[Congressional Record (Bound Edition), Volume 145 (1999), Part 21]
[Senate]
[Page 30889]
[From the U.S. Government Publishing Office, www.gpo.gov]



                    AMENDING THE FEDERAL RESERVE ACT

  Ms. COLLINS. Mr. President, I ask unanimous consent the Banking 
Committee be discharged from further consideration of H.R. 1094, and 
the Senate proceed to its immediate consideration.
  The PRESIDING OFFICER. Without objection, it is so ordered. The clerk 
will report the bill by title.
  The legislative clerk read as follows:

       A bill (H.R. 1094) to amend the Federal Reserve Act to 
     broaden the range of discount window loans which may be used 
     as collateral for Federal reserve notes.

  There being no objection, the Senate proceeded to consider the bill.
  Mr. GRAMM. Mr. President, today the Senate is taking up for its 
consideration H.R. 1094, a bill to amend the Federal Reserve Act to 
broaden the range of discount window loans which may be used as 
collateral for Federal Reserve notes. This legislation will expand the 
field of assets that the Federal Reserve may use to collateralize 
Federal Reserve notes. All currency in circulation must be backed by 
specific assets, but much of the collateral that the Federal Reserve 
accepts for discount window loans is ineligible under current law for 
use to back the currency. The changes put in place by this legislation 
will allow the Federal Reserve to apply all eligible discount loan 
assets to collateralize the currency.
  This legislation poses some risks unless adequate safeguards are in 
place. The Federal Reserve applies a discount to each type of asset 
used as collateral. Broadening the scope of eligible assets makes it 
even more imperative that strict and aggressive discounting be applied 
to any assets used to back U.S. currency. The Federal Reserve should 
discount aggressively these assets through an objective and clearly 
defined process that leaves no room for doubt that our currency is 
fully backed by reliable assets. At the most basic level, when valuing 
these assets this should be our general rule: when in doubt, discount.
  Failure to discount collateral assets aggressively would do more than 
threaten the safety and soundness of the Federal Reserve's balance 
sheet; it would threaten the U.S. economy and all economies that rely 
on a stable dollar. Many countries around the world recently have 
learned a painful lesson on the value of a sound currency.
  We must remember that any country can engage in monetary 
mismanagement, and most have at some point in time. The United States 
must avoid that path. With a currency that is considered a stable 
medium by U.S. citizens and a store of value by both domestic and 
foreign investors, the Federal Reserve must hold sound money paramount 
as it implements this important change in currency collateral 
requirements. It has taken nearly two decades to rebuild the reputation 
of the dollar after the inflation of the Carter years. Today, ``sound 
as a dollar'' has meaning here and all over the world. We must do 
nothing to undermine it.
  Ms. COLLINS. I ask unanimous consent the bill be read the third time 
and passed, the motion to reconsider be laid upon the table, and any 
statements relating to the bill be printed in the Record.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The bill (H.R. 1094) was read the third time and passed.




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