percent they increased from 1997 to mid-1999. Measured a different way, 
wage growth fell from 4.1 percent in 1999 to 3.6 percent in 1998. Wage 
growth could not have been slowing down over the past couple years if 
labor markets were operating as Chairman Greenspan describes.
  As Chairman Greenspan and the President have both pointed out, a 
remarkable feature of the current recovery is that workers' wage 
demands have been lower than their historical levels. Yesterday the 
President claimed the reason why American workers have not made 
``enormous wage demands'' is that they have become ``very sophisticated 
about the way the world economy works.'' That's an interesting comment. 
He seems to be suggesting that the way the world economy works is to 
depress wages.
  In his now-famous testimony before the Senate Budget Committee in 
January 1997, Mr. Greenspan had a slightly less upbeat explanation for 
slackening wage demands. He pointed to job insecurity. ``Heightened job 
insecurity explains a significant part of the restraint on 
compensation,'' he testified. Of course, Chairman Greenspan raised this 
issue because he was concerned the situation could not continue 
forever: ``At some point in the future,'' he said, ``the trade-off of 
subdued wage growth for job security has to come to an end.''
  There are several reasons why workers would be more insecure in 
today's economy, but it's hard for me to consider any of them good 
news. An unprecedented wave of mergers and corporate restructurings has 
led to layoffs for many senior employees. Labor unions have lost a 
great deal of its bargaining power, for various reasons. These include 
deregulation, a trade deficit that destroys unionized manufacturing 
jobs, and competition from low-wage imports.
  But even if wage growth really were picking up steam, it would not 
necessarily lead to inflation. I think pretty much every economist 
would agree that wages can increase at least as fast as productivity 
growth--without causing a rise in prices. That's because when there's 
more wealth to go around due to greater efficiencies, more of that 
wealth can be shared with workers without asking consumers to pay more.

  And that's exactly what's been happening. Ever since 1996, 
productivity has been rising at about 1 percent above the expected 
trend line. For the past couple of years productivity has been rising 
at about 2 percent, though real wages rose only 1.5 percent last year. 
Unit labor costs have fallen since 1996, meaning that wages have not 
been keeping up with productivity. Moreover, productivity growth is 
expected to remain strong in the future. There is plenty of room for 
more wage growth.
  One of the lessons of this recovery is that low unemployment can 
actually lead to higher productivity. It makes sense. For one thing, 
when labor markets are tight, businesses have to make more efficient 
use of their workers. That leads to higher efficiency and more wealth 
that can then be shared with workers. It's a virtuous cycle.
  In fact, this recovery has taught us several lessons which don't seem 
to be reflected in the Fed's recent shift toward higher rates. First 
and foremost, the theory that there is a natural rate of unemployment--
around 5.5 or 6 percent--below which inflation will spiral out of 
control appears to be thoroughly discredited.

[[Page S277]]

  In June 1996, when we were debating Mr. Greenspan's previous 
renomination, I came to the floor to take issue with this theory, which 
is called the NAIRU (Non-Accelerating Inflation Rate of Unemployment). 
At that time, unemployment was 5.6 percent. I was arguing that 
unemployment could go lower without sending wages--and therefore 
prices--into an upward spiral.
  Let's look at the record since 1996. Unemployment has been below 6 
percent the entire time, with no inflationary spiral in sight. 
Unemployment has been 4.1 percent for four months now. It's been below 
5 percent for 30 months. It's been below 4.5 percent for 14 months. Not 
only is inflation not spiraling out of control, it's pretty hard to 
detect any sign of inflation at all. Core inflation is the lowest it's 
been since 1965.
  In the most recent issue of the American Prospect, the economist 
James K. Galbraith writes,

       Faced with such embarrassing facts, only a handful of 
     economists continue to defend the natural rate idea. And yet, 
     the natural rate movement still influences policy. Some of 
     its survivors vote on the Federal Reserve's Open Market 
     Committee. They are presently driving interest rates upward 
     on precisely the pretext that low unemployment must otherwise 
     soon bring rising inflation. It is a notion for which no 
     evidence exists. And except for the damage that higher 
     interest rates will do, it would be hard not to laugh.

  The case for raising interest rates is also exceedingly weak. In 
fact, the very arguments made recently by Chairman Greenspan and 
various Wall Street analysts should actually persuade us to keep rates 
where they are. Yes, sustained low unemployment is having some effect 
on wages, especially at the lower end. It's not sending inflation 
spiraling out of control, but it is having an effect. But this is a 
positive phenomenon that we should be attempting to prolong, for all 
the reasons I listed before in praising the Fed's performance in 1997 
and 1998. The price of raising rates now is all the benefits we've seen 
flowing from lower unemployment and faster growth.

  After all, many working people are only now beginning to feel the 
effects of this recovery. Only in the last two years have wage 
increases given workers back some of what they had lost over the past 
two decades. During most of the recovery of the 1990s, the median wage 
actually fell. Wages for low and middle-income workers dropped sharply 
in the early 1990's, due in part to an unnecessarily tight monetary 
policy by the Federal Reserve.
  This trend didn't start to reverse itself until 1996--thanks to a 
looser monetary policy from the Federal Reserve, as well as an increase 
in the minimum wage. It wasn't until 1999 that median wages regained 
their peak level from 1989, before the last recession. That's where 
most workers are today: about where they were before the last 
recession. This is no time to actively dampen wage growth--precisely at 
the moment when workers are starting to benefit from this recovery. The 
policies that brought about these much-delayed benefits for working 
people are precisely the ones that the Federal Reserve is now poised to 
reverse.
  I think we have an obligation to make sure all Americans, not just 
corporate CEOs and those at the top of the income ladder, can benefit 
from this recovery. Just recently, the Center on Budget and Policy 
Priorities and the Economic Policy Institute released a report on 
income inequality in America. This is what they found. Despite strong 
economic growth, income disparities were significantly greater in the 
late 1990's than they were in the 1980's. In two-thirds of all states, 
income inequality between the top 20 percent and the bottom 20 percent 
increased. The earnings of the poorest fifth of American families rose 
less than 1 percent between 1988 and 1998, but the earning of the 
richest fifth jumped 15 percent. The income gap significantly narrowed 
in only three states--Alaska, Louisiana, and Tennessee.
  Even my friend John McCain has noted the widening gap between the 
haves and the have-nots in America, and that message seemed to go over 
pretty well in New Hampshire.
  Raising interest rates now could also have an indirect effect on 
inequality--by raising the value of the dollar and therefore 
contributing to the problems of our trade deficit. In the last 4 years, 
our trade deficit has grown from less than 1.0 percent of GDP to almost 
3.5 percent of GDP in the fourth quarter of 1999. This is 
unprecedented.
  The burgeoning trade deficit has contributed to inequality by 
resulting in the loss of manufacturing jobs. We lost 248,000 
manufacturing jobs in 1999, and 520,000 since March 1998. Because of 
low unemployment, those job losses are generally made up by job 
creation elsewhere. But the new jobs tend to be nonunionized, with 
lower pay and fewer benefits. In the last two years, job growth has 
occurred exclusively in the service industries, where wages and 
benefits are often much lower.
  A second problem with the trade deficit is that it casts a pall over 
this recovery. We are now the world's largest debtor nation. We have 
accumulated over $2 trillion in trade deficits over the last couple 
decades. Yesterday, even President Clinton said he worried that if 
foreign investors lost confidence in our economy and pulled out their 
money, they could do major damage to the economy.
  We have to consider the danger that unmanageable trade deficits or 
unnecessary monetary tightening could not only erase wage gains for 
lower-income workers, but could actually send the economy into a 
tailspin. This recovery has been kept alive by Americans who have been 
spending more than they earn, partly due to the ``wealth effect'' of 
soaring stock prices. Lowering growth with higher interest rates could 
cause investors to reassess their rosy assumption about future growth 
and puncture the speculative bubble on Wall Street.

  In fact, in his speech last month in New York, Chairman Greenspan 
also mentioned the danger of a stock market correction. If the goal is 
to curb ``irrational exuberance'' on Wall Street, there are much better 
ways of doing that. In the 1950's and 1960's, Fed Chairman William 
McChesney Martin, Jr., repeatedly raised margin requirements, but Mr. 
Greenspan has refused to take that step.
  Given the sizable dangers involved--both in terms of the damage it 
would do to lower-wage workers and to the overall economy--I think 
raising interest rates at this time would be extremely unwise. If an 
inflationary situation actually materializes and turns out not to be a 
figment of bankers' collective imaginations, the Fed can always deal 
with that problem if and when it arises. Recent evidence suggests that 
interest rate moves no longer operate with a lag due to the increased 
openness of the Fed.
  We have made a tremendous advance in the four years since we last 
debated this issue. We have discovered that the three-decade-old 
mystery over falling wages and rising inequality turns out to be not so 
mysterious after all. The fact is, we know how to raise wages and 
reduce inequality. We do not have to reinvent the wheel. Among other 
things, we need to maintain low unemployment over a sustained period. 
We've done this before and we can do it again. It would be a tragedy if 
an unjustified fear of rising wages or an economic downturn kept us 
from continuing that progress.
  I think Chairman Greenspan's performance at the Fed has been very 
helpful in drawing out these lessons over the past 4 years. It would be 
a tragedy--both for our country and especially for workers at the lower 
end of the income scale--if he were to ignore those lessons to once 
again focus on putting a stop to rising wages.
  Mr. President, it is kind of ironic that about the only time relevant 
to really discuss monetary policy or have a debate about monetary 
policy is when Alan Greenspan gets renominated to the Federal Reserve 
Board. It is a shame because there is probably not an issue that has 
greater impact on people's lives. People just do not know that much 
about monetary policy. But the fact is, when you look at the real 
interest rates, you are talking about a policy that dramatically 
affects small business people, dramatically affects family farmers, 
dramatically affects the industrial base of our country, dramatically 
affects low- and moderate-income people, and it is critically important 
to policy.
  There was a time in the history of our country, in the late 1800s, 
when there was a tremendous emphasis on monetary policy and the need to 
keep real interest rates down. There was a time post-Depression when 
there was a

[[Page S278]]

real focus on employment policy and the need to move toward full 
employment, and the whole question of what the tradeoff was between 
having high interest rates that would choke off economic growth, and 
then people would not be able to find jobs at decent wages.
  I think in 1996 we had a very good debate. I don't think the debate 
was so much about Alan Greenspan--I voted against Alan Greenspan's 
nomination then--but it had more to do with the debate about monetary 
policy.
  What was going on during that debate is that many of us were saying 
we were very concerned about the Federal Reserve policy. We were 
concerned about the focus on raising interest rates, and what we argued 
was all this discussion about NAIRU, all this discussion that you could 
not have low levels of officially defined unemployment without at the 
same time setting off an inflationary cycle, was simply wrong. What we 
were saying is it is extremely important to have a public policy which 
puts as our first priority that people should be able to obtain jobs at 
decent wages and that this was critically important when you looked at 
monetary policy. That is because when interest rates go up, then in 
fact it is very difficult to sustain this kind of growth.
  I am pleased to say tonight--I think this is the irony--I was right 
about the policy and wrong about Alan Greenspan. I think I was right to 
say that the Fed is not accountable to citizens in this country. There 
is no democratic accountability, with a small ``d.'' These are 
critically important decisions that are sort of walled off from any 
kind of public accountability. I think that is a profound mistake. This 
is a decisionmaking body with enormous power that crucially defines the 
quality or lack of quality of people's lives. But what we were saying, 
some of us, was that we took exception to the Fed's policy of always 
seeing inflation right around the corner when it did not exist, a kind 
of phantom inflation, and raising interest rates and having as 
its conscious policy: We are going to raise interest rates because 
unemployment is falling too low and we have to do something because 
surely there will be inflation.

  Therefore, many people still do not get jobs or the jobs they get are 
jobs at fairly low wages. And, when real interest rates go up, it has a 
draconian effect, again, on small businesspeople, a horrible effect on 
farmers and producers in my State, and a very harsh effect on low- and 
moderate-income people, a harsh effect on home buyers, a harsh effect 
on people who do not have a lot of money who are trying to buy a car.
  I give Alan Greenspan credit. What has happened in 1997 and 1998 is 
that Alan Greenspan did a superb job of being a dove. He was a dove. He 
did not raise the interest rates. There were many people in the Banking 
Committee, many people in the financial community, who kept saying he 
needed to raise those interest rates. He did not do so. I think his 
stewardship has been very important. As a result of that, this is what 
has happened. As a result of not raising these interest rates up until 
this past year, as a result of not accepting this orthodoxy, what have 
we been able to accomplish? Record low levels of unemployment--that is 
very important to communities of color; very important to people who 
are traditionally the ones who are most affected by high levels of 
unemployment. It is very important to the basic idea of economic 
opportunity in America because the key to economic opportunity is to be 
able to find a job, even more a job at a decent wage, even more a job 
at a decent wage under civilized working conditions.
  What else has been accomplished? Because we have had low levels of 
unemployment, finally we have seen the lowest wage workers be able to 
bid up their wages because this is a good market for them. We are 
beginning to see some closing of the gap. It is closing very little, 
but up until the past couple of years, or this past year, we had not 
seen much improvement at all in terms of real wages. We have seen some 
improvement.
  What have we been able to accomplish? Record surpluses. What have we 
been able to accomplish? The Social Security trust fund appears much 
stronger than it did because of economic performance. What have we been 
able to accomplish? High levels of productivity. By the way, if your 
productivity is ahead of your wage increases, I do not believe you are 
ever going to have to be concerned about an inflationary cycle.
  So I come to the floor of the Senate to say it was important we had 
this debate about monetary policy in 1996. I think those of us who took 
exception to the Fed's policy of continuing to raise interest rates 
were correct. Those of us who did not accept NAIRU and this whole 
argument that below a certain level of unemployment you could not go 
any further, I think we were correct. Those of us who argued it was 
important to keep interest rates down for economic growth and economic 
recovery and jobs at decent wages, that it was important to keep 
interest rates down for the sake of our producers, for the sake of the 
manufacturing sector, for the sake of small businesses, for the sake of 
moderate- and middle-income households were right. I was wrong about 
Alan Greenspan because, as it turns out, under his guidance, the Fed 
has what I think is a pretty darned good record.
  Therefore, I now come to part three. I am perplexed that now, again 
today, we saw an increase. The Fed is now raising interest rates, this 
past year I think three or four times. Yet inflation is at a record low 
level, and the only sector of the economy where we see inflation is 
energy costs, which has a whole lot to do with the OPEC cartel and does 
not have anything to do with ordinary families in the United States of 
America.

  So it seems to me, for reasons I cannot explain, Mr. Greenspan and 
the Fed are ignoring the very success that they have had. I do worry 
because I think if we continue to raise the interest rates, not only is 
it going to undercut our economic growth, not only will it have a 
disproportionate negative effect on those Americans who struggle the 
most, much less middle-income families, not only is it going to add to 
our already serious trade imbalance which plays havoc--which is both a 
result of and plays havoc with our industrial sector--but I think if it 
is going to continue to raise these interest rates, it threatens this 
unbelievable economic performance we have seen.
  One final point I make tonight is that during this period of economic 
growth we have not all grown together. To a certain extent we have 
grown apart. Actually, the gap between the richest 20 percent and 
poorest 20 percent grows wider and wider. Why, given the success of the 
Federal Reserve, why, given the success of this economic performance 
while keeping interest rates down, why, given some improvement for the 
lowest wage workers, why, given the surpluses, why, given the Social 
Security trust fund looking better because people are working, because 
people are making better wages, why at this point in time does Mr. 
Greenspan and the Federal Reserve seem to be going down the path of 
raising interest rates in direct contradiction to a policy that has 
been successful? That is the question.
  I wanted to come to the floor to speak because I find it, as a 
teacher, much less a Senator, to be just an interesting and, to a 
certain extent, perplexing irony. In 1996, we had a debate about 
monetary policy. It only comes up when the Greenspan nomination comes 
up. I think we should be debating monetary policy more. Once upon a 
time it was a front burner issue. But then Alan Greenspan has surprised 
me and kept real interest rates down. I want to give him all the credit 
in the world for that, and I think it has been very important and tied 
to our economic performance. It is very important to the people with 
the least amount of economic clout in our country who do not do as well 
financially. But now it looks as if Alan Greenspan and the Federal 
Reserve have been going in the exact opposite direction of what has 
been a successful economic policy. That I fear, that I worry about, 
that I dissent from, and that I wanted to speak about as a Senator.

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