[Congressional Record Volume 146, Number 60 (Tuesday, May 16, 2000)]
[Senate]
[Pages S3964-S3965]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


[[Page S3964]]
                     FEDERAL RESERVE BOARD MEETING

  Mr. DORGAN. Mr. President, a meeting started 1 hour and 5 minutes ago 
at 20th Street and Constitution Avenue here in Washington, DC. The 
Federal Reserve Board is meeting in a large room in a building that 
takes up nearly the entire block.
  No one in this Chamber is allowed at that meeting. No ordinary 
American citizen is allowed at this meeting. The door is locked. They 
are meeting behind closed doors at the Federal Reserve Board to decide 
how much they want to raise interest rates once again.
  I think it is important to allow people to see who is meeting. Here 
are the pictures of the folks at the Fed--the Federal Board of 
Governors. The ones with the stars are the regional Federal Reserve 
bank presidents who will make the decision this morning.
  They increased interest rates last June, in August, in November, in 
February, and again in March. In North Dakota, in Idaho, in Illinois, 
and in California, the average American household is now paying $1,200 
a year in additional interest charges as a result. If you have a 
$100,000 mortgage, you are paying $100 a month more for your mortgage 
payment. Why? Because the Federal Reserve Board feels that too many 
people are working in this country and that our economic growth ought 
to be slowed.
  If you ask them about the circumstance, they would say: We really 
have controlled inflation; it is because we have increased interest 
rates that inflation has been under control.
  That is like the weatherman taking credit for the sunshine. The fact 
is, this economy has worked in spite of the Federal Reserve Board.
  This Federal Reserve Board, under Mr. Greenspan's tutelage, has added 
nearly a three-quarters of 1 percent increase in the real Federal funds 
rate during his term versus the 20 years prior. It has added nearly a 
two percent increase in the real prime rate during the Greenspan years 
versus the prior years. They have leaned and tilted their interest rate 
policies towards the big banking center interests, and against the 
consumer's interest and against the taxpayers' interests.
  By what justification would they increase interest rates this 
morning? This morning the Consumer Price Index came out. It is flat; 
plumb flat. The Producer Price Index from last month was down. The core 
inflation rate is down.
  By what justification will the Federal Reserve Board decide to charge 
higher interest rates on the American people? They say, in a Washington 
Post article by John Berry, that the new theory of the Fed is that if 
worker productivity is up in this country, it puts pressure on the 
economy, and, therefore, they should raise interest rates to slow down 
the economy.
  What a prosperous notion. It used to be when I came to the floor and 
indicated that the Fed complained workers were getting more money, or 
there was a threat that they would get more money but their 
productivity wasn't rising, the Fed used to say that is inherently 
inflationary. Now what they say is that it doesn't matter how 
productive they are; in fact, the more productive they are, the more 
likely it is the Fed wants to raise interest rates.
  Talk about people flying blind. I learned to fly an airplane about a 
quarter century ago. I remember that as you do your solo cross-country 
flying the airplane, you have to learn to rely on instruments. How do 
you know where you are going? You have to read your instruments? The 
fact is, the Federal Reserve Board doesn't have instruments that work 
anymore.
  To the extent you could picture a group of bankers in gray suits and 
wearing goggles, with a leather helmet and a silk scarf--to the extent 
you could picture them flying and flying blind--I respectfully say they 
are flying in the wrong direction and are perfectly happy to do so even 
when told.
  The thing that I find interesting is this: We have an economy that 
has been remarkably strong. The Fed has been remarkably wrong all 
along. They have said our economy cannot grow more than 2\1/2\ percent, 
and if it does we are going to have more inflation. It has and we 
haven't.
  They have said that unemployment can't go below 6 percent. If it 
does, we will have more inflation. Unemployment has been below 6 
percent for 5 years, and inflation has been down.
  The Federal Reserve Board has been wrong about the performance of 
this economy. Yet as they write about the Fed, they simply take what 
the Fed says, print it, and they print no discussion about the 
alternatives. So we have no real debate about this.
  The interesting thing is 30 years ago a one-quarter percent increase 
in interest rates proposed by McChesney Martin caused an outcry in this 
country. It was front-page headlines. Lyndon Johnson was President. He 
called this guy down to the ranch in Texas and put pressure on him all 
the weekend. It was front-page news. Today the Fed can go behind closed 
doors and raise interest rates one-half percent, and nobody seems to 
mind.
  All of these chairs are largely empty in the Senate. I wonder where 
people are. What if someone were to bring to the floor of the Senate a 
proposal that said, what we would like to do is increase taxes on the 
average household in this country by $1,210 a year. If there were a 
proposal to increase taxes in the amount of $1,210 a year, all of these 
chairs would be full. There would be a raging debate, and all of the 
folks would come to the floor to talk about taxes. They would be 
hollering and bellowing.

  But guess what. You can increase interest rates five, six, or seven 
times by the Federal Reserve, and impose an additional $1,210 a year 
interest charge on the average household, and there is not a whimper.
  Again, let me give credit where credit is due. All of these folks 
look alike. They largely think alike. All of them wear gray suits. All 
of them have a banking background. When they close the doors and lock 
the American citizens out down at the Federal Reserve Board, they are 
going to make a banking decision.
  What is the banking decision? They increase interest rates on the 
American people in order to protect the big banking center interests.
  The point is this: There is no inflation. There is no evidence of 
inflation.
  It is going to be uncomfortable for the Fed. But of course they do 
not deal with comforts. Once they close the doors, they have all the 
comforts at hand.
  Just this morning the Consumer Price Index was announced, and it is 
flat; no inflation.
  Just this morning--a little over an hour ago--they went into the 
room, closed the doors, and locked everybody else out. Guess what they 
are going to decide. They will announce that they have decided, despite 
the fact there is no inflation, because American workers are more 
productive that justifies an increase in the interest rates.
  Why if the American worker is more productive should the American 
worker not be entitled to a better share of income? Of course, they 
should. That is not inflationary. But the Federal Reserve Board has now 
concocted this goofy new theory that says if the American worker is 
more productive, they must impose an added charge on the average 
American.
  You talk about people who can't think. I don't understand. Maybe they 
need to loosen all those neckties. But there is something wrong at the 
Fed.
  I would be happy to yield for a question.
  Mr. HARKIN. I thank the Senator for yielding. I thank him for 
bringing us back to this point about the Fed behind closed doors. When 
they raise the rates, this is really a hidden tax, is it not, I ask the 
Senator.
  Mr. DORGAN. It certainly is, and it is a tax that was not a part of 
any public discussion and imposed in a room with the doors locked.
  Mr. HARKIN. No representation for the American people.
  Mr. DORGAN. No representation.
  Mr. HARKIN. I want to ask the Senator another question. The decisions 
they make today are behind closed doors. Does the Senator know how long 
it will be before we will be able to look at the detailed books to find 
out why they made those decisions? I will answer it. It will be 5 years 
before we will fully know why they made the decisions. Maybe if we knew 
tomorrow, or next week, or next month why they made the decision, we 
might want to make some changes around here in the way we operate. They 
make the decisions, and we will not know the full picture for 5 years 
why they did it.

[[Page S3965]]

  Mr. DORGAN. We will know in 5 minutes that it was a mistake. If these 
folks at a time when there is no additional inflation raise interest 
rates once again to try to slow down this economy and penalize the 
American workforce for being more productive, we will know in 5 minutes 
that is a mistake.
  I hope with this announcement that will apparently be made at about 2 
o'clock this afternoon this group of folks perhaps might exhibit some 
good sense for a change.
  Mr. HARKIN. I thank the Senator.
  Mr. DORGAN. I yield the floor.
  The PRESIDING OFFICER. The Senator from Massachusetts.
  Mr. KENNEDY. Mr. President, as I understand it, we are in morning 
business, and we have some 22 minutes remaining.
  The PRESIDING OFFICER. The Senator is correct.
  The Senate is in morning business.
  The Senator from Massachusetts is recognized.

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